Exhibit 10.1
 
FIRST AMENDMENT TO CREDIT
AGREEMENT AND LIMITED WAIVER
 
This FIRST AMENDMENT TO CREDIT AGREEMENT AND LIMITED WAIVER (this “First
Amendment”) dated as of September 11, 2009 made by and among CYALUME
TECHNOLOGIES, INC., a Delaware corporation (the “Borrower”), CYALUME
TECHNOLOGIES HOLDINGS, INC., a Delaware corporation (the “Holding Company”) and
TD BANK, N.A., as Administrative Agent and as the Lender (the “Agent”).
 
Background
 
The Borrower, the Holding Company and the Agent entered into a credit agreement
(the “Original Credit Agreement”) dated as of December 19, 2008.  The Borrower
has requested a waiver of the Senior Leverage Ratio and the Total Debt Service
Coverage Ratio each for the quarter ending June 30, 2009.  In addition, the
Borrower has requested an amendment to the Senior Leverage Ratio.
 
NOW, THEREFORE, in consideration of the promises and the agreements, provisions
and covenants herein contained, the Borrower, the Holding Company and the Agent
hereby agree as follows:
 
1.           Limited Waiver.  Subject to the terms and conditions herein
contained and in reliance on the representations and warranties of the Borrower
herein contained, effective upon the satisfaction of the conditions precedent
set forth in section 3 below, the Agent hereby waives the requirement that the
Borrower be in compliance with the Total Debt Service Ratio contained in
section 12.1(b) of the Original Credit Agreement for the quarter ending June 30,
2009, and the Agent hereby waives the requirement that the Borrower be in
compliance with the Senior Leverage Ratio contained in section 12.2 of the
Original Credit Agreement for the quarter ending June 30, 2009.  The foregoing
limited waivers are limited to the waivers of the specific Total Debt Service
Ratio and Senior Leverage Ratio for the specific time period referred to in this
section 1 and is not a commitment or agreement to grant any waiver in the
future.
 
2.           Amendment.  Subject to the terms and conditions herein contained
and in reliance on the representations and warranties of the Borrower herein
contained, effective upon satisfaction of the conditions precedent contained in
section 3 below:
 
(a)           Section 1.1  “Definitions” of the Original Credit Agreement is
hereby amended by deleting the text of the defined terms below and inserting the
following in lieu thereof is hereby amended as follows:
 
(1)           Adjusted EBITDA.  With respect to any period, an amount equal to
EBITDA for such period plus to the extent accounted for in EBITDA and without
duplication, the sum of (i) Acquired EBITDA and (ii) legal and professional fees
related to Permitted Acquisitions to the extent included in Consolidated Net
Income.  For purposes of calculating trailing twelve (12) month Adjusted EBITDA
for a portion of the first twelve months following Closing, the following shall
apply:  $1,193,000 of restructuring expenses for the quarter ending March 31,
2008 are added, $700,000 of the Holding Company transaction expenses, and
$443,000 of one time Acquisition expenses are added, and $2,751,000 of gains on
settlement of lawsuit are subtracted.
 

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(2)           Applicable Margin.  Effective as of August 1, 2009, so long as no
Event of Default exists and subject to the terms of this definition, the
applicable per annum percentage set forth below; provided, that if any Event of
Default exists the applicable per annum percentage shall be that specified for
Level II.
 
