Exhibit 10.11
ADDENDUM TO SECURITY AND LOAN AGREEMENT
("SECURITY AND LOAN AGREEMENT")
BETWEEN DATAMETRICS CORPORATION AND IMPERIAL BANK
DATED: MARCH 4, 1997
This Addendum is made and entered into as of MARCH 4, 1997, between DATAMETRICS
CORPORATION ("Borrower") and IMPERIAL BANK ("Bank"). This Addendum amends and
supplements the Security and Loan Agreement. In the event of any inconsistency
between the terms herein and the terms of the Security and Loan Agreement, the
terms herein shall in all cases govern and control. All capitalized terms
herein, unless otherwise defined herein, shall have the meaning set forth in the
Security and Loan Agreement.
1. Any commitment of Bank, pursuant to the terms of the Security and Loan
Agreement, to make advances against Eligible Accounts shall expire on MARCH 3,
1998, subject to Bank's right to renew said commitment in its sole discretion.
Any such renewal of the commitment shall not be binding upon Bank unless it is
in writing and signed by an officer of the Bank.
2. Borrower represents and warrants that:
a. Litigation. There is no litigation or other proceeding pending or
threatened against or affecting Borrower, except as previously disclosed in
writing by Borrower to Bank, and Borrower is not in default with respect to any
order, writ, injunction, decree or demand of any court or other governmental or
regulatory authority.
b. Financial Condition. The consolidated balance sheet of Borrower and
subsidiaries of JANUARY 26, 1997, and the related consolidated profit and loss
statement on that date, a copy of which has heretofore been delivered to Bank by
Borrower, and all other statements and data submitted in writing by Borrower to
Bank in connection with this request for credit are true and correct, and said
balance sheet and profit and loss statement truly present the consolidated
financial condition of Borrower and subsidiaries as of the date thereof and the
results of the consolidated operations of Borrower and subsidiaries for the
period covered thereby, and have been prepared in accordance with generally
accepted accounting principles on a basis consistently maintained. Since such
date, there have been no materially adverse changes. Borrower has no knowledge
of any liabilities, contingent or otherwise, at such date not reflected in said
balance sheet, and Borrower has not entered into any special commitments or
substantial contracts which are not reflected in said balance sheet, other than
in the ordinary and normal course of its business, which may have a materially
adverse effect upon its financial condition, operations or business as now
conducted.
c. Trademarks, Patents. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with valid trademarks, trade names, copyrights, patents and license rights of
others.
d. Tax Status. Borrower has no liability for any delinquent state, local
or federal taxes, and, if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
3. Borrower agrees that so long as it is indebted to Bank, it will not,
without Bank's written consent, which will not be unreasonably withheld:
a. Type of Business; Management: Executives' Compensation. Make any
substantial change in the character of its business; or make any change in its
executive management, defined as consisting of Borrower's Chief Executive
Officer, Chief Financial Officer and Senior Vice President of Defense Business
Unit.
b. Outside Indebtedness. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than loans from Bank except obligations
now existing as shown in financial statement dated JANUARY 26, 1997, except as
previously disclosed in writing by Borrower to Bank, excluding those being
refinanced by Bank; or sell or transfer, either with or without recourse, any
accounts or notes receivable or any moneys due to become due. Notwithstanding
the foregoing, Borrower may incur indebtedness for up to $650,000 collateralized
by cash surrender value of life insurance.
c. Liens and Encumbrances. Except as agreed in 3.b., create, incur,
assume any mortgage, pledge, encumbrance, lien or charge of any kind (including
the charge upon property at any time purchased or acquired under conditional
sale or other title retention agreement) upon any asset now owned or hereafter
acquired by it, other than liens for taxes not delinquent and liens in Bank's
favor.
d. Loans, Investments, Secondary Liabilities. Make any loans or advances
to any person or other entity other than in the ordinary and normal course of
its business as now conducted or make any investment in the securities of any
person or other entity having less than an A1P1 rating by Xxxxx'x Investors
Service; or guarantee or otherwise become liable upon the obligation of any
person or other entity, except by endorsement of negotiable instruments for
deposit or collection in the ordinary and normal course of its business.
