5
FOURTH AMENDMENT TO LOAN AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AGREEMENT (this "Amendment"), made
and entered into as of December 5, 1996, by and between FAIRFIELD
MANUFACTURING COMPANY, INC., a Delaware corporation ("Borrower"), and
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE
Capital"), as sole "Lender" under the "Loan Agreement" hereinafter
referred to and as agent for itself and the other "Lenders" who may
hereafter become parties to the Loan Agreement (GE Capital, in such
capacity, the "Agent").
RECITALS:
A. Borrower and GE Capital, as a Lender and as Agent, entered
into a certain Loan Agreement, dated as of July 7, 1993, as amended
pursuant to a First Amendment to Loan Agreement, dated as of September
30, 1994, a Second Amendment to Loan Agreement, dated March 30, 1995,
but effective as of December 31, 1994 and a Third Amendment to Loan
Agreement, dated as of March 31, 1995 (the "Loan Agreement";
capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Loan Agreement) whereby, subject to
the terms and conditions set forth therein, GE Capital, as sole Lender
thereunder, made the Commitment and the Term Loans available to
Borrower;
B. Borrower has requested that Lenders make certain additional
financial accommodations available to it under the Loan Agreement in
the form of (i) an extension of the term of the Commitment and certain
modifications in the manner in which the Subsequent Commitment
Increase may be effected (which Subsequent Commitment Increase will be
made at Borrower's election but subject to the terms and conditions
set forth herein), and (ii) a Fifteen Million Dollar ($15,000,000)
increase in the amount of the Term Loans;
C. Borrower has further requested that Lenders permit certain
dividends to be paid to Lancer by Borrower and certain loans to be
made to Lancer by Borrower, subject to the terms and conditions set
forth herein;
D. Subject to the terms and conditions set forth herein,
including, without limitation, the payment by Borrower to Lenders of
the fees specified herein, Lenders are willing to make such additional
financial accommodations available to Borrower and to permit Borrower
to pay such dividends and make such loans; and
E. Borrower and GE Capital, as Agent and sole Lender under the
Loan Agreement, desire to enter into this Amendment in order to (i)
provide for the making by Lenders to Borrower of the financial
accommodations described generally in paragraph B of these recitals
and described more particularly herein, (ii) permit the payment of
certain dividends by Borrower to Lancer and the making of certain
loans by Borrower to Lancer described generally in paragraph C of
these recitals and described more particularly herein, and (iii) amend
the Loan Agreement in certain other respects as hereinafter set forth.
In consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto covenant and agree as
follows:
1. Amendments to Loan Agreement. Effective upon fulfillment,
to the satisfaction of Lenders, of the conditions precedent set forth
in Section 2 hereof, the Loan Agreement shall be deemed to be amended
as follows:
(a) Amendments to Section 1.1 of the Loan Agreement.
(i) Section 1.1 of the Loan Agreement shall be deemed to be
amended by deleting in its entirety the first paragraph only of
the definition of "Borrowing Base" set forth therein and
substituting in lieu thereof the following first paragraph:
"Borrowing Base" means, as of any date of determination, an
amount determined by the Agent to be equal to the sum of (a)
up to 80% of Eligible Accounts, plus (b) up to 60% of
Eligible Inventory consisting of finished goods, finished
parts or raw materials, plus (c) up to 20% of Eligible
Inventory consisting of work in process, all determined by
the Agent with reference to the most recent Borrowing Base
Certificate furnished to the Agent pursuant to Section
7.2(a) and the additional Collateral reporting furnished to
the Agent pursuant to Section 7.2(b), adjusted on a daily
basis at such time as a Triggering Event has occurred and is
continuing to reflect Collections and the information
contained in the daily Collateral reporting furnished to the
Agent pursuant to Section 7.2(c).
(ii) Section 1.1 of the Loan Agreement shall be deemed to be
further amended by deleting the definitions of "Agreement,"
"Collateral Documents", "Commitment," "Consolidated Excess Cash
Flow," "Fixed Rate," "Floating Rate," "Loan Documents," "Maturity
Date," "Monthly Payment Date", "Quarterly Payment Date",
"Subsequent Commitment Increase", "Subsequent Commitment Increase
Date", "Term Loan", "Term Loans" and "Term Note" therein in their
entirety and substituting in lieu thereof the following revised
definition of "Agreement," "Commitment," "Collateral Documents",
"Consolidated Excess Cash Flow," "Fixed Rate," "Floating Rate,"
"Loan Documents," "Maturity Date," "Monthly Payment Date",
"Quarterly Payment Date", "Subsequent Commitment Increase",
"Subsequent Commitment Increase Date", "Term Loan", "Term Loans"
and "Term Note".
"Agreement" means this Loan Agreement, either as originally
executed or as it may from time to time be supplemented,
modified, amended, renewed, extended or supplanted
(including, without limitation, by the First Amendment, the
Second Amendment, the Third Amendment and the Fourth
Amendment).
"Collateral Documents" means, collectively, the Security
Agreements, the Mortgage, the First Amended Mortgage, the
Second Amended Mortgage, the Trademark Security Agreement,
the Borrower Pledge Agreement, and any other pledge
agreement, security agreement, deed of trust, mortgage, deed
to secure debt or similar instrument executed by Borrower or
any Subsidiary in favor of the Agent for the benefit of the
Lenders to secure the Obligations.
"Commitment" means Twenty Million Dollars ($20,000,000), as
such amount may be increased to Twenty Five Million Dollars
($25,000,000) pursuant to the Subsequent Commitment
Increases provided for in Section 2.8, unless and until
reduced to zero pursuant to Section 3.2(a).