Level
Senior Leverage Ratio
LIBOR Rate Margin
Base Rate Margin
       
I
less than 2.0:1.0
5.00%
5.00%
       
II
greater than or equal to 2.0:1.0
5.50%
5.50%

 
Any change in the Applicable Margin required pursuant to the foregoing shall
become effective on the fifth (5th) Business Day after the Agent receives the
Borrower’s officer’s certificate under Section 10.4 for the Borrower’s fiscal
quarter or year-end, as the case may be, in question; provided that interest
rate reductions shall become final only on the basis of Borrower’s annual
audited financial statements and (a) in the event that such annual audited
financial statements establish that the Borrower was not entitled to a rate
reduction which was previously granted, the Borrower shall, upon written demand
by the Agent, repay to the Agent an amount equal to the excess of (i) interest
at the rate which should have been charged based on such annual audited
financial statement(s) to (ii) the rate actually charged on the basis of the
Borrower’s quarterly financial statement(s) and (b) in the event that such
annual audited financial statements establish the Borrower was entitled to a
rate reduction which was previously not granted, the Agent shall, upon written
demand by the Borrower, apply the excess of (i) the rate actually charged on the
basis of the Borrower’s quarterly financial statement(s) to (ii) interest at the
rate which should have been charged based on such annual audited financial
statement(s), to the payment of principal outstanding under the Term A Note and
if no amounts are outstanding thereunder, under the Term B Note, in inverse
order of maturity without the payment of any premium of penalty and if not
amounts are outstanding thereunder to the payments of the Revolving Credit Loans
and if no Revolving Credit Loans are outstanding such excess shall be remitted
to the Borrower; provided, that in the event of a dispute as to the appropriate
fiscal quarter as to which any adjustment should be allocated, the decision of
the independent accountants of the Borrower shall be made in accordance with
GAAP and shall be binding upon the Agent and the Borrower absent manifest error;
and, provided further, that in the event that the Borrower fails to provide any
financial statements or officer’s certificate on a timely basis in accordance
with Section 10.4, any interest rate increase payable as a result thereof shall
be retroactively effective to the date on which the financial statements or
officer’s certificate, as the case may be, should have been received by the
Agent in accordance with Section 10.4 and the Borrower shall pay any amount due
as a result thereof upon written demand from the Agent .  The Agent shall send
the Borrower a written acknowledgement of each change in the Applicable Margin
in accordance with the Agent’s customary procedures as in effect from time to
time, but the failure to send such acknowledgement shall have no effect on the
effectiveness or applicability of the foregoing provisions of this definition or
the Borrower’s obligations with respect to payment and calculation of interest
on the Loans.
 
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(3)           Borrowing Base.  At the relevant time of reference thereto, an
amount determined by the Agent by reference to the most recent Borrowing Base
Report delivered to the Agent pursuant to §10.4(h), as adjusted pursuant to the
provisions below, which is equal to the sum of:  80% of Eligible Accounts
Receivable plus the lesser of (i) $2,500,000 which amount will decrease in the
amount of $100,000 on the last day of each month with the first such reduction
occurring on August 31, 2009 until December 31, 2009 (when the amount of this
subsection (i) will be $2,000,000 or (ii) 50% of Eligible Raw Material  and
Finished Goods Inventory.
 
The Required Lenders may, in their reasonable discretion, from time to time, in
accordance with §2.7:  (x) reduce the lending formula with respect to any
Eligible Accounts Receivable to the extent that the Required Lenders reasonably
determine that:  (i) the dilution with respect of the Accounts Receivable for
any period has increased in any material respect or may be reasonably
anticipated to increase in any material respect above historical levels, or
(ii) the general creditworthiness of account debtors or other obligors of the
Borrower has declined materially or (y) reduce the lending formula with respect
to any Eligible Raw Material and Finished Goods Inventory to the extent that the
Required Lenders determine that:  (i) the number of days of the turnover of the
inventory owned by Borrower for any period has changed in any material adverse
respect, (ii) the liquidation value of any Eligible Raw Material and Finished
Goods Inventory, or any category thereof, has materially decreased, or (iii) the
nature and quality of the inventory has changed materially and adversely.  In
determining whether to reduce the lending formula(s), the Required Lenders may
consider events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts Receivable and Eligible Raw Material and Finished
Goods Inventory.
 
