Exhibit 10(a)
FOURTH AMENDMENT TO LOAN AGREEMENT
This FOURTH AMENDMENT TO LOAN AGREEMENT (the "Fourth
Amendment"), dated as of January 27, 1997, and effective as of October 31, 1996,
is by and among FIRST UNION NATIONAL Bank, successor to FIRST FIDELITY BANK,
N.A., a national banking association with offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Bank"), CENTRAL SPRINKLER COMPANY, a
Pennsylvania corporation with offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Borrower"), CENTRAL SPRINKLER CORPORATION, a
Pennsylvania corporation with offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Corporation") and CENTRAL CPVC CORPORATION, an Alabama
corporation with offices located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ("CPVC", and together with the Corporation, the "Guarantors", and together
with the Borrower, the "Obligors").
Background
A. The Bank, Central Sprink, Inc. (formerly, a California corporation
which has been merged into Central Castings Corporation, an Alabama corporation
and a subsidiary of Borrower ("Castings")), the Corporation and the Borrower
entered into that certain loan agreement, dated as of April 15, 1994 (as amended
from time to time, including without limitation, by this Fourth Amendment, the
"Loan Agreement"), pursuant to which the Bank agreed to make available to the
Borrower a term loan in the original principal amount of $10,000,000 (the
"Loan").
B. In connection with the Loan Agreement and in order to evidence the
Loan, the Borrower executed and delivered to the Bank that certain Term Loan
Note, dated as of April 15, 1994 (as amended, extended, substituted or replaced
from time to time, the "Note"), in favor of the Bank in the original principal
amount of $10,000,000.
C. In connection with the execution and delivery of the Loan Agreement
and the Note and in order to secure the prompt payment and performance of the
Borrower's obligations thereunder, Corporation executed and delivered to the
Bank that certain Guaranty, dated as of April 15, 1994 (together with all
amendments and modifications thereto, "Corporation Guaranty").
D. In connection with the execution and delivery of the Loan Agreement
and the Note and in order to secure the prompt payment and performance of the
Borrower's obligations thereunder, Sprink executed and delivered to the Bank
that certain Guaranty, dated as of April 15, 1994 (together with all amendments
and modifications thereto, "Sprink Guaranty", and together with Corporation
Guaranty, the "Guarantees").
E. The Loan Agreement, the Note, the Guarantees, and all of the
documents, instruments and agreements executed and delivered in connection
therewith, together with all amendments and modifications thereto, shall be
referred to hereinafter as the "Loan Documents".
F. Since the date of the last amendment to the Agreement, Sprink has
merged into Castings and CPVC and Central Sprinkler Export Corporation were
formed as subsidiaries of Borrower.
G. The Bank, the Borrower, and the Guarantors, pursuant to the terms
hereof, wish to amend certain of the terms of the Loan Documents.
NOW, THEREFORE, incorporating the foregoing Background herein by
reference and for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
1. Defined Terms. Terms used herein which are capitalized but
not defined herein shall have the respective meanings ascribed to such terms in
the Loan Agreement.
2. Amendments.
a. Each of the following defined terms
contained in Section 1.01 of the Loan Agreement is hereby amended and restated
in its entirety as follows:
"Consolidated Funded Indebtedness" means all
obligations of the Company for borrowed money, including,
without limitation (and without duplication): (a) all
obligations, contingent or otherwise, of the Company in
connection with all letter of credit facilities (whether or
not drawn), acceptance facilities, or other similar facilities
issued for the account of the Company; (b) all obligations of
the Company evidenced by bonds, debentures, or other similar
instruments; (c) all indebtedness created or arising under any
conditional sale or other title retention agreement with
respect to property acquired by the Company; (d) all capital
lease obligations of the Company; (e) all guarantees,
endorsements (other than for collection or deposit in the
ordinary course of business); and (f) all debt referred to in
clause (a) through (e) above secured by (or for which the
holder of such debt has existing rights, contingent or
otherwise, to be secured by) any lien, security interest, or
other charge or encumbrance upon or in property (including,
without limitation, accounts and contract rights) owned by
such person; provided, however, that: (i) trade indebtedness,
tax and other accruals, tax deferrals and deferred
compensation occurring in the ordinary course of the Company's
business shall be specifically excluded from the foregoing
definition; and (ii) the greater of: (A) the aggregate
outstanding amount of indebtedness under the bonds referred to
in Section 5.12(i), and (B) the maximum aggregate amount of
indebtedness for which Central Castings Corporation, the
Company or the Guarantors is obligated under the letters of
credit which secured such bonds, shall be used for purposes of
calculating Consolidated Funded Indebtedness.
"Guarantor" means, individually, and "Guarantors"
means, collectively, jointly and severally, Central Sprinkler
Corporation and CPVC;
"Guaranty" means, individually, and "Guaranties"
means, collectively (i) the Guaranty and Suretyship Agreements
dated as of April 15, 1994, executed and delivered by each
Original Guarantor in favor of the Bank, substantially in the
form of Exhibit B hereto, and (ii) the Guaranty and Suretyship
Agreement, in form and substance satisfactory to the Bank,
dated as of January 27, 1997, executed and delivered by CPVC
in favor of the Bank;
b. Each of the following additional definitions is
hereby added to Section 1.01 of the Loan Agreement to read in its entirety as
follows:
"CPVC" means Central CPVC Corporation, an Alabama
corporation.