"Consolidated Excess Cash Flow" means, for any period, (a)
Consolidated Cash Flow for such period, plus (b) any
decrease in Consolidated Working Capital of Borrower and its
Subsidiaries during such period, plus (c) the Cash portion
of extraordinary gains during such period, less (d) any
increase in Consolidated Working Capital of Borrower and its
Subsidiaries during such period, less (e) Consolidated Fixed
Charges (exclusive of Consolidated Net Interest Expense) for
such period, less (f) net Cash interest expense for such
periods, less (g) the Cash portion of extraordinary losses
for such period, less (h) Permitted Dividends declared and
paid during such period.
"Fixed Rate" means the LIBOR Rate plus two and one-quarter
percent (2-1/4%) per annum; provided that, commencing on
January 1, 1998, the Fixed Rate will mean the LIBOR Rate
plus the Applicable LIBOR Margin as determined in accordance
with the following grid:
If the Ratio of Consolidated The Applicable LIBOR
Margin
EBITDA to Consolidated for Fixed Rate Loans will be:
Net Interest Expense for the
Preceding Fiscal Quarter is: Revolving Credit Loans
Term Loans
Less than 3.0:1.0 2% per annum 2-1/4% per annum
3.0:1.0 to 3.5:1.0 1-3/4% per annum 2% per annum
Greater than 3.5:1.0 1-1/2% per annum 1-3/4% per
annum
For purposes of calculating the Ratio of Consolidated EBITDA
to Consolidated Net Interest Expense deferred financing
costs shall be excluded from Consolidated Net Interest
Expense.
Any change in the Applicable LIBOR Margin by virtue of the
foregoing provision with regard to any Fiscal Quarter shall
be made within five (5) days after delivery by Borrower to
Lender of financial statements for such Fiscal Quarter
pursuant to Section 7.1(b); provided, however, that any such
change shall be deemed to have become effective on that date
thirty (30) days after the end of such Fiscal Quarter.
"Floating Rate" means the Index Rate plus three-quarters of
one percent (3/4 of 1%) per annum.
"Loan Documents" means, collectively, this Agreement, the
First Amendment, the Second Amendment, the Third Amendment,
the Fourth Amendment, the Notes, the Blocked Account
Agreements, the Subsidiary Guaranty, the Collateral
Documents, the Lancer Pledge Agreement and any other
agreements of any type or nature heretofore or hereafter
executed and delivered by Borrower or any of its Affiliates
in favor of the Agent or Lenders in any way relating to or
in furtherance of this Agreement, in each case either as
originally executed or as the same may from time to time be
supplemented, modified, amended, restated, extended or
supplanted.
"Maturity Date" means July 1, 2001.
"Monthly Payment Date" means the fifteenth day of each
calendar month after the Closing Date, through and including
the Commitment Termination Date.
"Quarterly Payment Date" means the fifteenth day of each
February, May, August and November.
"Subsequent Commitment Increase" and "Subsequent Commitment
Increases" have the meanings set forth in Section 2.8.
"Subsequent Commitment Increase Date" and "Subsequent
Commitment Increase Dates" have the meanings set forth in
Section 2.8.
"Term Loan" and "Term Loans" each has the meaning set forth
in Section 2.3(a).
"Term Note" means any of the amended and restated promissory
notes substantially in the form of Exhibit P, issued by
Borrower in favor of a Lender evidencing the Term Loan made
by such Lender.
(iii) Section 1.1 of the Loan Agreement shall be deemed
further amended by adding therein, in appropriate alphabetical
order, the following additional definitions:
"Fourth Amendment" means the Fourth Amendment to the Loan
Agreement, dated as of December 5, 1996, among Borrower, the
Agent and GE Capital, as sole Lender.
"Fourth Amendment Date" means December 5, 1996, or such
later date as the Fourth Amendment shall have been executed
and delivered by the parties and all conditions precedent to
the effectiveness thereof set forth in Section 2 thereof
shall have been satisfied.
"New Term Loan" and "New Term Loans" have the respective
meanings specified in Section 2.3(a).
"Original Term Loans" means the term loans made by the
Lenders to Borrower on the Closing Date in the aggregate
principal amount of $25,000,000.
"Permitted Dividends" has the meaning set forth in clause
(k) of Section 6.3.
"Second Amended Mortgage" means the Second Amendment to the
Mortgage, dated as of the Fourth Amendment Date, executed by
Borrower on the Fourth Amendment Date.
"Special Dividend" has the meaning set forth in clause (j)
of Section 6.3.
"Special Loan" has the meaning set forth in clause (j) of
Section 6.3.
(iv) Section 1.1 of the Loan Agreement shall be deemed
further amended by deleting therefrom the definition of
"Commitment Increase".
(b) Amendment to Section 2.3 of the Loan Agreement. Section 2.3
of the Loan Agreement shall be deemed to be amended by deleting such
Section in its entirety and substituting in lieu thereof the following
revised Section 2.3:
2.3 Term Loans.
(a) On July 7, 1993, Lenders made the Original Term Loans
to Borrower. The outstanding principal balance of the Original
Term Loans on the Fourth Amendment Date is $18,000,000. On the
Fourth Amendment Date, each Lender shall make an additional term
loan to Borrower (individually, a "New Term Loan" and,
collectively, the "New Term Loans") in an amount equal to the
amount set forth opposite the name of that Lender on the
signature pages hereof. The aggregate principal amount of the
New Term Loans shall be $15,000,000. The Original Term Loans and
the New Term Loans shall be consolidated into a single term loan
in the principal amount of $33,000,000 (individually, the "Term
Loan" and, collectively, the "Term Loans"). Borrower may not
reborrow the Term Loans or any portion thereof once repaid.