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(4)           EBITDA.  With respect to any period, an amount equal to the
Consolidated Net Income of the Borrower and its Subsidiaries for such period,
plus to the extent accounted for in Consolidated Net Income during such period
and without duplication the sum of:  (i) depreciation and amortization,
(ii) Consolidated Total Interest Expense for such period, (iii) non-cash
expenses, (iv) income tax expense and (v) extraordinary losses (net of tax
effects) approved by the Agent in writing, all as determined in accordance with
GAAP minus the sum of:  (a) interest and dividend income during such period,
(b) gain on the sale of assets other than the sale of inventory in the ordinary
course of business during such period, (c) extraordinary gains during such
period, and (d) any non-cash components of income during such period.
 
(5)           Revolving Credit Loan Maturity Date.  December 31, 2010, unless
sooner occurring following acceleration.
 
(6)           Total Debt Service Coverage Ratio.  The ratio of (i) EBITDA for
the two fiscal quarters then ending (including deductions for any Restricted
Payments during the period) to (ii) Consolidated Total Debt Service for the same
period.
 
(b)           Section 6.2  “Interest on Loans” of the Original Credit Agreement
is hereby amended by deleting the text contained therein and inserting the
following in lieu thereof:
 
Section 6.2                                Interest on Loans.
 
(a)           Unless an Event of Default shall have occurred and the Default
Rate applies, the outstanding principal of the Term Loans shall bear interest at
(x) the Reserve Adjusted LIBOR plus the Applicable Margin for the LIBOR Rate
Loans or the Base Rate plus the Applicable Margin for the Base Rate Loans.
 
(b)           Unless an Event of Default shall have occurred and the Default
Rate applies, the outstanding principal of the Revolving Credit Loans shall bear
interest at a rate per annum selected by the Borrower equal to:
 
(i)           the Base Rate plus the Applicable Margin for the Base Rate Loans;
or
 
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(ii)           Reserve Adjusted LIBOR plus the Applicable Margin for the LIBOR
Rate Loans.
 
(c)           The Borrower promises to pay interest on the outstanding amount of
each Revolving Credit Loan, in arrears, on the first day of each calendar month
commencing with the payment to be made on September 1, 2009 (subject to the
Following Business Day Convention).
 
(d)           The Borrower promises to pay interest on the outstanding amount of
each of the Term Loans, in arrears, on the first day of each calendar month
commencing with the payment to be made on September 1, 2009 (subject to the
Following Business Day Convention).
 
(c)           Section 11.4  “Restricted Payments” contained in the Original
Credit Agreement is hereby amended by deleting the text contained therein and
inserting the following in lieu thereof:
 
Section 11.4  Restricted Payments.  The Borrower will not and will not permit
any of its Subsidiaries to make any Restricted Payment:
 
(i)           provided, that: the Borrower may make a Distribution to the
Holding Company to allow the Holding Company to make a payment of the Management
Fee under the Management Agreement in the amount of such Management Fees upon
such payment, so long as: (x) the aggregate amount of all of such payments made
pursuant to this clause (a) shall not exceed $21,000 in any calendar month and
(y) both at the time of and after giving effect to each such payment no Default
or Event of Default shall have occurred and be continuing or would be caused if
such payment were made;
 
(ii)           provided, that so long as no Default or Event of Default has
occurred and is continuing, the Borrower may make a Distribution to the Holding
Company to allow the Holding Company to pay out-of-pocket expenses for
accounting, board of director fees and expenses, investor relations, legal, SEC
reporting and other operating costs (excluding such costs and expenses incurred
in connection with closing the Acquisition and this financing transaction) in an
amount not to exceed $500,000 in any fiscal year of the Borrower;
 
(iii)           provided, that any Subsidiary of the Borrower may make a
Distribution to the Borrower;
 
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(iv)           provided, that the Borrower may make payments on Subordinated
Debt permitted under an Agent Approved Subordination Agreement;
 
(v)           provided, that the Borrower may pay to the Seller under the
Purchase Agreements net cash proceeds actually received which it is required to
pay to such Sellers from the litigation described in Section 8.12 of the
Purchase Agreement in effect on the date hereof; or
 
(vi)           provided, that the Borrower may make a Distribution to the
Holding Company to allow the Holding Company to pay costs and expenses,
including, without limitation, legal fees, incurred in connection with closing
the Acquisition and this financing transaction so long as:  (x) the aggregate
amount of such payments made pursuant to this clause (f) shall not exceed
$150,000 in any fiscal quarter and (y) both at the time of and after giving
effect to each such payment no Default or Event of Default shall have occurred
and be continuing or would be caused if such payment were made.
 
