EXHIBIT 10.1
FOURTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT
AND WAIVER
THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER (this
"Amendment"), dated as of June 27, 2002, amends and modifies a certain Loan and
Security Agreement dated as of June 28, 2001 as amended by Amendments dated as
of December 20, 2001, March 25, 2002 and May 3, 2002 (as amended, the "Credit
Agreement") by and between PEMSTAR INC. (the "Borrower") and U.S. BANK NATIONAL
ASSOCIATION (the "Lender"). Terms not otherwise expressly defined herein shall
have the meanings set forth in the Credit Agreement.
FOR VALUE RECEIVED, the Borrower and the Lender agree as follows:
ARTICLE I - AMENDMENTS TO THE CREDIT AGREEMENT
The Credit Agreement is amended as follows:
1.1 Definitions. Section 1.1 is amended as follows
(a) The definition of "Applicable Margin" is amended to read as
follows:
"`Applicable Margin' shall mean, for the period from the date
hereof until the date on which the applicable margin changes in
accordance with the following provisions, 3.75% per annum for
Eurodollar Advances and 1.50% per annum for Prime Rate Advances, and
thereafter, for any period, the applicable percentage set forth below:
Applicable Margin
Prime Rate Eurodollar
Fixed Charge Coverage Ratio: Advances: Advances:
--------------------------- ----------- -----------
Less than or equal
to 1.25 to 1.00 1.50% 3.75%
Greater than or equal to
1.25 to 1.00 but less
than 1.50 to 1.00 1.25% 3.50%
Greater than or equal to
1.50 to 1.00 but less
than 1.75 to 1.00 1.00% 3.25%
Greater than or equal to
1.75 to 1.00 0.75% 3.00%
The Applicable Margin shall be determined by the Lender based upon the
information set forth in the quarterly or annual consolidated financial
statements of the Borrower and the Subsidiaries furnished to Lender
pursuant to Section 7.1(a) or (c) for the period of four consecutive
fiscal quarters ending on the date of such financial statements
beginning with the quarter ending December 31, 2002; provided, that
with respect to the fiscal quarter ending on December 31, 2002, the
Applicable Margin shall be determined based on the period of two (2)
consecutive fiscal quarters ending on such date and with respect to the
fiscal quarter ending on March 31, 2003, the Applicable Margin shall be
determined based on the period of three (3) consecutive fiscal quarters
ending on such date. Any change in the Applicable Margin shall affect
all outstanding and future Loans and shall take effect on the first day
of the month following the date of Lender's receipt of the applicable
financial statement. Upon any failure of the Borrower to deliver to the
Lender the financial statements within the time provided by Section
7.1(a) or (c), the Applicable Margin shall be the highest Applicable
Margin set forth above and such Applicable Margin shall remain in
effect until the first day following the date Lender receives the
applicable financial statements requiring a lower Applicable Margin."
(b) The definition of "Letter of Credit Sublimit" is amended to
read as follows:
"Letter of Credit Sublimit" shall mean $5,000,000."
1.2 Borrowing Base. Section 3.1(a)(ii) (Inventory Availability) is
amended by deleting "30%" and inserting "25%" in place thereof.
1.3 Minimum Availability. New Section 7.15 is added after Section 7.14
and shall read as follows:
"Section 7.15 Minimum Availability. Maintain at all times a
Minimum Availability of at least $1,000,000. For this purpose, "Minimum
Availability" shall mean the lesser of (a) the Line of Credit Amount
less the Letter of Credit Obligations and less the outstanding
principal amount of the Line of Credit Advances, or (b) the Borrowing
Base less the Letter of Credit Obligations and less the outstanding
principal amount of the Line of Credit Advances."
1.4 Financial Covenants. Section 8.11 of the Credit Agreement is
amended to read as follows:
"Section 8.11. Financial Covenants.
(a) Adjusted Consolidated Tangible Net Worth. At any time,
permit the Adjusted Consolidated Tangible Net Worth of the Borrower and
the Subsidiaries to be less than the sum of (i) $120,000,000, plus (ii)
the principal amount of Subordinated Debt incurred by the Borrower on
and after June 27, 2002.
(b) Leverage Ratio. As of the last day of any calendar month,
permit the Leverage Ratio to exceed 1.75 to 1.00 at any time.
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(c) Fixed Charge Coverage Ratio. As of the last day of any
calendar month, permit the Fixed Charge Coverage Ratio for any period
of twelve consecutive calendar months ending on or after June 30, 2003
to be less than 1.25 to 1.00.
(d) Current Ratio. As of the last day of any calendar month,
permit the Current Ratio to be less than 1.75 to 1.00.
(e) Capital Expenditure. Make Capital Expenditures during any
year exceeding, on a consolidated basis for the Borrower and its
Subsidiaries, (i) $40,000,000 during the fiscal year ending March 31,
2002, or (ii) $18,000,000 during any other fiscal year.
(f) EBITDA. Permit the EBITDA of the Borrower and the
Subsidiaries to be less than (i) ($11,600,000) for the fiscal quarter
ending Xxxxx 00, 0000, (xx) ($14,000,000) for the combined fiscal
quarters ending March 31, 2002 and June 30, 2002, (iii) ($7,500,000)
for the combined fiscal quarters ending March 31, 2002, June 30, 2002
and September 30, 2002, (iv) $2,000,000 for the combined fiscal
quarters ending March 31, 2002, June 30, 2002, September 30, 2002 and
December 31, 2002, and (v) $10,000,000 for the combined fiscal quarters
ending March 31, 2002, June 30, 2002, September 30, 2002, December 31,
2002 and March 31, 2003. For purposes of the foregoing, a parenthesis
in such requirement indicating a negative number and `less than'
meaning a larger negative number."