(b) Not later than 11:00 a.m., Atlanta time, on the Fourth
Amendment Date each Lender shall make its New Term Loan available
to the Agent by wire transfer of immediately available funds to
the Agent's Deposit Account. Upon fulfillment of the applicable
conditions set forth in Section 2 of the Fourth Amendment, each
such New Term Loan shall be made available to Borrower by the
Agent by wire transfer of immediately available funds as
instructed by Borrower, to the extent actually received from the
Lenders. No Lender shall be responsible for the failure of any
other Lender to make the New Term Loan to be made by such other
Lender.
(c) Each Lender's Original Term Loan and New Term Loan
shall be consolidated, renewed and extended, as provided herein,
and as so consolidated renewed and extended shall be evidenced by
that Lender's Term Note, subject to the provisions of Section
2.6.
(c) Amendment to Section 2.8 to the Loan Agreement. The Loan
Agreement shall be deemed further amended by deleting Section 2.8
thereof in its entirety and substituting in lieu thereof the following
revised Section 2.8:
2.8 Subsequent Commitment Increases.
(a) Subsequent Commitment Increases. Subject to the
satisfaction of each of the conditions set forth in
Section 2.8(b), at Borrower's written request, delivered by
Borrower to the Agent at least thirty (30) days prior to the
requested increase date and specifying the requested increase
date (each individually a "Subsequent Commitment Increase Date"
and collectively the "Subsequent Commitment Increase Dates"), the
Commitment shall be increased (each individually a "Subsequent
Commitment Increase" and collectively the "Subsequent Commitment
Increases") on no more than two Subsequent Commitment Increase
Dates by an amount not in excess of Five Million Dollars
($5,000,000) in the aggregate as to all Subsequent Commitment
Increases.
(b) Conditions Precedent to Subsequent Commitment
Increases. The obligations of the Lenders to make the Subsequent
Commitment Increases available to Borrower are subject to the
following conditions precedent each of which shall be satisfied
prior to or on the applicable Subsequent Commitment Increase
Date:
(i) There shall be no more than two Subsequent
Commitment Increases.
(ii) As to any Subsequent Commitment Increase in excess
of $2,000,000 the Borrower shall have reduced the
outstanding principal balance of the Term Loans by the
amount by which the requested Subsequent Commitment Increase
exceeds $2,000,000.
(iii) Each Subsequent Commitment Increase shall be
in the maximum amount then obtainable; i.e. the first
Subsequent Commitment Increase shall be in an amount equal
to $2,000,000 plus the amount in excess of $2,000,000 by
which the Borrower has reduced the outstanding principal
balance of the Term Loans and the second Subsequent
Commitment Increase shall be in the amount by which Borrower
has reduced the outstanding principal balance of the Term
Loans after the first Subsequent Commitment Increase Date;
provided, however that the aggregate amount of the
Subsequent Commitment Increases may not exceed $5,000,000.
(iv) The Agent shall have received all of the
following, each dated as of the applicable Subsequent
Commitment Increase Date and all in form and substance
satisfactory to the Agent and legal counsel for the Agent:
(1) amendments to the then existing Revolving
Credit Note executed by Borrower in favor of each
Lender pursuant to which the principal amount of the
Revolving Credit Note held by each Lender shall be
increased by an amount equal to such Lender's Pro Rata
Share of the Subsequent Commitment Increase;
(2) an Officer's Certificate affirming that the
conditions set forth in clauses (v), (vi), (vii) and
(viii) below have been satisfied;
(3) to the extent deemed necessary by the Agent,
an amendment to the Mortgage giving effect to the
Subsequent Commitment Increase, executed by Borrower,
and in form acceptable for recordation with the
appropriate Governmental Agency;
(4) to the extent deemed necessary by the Agent,
assurance from the Title Company that it is committed
to cause such amendment to the Mortgage to be recorded,
and, upon recordation of such amendment to issue an
endorsement to the title insurance policy issued by the
Title Company with regard to the Mortgage, in a form
acceptable to the Agent, insuring the continued
validity and priority of the Mortgage as a lien upon
the Owned Real Property, subject to only those title
exceptions which are set forth in such title insurance
policy and such other title exceptions as may be
approved by the Agent in its sole discretion; and
(5) such other assurances, certificates,
documents, consents or opinions (in addition to those
described hereinbelow) as the Agent may reasonably
require.
(v) The representations and warranties contained in
Article 4 shall be true and correct in all material respects
on and as of the Subsequent Commitment Increase Date as
though made on and as of that date (except to the extent
that such representations and warranties relate solely to an
earlier date and except as affected by transactions
expressly contemplated by this Agreement).
(vi) There shall not then be pending or, to the best
knowledge of Borrower, threatened, any litigation,
arbitration, injunction, proceeding, governmental
investigation or inquiry against or affecting Borrower or
any Property of Borrower before any Governmental Agency that
could reasonably be expected to have a Material Adverse
Effect.
(vii) Each of Lancer, Borrower and each of
Borrower's Subsidiaries shall be in compliance with all the
terms and provisions of the Loan Documents to which it is
party, and no Default or Event of Default shall have
occurred and be continuing.
