Exhibit 10.1
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND LIMITED WAIVER OF DEFAULTS
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT AND LIMITED WAIVER
OF DEFAULTS (this "Amendment") is entered into as of July __, 2003, by and
between GUARANTY BUSINESS CREDIT CORPORATION, a Delaware Corporation ("GBCC")
and U.S. PLASTIC LUMBER LTD., a Delaware Corporation ("Company"), with respect
to the following:
A. GBCC and Company have entered into that certain Loan and Security
Agreement dated as of December 19, 2002 (as amended, restated, modified and
supplemented from time to time, including by this Amendment, the "Loan
Agreement"). Capitalized terms used but not defined in this Amendment shall have
the meanings given to them in the Loan Agreement.
B. As set forth in those certain Notice of Default letters from GBCC to
Company dated June 6 and July 10, 2003, one or more Events of Default have
occurred and are continuing (the "Existing Defaults").
C. Company has advised GBCC that: (i) Company intends, on or before
October 31, 2003, to sell and transfer (the "Sale") to a third party ("Buyer")
certain assets of Company and (ii) the proceeds of the Sale will be applied to,
and will be sufficient to, pay in full the Obligations, including the Special
Advances (as defined below). For purposes of this Amendment, Obligations other
than the Special Advances shall be referred to as the "Other Obligations". The
date of the closing of the Sale shall be referred to herein as the "Closing
Date" and the documents effecting the Sale shall be referred to as the "Sale
Documents".
D. The Company has asked GBCC to permit certain investors satisfactory
to GBCC to participate in the credit facility under the Loan Agreement in order
to provide additional working capital and loans to Company.
E. Company has requested waivers of the Existing Defaults and certain
financial covenant defaults and has requested certain amendments to the Loan
Agreement, and GBCC has agreed to waive the Existing Defaults, certain financial
covenant defaults and amend the Loan Agreement on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions hereof, the parties hereto agree as follows:
1. Use of Proceeds from Sale. Company agrees that immediately available
funds payable to Company pursuant to the Sale Documents in an amount no less
than the amount of the Obligations shall be paid by Buyer directly to GBCC on
the Closing Date for application to the Obligations in accordance with the terms
of the Loan Agreement. The amount of the Obligations, including the Other
Obligations, as of the Closing Date shall be as set forth in a
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certificate of GBCC delivered to Company and Buyer (if Buyer has provided GBCC
with its complete contact information prior thereto) one (1) Business Day before
the Closing Date. Such certificate shall be binding upon Company absent manifest
error.
2. Closing Date.
(a) If the Obligations are not paid in full on or before
October 31, 2003, then an Event of Default shall have occurred (a "Sale
Default") entitling GBCC to exercise all of its default rights and
remedies under the Transaction Documents and at law, including, without
limitation, acceleration of the Obligations and termination of the Loan
Agreement. The occurrence of a Sale Default (I) shall not be curable by
the occurrence of the Sale and/or payment in full of the Obligations
after October 31, 2003, and (II) without limiting GBCC's other rights
and remedies under the Transaction Documents, shall relieve GBCC of any
further obligation under the Transaction Documents to make any further
Advances or other financial accommodations whatsoever available to
Company, any such further Advances or accommodations by GBCC being in
GBCC's sole and absolute discretion.
(b) On or before August 31, 2003, Company shall provide GBCC
with a fully executed letter of intent for the Sale or draft Sale
Documents in form and substance satisfactory to GBCC in its sole
discretion providing, among other things, for the payment to GBCC on
the Closing Date of net proceeds in an amount sufficient to pay in full
all anticipated Obligations as of such date.
3. Termination of Loan Facility. Without limiting GBCC's rights and
remedies under the Loan Agreement, the other Transaction Documents and
applicable law, upon the payment in full of the Obligations (whether as a result
of the application of the net proceeds of the Sale to the Obligations or
otherwise), GBCC shall be relieved of any further obligation under the
Transaction Documents to make any further Advances or other financial
accommodations whatsoever available to Company. Upon termination of the Loan
Agreement and the indefeasible payment in full of the Obligations, GBCC shall,
at Company's cost and expense, promptly execute and deliver to Company,
authorize the filing of, and/or record with the appropriate governmental
authority (in each case as GBCC shall elect) all documents necessary to release
all liens against and security interests in the Collateral, including, without
limitation, a satisfaction of mortgage with respect to the real property
mortgage in favor of GBCC recorded in Xxxxxx County, Florida and appropriate
UCC-3 termination statements with respect to the Collateral.
