Exhibit 10.1
THIRD MODIFICATION AGREEMENT

          DATE:   As of March 31, 2009 (the “Effective Date”)  
PARTIES:
  Borrower:   WHITE ELECTRONIC DESIGNS CORPORATION,
an Indiana corporation  
 
  Bank:   JPMORGAN CHASE BANK, N.A., as Administrative
Agent and Lender

RECITALS:
     A. Bank has heretofore established in favor of Borrower a credit
accommodation (“Loan”) under that certain Credit Agreement, dated as of April 3,
2007 (as amended from time to time, the “Credit Agreement”), in the original
principal amount of $30,000,000.00, which is evidenced by that certain Note
(Revolving Loans), dated as of April 3, 2007 (as amended from time to time, the
“Note”). As of the Effective Date, there is no outstanding principal balance on
the Loan.
     B. The Note, the Credit Agreement and the other documents evidencing and
securing the Loan (a) have heretofore been amended by that certain Modification
Agreement, dated February 12, 2008 (the “First Modification Agreement”), and
(ii) that certain Second Modification Agreement, dated August 15, 2008 (the
“Second Modification Agreement”), and (b) as heretofore modified are referred to
hereinafter, jointly and severally, as the “Credit Documents.”
     C. All undefined capitalized terms used herein shall have the meaning given
them in the Credit Agreement.
     D. The Loan is secured by, among other things, the Security Documents. The
agreements, documents, and instruments securing the Loan and the Credit
Agreement are referred to individually and collectively as the “Security
Documents.”
     E. Borrower has requested that Bank further modify the Loan and the Credit
Documents as provided herein. Bank is willing to so modify the Loan and the
Credit Documents, subject to the terms and conditions herein.
AGREEMENT:
     For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Bank agree as follows:
SECTION 1. ACCURACY OF RECITALS, ACKNOWLEDGMENTS.
     1.1 Borrower acknowledges the accuracy of the Recitals.

 

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SECTION 2. MODIFICATION OF CREDIT DOCUMENTS; OTHER AGREEMENTS.
     2.1 Section 1.01 of the Credit Agreement is hereby amended by the addition
of the following definitions of in their respective correct alphabetic
positions:
     “Adjusted One Month LIBOR Rate” means an interest rate per annum equal to
the sum of (i) 2.50% per annum plus (ii) the Adjusted LIBO Rate for a one month
Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day); provided that, for the avoidance of doubt,
the Adjusted LIBO Rate for any day shall be based on the rate appearing on the
Reuters Screen LIBOR01 Page (or on any successor or substitute page) at
approximately 11:00 a.m. London time on such day (without any rounding).
     “CB Floating Rate” means the Prime Rate; provided that the CB Floating Rate
shall never be less than the Adjusted One Month LIBOR Rate for a one month
Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day). Any change in the CB Floating Rate due to a
change in the Prime Rate or the Adjusted One Month LIBOR Rate shall be effective
from and including the effective date of such change in the Prime Rate or the
Adjusted One Month LIBOR Rate, respectively.
     “CBFR,” when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the CB Floating Rate.
     2.2 Section 1.01 of the Credit Agreement is hereby amended by the deletion
of the definitions of the terms “ABR” and “Alternate Base Rate.”
     2.3 The definition of “Applicable Rate” in Section 1.01 of the Credit
Agreement is hereby amended to read as follows:
     “Applicable Rate” means, for any day, with respect to any CBFR Loan or
Eurodollar Loan, or with respect to the facility fees payable hereunder, as the
case may be, the applicable rate per annum set forth below under the caption
“CBFR Spread,” “Eurodollar Spread,” “Facility Fee Rate,” or “LC Rate” as the
case may be:

              CBFR   Eurodollar   Facility Fee     Spread   Spread   Rate Per
Annum   LC Rate 1.0%   2.65%   0.5%   1.50%

     2.4 The definition of “EBITDA” in Section 1.01 of the Credit Agreement is
hereby amended to read, in its entirety, as follows:
     “EBITDA” means, as applied to any Person, the Net Income of such Person
(excluding the effect of any non-cash goodwill impairments or non-cash gains or
losses from discontinued operations) plus interest expense, plus depreciation
expense, plus