(viii) Since September 30, 1996, there shall not
have occurred: (A) any event or circumstance that could
reasonably be expected to have a Material Adverse Effect, or
(B) any dividends or other distributions made to the
stockholders of Borrower, except as permitted by Section 6.3
of this Agreement or Section 7(b) of the Lancer Pledge
Agreement.
(ix) Lenders shall be satisfied that Borrower and its
Subsidiaries are in compliance with all applicable Laws,
including, without limitation, all Environmental Laws and
all Laws pertaining to labor, occupational safety and health
and ERISA matters except to the extent that noncompliance
could not reasonably be expected to have a Material Adverse
Effect. Lenders shall be satisfied that the consummation
of the Subsequent Commitment Increase will not cause
Borrower or any Subsidiary to violate any Contractual
Obligation to which it is party or by which it is bound or
any Laws applicable to it.
(x) Lenders shall be satisfied that Borrower's
incurrence of Indebtedness pursuant to the Subsequent
Commitment Increase is permissible pursuant to Section 1010
of the Senior Subordinated Note Indenture and that after
giving effect thereto each of the representations and
warranties set forth in Section 4.21 shall continue to be
true and correct in all respects and shall have received
such assurances in regard thereto as Lenders shall request,
including without limitation, certifications of Senior
Officers of Borrower and an opinion of Borrower's counsel
with regard to such matters, each to be in form and
substance satisfactory to Lenders.
(d) Amendment to Section 3.1 of the Loan Agreement. The Loan
Agreement shall be deemed to be further amended by deleting in its
entirety clause (b) only of Section 3.1 thereof and substituting in
lieu thereof the following revised clause (b):
(b) The aggregate principal amount of the Term Loans shall,
if not sooner paid, be payable in installments on each Quarterly
Payment Date, in accordance with the Schedule of Payments set
forth hereinbelow, commencing on February 15, 1997 and continuing
through December 31, 2000:
Schedule of Payments
Quarterly Payment Date Installment
February 15, 1997 $ 750,000
May 15, 1997 $ 750,000
August 15, 1997 $ 750,000
November 15,1997 $ 750,000
February 15,1998 $ 1,000,000
May 15, 1998 $ 1,000,000
August 15, 1998 $ 1,000,000
November 15, 1998 $ 1,000,000
February 15, 1999 $ 1,750,000
May 15, 1999 $ 1,750,000
August 15, 1999 $ 1,750,000
November 15, 1999 $ 1,750,000
February 15, 2000 $ 2,250,000
May 15, 2000 $ 2,250,000
August 15, 2000 $ 2,250,000
November 15, 2000 $ 2,250,000
December 31, 2000 $ 10,000,000
(e) Amendment to Section 3.3(b) of the Loan Agreement. Section
3.3(b) of the Loan Agreement shall be deemed to be amended by deleting
the date therein "December 31, 1993" and substituting in lieu thereof
the date "December 31, 1997."
(f) Amendment to Section 3.10 of the Loan Agreement. The Loan
Agreement shall be deemed to be further amended by deleting Section
3.10 thereof in its entirety and substituting in lieu thereof the
following revised Section 3.10:
3.10 Agent's Fees. Borrower shall pay to the Agent, for its
account, an agency fee in the amount of $50,000 per annum,
payable on July 1, 1997 and on each anniversary thereof prior to
the Maturity Date.
(g) Amendment to Section 4.20 of the Loan Agreement.
Section 4.20 of the Loan Agreement shall be deemed to be amended by
deleting such Section in its entirety and substituting in lieu thereof
the following revised Section 4.20:
4.20 Solvency. After giving effect to the entering into by
Borrower of this Agreement, the Fourth Amendment and the other
Loan Documents, the making of any Advance, the incurrence of any
Letter of Credit Obligation, the funding of the New Term Loans,
the declaration and payment of the Special Dividend, the making
of the Special Loan and the declaration and payment of any
Permitted Dividend, Borrower and each Subsidiary is Solvent.
(h) Amendment to Section 4.21 of the Loan Agreement. Section
4.21 of the Loan Agreement shall be deemed to be amended by deleting
such Section in its entirety and substituting in lieu thereof the
following revised Section 4.21:
4.21 Subordination of Subordinated Indebtedness. This
Agreement, as amended by the First Amendment, the Second Amendment,
the Third Amendment and the Fourth Amendment, and the other Loan
Documents to which Borrower or any Subsidiary is party, and, to the
extent permissible under Section 1010 of the Senior Subordinated Note
Indenture, all further amendments, amendments and restatements,
renewals, extensions, restructurings, supplements, modifications,
refinancings, refundings, or replacements hereof and thereof consti
tute the "Credit Agreement" within the meaning of the Senior Sub
ordinated Note Indenture, and the Term Loans, the Revolving Credit
Loan, the Letter of Credit Obligations and all other Obligations of
Borrower to the Agent and the Lenders under this Agreement, the Notes
and any of the other Loan Documents, and, to the extent permissible
pursuant to Section 1010 of the Senior Subordinated Note Indenture,
all further amendments, amendments and restatements, renewals,
extensions, restructurings, supplements, modifications, refinancings,
refundings and replacements of any of the foregoing, constitute
"Senior Indebtedness" of Borrower within the meaning of the Senior
Subordinated Note Indenture, and the holders thereof from time to time
shall be entitled to all of the rights of a holder of "Senior
Indebtedness" pursuant to Article 13 of the Senior Subordinated Note
Indenture.