1.5 Construction. All references in the Credit Agreement to "this
Agreement", "herein" and similar references shall be deemed to refer to the
Credit Agreement as amended by this Amendment. The Loans shall continue to be
evidenced by the Note and it is acknowledged that the amount of the Note is
greater than the Line of Credit Amount, as amended hereby.
ARTICLE II - WAIVER
The Borrower has informed the Bank that, for the period after March 31,
2002, it was not in compliance with Section 8.11(a) as in effect prior to this
Amendment. The Borrower has requested that the Bank waive such non-compliance
with the Credit Agreement. Effective as set forth below, the Bank waives the
Borrower's non-compliance with Section 8.11(a) of the Credit Agreement for
periods after March 31, 2002, as such Section was in effect prior to this
Amendment and waives any Default or Event of Default arising from such
non-compliance. The Bank does not waive any non-compliance with such Section as
amended by this Amendment. Except as expressly provided herein, all provisions
of the Credit Agreement remain in full force and effect and this waiver shall
not apply to any other or subsequent failure to comply with such Sections or any
other provision of the Credit Agreement.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Amendment and to make and
maintain the Loans under the Credit Agreement as amended hereby, the Borrower
hereby warrants and represents to the Lender that it is duly authorized to
execute and deliver this Amendment, and to perform its
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obligations under the Credit Agreement as amended hereby, and that this
Amendment constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.
ARTICLE III - CONDITIONS PRECEDENT
This Amendment shall become effective on the date first set forth
above, provided, however, that the effectiveness of this Amendment is subject to
the satisfaction of each of the following conditions precedent:
3.1 Warranties. After giving effect to this Amendment, the
representations and warranties in Article 6 of the Credit Agreement shall be
true and correct as though made on the date hereof, except for changes that are
permitted by the terms of the Credit Agreement. The execution by the Borrower of
this Amendment shall be deemed a representation that the Borrower has complied
with the foregoing condition.
3.2 Defaults. After giving effect to this Amendment, no Default and no
Event of Default shall have occurred and be continuing under the Credit
Agreement. The execution by the Borrower of this Amendment shall be deemed a
representation that the Borrower has complied with the foregoing condition.
3.3 Documents and Fee. This Amendment and the acknowledgment by the
Guarantor in the form attached hereto shall have been executed and delivered by
the appropriate parties and the Borrower shall have paid fees and expenses
specified by the Bank.
ARTICLE IV - GENERAL
4.1 Expenses. The Borrower agrees to reimburse the Lender upon demand
for all reasonable expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Lender in the preparation, negotiation and execution
of this Amendment and any other document required to be furnished herewith, and
in enforcing the obligations of the Borrower hereunder, and to pay and save the
Lender harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of this Amendment, which
obligations of the Borrower shall survive any termination of the Credit
Agreement.
4.2 Counterparts. This Amendment may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original but all such counterparts shall constitute but one and the
same instrument.
4.3 Severability. Any provision of this Amendment which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
4.4 Law. This Amendment shall be a contract made under the laws of the
State of Minnesota, which laws shall govern all the rights and duties hereunder.
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4.5 Successors; Enforceability. This Amendment shall be binding upon
the Borrower and the Lender and their respective successors and assigns, and
shall inure to the benefit of the Borrower and the Lender and the successors and
assigns of the Lender. Except as hereby amended, the Credit Agreement shall
remain in full force and effect and is hereby ratified and confirmed in all
respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed at Minneapolis, Minnesota by their respective officers thereunto duly
authorized as of the date first written above.
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Xxxxxxxxxxx X. Xxxxxx
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Title Vice President
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PEMSTAR INC.
By /s/ Xxxxx Xxxxxxx
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Title Chief Executive Officer
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GUARANTOR'S ACKNOWLEDGMENT
The undersigned has guaranteed payment and performance of obligations
of PEMSTAR INC. (the "Borrower") to U.S. Bank National Association (the
"Lender") pursuant to the terms of a Guaranty, dated as of June 28, 2001 (the
"Guaranty"), which obligations include without limitation obligations under that
certain Loan and Security Agreement, dated as of June 28, 2001, as thereafter
amended (the "Credit Agreement"). The undersigned acknowledges that its has
received a copy of the proposed Fourth Amendment to the Credit Agreement, to be
dated on or about June 27, 2002 (the "Amendment"). The undersigned agrees and
acknowledges that the Amendment shall in no way impair or limit the right of the
Lender under the Guaranty, and confirms that by the Guaranty, the undersigned
continues to guaranty payment and performance of the obligations of the Borrower
to the Lender, including without limitation obligations under the Credit
Agreement as amended pursuant to the Amendment. The undersigned hereby confirms
that the Guaranty remains in full force and effect, enforceable against the
undersigned in accordance with its terms.
TURTLE MOUNTAIN CORPORATION
By: /s/ Xx Xxxxxxx
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Title Director
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and
By: /s/ Xxxxx Xxxxx
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Title Secretary
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