4. Waiver of Existing Defaults; Default Rate of Interest.
(a) Company hereby acknowledges that the Existing Defaults
have occurred and are continuing, and GBCC hereby waives such Events of
Default. The waiver granted in the foregoing sentence is a one-time
waiver only, is a waiver only of the Existing Defaults, shall be
limited strictly as written and shall not be deemed to constitute a
waiver of, or any consent to noncompliance with, any term or provision
of this Amendment, the Loan Agreement or any other Transaction Document
whether or not similar to the Existing Defaults.
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(b) Notwithstanding the waivers contained in this Amendment,
interest under the Loan Agreement shall continue to accrue at the
Default Rate until the Obligations are paid in full and the Loan
Agreement is terminated.
5. Financial Covenants. From and including May 1, 2003, Company shall
not be required to satisfy the financial covenants set forth in Section 7.1
(Tangible Net Worth), Section 7.3 (Senior Debt Service Coverage Ratio) and
Section 7.4 (Total Debt Service Coverage Ratio) of the Loan Agreement, provided
that nothing herein shall be construed to relieve Company of any of its
financial or other reporting obligations under the Loan Agreement. GBCC hereby
waives any Event of Default resulting from Company's failure to satisfy the
financial covenants set forth in Section 7.1, Section 7.3 and Section 7.4 of the
Loan Agreement from and after May 1, 2003. The waiver granted in the foregoing
sentence is a one-time waiver only, is a waiver only of the identified defaults,
shall be limited strictly as written and shall not be deemed to constitute a
waiver of, or any consent to noncompliance with, any term or provision of this
Amendment, the Loan Agreement (other than Sections 7.1, 7.3 and 7.4 thereof) or
any other Transaction Document whether or not similar to such defaults.
6. Special Advance Participant. No later than ten (10) Business Days
after the date hereof, Company shall cause one or more investors satisfactory to
GBCC (collectively, the "Special Advance Participant") to enter into definitive
legal documentation in form and substance satisfactory to GBCC in its sole
discretion (the "Junior Participation Agreement") providing for the
participation by the Special Advance Participant in the Special Advance Subline
(defined below). In addition, the Junior Participation Agreement shall provide,
among other things, that:
(a) the Special Advances and interest accrued thereon shall
not be paid unless and until all Other Obligations have been paid in
full; and
(b) the Special Advance Participant shall make available to
GBCC in immediately available funds, to the account designated from
time to time by GBCC, one hundred percent (100%) of all advances
requested by Company under the Special Advance Subline.
7. Special Advance Subline. The Loan Agreement is hereby amended to
provide for a subline (the "Special Advance Subline") under the Revolving
Facility Limit subject to the following terms and conditions:
(a) The amounts advanced by GBCC to Company under the Special
Advance Subline (each advance, a "Special Advance" and collectively the
"Special Advances") shall be evidenced by a promissory note in favor of
GBCC in form and substance satisfactory to GBCC in its sole discretion
(the "Special Advance Promissory Note"). The aggregate amount of
Special Advances made under the Special Advance Subline shall not
exceed Seven Hundred Fifty Thousand Dollars ($750,000). Without
limiting the existing representations, warranties and covenants in the
Loan Agreement, Company represents, warrants and covenants to GBCC that
no proceeds of any Special Advance shall be paid by Company to, or for
the direct benefit of, any Affiliate or insider (as defined in the
United States Bankruptcy Code) of Company, provided that,
notwithstanding anything to the contrary in the Loan Agreement, Company
may advance an aggregate amount not to exceed Two Hundred Fifty
Thousand Dollars ($250,000) to
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X.X. Xxxxxxx Xxxxxx Corp. for the sole purpose of the payment of
corporate overhead expenses incurred by it in the ordinary course of
business.
(b) Except as set forth below or otherwise provided in this
Amendment, each Special Advance shall be treated in the same manner as
a Revolving Loan:
(i) Special Advances shall not be subject to the
Borrowing Base.
(ii) Any request by Company for a Special Advance
shall be made in writing to GBCC and to the Special Advance
Participant no later than 12:00 PM Pacific time on the
Business Day before the Business Day on which Company wishes
the Special Advance to be made (the "Funding Date"). Company
shall not be required to submit to GBCC a Borrowing Base
Certificate in connection with any request for a Special
Advance unless written demand therefor is made by GBCC.
(iii) A Special Advance, once repaid, may not be
reborrowed.
(iv) The amount of each Special Advance actually
funded shall reduce the P&I Reserve (defined below) in an
equal amount dollar for dollar.
(v) Provided that in no case shall the Special
Advances or interest accrued thereon be paid prior to the
payment in full of the Other Obligations, the Special Advances
shall be due and payable by Company to GBCC on the earliest to
occur of the following:
a. A Sale Default;
b. The date of the termination of the Loan Agreement;
c. The date of the acceleration of the Obligations;
and
d. The Closing Date.