(i) New Section 4.26 of the Loan Agreement. Article 4 of the
Loan Agreement shall be deemed to be further amended by adding the
following Section 4.26 thereto:
4.26. The declaration and payment of the Special
Dividend by Borrower to Lancer and the making of the Special Loan
by Borrower to Lancer on the Fourth Amendment Date and the use of
the proceeds thereof by Lancer for the purpose set forth in
Section 6.3(j) are, and the declaration and payment of each
Permitted Dividend subsequent to the Fourth Amendment Date and
the use of the proceeds thereof by Lancer for the purpose set
forth in Section 6.3(k) will be, within the corporate powers of
Borrower and Lancer, respectively, have been and will be duly
authorized by all requisite corporate action on the part of
Borrower and Lancer, respectively, and do not and will not (a)
require any consent or approval of any stockholder, security
holder or creditor of Borrower or Lancer (including, without
limitation, the holders of the Senior Subordinated Notes) not
heretofore or theretofore obtained, (b) violate or conflict with
any provision of the certificate of incorporation or by-laws of
Borrower or Lancer, (c) result in or require the creation of any
Lien or Right of Others upon or with respect to any Property of
Borrower or Lancer, other than in favor of Lenders, (d) violate
any provision of Law applicable to Borrower or Lancer, (e)
contravene or conflict with any judgment, award, decree, writ or
determination of any Governmental Agency applicable to or binding
upon Borrower or Lancer or any of their respective Property or to
which Borrower or Lancer or any of their respective Property is
subject or (f) conflict with, result in a breach of or default
under, or with the giving of notice or the lapse of time or both,
constitute a breach of or default under, or cause or permit the
acceleration of any obligation owed under or require the
termination of (i) the Senior Subordinated Note Indenture, or the
Senior Subordinated Notes or (ii) any other Contractual
Obligation of any Borrower or Lancer other than, in the case of
clause (ii), conflicts, breaches or defaults which, either singly
or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(j) New Text at End of Article 4 of the Loan Agreement. Article
4 of the Loan Agreement is hereby further amended by adding the
following paragraph at the end thereof:
In connection with its execution and delivery of the Fourth
Amendment, Borrower hereby affirms that each of the
representations and warranties of Borrower contained in this
Agreement or in any of the other Loan Documents is correct in all
material respects as of the Fourth Amendment Date and after
giving effect to the Fourth Amendment (except to the extent that
such representations and warranties relate solely to an earlier
date and except as affected by transactions expressly
contemplated by this Agreement). In addition to induce GE
Capital to enter into the Fourth Amendment, Borrower represents
and warrants to the Agent and Lenders as follows:
(a) Financial Statements. Borrower has furnished to the
Lenders (i) Borrower's audited consolidated balance sheets for
its Fiscal Year ending December 31, 1995 and Borrower's related
audited consolidated statements of operations, stockholders'
equity and cash flows for its Fiscal Year ending December 31,
1995, (ii) Borrower's unaudited consolidated balance sheet for
its Fiscal Quarter ending September 30, 1996 and Borrower's
related consolidated statements of operations, stockholders'
equity and cash flows for such Fiscal Quarter, and
(iii) Borrower's operating and financial plan for the five Fiscal
Years ending after the date hereof, including projected balance
sheets, statements of operations, and statements of cash flow.
The financial statements described in clauses (i) and (ii) above
fairly present the financial position and results of operations
of Borrower, on a consolidated basis, as at the dates and for the
periods indicated in accordance with GAAP consistently applied.
The projections referred to in clause (iii) above were prepared
on the basis of the estimates and assumptions stated therein and
represented, at the date thereof, Borrower's good faith pro
jections of its future financial performance prepared after rea
sonable investigations; such estimates, assumptions and projec
tions reflected Borrower's estimates of the most likely future
financial results and condition of Borrower, in the light of busi
ness conditions existing at the date thereof; and any such esti
mates, assumptions and projections, if prepared as of the Fourth
Amendment Date, would contain estimates of the future financial
performance of Borrower which would not materially and adversely
differ from the respective estimates contained in such financial
projections. As of the Fourth Amendment Date, no material
developments have occurred since the date of such projections
which would lead Borrower to believe that such projections, taken
as a whole, are not reasonably attainable, subject to the
uncertainties and approximations inherent in any projection.
(b) No Other Liabilities; No Material Adverse Effect.
Neither Borrower nor any Subsidiary has any liability or
contingent liability that is material to Borrower or such
Subsidiary that is not reflected in, reserved for or against or
otherwise disclosed in the financial statements described in
clause (a) above, and, since September 30, 1996, no event or
circumstance has occurred that could reasonably be expected to
have a Material Adverse Effect.
