EX-10.1






FIFTH AMENDMENT TO SECOND AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT




THIS FIFTH AMENDMENT TO SECOND AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT (this
“Agreement”) is made as of March 31, 2006, by ARGON ST, INC., a Delaware corporation, successor to
SensyTech, Inc., formerly known as Sensys Technologies Inc., a Delaware corporation (“Argon”) (the
“Original Borrower”), RADIX TECHNOLOGIES, INC., a California corporation (“Radix”) and BANK OF
AMERICA, N. A., a national banking association (the “Lender”).



RECITALS




A. Original Borrower and Lender entered into a Second Amended and Restated Financing and
Security Agreement dated as of February 28, 2002, as modified pursuant to a First Amendment to
Second Amended and Restated Financing and Security Agreement dated as of February 28, 2003, a
Second Amendment to Second Amended and Restated Financing and Security Agreement dated as of March
31, 2003, a Third Amendment to Second Amended and Restated Financing and Security Agreement dated
as of February 28, 2004, and a Fourth Amendment to Second Amended and Restated Financing and
Security Agreement dated as of February 28, 2006 (together with the Original Agreement, as amended,
modified, substituted, extended, and renewed from time to time, collectively, the “Financing
Agreement”).



B. The Financing Agreement provides for some of the agreements between Borrower and Lender
with respect to the “Loans” (as defined in the Financing Agreement), including a revolving credit
facility in the maximum principal amount of $15,000,000 and a letter of credit facility as part of
that revolving credit facility.



C. Argon has acquired Radix (Original Borrower and Radix are hereinafter referred to
collectively as “Borrower”) and Radix has executed an Additional Borrower Joinder Supplement of
even date herewith as an Additional Borrower (as defined in the Financing Agreement).



D. Borrower has requested that Lender (a) increase the maximum principal amount of the
revolving credit facility to $40,000,000 and establish a letter of credit facility sub-limit in the
maximum principal amount of $15,000,000 as part of that revolving credit facility, and (b) extend
the Revolving Credit Expiration Date to February 28, 2008.



E. Lender is willing to agree to Borrower’s request on the condition, among others, that this
Agreement be executed.



AGREEMENTS




NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, receipt of which is hereby acknowledged, Borrower and Lender agree as follows:



1. Borrower and Lender agree that the Recitals above are a part of this Agreement.
Unless otherwise expressly defined in this Agreement, terms defined in the Financing Agreement
shall have the same meaning under this Agreement.



2. Borrower and Lender agree that on the date hereof (a) the aggregate outstanding
principal balance under the Revolving Credit Note (subject to change for returned items and other
adjustments made in the ordinary course of business) is $-0- and (b) the Outstanding Letter of
Credit Obligations is $1,516,051.



3. Each Borrower represents and warrants to Lender as follows:



(a) It is a corporation duly organized, and validly existing and in good standing
under the laws of the state of its organization and is duly qualified to do business as a foreign
corporation in good standing in every other state wherein the conduct of its business or the
ownership of its property requires such qualification;



(b) It has the power and authority to execute and deliver this Agreement and perform
its obligations hereunder and has taken all necessary and appropriate corporate/partnership action
to authorize the execution, delivery and performance of this Agreement;



(c) The Financing Agreement, as heretofore amended and as amended by this Agreement,
and each of the other Financing Documents remains in full force and effect, and each constitutes
the valid and legally binding obligation of Borrower, enforceable in accordance with its terms;



(d) All of Borrower’s representations and warranties contained in the Financing
Agreement and the other Financing Documents are true and correct on and as of the date of
Borrower’s execution of this Agreement; and



(e) No Event of Default and no event which, with notice, lapse of time or both would
constitute an Event of Default, has occurred and is continuing under the Financing Agreement or the
other Financing Documents which has not been waived in writing by Lender.



4. The Financing Agreement is hereby amended as follows:



(a) Section 1.1 (Certain Defined Terms) of the Financing Agreement is hereby amended
by deleting the following defined terms in their entirety and inserting the following defined terms
in place thereof:




““Funded Debt” means all outstanding liabilities for borrowed money and other
interest-bearing liabilities, including current and long-term debt, issued letters of
credit, Capital Leases and Subordinated Indebtedness.”




““Letter of Credit Sublimit” has the meaning described in Section 2.2.1 (Letters of
Credit).”




““Permitted Uses” means to finance the performance of Borrower’s Government Contracts,
to support the issuance of commercial and standby letters of credit, Borrower’s short term
working capital purposes and for financing future acquisitions of companies under the
acquisition parameters outlined in EXHIBIT G.”