Each of the foregoing events in clauses a. through d.
above is referred to herein as an "Acceleration
Event". Company shall not repay the Special Advances
other than as set forth above in this subparagraph
7(b)(v), and any payment received by GBCC on the
Obligations (notwithstanding any designation of such
payment as a payment on the Special Advances or
otherwise) shall be applied, first, to the Other
Obligations until all such Other Obligations have
been paid in full and satisfied and, second, to the
outstanding amount of the Special Advances and
interest accrued thereon.
(vi) GBCC's obligation to make any Special Advance to
Company shall be subject to the following additional terms and
conditions:
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a. GBCC shall have no obligation to make any Special
Advance to Company unless and until (x) GBCC shall
have confirmed that GBCC has received, in immediately
available funds, from the Special Advance Participant
one hundred percent (100%) of the amount of such
Special Advance in accordance with the terms of the
Junior Participation Agreement no later than two (2)
Business Days after the Funding Date, and (y) one (1)
Business Day after the receipt of such funds. If GBCC
receives the amount of a Special Advance from the
Special Advance Participant after 12:00 PM Pacific
time on a Business Day, such amount shall be deemed
received on the next Business Day.
b. If GBCC receives from the Special Advance
Participant some or all of the amount of a requested
Special Advance later than two (2) Business Days
after the Funding Date, GBCC may, but shall not be
required to, make a Special Advance to Company in the
amount of the Special Advance or portion thereof
actually received by GBCC from the Special Advance
Participant.
(vii) GBCC shall have no obligation to make any
further Special Advances to Company if an Event of Default
(other than an Event of Default waived in this Amendment) has
occurred and, as a result of such Event of Default, GBCC has
ceased making advances to Company under the Loan Agreement,
except that GBCC shall continue to make Special Advances to
Company in accordance with this Amendment and the other
Transaction Documents if:
a. such Event of Default is expressly curable
pursuant to the Transaction Documents and has been
cured as provided therein; or
b. the Special Advance requested by Company will be
used to cure an Event of Default that is expressly
curable pursuant to the Transaction Documents and can
be cured by the making of such Special Advance
without breaching any other terms of the Loan
Agreement or the other Transaction Documents (other
than this paragraph 7(b)(vii).
(viii) GBCC shall not be responsible for the failure
of the Special Advance Participant to make available to GBCC
the full amount of the Special Advance in accordance with the
terms of this Amendment and the Junior Participation
Agreement.
8. Reserves Against Availability.
(a) Without limiting GBCC's rights under the Loan Agreement to
establish reserves, Company hereby acknowledges and agrees that GBCC
has established a reserve against borrowing availability (the "P&I
Reserve") in an amount equal to Eight Hundred Fifty Thousand Dollars
($850,000). Contemporaneously with the making of any
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Special Advance by GBCC, GBCC shall reduce the amount of the P&I
Reserve by the amount of such Special Advance, dollar for dollar, in
accordance with paragraph 7(b)(iv) above, except that under no
circumstances shall the P&I Reserve be reduced below actual principal
payments due or to become due (excluding the amount of the Special
Advances) and, as reasonably determined by GBCC, estimated interest on
the Obligations due or to become due, in each case through October 31,
2003.
(b) As of the date hereof, GBCC shall eliminate the existing
reserve in the amount of Five Hundred Fifty Thousand Dollars ($550,000)
established by GBCC in connection with the Company's outstanding
accounts payable.
9. Minimum Liquidity. Company shall at all times have a sufficient
amount of unrestricted, available cash and cash equivalents to meet all of its
commitments and liabilities as and when the same come due, taking into account,
without limitation, Company's accounts payable, contingent liabilities, bank
overdrafts, the Obligations and other Debt of Company and avoidance of any
overadvances under the Loan Agreement (after giving effect to any reserves
thereunder established by GBCC from time to time).
(a) Company shall submit to GBCC on the 15th day (or if such
day is not a Business Day, on the first Business Day thereafter) and
the last Business Day of each month a certificate in form and substance
satisfactory to GBCC executed by an authorized officer of Company
providing sufficient information to evaluate Company's compliance with
the liquidity covenant set forth in paragraph 9 above.
