AMENDMENT NO. 10 TO FINANCING AGREEMENTS
June 30, 1999
Congress Financial Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Congress Financial Corporation (together with its successors and assigns,
"Lender") and Worksafe Industries Inc., formerly known a Eastco Industrial
Safety Corp. ("Worksafe") and Eastco Glove Technologies, Inc. ("Eastco Glove",
and together with Worksafe and their respective successors and assigns,
individually and collectively, "Borrower") and Puerto Rico Safety Equipment
Corporation ("PR Equipment"), Worksafe Industries of Puerto Rico Inc., formerly
known as Puerto Rico Safety Corporation ("PR Safety"), Disposable Safety Wear
Inc. ("Disposable"), Safety Wear Corp. ("Safety") and Protective Knitting Inc.
("PKI", and together with PR Equipment, PR Safety, Disposable and Safety, each
individually a "Guarantor", and collectively, "Guarantors") have entered into
financing arrangements pursuant to which Lender may make loans and provide other
financial accommodations to Borrower as set forth in the Accounts Financing
Agreement (Security Agreement], dated as of October 1,1991, by and among Lender
and Borrower, as amended by Amendment to Financing Agreements, dated June 29,
1993, Amendment No. 2 to Financing Agreements, dated September 30,1994,
Amendment No. 3 to Financing Agreements, dated July 1, 1995, Amendment No. 4 to
Financing Agreements, dated November, 1995, Amendment No. 5 to Financing
Agreements, dated as of February 1, 1996, Amendment No. 6 to Financing
Agreements, dated as of February 23, 1996, Amendment No. 7 to Financing
Agreements, dated July 22, 1996, Amendment No. 8 to Financing Agreements, dated
April 17, 1997 and Amendment No. 9 to Financing Agreements, dated January 11,
1999 ("Amendment No. 9") and as supplemented, including, without limitation, by
the Covenants Supplement to Accounts Financing Agreement [Security Agreement],
dated as of October 1, 1991, by and among Lender and Borrower, (the "Covenants
Supplement"), the letter re: Inventory Loans, dated as of October 1, 1991, by
Borrower in favor of Lender (the "Inventory Loan Letter") and the Inventory and
Equipment Security Agreement Supplement to Accounts Financing Agreement
[Security Agreement], dated as of October 1, 1991, by Borrower in favor of
Lender, as the same is amended hereby and as the same may hereafter be further
amended, modified, supplemented, extended, renewed, restated or replaced, the
"Loan Agreement") and other agreements, documents and instruments referred to
therein or at any time executed and/or delivered in connection therewith or
related thereto, including this Amendment (all of the foregoing, together with
the Loan Agreement, as she same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, being collectively
referred to herein as the "Financing Agreements").
Borrower and Guarantors have requested that Lender (a) waive certain Events
of Default arising prior to the date hereof as a result of the failure of
Borrower to maintain the amount of Consolidated Working Capital required under
the Loan Agreement and (b) agree to certain amendments to the Loan Agreement and
Lender is willing to grant such waiver and agree to such amendments, subject to
the terms and conditions contained herein. By this Amendment, Lender, Borrower
and Guarantors desire and intend to evidence such waiver and such amendments.
In consideration of the foregoing and the agreements and covenants
contained herein, the parties hereto agree as follows:
1. Definitions.
1.1 Additional Definitions. As used herein, the following terms shall have
the respective meanings given to them below and the Loan Agreement shall be
deemed and is hereby amended to include, in addition and not in limitation, each
of the following definitions:
(a) "Amendment No. 10" shall mean this Amendment No. 10 to Financing
Agreements by and among Lender, Borrower and Guarantors, as it now exists
or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
(b) "Supplemental Loans" shall mean the loans hereafter made by Lender
to or for the benefit of Borrower on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 2 of Amendment No. 10.
(c) "Supplemental Loan Limit" shall mean at any time $250,000.
(d) "Supplemental Loan Termination Date" shall mean December 31, 1999.
(e) "Worksafe" shall mean Worksafe Industries Inc., formerly known as
Eastco Industrial Safety Corp., and its successors and assigns.
1.2 Amendments to Definitions.
(a) All references to the term "Maximum Credit" in the Loan Agreement
and the other Financing Agreements shall be deemed and each such reference
is hereby amended to mean $8,000,000.