(k) Amendment to Section 6.3 of the Loan Agreement. Section 6.3
of the Loan Agreement shall be deemed to be amended by deleting the
word "and" before clause (i) thereof and replacing it with a comma,
and by adding thereto the following clauses (j) and (k):
(j) a special cash dividend in the amount of $17,000,000, to be
declared and paid by Borrower to Lancer on the Fourth Amendment
Date (the "Special Dividend"), and a loan in the amount of
$3,000,000, having the terms set forth in the promissory note
evidencing such loan, a copy of which is attached to the Fourth
Amendment as Exhibit 1, to be made by Borrower to Lancer on the
Fourth Amendment Date (the "Special Loan"), the proceeds of which
are to be used by Lancer solely for the purpose of redeeming a
portion of Lancer's Series C Preferred Stock; and (k) other cash
dividends declared and paid by Borrower to Lancer subsequent to
the Fourth Amendment Date; provided that (A) no Default or Event
of Default has occurred and is continuing hereunder or would
result from the declaration and payment of such dividend; (B) the
proceeds of such dividends are used solely for the purpose of
redeeming a portion of Lancer's Series C Preferred Stock; (C)
such dividends are permitted to be paid under Section 1011 of the
Senior Subordinated Note Indenture as in effect on the Closing
Date; and (D) the Agent shall have received all of the following
prior to the declaration and payment of each such dividend, all
in form and substance satisfactory to the Agent and legal counsel
for the Agent: (1) an Officer's Certificate affirming that the
conditions set forth in clauses (A), (B) and (C) above have been
satisfied with respect to such dividend (and attaching all
calculations necessary to demonstrate satisfaction of the
condition set forth at clause (c) above); (2) such documentation
as the Agent may request to confirm that such dividend has been
duly authorized, including certificates of corporate resolutions,
certificates of Responsible Officials and the like; (3) upon the
written request of the Agent, the legal opinion of Debevoise &
Xxxxxxxx, special counsel to Borrower, with respect to such
dividend substantially in the form of paragraph 9 of Exhibit 2 to
the Fourth Amendment, together with copies of all factual
certificates and legal opinions upon which such counsel has
relied; and (4) upon the written request of the Agent, the
favorable written opinion of Chartered Capital Advisors, Inc.,
valuation consultants to Borrower or other valuation consultants
selected by Borrower and acceptable to Lender, as to the solvency
of Borrower after giving effect to the declaration and payment of
such dividend (any such dividend meeting the requirements of
clauses (A)-(D) above, a "Permitted Dividend").
(l) Amendment to Section 6.9 of the Loan Agreement. Section 6.9
of the Loan Agreement is hereby amended by deleting subclause (ii) of
clause (c) thereof in its entirety and substituting in lieu thereof
the following revised subclause (ii):
(ii) no principal, interest or other payment is payable
or paid on any such loans until the Obligations have been
paid in full and the Loan Agreement has been terminated,
except that Borrower may pay interest to T-H Licensing on
such loans at a rate not in excess of the rate then in
effect with respect to the New Term Loans so long as any
such interest payment is returned by T-H Licensing to
Borrower as a loan within sixty (60) days after receipt by T-
H Licensing.
(m) Amendment to Section 6.12 of the Loan Agreement. Section
6.12 of the Loan Agreement shall be deemed to be amended by deleting
the word "and" before clause (e) thereof and replacing it with a
comma, and by adding at the end of such section the following clause
(f):
"and (f) Investments consisting of the Special Loan".
(n) Amendments to Sections 6.18 and 6.20 through 6.22 of the
Loan Agreement. Sections 6.18 and 6.20 through 6.22 of the Loan
Agreement shall be deemed to be amended by deleting such Sections in
their entireties and substituting in lieu thereof the following
revised Sections 6.18 through 6.22:
6.18 Capital Expenditures. Borrower shall not, and shall
not permit any Subsidiary to, make or commit to make Capital
Expenditures in any Fiscal Year set forth below which exceed in
the aggregate for Borrower and its Subsidiaries the amount set
forth below with respect to each such Fiscal Year:
FISCAL YEAR ENDING CAPITAL EXPENDITURES
December 31, 1996 $10,000,000
December 31, 1997 $10,000,000
December 31, 1998 $10,000,000
December 31, 1999 $12,000,000
Each Fiscal Year Thereafter $12,500,000;
provided that, in the event that the maximum aggregate amount for
any Fiscal Year set forth above exceeds the amount of Capital
Expenditures actually made in such Fiscal Year, the unused portion
of such permitted amount for such Fiscal Year may be carried
forward and used solely in the next succeeding Fiscal Year for
Capital Expenditures, but only after the entire amount actually
scheduled for use in such succeeding Fiscal Year shall have been
used.
6.20 Current Ratio. Borrower will not permit (as of the end
of any Fiscal Quarter) the ratio of Consolidated Current Assets to
Consolidated Current Liabilities to be less than the ratio set
forth below next to the Fiscal Year in which such Fiscal Quarter
occurs:
FISCAL YEAR ENDING RATIO
December 31, 1996 1.25:1.00
December 31, 1997 1.50:1.00
December 31, 1998 1.50:1.00
December 31, 1999 1.50:1.00
Each Fiscal Year Thereafter 1.75:1.00
6.21 Consolidated Fixed Charge Coverage Ratio. Borrower will
not permit the ratio of (a) Consolidated Cash Flow for any Fiscal
Quarter to (b) Consolidated Fixed Charges for such Fiscal Quarter
to be less than the ratio set forth below next to the Fiscal Year
in which such Fiscal Quarter occurs:
FISCAL YEAR ENDING RATIO
December 31, 1996 1.00:1.00
December 31, 1997 0.95:1.00
December 31, 1998 1.00:1.00
December 31, 1999 1.00:1.00
Each Fiscal Year Thereafter 1.00:1.00
For purposes of this Section 6.21, (a) Consolidated Cash
Flow and Consolidated Fixed Charges shall be calculated based upon the
period of four Fiscal Quarters ending on the date of calculation and
(b) the final $10,000,000 due and payable on the Term Loans on
December 31, 2000 shall not be included in the calculation of
Consolidated Fixed Charges.