e. Acquisition or Sale of Business; Merger or Consolidation. Purchase or
otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor;
or sell any assets except in the ordinary and normal course of its business or
fixed assets, or any property or other assets necessary for the continuance of
its business as now
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conducted, including without limitation the selling of any property or other
asset accompanied by the leasing back of the same.
f. Dividends, Stock Payments. Declare or pay any dividend (other than
dividends payable in common stock of Borrower) or make any other distribution on
any of its capital stock now outstanding (except for dividends required to be
paid on Series B Redeemable Preferred Stock) or hereafter issued or purchase,
redeem or retire any of such stock (except for Series B Redeemable Preferred
Stock).
g. Capital Expenditures. Make or incur consolidated obligations for
capital expenditures in excess of $1,900,000 in the period from the date hereof
to OCTOBER 31, 1997 or in excess of $1,900,000 in any one fiscal year
thereafter.
h. Lease Liability. Make or incur consolidated liability for payments of
rent under leases of real property in excess of $850,000 and personal property
in excess of $700,000 in any one fiscal year.
4. Should there be a default under the Security and Loan Agreement, the
General Security Agreement or under the Note, all obligations, loans and
liabilities of Borrower to Bank, due or to become due, whether now existing or
hereafter arising, shall, at the option of Bank, become immediately due and
payable without notice or demand, and Bank shall thereupon have the right to
exercise all of its default rights and remedies. Default shall include any
material adverse change in the financial condition or business of Borrower.
5. If any installment payment, interest payment, principal payment or
principal balance payment due hereunder is delinquent ten or more days, Obligor
agrees to pay Bank a late charge in the amount of 5% of the payment so due and
unpaid, in addition to the payment; but nothing in this paragraph to be
construed as any obligation on the part of the holder of this note to accept
payment of any payment past due or less than the total unpaid principal balance
after maturity.
All payments shall be applied first to any late charges owing, then to interest
and the remainder, if any to principal.
6. In addition to the provisions in the Security and Loan Agreement, Eligible
Accounts and Eligible Progress Billing Accounts shall only include such accounts
as Bank in its sole discretion shall determine are eligible from time to time
and shall include, in addition to Borrower's Accounts, Accounts of Datametrics
Technology Systems Corporation. "Eligible Accounts" and "Eligible Progress
Billing Accounts" shall also not include any of the following:
a. Accounts with respect to which the account debtor is an officer,
director, shareholder, employee, subsidiary or affiliate of Borrower.
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b. Accounts with respect to which 25% or more of the account debtor's
total accounts or obligations outstanding to Borrower are more than 90 days from
invoice date are not eligible.
c. Accounts representing xxxxxxxx for service or maintenance contracts or
for inventory or equipment on rent to the account debtor.
d. For accounts representing more than 25% of total accounts receivable,
the balance in excess of the 25% is not eligible. However, the Bank may deem,
at its sole discretion, the entire amount, or any portion thereof, eligible.
e. Accounts with respect to international transactions unless insured to
the satisfaction of Bank, or covered by letters of credit issued by or confirmed
by a bank satisfactory to Bank.
f. Accounts receivable from creditors (contra accounts) to the extent of
the offsetting accounts payable.
g. Credit balances greater than 90 days.
h. Federal Government accounts unless Assignment of Claims is filed.
7. All financial covenants and financial information referenced herein shall
be interpreted and prepared in accordance with generally accepted accounting
principles applied on a basis consistent with previous years. Compliance with
financial covenants shall be calculated and monitored on a quarterly basis.