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amortization expense, plus income tax expense, plus non-cash non-recurring
expense, minus non-cash non-recurring income, and minus extraordinary gains, all
as determined in accordance with GAAP, and all computed for any period of twelve
consecutive months.
     2.5 The definition of “interest Period” in Section 1.01 of the Credit
Agreement is hereby amended to read, in its entirety, as follows:
     “Interest Period” means with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, three or six months
thereafter, as the Borrower may elect; provided that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
     2.6 The definition of “LIBO Rate” in Section 1.01 of the Credit Agreement
is hereby amended to read as follows:
     “LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Reuters Screen LIBOR01 Page (or on any
successor or substitute page thereof, or any successor to or substitute for such
page, providing rate quotations comparable to those currently provided on such
page, as determined by the Bank from time to time for purposes of providing
quotations of interest rates applicable to dollar deposits in the London
interbank market) at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the “LIBO Rate”
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of the Bank in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
     2.7 The definition of “Prime Rate” in Section 1.01 of the Credit Agreement
is hereby amended to read as follows:
     “Prime Rate” means the rate of interest per annum publicly announced from
time to time by JPMorgan Chase Bank, N.A. as its prime rate; each change in the
Prime Rate

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shall be effective from and including the date such change is publicly announced
as being effective. The Prime Rate is a reference rate and is not necessarily
the lowest rate.
     2.8 The definition of “Revolving Loan Maturity Date” in Section 1.01 of the
Credit Agreement is hereby amended to read as follows:
“Revolving Loan Maturity Date” means March 31, 2011.
     2.9 From and after the date hereof, the following terms and conditions will
govern the Loan:
          (a) The parties agree that the maximum aggregate amount of the
Commitment of all Lenders is hereby reduced from $30,000,000 to $10,000,000. In
furtherance thereof, each reference in the Note, the Credit Agreement and the
other Credit Documents to $30,000,000 is used to signify the maximum amount of
Loan, is hereby replaced by $10,000,000.
          (b) The parties further agree that the interest rate borne by Loans
and Borrowings may no longer be related to “ABR” and “Alternate Base Rate,” each
of which is intended to be eliminated hereby. Therefore, Borrower’s right to
choose the interest rate applicable to any Loan or Borrowing (i) will no longer
include the right to have such Loan or Borrowing bear interest with reference to
the Alternate Base Rate, but (ii) will include the right to have such Loan or
Borrowing bear interest with reference to the CB Floating Rate or the Adjusted
LIBO Rate. In furtherance thereof, wherever the term “ABR” is used in the Credit
Agreement, it is hereby deleted and replaced by the term “CBFR,” as defined
herein, and wherever the term “Alternate Base Rate” is used in the Credit
Agreement, it is hereby deleted and replaced by the term “CB Floating Rate.”
          (c) If Borrower elects to have a Loan or Borrowing bear interest with
reference to the Adjusted LIBO Rate, such Loan or Borrowing must have an
original, aggregate principal amount of not less than $100,000. Borrower
acknowledges and agrees that there may not be more than five (5) Eurodollar
Loans outstanding at any one time.
     2.10 Section 5.01(b) of the Credit Agreement is hereby amended by deleting
“sixty (60) days” from the second and third lines thereof, and substituting
therefor “forty-five (45) days.”
     2.11 Section 5.01(c) of the Credit Agreement is hereby amended to read in
its entirety as follows:
     (c) a certificate of a Financial Officer of the Borrower substantially in
the form of Exhibit “C” (i) certifying as to whether a Default has occurred and,
if a Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with Section 6.09 and
(iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 3.04 and, if any such change has occurred,

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specifying the effect of such change on the financial statements accompanying
such certificate. Such certificate must be delivered (1) concurrently with each
delivery of financial statements under clause (a) or (b) above, (2) unless
Borrower’s financial statements have been furnished within 90 days prior to at
Borrower’s request that a Loan or Borrowing be made hereunder, at the time of
Borrower’s making such request, and (3) within forty-five (45) days of the last
day of each month, whenever there are Loans or Borrowings outstanding; and
     2.12 Section 6.06 of the Credit Agreement is hereby amended to read in its
entirety as follows:
6.06 Restricted Payments. Permit any of its Subsidiaries to, declare or make, or
agree to pay or make, directly or indirectly, any Restricted Payment, except
(i) the Borrower may declare and pay dividends with respect to its Equity
Interests payable solely in additional shares of its common stock,
(ii) Subsidiaries may declare and pay dividends ratably with respect to their
Equity Interests, (iii) the Borrower may make Restricted Payments pursuant to
and in accordance with stock option plans or other benefit plans for management
or employees of the Borrower and its Subsidiaries, (iv) the Borrower may
purchase, redeem or otherwise acquire up to, but no more than, twenty percent
(20%) of its common stock prior to the termination of this Agreement, and
(v) cash dividends and distributions paid on the common stock of Borrower;
provided, for purpose of this clause (v), that (1) no Default has occurred and
is continuing at the time such dividend or distribution is paid, (2) the
aggregate amount of all such Restricted Payments pursuant to this clause
(v) made by Borrower in any fiscal year docs not exceed 50% of Net Income (if
greater than $0) earned during the immediately preceding fiscal year, and (3) if
Restricted Payments made pursuant to this clause (v) in any fiscal year are less
than permitted in such fiscal year, the excess permitted amount for such fiscal
year may be carried forward to the next succeeding fiscal year.
     2.13 Section 6.09 of the Credit Agreement is hereby amended to read, in its
entirety, as follows:
     Section 6.09 Financial Covenants. The Borrower will not:
     (a) Minimum EBITDA. Permit at any time its EBITDA to be less than
$4,500,000.
     (b) Minimum Liquidity. Permit at any time the sum of (i) its unencumbered
cash, and (ii) the market value of its

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unencumbered marketable securities held at JPMorgan Chase Bank, N.A. to be less
than $20,000,000.
     (c) Acquisitions. Permit at any time its expenditures on Permitted
Acquisitions during the period from March     , 2009, to March 31, 2011, to
exceed $10,000,000, without Bank’s prior written consent.
     2.14 The Credit Agreement is hereby amended by replacing the current form
of Exhibit “C” attached thereto, with the form of such Compliance Certificate in
the form attached hereto as Attachment “1.”
SECTION 3. RATIFICATION OF CREDIT DOCUMENTS AND COLLATERAL.
     The Credit Documents are ratified and affirmed by Borrower and shall remain
in full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Credit Documents shall remain
as security for the Loan and the obligations of Borrower in the Credit
Documents.
SECTION 4. BORROWER REPRESENTATIONS AND WARRANTIES.
     Borrower represents and warrants to Bank:
     4.1 No default or event of default under any of the Credit Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Credit
Documents as modified herein has occurred and is continuing.
     4.2 There has been no material adverse change in the financial condition of
Borrower or any other person whose financial statement has been delivered to
Bank in connection with the Loan from the most recent financial statement
received by Bank.
     4.3 Each and all representations and warranties of Borrower in the Credit
Documents are accurate on the date hereof.
     4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Credit Documents as modified herein.
     4.5 The Credit Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms.
     4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Credit Documents as modified
herein. The execution and delivery of this Agreement and the performance of the
Credit Documents as modified herein have been duly authorized by all requisite
action by or on behalf of Borrower. This Agreement has been duly executed and
delivered on behalf of Borrower.

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SECTION 5. BORROWER COVENANTS.
     Borrower covenants with Bank:
     5.1 Borrower shall execute, deliver, and provide to Bank such additional
agreements, documents, and instruments as reasonably required by Bank to
effectuate the intent of this Agreement.
     5.2 Borrower fully, finally, and absolutely and forever releases and
discharges Bank and its present and former directors, shareholders, officers,
employees, agents, representatives, successors and assigns, and their separate
and respective heirs, personal representatives, successors and assigns, from any
and all actions, causes of action, claims, debts, damages, demands, liabilities,
obligations, and suits, of whatever kind or nature, in law or equity of
Borrower, whether now known or unknown to Borrower, and whether contingent or
matured, (i) in respect of the Loan, the Credit Documents, or the actions or
omissions of Bank in respect of the Loan or the Credit Documents and
(ii) arising from events occurring prior to the date of this Agreement.
     5.3 Borrower hereby agrees that, from and after the date hereof, it shall
maintain Bank as its principal depository bank, including for the maintenance of
business, cash management, operating and administrative deposit accounts,
disbursement services and investment financial services.
SECTION 6. CONDITIONS.
     6.1 The agreements of Bank and the modifications contained herein shall not
be binding upon Bank until Bank has executed and delivered this Agreement and
Bank has received, at Borrower’s expense, all of the following, all of which
shall be in form and content satisfactory to Bank and shall be subject to
approval by Bank:
          (a) An original of this Agreement fully executed by the Borrower and
Guarantors.
          (b) Such resolutions or authorizations and such other documents as
Bank may require relating to the existence and good standing of that
corporation, partnership or trust, and the authority of any person executing
this Agreement or other documents on behalf of that corporation, limited
liability company, partnership or trust.
          (c) Payment of all the internal and external costs and expenses
incurred by Bank in connection with this Agreement (including, without
limitation, inside and outside attorneys, appraisal, appraisal review,
processing, title, filing, and recording costs, expenses, and fees).
SECTION 7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
WAIVER.
     The Credit Documents as modified herein contain the complete understanding
and agreement of Borrower and Bank in respect of the Loan and supersede all
prior representations,

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warranties, agreements, arrangements, understandings, and negotiations. No
provision of the Credit Documents as modified herein may be changed, discharged,
supplemented, terminated, or waived except in a writing signed by the parties
thereto.
SECTION 8. BINDING EFFECT.
     The Credit Documents as modified herein shall be binding upon and shall
inure to the benefit of Borrower and Bank and their successors and assigns and
the executors, legal administrators, personal representatives, heirs, devisees,
and beneficiaries of Borrower, provided, however, Borrower may not assign any of
its right or delegate any of its obligation under the Credit Documents and any
purported assignment or delegation shall be void.
SECTION 9. CHOICE OF LAW.
     This Agreement shall be governed by and construed in accordance with the
laws of the State of Arizona, without giving effect to conflicts of law
principles.
SECTION 10. COUNTERPART EXECUTION.
     This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
     DATED as of the date first above stated.

            WHITE ELECTRONIC DESIGNS CORPORATION,
an Indiana corporation
      By:   /s/ Roger A. Derse         Name:   Roger A. Derse        Title:  
VP/CFO     

BORROWER

            JPMORGAN CHASE BANK, N.A., individually
and as Administrative Agent
      By:   /s/ Jeffery M. Hoyt         Name:   Jeffery M. Hoyt        Title:  
SVP     

BANK

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ATTACHMENT “1”
to
THIRD MODIFICATION AGREEMENT
EXHIBIT “C”
COMPLIANCE CERTIFICATE
     This Compliance Certificate (this “Certificate”) is executed and delivered
pursuant to and in accordance with the provisions of that certain Credit
Agreement, dated as of April 3, 2007 (as amended, modified, extended or restated
from time to time, the “Credit Agreement”), among WHITE ELECTRONIC DESIGNS
CORPORATION, an Indiana corporation (“Borrower”), the Lenders party thereto and
JPMORGAN CHASE BANK, N.A., as Administrative Agent (“Bank”). All capitalized
terms used in this Certificate, if not otherwise defined herein, shall have the
respective meanings assigned to such terms under the Credit Agreement.
     The undersigned hereby represents and warrants to Bank as follows:
     1. Authority. The undersigned is a Financial Officer of Borrower.
     2. Review. The undersigned has reviewed (a) the activities of Borrower
during Borrower’s fiscal period ending                                         ,
20      (the “Subject Fiscal Period”), (b) the financial condition of Borrower
as of the last day of the Subject Fiscal Period, and (c) the Credit Agreement
and all of the other Credit Documents.
     3. Compliance. Based upon my review of the financial condition of Borrower
and the other information and documents described in paragraph 2 above, Borrower
(a) has observed, performed and fulfilled its obligations and covenants
contained in the Credit Agreement and the other Credit Documents, (b) without
limiting the generality of Borrower’s statement in clause (a) of this paragraph
3, Borrower is in full compliance with its obligations under Sections 6.01
through 6.08, inclusive, of the Credit Agreement, and (c) no Default or Event of
Default has occurred and is continuing or, if any Default or Event of Default
has occurred, the nature and status of such Default or Event of Default is
described as follows:
     
 
     
 
     
 
     4. GAAP. No change in GAAP or in the application thereof has occurred since
the date of the financial statements accompanying this certificate or if any
change has occurred, the effect of such change in the said financial statements
is as follows:                                
     
 
     
 
     5. Financial Covenants. The financial information of Borrower that the
undersigned has provided below demonstrates the Borrower’s compliance with the
financial covenants set forth in Section 6.09 of the Credit Agreement. All of
such financial information is true and correct as of the last day of the Subject
Fiscal Period (unless another date or a specific time period is stated). The
Subsections specifically referenced below have been provided to identify the
applicable provision in the Credit Agreement which covers the subject financial
covenant. All financial covenants are calculated on a consolidated basis:

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     (a) EBITDA. Borrower shall not permit its EBITDA to be at any time less
than $4,500,000.

         
Net Income:
  $                                           
(excluding certain items per the Credit Agreement)
       
 
       
Plus Interest Expense:
  $                                           
 
       
Plus Depreciation Expense:
  $                                           
 
       
Plus Amortization Expense:
  $                                           
 
       
Plus Income Tax Expense:
  $                                           
 
       
Plus Non-Cash Non-Recurring Expense:
  $                                           
 
       
Less Non-Cash Non-Recurring Income:
  $                                           
 
       
Less Extraordinary Gains:
  $                                           
 
       
Total:
  $                                           

     (b) Minimum Liquidity. Borrower shall not permit the sum of (i) its
unencumbered cash, and (ii) the market value of its unencumbered marketable
securities held at JPMorgan Chase Bank, N.A. to be less than $20,000.000.

         
Unencumbered cash on deposit with Bank:
  $                                           
 
       
Value of its unencumbered marketable securities held with Bank:
  $                                           
 
       
Total
  $                                           

     (c) Acquisitions. Borrower shall not permit at any time its expenditures on
Permitted Acquisitions during the period from March __, 2009, to March 31, 2011
to exceed $10,000,000, without Bank’s prior written consent.

         
Permitted Acquisitions since March      , 2009:
  $                                           

     Dated:                                         

            WHITE ELECTRONIC DESIGNS CORPORATION
      By:           Name:           Title:      

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