6.22 Interest Coverage Ratio. Borrower shall not permit the
ratio of (a) Consolidated EBITDA for any Fiscal Quarter to (b)
Consolidated Net Interest Expense for such Fiscal Quarter to be
less than the ratio set forth below next to the Fiscal Year in
which such Fiscal Quarter occurs:
FISCAL YEAR ENDING RATIO
December 31, 1996 2.25:1.00
December 31, 1997 1.65:1.00
December 31, 1998 1.75:1.00
December 31, 1999 2.25:1.00
Each Fiscal Year Thereafter 2.25:1.00
For purposes of this Section 6.22, Consolidated EBITDA and
Consolidated Net Interest Expense shall be calculated based upon
the period of four Fiscal Quarters ending on the date of
calculation.
(o) Amendment to Exhibit P to the Loan Agreement. Exhibit P to
the Loan Agreement shall be deemed to be amended by deleting such
Exhibit in its entirety and substituting in lieu thereof the revised
Exhibit P attached to this Fourth Amendment.
2. Conditions Precedent. This Amendment shall not become
effective and Lenders shall have no obligation to make the New Term
Loans available to Borrower unless and until each of the following
conditions precedent shall have been fulfilled, to Lenders' and its
counsel's satisfaction:
(a) Documents. The Agent shall have received all of the
following, each dated as of the date hereof and all in form and
substance satisfactory to the Agent and legal counsel for the Agent:
(i) a Term Note executed by Borrower in favor of each
Lender in the amount of such Lender's Pro Rata Share of the Term
Loans after giving effect to the making of the New Term Loans,
which Term Notes (to the extent of the principal balances of the
then outstanding Promissory Notes evidencing the Original Term
Loans) shall be issued in consolidation, extension and renewal of
the Original Term Loans and the New Term Loans;
(ii) an amendment to the Mortgage giving effect to the
making of the New Term Loans and the extension of the Maturity
Date contemplated by this Amendment, executed by Borrower, and in
form acceptable for recordation with the appropriate Governmental
Agency;
(iii) assurance from the Title Company that it is
committed to cause such amendment to the Mortgage to be recorded,
and, upon recordation of such amendment to issue an endorsement
to the title insurance policy issued by the Title Company with
regard to the Mortgage, in a form acceptable to the Agent,
insuring the continued validity and priority of the Mortgage as a
lien upon the Owned Real Property, subject to only those title
exceptions which are set forth in such title insurance policy and
such other title exceptions as may be approved by the Agent in
its sole discretion;
(iv) a reaffirmation of the Subsidiary Guaranty and
Subsidiary Security Agreement signed by T-H Licensing and a
reaffirmation of the Lancer Pledge Agreement signed by Lancer;
(v) an Officer's Certificate affirming that the conditions
set forth in clauses (b), (c), (d) and (e) below have been
satisfied;
(vi) such documentation as the Agent may reasonably require
to confirm the good standing of Borrower in the respective states
of their incorporation, the qualification of Borrower to engage
in business in each jurisdiction in which it is engaged in
business or required to be so qualified, its authority to
execute, deliver and perform this Amendment and any other Loan
Documents to be executed and delivered in connection herewith to
which it is party, certificates of good standing and of
qualification to engage in business, certificates of corporate
resolutions, incumbency certificates, certificates of Responsible
Officials and the like;
(vii) the legal opinion of Debevoise & Xxxxxxxx,
special counsel to Borrower, substantially in the form of Exhibit
2 to this Amendment, together with copies of all factual
certificates and legal opinions upon which such counsel has
relied;
(viii) the favorable written opinion of Chartered Capital
Advisors, Inc., valuation consultants to Borrower, as to the
solvency of Borrower, after giving effect to the execution and
delivery of this Amendment, the incurrence of the Indebtedness
contemplated hereby and the declaration and payment of the
Special Dividend and the making of the Special Loan (treating
both the Special Dividend and the Special Loan as a "dividend"
for purposes of the solvency opinion);
(ix) Lancer's promissory note to Borrower evidencing the
Special Loan, duly endorsed and delivered to Agent for the
benefit of the Lenders; and
(x) such other assurances, certificates, documents,
consents or opinions (in addition to those described hereinbelow)
as the Agent may reasonably require.
(b) Representations and Warranties. The representations and
warranties contained in Article 4 of the Loan Agreement (as amended
hereby) shall be true and correct in all material respects on and as
of the date hereof as though made on and as of that date (except to
the extent that such representations and warranties relate solely to
an earlier date and except as affected by transactions expressly
contemplated by the Loan Agreement).
(c) Absence of Litigation. There shall not be pending or, to
the best knowledge of Borrower, threatened, any litigation,
arbitration, injunction, proceeding, governmental investigation or
inquiry against or affecting Borrower or any Property of Borrower
before any Governmental Agency that could reasonably be expected to
have a Material Adverse Effect.
(d) No Default. After giving effect to this Fourth Amendment,
Lancer, Borrower and T-H Licensing shall be in compliance with all the
terms and provisions of the Loan Documents to which they are party,
and no Default or Event of Default shall have occurred and be
continuing.
(e) No Material Adverse Effect. Since September 30, 1996, there
shall not have occurred: (1) any event or circumstance that could
reasonably be expected to have a Material Adverse Effect, or (2) any
dividends or other distributions made to the stockholders of Borrower,
except as permitted by Section 6.3 of the Loan Agreement and
Section 7(b) of the Lancer Pledge Agreement.
(f) Compliance with Laws. Lenders shall be satisfied that
Borrower and its Subsidiaries are in compliance with all applicable
Laws, including, without limitation, all Environmental Laws and all
Laws pertaining to labor, occupational safety and health and ERISA
matters except to the extent that noncompliance could not reasonably
be expected to have a Material Adverse Effect. Lenders shall be
satisfied that the execution and delivery of this Fourth Amendment and
the consummation of the transactions contemplated hereby will not
cause Borrower or any Subsidiary to violate any Contractual Obligation
to which it is party or by which it is bound or any Laws applicable to
it.