8. Borrower affirmatively covenants that so long as any loans, obligations or
liabilities remain outstanding or unpaid to Bank, it will:
a. Maintain a minimum of consolidated tangible net worth (meaning the
excess of all consolidated assets, excluding any value for goodwill, trademarks,
patents, copyrights, organization expense, and other similar intangible items,
over its consolidated liabilities) of not less than $5,800,000 presently and
thereafter. All subordinated debt shall be considered equity for calculation of
financial covenants.
b. At all times maintain consolidated working capital (Borrower's
consolidated current assets minus consolidated current liabilities) of not less
than $5,000,000 presently and thereafter.
c. At all times maintain a consolidated current ratio of at least 1.50 to
1.0. "Current ratio" is the ratio of consolidated current assets to consolidated
current liabilities.
d. Maintain a maximum ratio of consolidated total debt to consolidated
tangible net worth not to exceed 1.50 TO 1.0.
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e. Achieve profitability on a quarterly basis.
f. Except for payroll and income tax depository accounts, maintain all
significant bank accounts and banking relationship with Bank.
g. As of and within 15 working days from each month-end, deliver to Bank,
a borrowing certificate certified by an officer of Borrower, an accounts
receivable aging reconciled to the general ledger of Borrower, a detailed
accounts payable aging reconciled to the Borrower's general ledger and setting
forth the amount of any book overdraft or the amount of checks issued but not
sent. All the foregoing will be in a form and with such detail as Bank may
request from time to time. Provide Bank a customer listing with addresses on a
quarterly basis. Sales and cash receipts reporting will be made to the Bank on
a minimum of three times a week basis.
h. Within 45 days after the end of each quarter, deliver to Bank
Borrower's Form 10-Q, including a profit and loss statement and a balance sheet
in form satisfactory to Bank all certified by an officer of Borrower.
i. Within 90 days after the end of Borrower's fiscal year, deliver to
Bank Borrower's Form 10-K, including the same financial statements as otherwise
provided quarterly together with Changes in Financial Position Statement,
certified with a unqualified opinion by an independent certified public
accountant selected by Borrower but acceptable to Bank.
j. Within 5 days of filing, deliver to Bank copies of the income tax
returns of Borrower.
k. Rights and Facilities. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business or partnership, maintain and preserve its existence.
l. Insurance. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to the Bank. Bank to be named as Loss
Payee.
m. Taxes and Other Liabilities. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and any of
its other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse
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effect upon its financial condition or the loss of any right of
redemption from any sale thereunder; and
(b) It shall have set aside on its books reserves (segregated to the
extent required by generally accepted accounting practice) deemed by
it adequate with respect thereto.
n. Records and Reports. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles or a
basis consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at reasonable times, at least
two times a year.
9. The rate of interest applicable to the Loan Account shall be 2.00% per year
in excess of the rate of interest which Bank has announced as its prime lending
rate ("Prime Rate") which shall vary concurrently with any change in such Prime
Rate. Interest shall be computed at the above rate on the basis of the actual
number of days during which the principal balance of the loan account is
outstanding divided by 360, which shall for interest computation purposes be
considered one year.
10. Miscellaneous Provisions. Failure or Indulgence Not Waiver. No failure
or delay on the part of your Bank or any holder or Notes Issued hereunder, in
the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof or of any other
right, power or privilege. All rights and remedies existing under this
agreement or any not issued in connection with a loan that your Bank may make
hereunder, are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
11. This addendum is executed by and on behalf of the parties as of the date
first above written.
12. Notwithstanding the provisions of the Security and Loan Agreement (Accounts
Receivable and/or Inventory), the following provision shall apply to all
obligations of the Borrower to the Bank: All sums received by Bank, whether
from Borrower or from Borrower's account debtors, shall be applied to the
outstanding loan balance on the 2nd (second) day following receipt thereof by
the Bank. Interest shall continue to accrue on all loans outstanding pursuant
to the Loan and Security Agreement until sums received are applied as herein
provided.
DATAMETRICS CORPORATION "BORROWER" IMPERIAL BANK "BANK"
BY: /s/Xxxxxx Xxxxx BY: /s/Xxxxx XxXxxxxx
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Xxxxxx Xxxxx Xxxxx XxXxxxxx
Chairman Senior Vice President
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