(b) All references to "Eastco" in the Loan Agreement and the other
Financing Agreements shall be deemed and each such reference is hereby
amended to mean Worksafe.
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1.3 Interpretation. For purposes of this Amendment, unless otherwise
defined herein, all terms used herein shall have the respective meanings
assigned to such terms in the Loan Agreement and the Financing Agreements.
2. Supplemental Loans.
(a) In addition to the Loans which may be made by Lender to Borrower
pursuant to Section 2.1(a) of the Loan Agreement, upon the request of
Borrower, made at any time and from time to time on or after the date
hereof and prior to the Supplemental Loan Termination Date, subject to (i)
the terms and conditions contained herein, in the Loan Agreement and in the
other Financing Agreements, and (ii) to Lender's receipt of a written
"desktop" appraisal as to Borrower's Equipment located in Puerto Rico and
Alabama and to Lender's receipt of a full written appraisal as to
Borrower's Equipment located in Minnesota, in each case in form, scope and
methodology acceptable to Lender in its sole discretion and prepared by
Xxxxx-Xxxxxx, Inc. in the case of Equipment located in Puerto Rico and
Alabama and Accu-Val, Inc. in the case of Equipment located in Minnesota,
each of which appraisal shall forth such information with respect to the
value and condition of Borrower's Equipment as Lender shall, in its sole
discretion, deem acceptable, Lender shall make Supplemental Loans available
to Borrower in amounts in excess of the amounts otherwise available to
Borrower under Section 2.1(a) of the Loan Agreement (as calculated by
Lender, and subject to the Maximum Credit and the applicable sublimits
provided for in the Loan Agreement and after deduction for all reserves
established and maintained at such time by Lender) up to the amount of the
Supplemental Loan Limit. No Supplemental Loans shall be available unless on
the date of the proposed Supplemental Loans there are no other Loans
available to Borrower under Section 2.1(a) of the Loan Agreement (as
calculated by Lender, subject to the applicable sublimits provided for in
the Loan Agreement and after deduction for all reserves established and
maintained at such time by Lender).
(b) Except in Lender' discretion, Borrower shall not have any right to
request, and Lender shall not make, any Supplemental Loans (i) if after
making such Supplemental Loans, the aggregate amount of Supplemental Loans
outstanding would exceed the Supplemental Loan Limit, (ii) at any time on
or after the Supplemental Loan Termination Date, or (iii) if an Event of
Default has occurred and is continuing. The Supplemental Loans shall
constitute Obligations and shall be secured by the Collateral.
(c) Unless sooner demanded by Lender in accordance with the terms of
the Loan Agreement or the other Financing Agreements, all outstanding and
unpaid Obligations relating to the Supplemental Loans (including, but not
limited to, principal, interest, fees, costs, expenses and other charges in
respect thereof payable by Borrower to Lender) shall automatically, without
notice or demand, be absolutely and unconditionally due and payable and
Borrower shall pay to Lender in cash or other immediately available funds
all such Obligations on the Supplemental Loan Termination Date. Interest
shall accrue and be due, until and including the next Business
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Day, if the amount so paid by Borrower to the bank account designated by
Lender for such purpose is received in such bank account after 11:00 a.m.
New York City time.
(d) Borrower acknowledges and agrees that, notwithstanding anything to
the contrary contained in the Loan Agreement or the other Financing
Agreements, the failure of Borrower to pay all of the Obligations arising
pursuant to the Supplemental Loans on the Supplemental Loan Termination
Date shall constitute an Event of Default.
3. Amendments to Loan Agreement.
3.1 Inventory Sublimit. Paragraph 3 of the Inventory Loan Letter is hereby
deleted in its entirety and the following substituted therefor:
"3. Except in your sole discretion, the outstanding aggregate
principal amount of loans by you to us hereunder shall not exceed, at
any time, the lower of (a) the aggregate amount of the above
percentages of Value of Eligible Inventory or (b) $3,600,000."