(g) Senior Indebtedness. Lenders shall be satisfied that (i)
Borrower's incurrence of Indebtedness pursuant to the Term Loans is
permissible pursuant to Section 1010 of the Senior Subordinated Note
Indenture and that after giving effect thereto, each of the
representations and warranties set forth in Section 4.21 of the Loan
Agreement shall continue to be true and correct in all respects, and
(ii) the Special Dividend is permissible pursuant to Section 1011 of
the Senior Subordinated Note Indenture and the Special Loan is
permissible pursuant to Sections 1011 and 1016 of the Senior
Subordinated Note Indenture; and Lenders shall have received such
assurances in regard to each of clauses (i) and (ii) above as Lenders
shall request, including without limitation, certifications of
Borrower and an opinion of Borrower's counsel with regard to such
matters, each to be in form and substance satisfactory to Lenders.
(h) Fees. The Agent shall have received, for the account of
Lenders, a closing fee in the amount of $75,000, which shall be fully-
earned and non-refundable on the date hereof and in addition to and
not in lieu of all other fees, interest and reimbursement for expenses
provided herein and in the Loan Agreement.
3. Other Agreements
(a) Except as set forth expressly herein and above, all terms of
the Loan Agreement and the other Loan Documents shall be and remain in
full force and effect and shall constitute the legal, valid, binding
and enforceable obligations of Borrower to the Agent and Lenders. In
furtherance of the foregoing, Borrower acknowledges that from and
after the date hereof, it shall continue to be bound by all provisions
of the Loan Agreement as amended hereby. To the extent any terms and
conditions in any of the other Loan Documents shall contradict or be
in conflict with any terms or conditions of the Loan Agreement, after
giving effect to this Amendment, such terms and conditions are hereby
deemed modified and amended accordingly to reflect the terms and
conditions of the Loan Agreement as modified and amended hereby.
(b) Borrower agrees to pay on demand the reasonable fees and out-
of-pocket expenses of counsel to GE Capital incurred in connection
with the preparation, execution, delivery and enforcement of this
Amendment, the closing hereof, and any other transactions contemplated
hereby.
(c) To induce the Agent and Lenders to enter into this
Amendment, Borrower hereby acknowledges and agrees that, as of the
date hereof, there exists no right of offset, defense or counterclaim
in favor of Borrower as against the Agent or Lenders with respect to
the Obligations.
(d) This Amendment shall be governed by, and construed in
accordance with the laws of the State of New York applicable to
contracts made and performed in such State and all applicable laws of
the United States of America.
(e) This Amendment may be executed in two or more counterparts,
all of which shall constitute one and the same agreement.
4. Refinancings. Borrower agrees that Agent and Lender shall
have the right of first refusal to serve as agent and to participate
as a lender, respectively, in any debt refinancing of the Obligations
under the Loan Agreement consummated at any time prior to December 5,
1998, on substantially the same terms and conditions as offered by any
other prospective agent and lender; provided, however, that (i) such
right of first refusal shall not be applicable to any proposed
refinancing of the Obligations (or portion thereof) using the proceeds
of subordinated Indebtedness which is junior in rank to the
Obligations and (ii) in the event that any other Indebtedness of
Borrower is refinanced contemporaneously with, or as part of, any
refinancing of the Obligations, such right of first refusal shall only
apply to the refinancing of the Obligations and not such other
Indebtedness.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed under seal by their respective officers thereunto duly
authorized, as of the date first above written.
FAIRFIELD MANUFACTURING
COMPANY, INC.
By:________________________________
_
Xxxxxxx X. Xxxx
Vice President-Finance
[CORPORATE SEAL]
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By:________________________________
Xxxxxx X. Xxxxx
Senior Vice President,
as duly authorized
GENERAL ELECTRIC CAPITAL
CORPORATION, as Lender
By:________________________________
_
Xxxxxx X. Xxxxx
Senior Vice President,
as duly authorized
Pro Rata Share of Commitment: 100%
Amount of New Term Loan:
$15,000,000
ACKNOWLEDGMENT OF GUARANTOR
The undersigned, T-H Licensing, Inc., hereby (a) acknowledges its
receipt of a copy of and consents to the within and foregoing
Amendment, (b) agrees to be bound by the provisions thereof and (c)
acknowledges and agrees that the Subsidiary Guaranty, the Subsidiary
Security Agreement and all other Loan Documents to which the
undersigned is a party shall continue in full force and effect from
and after the execution and delivery of the within and foregoing
Amendment without diminution or impairment.
IN WITNESS WHEREOF, the undersigned has set its hand and seal as
of the ____ day of _____________, 1996.
T-H LICENSING, INC.
By:______________________________
Name:
Title:
ACKNOWLEDGMENT OF LANCER
The undersigned, Lancer Industries Inc., hereby (a) acknowledges
its receipt of a copy of and consents to the within and foregoing
amendment, (b) agrees to be bound by the provisions thereof and (c)
acknowledges and agrees that the Lancer Pledge Agreement shall
continue in full force and effect from and after the execution and
delivery of the within and foregoing Amendment without diminution or
impairment.
IN WITNESS WHEREOF, the undersigned has set its hand and seal as
of the ____ day of December, 1996.
LANCER INDUSTRIES INC.
By:_____________________________________
Name:
Title:
