EXHIBIT 10.3
FIFTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT
AND WAIVER
THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER (this
"Amendment"), dated as of January 29, 2003, 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, May 3, 2002 and June 27, 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.
Preliminary Statement
An Event of Default exists under the Credit Agreement, and the Borrower
has requested that the Lender waive such default. To induce the Lender to grant
such waiver and in consideration of such waiver, the Borrower has agreed to the
terms and conditions set forth in this Amendment, including terms and conditions
intended to benefit U.S. Bancorp Equipment Finance, Inc. ("USBEF"), an affiliate
of the Lender that has also extended credit to the Borrower in the form of lease
agreements.
NOW THEREFOR, in consideration of the foregoing and for other valuable
consideration, the Borrower and the Lender agree as follows:
ARTICLE I - AMENDMENTS TO THE CREDIT AGREEMENT
The Credit Agreement is amended as follows:
1.1 Line of Credit. The first sentence of Section 2.1(a) is amended
to read as follows:
"Lender agrees to make advances (each a `Line of Credit Advance') to
Borrower, from and after the date of this Agreement through and
including the earlier of December 31, 2003, or the date on which the
Line of Credit is terminated, whether under Section 2.1(d), Section
9.2(a) or otherwise (the `Termination Date'), in such amounts and at
such times as the Borrower may from time to time request in an
aggregate amount at any time outstanding not to exceed the Line of
Credit Availability."
1.2 Termination Date. New Section 2.1(d) is added following Section
2.1(c), and shall read as follows:
"(d) Termination Date. The Borrower agrees to give the Lender immediate
notice of the shortening of the maturity of loans or extensions of
credit under the IBM Credit Loan Agreement or other credit agreement
involving a material (in excess of $2,000,000) amount of senior
indebtedness. Upon such notice, the Lender shall have the option, by
notice to the Borrower, of causing the Termination Date hereunder to
fall on a date (not later than the Termination Date prior to giving
effect to such notice) not later than the maturity date under the IBM
Credit Loan Agreement or such other credit agreement. This provision
shall not affect other changes to the Termination Date set forth in
this Agreement."
1.3 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 Lender that, as of December 31, 2002, its
Current Ratio was 1.31 to 1.00, and for such reason for the period on and after
December 31, 2002, it was not in compliance with Section 8.11(d) of the Credit
Agreement. The Borrower has requested that the Lender waive such non-compliance
with the Credit Agreement. Effective as provided below, and subject to the
additional requirements that IBM Credit shall have waived, or will waive
simultaneously herewith, any default under the IBM Credit Loan Agreement caused
by Borrower's breach of the Current Ratio financial covenant, the Lender waives
the Borrower's non-compliance with Section 8.11(d) of the Credit
Agreement for periods from and after December 31, 2002, through March 30, 2003
(and not including the reporting date on or about March 31, 2003). The Lender
waives any Default or Event of Default arising from such non-compliance. 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 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 IV - 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:
4.1 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.
4.2 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.
4.3 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 a fee of $60,000 to the
Lender.
4.4 Further Condition. As a further condition to effectiveness of this
Amendment and effectiveness of the waiver set forth in Article II, the Borrower
has agreed that the leases of USBEF shall be amended so that (a) the payments in
February and March, 2003, shall continue as scheduled, and (b) commencing on
April 15, 2003, the remaining lease payments shall be rescheduled so that all
obligations under the leases (both interest and principal) are satisfied in
twelve monthly installments, with the final such installment due and payable on
March 15, 2004. The Borrower shall enter into document with USBEF to evidence
such agreement not later than the earlier of (i) February 15, 2003, or (ii) the
date the Borrower shall release to the pubic its financial statements for the
period ended December 31, 2002; and if the Borrower shall fail to enter into
documents reasonably acceptable to USBEF by the earlier of such dates, this
Amendment and the waiver herein shall be deemed to be terminated and of no
effect (and the Event of Default described herein shall be deemed to have
continued and not to have been waived).
ARTICLE V - GENERAL
5.1 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.
5.2 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.
5.3 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
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invalidating the remaining portions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
5.4 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.
5.5 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: Xxxxxxxxxxx X. Xxxxxx
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Title Vice President
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PEMSTAR INC.
By: Xxxx X Xxx
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Title CFO
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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 Fifth Amendment to the Credit Agreement and
Waiver, to be dated on or about January 29, 2003 (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: Xxxxx X. Xxxxx
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Title Secretary
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and
By: Xxxx X. Xxxxxx
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Title President
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