(b) If GBCC determines in its discretion reasonably exercised
that Company is not in compliance with the liquidity covenant set forth
in paragraph 9 above, an Event of Default shall have occurred and be
continuing three (3) Business Days after GBCC provides notice thereof
to Company; provided that during such three (3) Business Day period
Company may cure such breach of the liquidity covenant and avoid the
occurrence of an Event of Default by, subject to the terms of the Loan
Agreement and the other Transaction Documents: (i) drawing on the
Special Advance Subline in an amount determined by GBCC (the "Cure
Amount"); (ii) issuing common shares in consideration for the immediate
payment in cash to Company of the Cure Amount; (iii) acquiring
unrestricted cash and cash equivalents by obtaining Revolving Loans in
accordance with the Loan Agreement in an aggregate amount no less than
the Cure Amount; or (iv) otherwise acquiring unrestricted cash and cash
equivalents in an aggregate amount no less than the Cure Amount .
10. Release and Waiver of Claims by Company. For good and valuable
consideration, the receipt of which is hereby acknowledged and in consideration
of GBCC executing this Amendment, Company does hereby release GBCC and its
employees, officers, directors, attorneys and agents from any and all claims,
demands, causes of action, now known or unknown, arising out of or related to
the Loan Agreement or the transactions connected therewith. Company does hereby
warrant and represent that no claims, demands or causes of action, arising out
of or related to the Loan Agreement or the transactions connected therewith are
now known or suspected to exist.
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Company intends this release to cover, encompass, release, and
extinguish, among other things, all claims and matters which might otherwise be
reserved by California Civil Code section 1542, which provides as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
11. Effective Date. The obligations of GBCC hereunder shall take effect
only upon the satisfaction of the following conditions:
(a) Receipt by GBCC of a fully executed original of this
Amendment and the Special Advance Promissory Note;
(b) Other than the Existing Defaults and the financial
covenant defaults specifically referenced in paragraph 5 of this
Amendment, no Defaults or Events of Default shall have occurred and be
continuing; and
(c) GBCC shall have received such other documents,
certificates, opinions and information that GBCC shall require, each in
form and substance satisfactory to GBCC in its sole discretion.
12. Miscellaneous.
(a) Reference to the Loan Agreement and the Transaction
Documents.
(i) Except as specifically amended by this Amendment,
the Loan Agreement and the other Transaction Documents shall
remain in full force and effect in accordance with their
respective terms and are hereby ratified and confirmed.
(ii) Company hereby warrants and represents to GBCC
that there does not exist a Default or an Event of Default
other than the Existing Defaults and Company reaffirms, as of
the date hereof, that all of the warranties and
representations of Company contained in the Loan Agreement and
in the other Transaction Documents are true, complete and
correct.
(b) Events of Default. Any failure to comply with the terms
and conditions of this Amendment shall constitute an Event of Default.
(c) Counterparts. This Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
(d) Governing Law. This Amendment shall be governed by and
construed according to the laws of the State of California.
(e) Attorneys' Fees. Company shall pay, on written demand, all
fees and costs incurred by GBCC in connection with the negotiation,
documentation and execution of this Amendment, including the reasonable
fees and expenses of attorneys. If any legal action or proceeding shall
be commenced at any time by any party to this Amendment in connection
with its interpretation or enforcement, the prevailing party or
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parties in such action or proceeding shall be entitled to reimbursement
of its reasonable attorneys' fees and costs in connection therewith, in
addition to all other relief to which the prevailing party or parties
may be entitled.
(f) Jury Trial Waiver. EACH OF THE PARTIES HERETO WAIVES ITS
RIGHT TO A TRIAL BY JURY, IF ANY, IN ANY ACTION TO ENFORCE, DEFEND,
INTERPRET OR OTHERWISE CONCERNING THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first written above.
U.S. PLASTIC LUMBER LTD., a Delaware
Corporation
By: /s/ XXXXXXX X. XXXXXXX
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Name: Xxxxxxx X. Xxxxxxx
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Title: Treasurer
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GUARANTY BUSINESS CREDIT
CORPORATION, a Delaware Corporation
By: /s/ Xxxx Xxxxxxx
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Name: Xxxx Xxxxxxx
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Title: Vice President
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The undersigned hereby consents to and acknowledges the terms
and conditions of the foregoing Amendment and agrees that its Continuing
Guaranty and each other document executed in favor of GBCC remain in full force
and effect.
U.S. PLASTIC LUMBER IP CORPORATION
By: /s/ XXXXXXX X. XXXXXXX
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Name: Xxxxxxx X. Xxxxxxx
----------------------------------------
Title: Treasurer
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U.S. PLASTIC LUMBER CORP.
By: /s/ XXXXXXX X. XXXXXXX
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Name: Xxxxxxx X. Xxxxxxx
----------------------------------------
Title: Chief Financial Officer
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U.S. PLASTIC LUMBER FINANCE CORPORATION
By: /s/ XXXXXXX X. XXXXXXX
------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
----------------------------------------
Title: Treasurer
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