““Revolving Credit Expiration Date” means February 28, 2008.”



(b) The definitions “Borrowing Base”, “Borrowing Base Deficiency”, “Borrowing Base
Report”, “Eligible Receivable” and “Tangible Net Worth” are hereby deleted in their entirety.



(c) Section 2.1.1 (Revolving Credit Facility) is hereby amended by deleting the
second and third paragraphs of Section 2.1.1 in their entirety and inserting the following in their
place:



“The principal amount of Forty Million Dollars ($40,000,000) is the “Revolving
Credit Committed Amount”. If at any time the unpaid principal balance of the
Revolving Loan exceeds the Revolving Credit Committed Amount in effect from time to
time, the Borrower shall pay such excess to the Lender ON DEMAND.



During the Revolving Credit Commitment Period, the Borrower may request
advances under the Revolving Credit Facility in accordance with the provisions of
this Agreement; provided that after giving effect to the Borrower’s request the
aggregate outstanding principal balance of the Revolving Loan and all Letter of
Credit Obligations would not exceed the Revolving Credit Committed Amount.”



(d) Section 2.1.2 (Procedure for Making Advances Under the Revolving Loan; Lender
Protection Loans) is hereby amended by deleting the second paragraph thereof in its entirety and
inserting the following in its place:



“In addition, the Borrower hereby irrevocably authorizes the Lender at any time
and from time to time, without further request from or notice to the Borrower, to
make advances under the Revolving Loan, which the Lender, in its sole and absolute
discretion, deems necessary or appropriate to protect the interests of the Lender,
including, without limitation, advances and reserves under the Revolving Loan made
to cover debit balances in the Revolving Loan Account, principal of, and/or interest
on, any Loan, the Obligations (including, without limitation, any Letter of Credit
Obligations), and/or Enforcement Costs, prior to, on, or after the termination of
other advances under this Agreement, regardless of whether the outstanding principal
amount of the Revolving Loan that the Lender may advance or reserve hereunder
exceeds the Revolving Credit Committed Amount.”



(e) Section 2.1.3 (Borrowing Base), Section 2.1.4 (Borrowing Base Report) and
Section 2.1.6 (Mandatory Prepayments of Revolving Loan) are hereby deleted in their entirety.



(f) Section 2.1.8 (The Collateral Account) is hereby deleted in its entirety and the
following section is inserted in its place:



“2.1.8 The Collateral Account.



If so directed by the Lender, the Borrower will deposit, or cause to be
deposited, all Items of Payment to a bank account designated by the Lender and from
which the Lender alone has power of access and withdrawal (the “Collateral
Account”). Each deposit shall be made not later than the next Business Day after
the date of receipt of the Items of Payment. The Items of Payment shall be
deposited in precisely the form received, except for the endorsements of the
Borrower where necessary to permit the collection of any such Items of Payment, the
Borrower hereby agreeing to make such endorsement. In the event the Borrower fails
to do so, the Lender is hereby authorized by the Borrower to make the endorsement in
the name of the Borrower. Prior to such a deposit, the Borrower will not commingle
any Items of Payment with any of the Borrower’s other funds or property, but will
hold them separate and apart in trust and for the account of the Lender.



In addition, if so directed by the Lender, the Borrower shall direct the
mailing of all Items of Payment from its Account Debtors to a post-office box
designated by the Lender, or to such other additional or replacement post-office
boxes pursuant to the request of the Lender from time to time (collectively, the
“Lockbox”). The Lender shall have unrestricted and exclusive access to the Lockbox.



The Borrower hereby authorizes the Lender to inspect all Items of Payment,
endorse all Items of Payment in the name of the Borrower, and deposit such Items of
Payment in the Collateral Account. The Lender reserves the right, exercised in its
sole and absolute discretion from time to time, to provide to the Collateral Account
credit prior to final collection of an Item of Payment and to disallow credit for
any Item of Payment which is unsatisfactory to the Lender. In the event Items of
Payment are returned to the Lender for any reason whatsoever, the Lender may, in the
exercise of its discretion from time to time, forward such Items of Payment a second
time. Any returned Items of Payment shall be charged back to the Collateral
Account, the Revolving Loan Account, or other account, as appropriate.