3.2 Consolidated Tangible Net Worth. Section 2.7 of the Covenants
Supplement is hereby deleted in its entirety and the following substituted
therefor:
"2.7 Consolidated Tangible Net Worth. Borrower and its Subsidiaries
shall, at all times, until all Obligations have been indefeasibly paid
in full, maintain a Consolidated Tangible Net Worth of not less than
$2,700,000;"
3.3 Consolidated Working Capital. Section 2.8 of the Covenants Supplement
is hereby deleted in its entirety and the following substituted therefor:
"2.8 Consolidated Working Capital. Borrower and its Subsidiaries
shall, at all times, until all Obligations have been indefeasibly paid
in full, maintain a Consolidated Working Capital of not less than
$6,000,000 on and prior to June 30, 1999 and $6,100,000 at all times
thereafter;"
3.4 Interest.
(a) The first sentence of Section 3.1(a) of the Loan Agreement is
hereby deleted in its entirety and the following substituted therefor:
"3.1(a) Interest shall be payable by us to you on the first day of
each month upon the closing daily balances in our loan account for
each day during the immediately preceding month, at a rate equal
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to three quarters of one percent (.75%) per annum in excess of the
prime rate from time to time publicly announced by First Union
National Bank, or its successors, whether or not such rate is the best
rate available at such bank (the "Prime Rate"); provided, that if; in
any fiscal year of Borrower, commencing with the fiscal year of
Borrower ending June 30, 2000, if the pre-tax income (exclusive of
one-time or extraordinary gains) of Borrower for such fiscal year is
not positive, as determined by Lender based on the audited
consolidated financial statements for Borrower and its Subsidiaries
for such fiscal year, then effective as of the first day of the month
after the date upon which Lender receives such audited financial
statements in accordance with Section 6.4 of this Agreement, the
interest rate hereunder shall be equal to one percent (1%)per annum
in excess of the Prime Rate."
(b,) Section 3.1(b) of Loan Agreement is hereby deleted in its entirety and
the following substituted therefor: "[Intentionally omitted]".
3.5 Collection and Administration. The last sentence of Section 5.1 of the
Loan Agreement is hereby deleted in its entirety and the following substituted
therefor:
"All amounts collected on Accounts when received by you shall be
credited to our loan account, after adding four (4) business days for
collection, clearance and transfer of remittances, conditional upon
final payment to you."
3.6 Termination. The first sentence of Section 9.1 of the Loan Agreement
(including the proviso thereto) is hereby deleted in its entirety and the
following substituted therefor:
"This Agreement shall become effective upon acceptance by you and
shall continue in full force and effect for a term ending October
1, 2002 (the "Renewal Date") and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof."
3.7 Amendment No. 9. Section 4 of Amendment No. 9 is hereby deleted in its
entirety.
4. Special Availability Reserve. Lender has established a special reserve
against loans otherwise available to Borrower in the amount of $100,000. As of
the date hereof, subject to the satisfaction of the conditions set forth herein,
such reserve shall be released in its entirety. Without limiting any other
rights of Lender with respect to the establishment of any reserves, as of
January 1, 2000, a special reserve shall be established in the amount of
$25,000, which reserve shall, at Lender's option increase by $25,000 on the
first day of each of the next three (3) consecutive months thereafter, until it
is $100,000.
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5. Waiver of Events of Default. Lender hereby waives the Event of Default
arising as a result of the failure of Borrower to maintain the amount of
Consolidated Tangible Net Worth and the amount of Consolidated Working Capital
required under Sections 2.7 and 2.8 of the Covenants Supplement, respectively,
for the period ending on June 29, 1999. Lender has not waived and is not by this
Amendment waiving, and has no intention of waiving, any other Event of Default
which may have occurred prior to, or may be continuing on, the date hereof or
any Event of Default which may occur after the date hereof (whether the same or
similar to any Event of Default referred to in the first sentence of this
Section 5) and Lender reserves the right, in its discretion, to exercise any or
all of its rights and remedies arising under the terms of the Financing
Agreements as a result of any Event of Default which may have occurred prior to,
or is continuing on, the date hereof or which may occur after the date hereof
(whether the same or similar to any Event of Default referred to in the first
sentence of this Section 5). The waiver contained herein shall not constitute a
waiver of any Event of Default arising as a result of the failure of Borrower to
comply with Section 2.7 or Section 2.8 of the Covenants Supplement at any time
after June 29, 1999.
6. Waiver and Amendment Fee. In consideration of the waiver and amendments
set forth herein, Borrower shall pay to Lender a fee in the amount of $3,500,
which fee is fully earned as of the date hereof and $2,500 of which is payable
on the date hereof and $1,000 of which is payable on the date of the initial
disbursement of the Supplemental Loans (or if earlier any Event of Default or
termination or non-renewal of the Financing Agreements). Such fee may be charged
by Lender to Borrower's loan account with Lender.