(d)           Section 12.2  “Leverage Ratio” contained in the Original Credit
Agreement is deleted in its entirety and the following is hereby inserted in
lieu thereof:
 
Section 12.2                                Leverage Ratio.  At any time during
the periods set forth below, the Senior Leverage Ratio shall not be more than
the ratio set forth below during such period:
 
Period
Ratio
   
The date hereof through and including September 30, 2009
3.60:1.00
   
October 1, 2009, through and including December 31, 2009
3.00:1.00
   
January 1, 2010, through and including September 30, 2010
2.50:1.00
   
October 1, 2010, through and including September 30, 2011
2.00:1.00
   
October 1, 2011, and thereafter
1.50:1.00

 
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(e)           The original Credit Agreement is hereby amended by adding the
following new Section 12.5 “Minimum Quarterly EBITDA”:
 
Section 12.5 Minimum Quarterly EBITDA.  At any time during the periods set forth
below the minimum EBITDA of the Borrower and its subsidiaries for the fiscal
quarter then ending shall not be less than the amount set forth below:
 
Quarterly Date
Minimum EBITDA for Quarter
   
September 30, 2009   
$1,700,000
   
December 31, 2009  
$1,700,000
   
March 31, 2010 and the last day of each quarter thereafter
$2,000,000

                            
3.           Conditions Precedent.  The provisions of this First Amendment shall
be effective as of the date on which all of the following conditions shall be
satisfied:
 
(a)           the Borrower shall have delivered to the Agent a fully executed
counterpart of this first amendment;
 
(b)           the Borrower shall have paid all fees, costs and expenses owing to
the Agent and its counsel on or before the date hereof;
 
(c)           the Agent shall have indicated its consent and agreement by
executing this First Amendment;
 
(d)           the Borrower shall have delivered certified copies of the
resolutions of its Board of Directors approving the execution of this First
Amendment and the actions contemplated herein, in form and substance
satisfactory to the Agent; and
 
(e)           the Borrower shall have paid the Agent $75,000 for this First
Amendment.
 
4.           Miscellaneous.
 
(a)           Ratification.  The terms and provisions set forth in this First
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Original Credit Agreement and except as expressly modified and
superseded by this First Amendment, the terms and provisions of the Original
Credit Agreement and the other Loan Documents are ratified and confirmed and
shall continue in full force and effect. The Borrower and the Agent agree that
the Original Credit Agreement as amended hereby and the other Loan Documents
shall continue to be legal, valid, binding and enforceable in accordance with
their respective terms. For all matters arising prior to the effective date of
this First Amendment, the Original Credit Agreement (as unmodified by this
Amendment) shall control.  The Borrower hereby acknowledges that, as of the date
hereof, the security interests and liens granted to the Agent under the Credit
Agreement and the other Loan Documents are in full force and effect, are
properly perfected and are enforceable in accordance with the terms of the
Credit Agreement and the other Loan Documents.
 
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(b)           Representations and Warranties.  The Borrower hereby represents
and warrants to the Agent that the representations and warranties set forth in
the Loan Documents, after giving effect to the waiver contained in this First
Amendment, are true and correct in all material respects on and as of the date
hereof, with the same effect as though made on and as of such date except with
respect to any representations and warranties limited by their terms to a
specific date.  The Borrower further represents and warrants to the Agent that
the execution, delivery and performance by the Borrower of this consent letter
(i) are within the Borrower’s power and authority; (ii) have been duly
authorized by all necessary corporate and shareholder action; (iii) are not in
contravention of any provision of the Borrower’s certificate or articles of
incorporation or bylaws or other organizational documents; (iv) do not violate
any law or regulation, or any order or decree of any Governmental Authority; (v)
do not conflict with or result in the breach or termination of, constitute a
default under or accelerate any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which the
Borrower is a party or by which the Borrower or any of its property is bound;
(vi) do not result in the creation or imposition of any Lien upon any of the
property of the Borrower other than in favor of Agent; (vii) do not require the
consent or approval of any Governmental Authority.  All representations and
warranties made in this First Amendment shall survive the execution and delivery
of this First Amendment, and no investigation by the Agent shall affect the
representations and warranties or the right of the Agent to rely upon them.
 