The Lender will apply the whole or any part of the collected funds credited to
the Collateral Account against the Revolving Loan (or with respect to Items of
Payment that are not proceeds of Accounts or after a Default or Event of Default,
against any of the Obligations) or credit such collected funds to a depository
account of the Borrower with the Lender (or an Affiliate of the Lender), the order
and method of such application to be in the reasonable discretion of the Lender.”



(g) Section 2.2.1 (Letters of Credit) is hereby deleted in its entirety and the
following section is inserted in its place:




“2.2.1 Letters of Credit.




Subject to and upon the provisions of this Agreement, and as a part of the Revolving
Credit Commitments, Borrower, upon the prior approval of Agent, may obtain standby or
commercial letters of credit (as the same may from time to time be amended, supplemented or
otherwise modified, each a “Letter of Credit” and collectively the “Letters of Credit”) from
Lender from time to time from the Closing Date until the Business Day preceding the
Revolving Credit Termination Date. The Borrower will not be entitled to obtain a Letter of
Credit hereunder unless (a) after giving effect to the request, the outstanding principal
balance of the Revolving Loan and of the Letter of Credit Obligations would not exceed the
Revolving Credit Committed Amount and (b) the sum of the aggregate face amount of the then
outstanding Letters of Credit (including the face amount of the requested Letter of Credit)
does not exceed Fifteen Million Dollars ($15,000,000) (the “Letter of Credit Sublimit”).”



(h) Section 2.2.2 (Letter of Credit Fees) is hereby deleted in its entirety and the
following section is inserted in its place:




“2.2.2 Letter of Credit Fees.




Prior to or simultaneously with the opening of each Letter of Credit, and annually
thereafter, the Borrower shall pay to Lender, a letter of credit fee (each a “Letter of
Credit Fee” and collectively the “Letter of Credit Fees”) in an amount equal to one and
one-half percent (1.5%) per annum of the face amount of said Letter of Credit at the time
said Letter of Credit Fee is due. Each Letter of Credit Fee shall be paid in advance on
each anniversary of the date the related Letter of Credit was issued. In addition, the
Borrower shall pay to the Lender any and all additional issuance, negotiation, processing,
transfer or other fees to the extent and as and when required by the provisions of any
Letter of Credit Agreement. The Lender is authorized to deduct any payment due hereunder
from the Borrower’s account #004122817025 issued by the Lender, on or after the date any
Letter of Credit Fee is due. All Letter of Credit Fees and all such other additional fees
are included in and are a part of the “Fees” payable by the Borrower under the provisions of
this Agreement and are a part of the Obligations.”



(i) Section 2.3.3 (Administrative Fees) is hereby deleted in its entirety and the
following section is inserted in its place:



“2.2.3 Administrative Fees.



The Borrower shall pay to the Lender an annual administrative fee (each an
“Administrative Fee” and collectively, the “Administrative Fees”) for administrative
services performed in conjunction with the Revolving Credit Facility. The
Administrative Fee shall be $60,000.00 per year and shall be payable in advance on
the first (1st) day of each March until the Revolving Credit Termination Date.”



(j) Section 2.4.1 (Applicable Interest Rates) is hereby deleted in its entirety and
the following section is inserted in its place:



“2.4.1 Applicable Interest Rates.



(a) Each Loan shall bear interest until maturity (whether by acceleration,
declaration, extension or otherwise) at either the Base Rate or the Eurodollar Rate,
as selected and specified by the Borrower in an Interest Rate Election Notice
furnished to the Lender in accordance with the provisions of Section 2.4.2(e), or as
otherwise determined in accordance with the provisions of this 2.3.8, as may be
adjusted from time to time in accordance with the provisions of this Section.



(b) Notwithstanding the foregoing, following the occurrence and during the
continuance of an Event of Default, at the option of the Lender, all Loans and all
other Obligations shall bear interest at the Post-Default Rate.



(c) Subject to Section 6.1.25, the Applicable Margin for Eurodollar Loans shall
be 150 basis points per annum, and (ii) Base Rate Loans shall be 0 basis points per
annum.”



(k) Section 4.1.25 (Compliance with Eligibility Standards) and Section 5.2.2
(Borrowing Base) are hereby deleted in their entirety.



(l) Section 6.1.1 (Financial Statements) is hereby deleted in its entirety and the
following section is inserted in its place:




“6.1.1 Financial Statements.