7. Additional Representations, Warranties and Covenants. Borrower and
Guarantors hereby jointly and severally represent, warrant and covenant with and
to Lender as follows, which representations, warranties and covenants are
continuing and shall survive the execution and delivery hereof, and the truth
and accuracy of, or compliance with each, together with the representations,
warranties and covenants in the other Financing Agreements, being a continuing
condition of the making of loans and providing other financial accommodations by
Lender to Borrower:
(a) No Event of Default or act, condition or event which with notice or
passage of time or both would constitute an Event of Default exists or has
occurred as of the date of this Amendment (after giving effect to the amendments
to the Financing Agreements made by this Amendment).
(b) This Amendment has been duly executed and delivered by Borrower and
Guarantors and is in full force and effect as of the date hereof and the
agreements and obligations of Borrower and Guarantors contained herein
constitute legal, valid and binding obligations of Borrower and Guarantors
enforceable against each of them in accordance with its terms.
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8. Conditions Precedent. The effectiveness of the amendments contained in
Sections 1 and 2 hereof is subject to the satisfaction of each of the following
conditions precedent in a manner satisfactory to Lender:
(a) all representations and warranties contained herein shall be true and
correct;
(b) as of the date hereof, no Event of Default, or event, act or condition
which with notice or passage of time or both would constitute an Event of
Default, shall exist or have occurred; and
(c) Lender shall have received an original of this Amendment, duly
authorized, executed and delivered by Borrower and Guarantors.
9. Additional Defaults. The failure of any Borrower or Guarantor to comply
with the representations, warranties, covenants, conditions and agreements
contained herein or in any other agreement, document or instrument at any time
executed and/or delivered by any Borrower or Guarantor with, to or in favor of
Lender shall constitute an Event of Default under the Financing Agreements.
10. Effect of this Amendment. Except as modified pursuant hereto, no other
changes or modifications to the Financing Agreements are intended or implied,
and in all other respects the Financing Agreements are hereby specifically
ratified, restated and confirmed by all parties hereto as of the effective date
hereof. Any acknowledgment or consent contained herein shall not be construed to
constitute a consent to any other or further action by any Borrower or Guarantor
or to entitle any Borrower or Guarantor to any other consent. To the extent of
conflict between the terms of this Amendment and the other Financing Agreements,
the terms of this Amendment shall control. The Loan Agreement and this Amendment
shall be read and construed as one agreement.
11. Governing Law. The validity, interpretation and enforcement of this
Amendment and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of laws).
12. Headings. The headings listed herein are for convenience only and do
not constitute matters to be construed in interpreting this Amendment.
13. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
14. Binding Effect. This letter agreement shall be binding upon and inure
to the benefit of each of the parties hereto and their respective successors and
assigns.
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The parties hereto have caused this letter agreement to be duly executed
and delivered by their authorized officers as of the day and year first above
written.
Very truly yours,
WORKSAFE INDUSTRIES INC., formerly
known as Eastco Industrial Safety Corp.
By: /s/ XXXXXX XXXXXXXXXXXX
---------------------------------
Title: VP
------------------------------
EASTCO GLOVE TECHNOLOGIES, INC.
By: /s/ XXXXXX XXXXXXXXXXXX
---------------------------------
Title: VP
------------------------------
AGREED:
PUERTO RICO SAFETY EQUIPMENT
CORPORATION
By: /s/ XXXXXX XXXXXXXXXXXX
---------------------------
Title: VP
----------------------
WORKSAFE INDUSTRIES OF PUERTO
RICO INC., formerly known as Puerto
Rico Safety Corporation
By: /s/ XXXXXX XXXXXXXXXXXX
---------------------------
Title: VP
----------------------
(SIGNATURES CONTINUE ON NEXT PAGE)
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DISPOSABLE SAFETY WEAR INC.
By: /s/ XXXXXX XXXXXXXXXXXX
----------------------------
Title: VP
----------------------
SAFETY WEAR CORP.
By: /s/ XXXXXX XXXXXXXXXXXX
---------------------------
Title: VP
----------------------
PROTECTIVE KNITTING, INC.
By: /s/ XXXXXX XXXXXXXXXXXX
---------------------------
Title: VP
----------------------
CONGRESS FINANCIAL CORPORATION
By: /s/ XXXXX X.XXXXXXX
-------------------------
Title: VP
----------------------
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