(c)           Release.  In addition, to induce the agent to agree to the terms
of this first amendment, the borrower represents and warrants that as of the
date of its execution of this first amendment there are no claims or offsets
against or rights of recoupment with respect to or defenses or counterclaims to
its obligations under the loan documents and in accordance therewith it:
 
(i)           Waives any and all such claims, offsets, rights of recoupment,
defenses or counterclaims, arising prior to the date of its execution of this
amendment and
 
(ii)           Releases and discharges the agent and its officers, directors,
employees, agents and affiliates (collectively the "released parties") from any
and all liabilities, claims, causes of action, in law or equity, which the
borrower or any guarantor may have against any released party arising prior to
the date hereof in connection with the loan documents or the transactions
contemplated thereby.
 
(d)           Reference to Agreement.  Each of the Loan Documents, including the
Original Credit Agreement and any and all other agreements, documents, or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Original Credit Agreement as amended hereby, are
hereby amended so that any reference in such Loan Documents to the Original
Credit Agreement shall mean a reference to the Original Credit Agreement as
amended hereby.
 
(e)           Expenses of the Agent.  As provided in the Credit Agreement, the
Borrower agrees to pay all reasonable costs and expenses incurred by the Agent
in connection with the preparation, negotiation, and execution of this First
Amendment, including without limitation, the reasonable costs and fees of the
Agent’s legal counsel.
 
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(f)           Severability.  Any provision of this First Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this First Amendment and the effect thereof shall
be confined to the provision so held to be invalid or unenforceable.
 
(g)           Applicable Law.  This Amendment shall be governed by and construed
in accordance with the laws of The Commonwealth of Massachusetts and the
applicable laws of the United States of America.
 
(h)           Successors and Assigns.  This First Amendment is binding upon and
shall inure to the benefit of the Agent, the Holding Company and the Borrower,
and their respective successors and assigns, except the Borrower may not assign
or transfer any of its rights or obligations hereunder without the prior written
consent of the Agent.
 
(i)           Counterparts.  This First Amendment may be executed in one or more
counterparts and on facsimile counterparts, each of which when so executed shall
be deemed to be an original, but all of which when taken together shall
constitute one and the same agreement.
 
(j)           Effect of Waiver.  No consent or waiver, express or implied, by
the Agent to or for any breach of or deviation from any covenant, condition or
duty by the Borrower shall be deemed a consent or waiver to or of any other
breach of the same or any other covenant, condition or duty.
 
(k)           Headings.  The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
 
(l)           Entire Agreement.  This First Amendment embodies the entire
agreement among the parties hereto with respect to the subject matter thereof,
and supersedes any and all prior representations and understandings, whether
written or oral, relating to this Amendment.  There are no oral agreements among
the parties hereto with respect to the subject matter hereof.
 
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IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of
the date first above written.
 

  BORROWER           CYALUME TECHNOLOGIES, INC.          
 
By:
/s/ Michael Bielonko       Name: Michael Bielonko       Title: Chief Financial
Officer          

 

  HOLDING COMPANY           CYALUME TECHNOLOGIES HOLDINGS, INC.          
 
By:
/s/ Derek Dunaway       Name: Derek Dunaway       Title: Chief Executive Officer
         

 

  AGENT           TD BANK, N.A.          
 
By:
/s/ Greg Spurr        Name: Gregory W. Spurr       Title: Senior Vice President
         

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