The Borrower shall furnish to the Lender:



(a) Annual Statements and Certificates. The Borrower shall furnish to
the Lender as soon as available, but in no event more than one hundred and twenty
(120) days after the close of each fiscal year of the Borrower, (i) a copy of the
annual audited consolidated financial statement in reasonable detail satisfactory to
the Lender relating to the Borrower and its Subsidiaries, prepared in accordance
with GAAP and examined and certified by independent certified public accountants
satisfactory to the Lender, which financial statement shall include a consolidated
and consolidating balance sheet of the Borrower and its Subsidiaries as of the end
of such fiscal year and consolidated and consolidating statements of income, cash
flows and changes in shareholders equity of the and its Subsidiaries for such fiscal
year, (ii) a Compliance Certificate, in substantially the form attached to this
Agreement as EXHIBIT B, as may be amended by the Lender from time to time,
containing a detailed computation of each financial covenant which is applicable for
the period reported, a certification that no material change has occurred to the
information contained in the Collateral Disclosure List (except as set forth in a
schedule attached to the certification), and a cash flow projection report, each
prepared by a Responsible Officer of the Borrower in a format acceptable to the
Lender, and (iii) a management letter in the form prepared by the Borrower’s
independent certified public accountants, if prepared by such accountants.



(b) Annual Opinion of Accountant. The Borrower shall furnish to the
Lender as soon as available, but in no event more than one hundred and twenty (120)
days after the close of the Borrower’s fiscal years, a letter or opinion of the
accountant who examined and certified the annual financial statement relating to the
Borrower and its Subsidiaries (i) stating whether anything in such accountant’s
examination has revealed the occurrence of a Default or an Event of Default
hereunder, and, if so, stating the facts with respect thereto and (ii) acknowledging
that the Lender will rely on the statement and that the Borrower knows of the
intended reliance by the Lender.



(c) Quarterly Statements and Certificates. The Borrower shall furnish
to the Lender as soon as available, but in no event more than forty five (45) days
after the close of the Borrower’s fiscal quarters, consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as of the close of such period,
consolidated and consolidating income, cash flows and changes in shareholders equity
statements for such period and a Compliance Certificate, in substantially the form
attached to this Agreement as EXHIBIT B, containing a detailed computation
of each financial covenant which is applicable for the period reported, a
certification that no change has occurred to the information contained in the
Collateral Disclosure List (except as set forth on any schedule attached to the
certification), each prepared by a Responsible Officer of the Borrower in a format
acceptable to the Lender, all as prepared and certified by a Responsible Officer of
the Borrower and accompanied by a certificate of that officer stating whether any
event has occurred which constitutes a Default or an Event of Default hereunder,
and, if so, stating the facts with respect thereto.



(d) Contract Backlog and A/R Aging Reports. The Borrower shall furnish
to the Lender within sixty (60) days after the end of the preceding fiscal year, a
contract backlog report and accounts receivable aging in form and substance
acceptable to the Lender. A form of Backlog Report is attached hereto as
EXHIBIT E and made a part hereof.



(e) Annual Budget and Projections. The Borrower shall furnish to the
Lender as soon as available, but in no event later than sixty (60) days after the
end of the preceding fiscal year, a projected income statement, on a quarterly basis
for the current fiscal year.



(f) Additional Reports and Information. The Borrower shall furnish to
the Lender promptly, such additional information, reports or statements as the
Lender may from time to time reasonably request.”



(m) Subsection 6.1.3(b) is hereby amended by deleting the last two sentences of said
subsection.



(n) Section 6.1.15 (Financial Covenants) is hereby deleted in its entirety and the
following section is inserted in its place:




“6.1.15 Financial Covenant – Funded Debt to EBITDA.



The Borrower will maintain, on a consolidated basis and tested as of the last
day of each of the Borrower’s fiscal quarters for the four (4) quarter period ending
on that date, a ratio of Funded Debt to EBITDA equal to not more than 1.00 to 1.00.”



(o) The following section is hereby added to Section 6.1 (Affirmative Covenants):




“6.1.25 Primary Banking Relationship.



As a material inducement to the Lender to enter into this Agreement, the
Borrower agrees to maintain their primary operating accounts with the Lender. The
Borrower understands that the failure to maintain their primary operating accounts
with the Lender may result in an adjustment of the Applicable Margin or Fees
applicable to the Obligations in order for the Lender to maintain the rate of return
on the Obligations contemplated with such accounts maintained with the Lender.”



(p) Section 6.2.1 (Capital Structure, Merger, Acquisition or Sale of Assets) is
hereby deleted in its entirety and the following section is inserted in its place:



“6.2.1 Capital Structure, Merger, Acquisition or Sale of Assets.



Except with respect to an Authorized Acquisition, the Borrower will not,
without the prior written consent of the Lender, alter or amend its capital
structure, authorize any additional class of equity, enter into any merger or
consolidation or amalgamation, windup or dissolve itself (or suffer any liquidation
or dissolution) or acquire all or substantially all the assets of any Person, or
sell, lease or otherwise dispose of any of its assets. Any consent of the Lender to
the disposition of any assets may be conditioned on a specified use of the proceeds
of disposition. As used herein, an “Authorized Acquisition” means any acquisition
by the Borrower which complies with the acquisition criteria set forth on
EXHIBIT G hereto.



(q) Subsection 6.2.4(d) is hereby deleted in its entirety and the following
subsection is inserted in its place:



“(d) With the prior written consent of the Lender in each case, Subordinated
Indebtedness.”



(r) EXHIBIT B is hereby deleted in its entirety and replaced with
“EXHIBIT B” attached hereto. EXHIBIT C is hereby deleted in its entirety.
“EXHIBIT G” is hereby added to the Financing Agreement immediately after EXHIBIT F
and is attached hereto.



5. Lender hereby consents to the acquisition of Radix by Argon and hereby waives
defaults under the Financing Agreement which, prior to the execution of this Agreement, existed
under the Financing Agreement as a result of such acquisition.



6. The agreements of the Lender under this Agreement are subject to the following
terms and conditions, time being of the essence:



(a) Execution and delivery by Radix of a Collateral Disclosure List on Lender’s form and in
all respects satisfactory to Lender;



(b) Execution and delivery of an Additional Borrower Joinder Supplement by each Borrower
pursuant to which Radix is added as a Borrower under the Financing Agreement;



(c) Completion of UCC searches in all offices and under all names deemed necessary by Lender
and confirming Lender’s first perfected security interest in the Collateral;



(d) Payment by Borrower to Lender of an extension fee in the amount of $5,000; and



(e) Execution and delivery by Borrower of a Second Amendment to Second Amended and Restated
Revolving Credit Note.



7. Each Borrower hereby issues, ratifies and confirms the representations,
warranties and covenants contained in the Financing Agreement, as amended hereby. Each Borrower
agrees that this Agreement is not intended to and shall not cause a novation with respect to any or
all of the Obligations.



8. Each Borrower acknowledges and warrants that Lender has acted in good faith and
has conducted in a commercially reasonable manner its relationships with Borrower in connection
with this Agreement and generally in connection with the Financing Agreement and the Obligations,
each Borrower hereby waiving and releasing any claims to the contrary.



9. Borrower shall pay at the time this Agreement is executed and delivered all fees,
commissions, costs, charges, taxes and other expenses incurred by Lender and its counsel in
connection with this Agreement, including, but not limited to, reasonable fees and expenses of
Lender’s counsel and all recording fees, taxes and charges.



10. This Agreement may be executed in any number of duplicate originals or
counterparts, each of such duplicate originals or counterparts shall be deemed to be an original
and all taken together shall constitute but one and the same instrument. Borrower agrees that
Lender may rely on a telecopy of any signature of Borrower. Lender agrees that Borrower may rely
on a telecopy of this Agreement executed by Lender.



IN WITNESS WHEREOF, each Borrower and Lender have executed this Agreement under seal as of the
date and year first written above.



	 	 	 
	WITNESS OR ATTEST:

	 	By: /s/ Victor F. Sellier           (SEAL)
	
 
	 	 
	
 
	 	Name: Victor F. Sellier

Title: Vice President Business Operations,

Treasurer, Secretary and Chief Financial Officer
	 
	 	 
	/s/ Joseph T. Houston                       

	 	ARGON ST, INC. successor to SensyTech, Inc., formerly

known as Sensys Technologies Inc.
	 

	 	

	 
	 	 
	WITNESS:

	 	RADIX TECHNOLOGIES, INC.
	 
	 	 
	/s/ Joseph T. Houston                       

	 	By: /s/ Victor F. Sellier             (SEAL)
	 

	 	 
	 
	 	 
	 

 

	 	Name: Victor F. Sellier

Title: Vice President Business Operations, Treasurer,

Secretary and Chief Financial Officer
	 
	 	 
	WITNESS:

	 	BANK OF AMERICA, N. A.
	 
	 	 
	/s/ Vickie A. Colby                         

	 	By: /s/ Diane B. Zanetti              (SEAL)
	 

	 	 
	 
	 	 
	
 
	 	Diane B. Zanetti

Senior Vice President