"Export" means Central Sprinkler Export Corporation,
a Barbados corporation.
"Fourth Amendment" means the Fourth Amendment to Loan
Agreement dated as of January 27, 1997, by and between the
Bank, Borrower, and Guarantors.
"Fourth Amendment Documents" means collectively, the
Fourth Amendment, the Guaranties executed and delivered
pursuant to Paragraph 6(a) of the Fourth Amendment, and all
other agreements, documents, instruments and writings required
pursuant to or delivered in connection with the Fourth
Amendment.
"Original Guarantor" means, individually, and
"Original Guarantors" means collectively, jointly, and
severally, Central Sprinkler Corporation and Central Sprink,
Inc.
c. Section 5.11 of the Loan Agreement is
hereby amended by substituting the following for clause (b) thereof:
(b) Liens (i) in existence on the date of, and disclosed in
the Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1993, or otherwise disclosed to the Bank in
writing on or prior to April 15, 1994, all as listed and
described on Schedule 5.11 attached hereto and (ii) in
existence on the date of the Fourth Amendment or contemplated
in connection with the financing of CPVC's new plant and
machinery, as listed and described on Schedule A to the Fourth
Amendment, relating to the following: (A) Central Sprinkler
Company indebtedness to CoreStates Bank, N.A., in the original
principal amount of $688,000, (B) CPVC indebtedness to
CoreStates Bank, N.A., in a principal amount of up to
$7,500,000, or any refinancing thereof, whether such
refinancing is with CoreStates Bank, N.A., or with another
lender, in any form whatsoever, including without limitation,
a bond issue, and (C) Spraysafe's indebtedness to Royal Bank
of Scotland in the original principal amount of $1,110,000;
provided however, that such Liens permitted hereunder shall
not include the extension thereof to other property, but shall
include those of such Liens that may be renewed or maintained
in effect to secure indebtedness that is renewed, extended or
refinanced in accordance with Section 5.12(a).
d. Section 5.12 of the Loan Agreement is hereby
amended and restated in its entirety to read as follows:
Section 5.12. Neither the Company nor any Guarantor will, or
will permit any Subsidiary to, incur, create or permit to
exist any Consolidated Funded Indebtedness without the prior
written consent of the Bank, except that the Company and the
Guarantors may incur, create or permit to exist the following:
(a) existing indebtedness listed and described on
Schedule 5.12 attached hereto and the indebtedness listed on
Schedule A attached to the Fourth Amendment and renewals,
extensions and refinancings thereof, provided that the
effective rate of amortization thereof is not increased by any
such renewal, extension or refinancing and any such renewal,
extension or refinancing shall not be on terms less favorable
to the Company and the Guarantors than those provided in the
existing agreements for such indebtedness;
(b) indebtedness to the Bank;
(c) indebtedness subordinated to the indebtedness
evidenced by the Loan Documents on terms and conditions
satisfactory to the Bank;
(d) indebtedness arising from purchase money
mortgages or capital leases for equipment financing;
(e) acquisition indebtedness provided by the seller
in any transaction, provided that such indebtedness is
unsecured and is treated as current debt for purposes of
compliance with the covenants contained in this Agreement and
none of the Company and the Guarantors makes any covenant
(other than to repay such indebtedness) in incurring such
indebtedness;
(f) additional secured indebtedness, provided that
such indebtedness shall not exceed $3,000,000 in the aggregate
at any time ("Additional Secured Indebtedness");
(g) indebtedness incurred as a result of a Second
CoreStates Loan; and
(h) indebtedness under existing unsecured lines of
credit, provided that such indebtedness shall not exceed
$45,000,000 in the aggregate at any time, and
(i) Central Castings Corporation, a Subsidiary of the
Company, shall be permitted to obtain up to approximately
$11,440,000 of financing for the acquisition and improvement
of certain foundry assets located in ▇▇▇▇▇▇▇ County, Alabama,
through the issuance of industrial revenue bonds supported by
a letter or letters of credit issued by the Bank, subject to
the agreement of Central Castings Corporation (which
obligation shall be guaranteed by the Company and the
Guarantors), to reimburse the Bank for any and all draws under
such letter(s) of credit.
e. Section 5.13 of the Loan Agreement is hereby
amended and restated in its entirety to read as follows:
Section 5.13. Neither the Company nor any Guarantor will, or
will permit any Subsidiary of the Company or any Subsidiary of
any Guarantor to, guarantee or otherwise become liable or
responsible for Consolidated Funded Indebtedness or other
obligations of any other Person, contingent or otherwise,
without the prior written consent of the Bank, except that the
Company and the Guarantors may incur, create or permit to
exist the following:
(a) the existing guarantees listed and
described on Schedule 5.13 attached hereto and the
additional guarantees listed and described on
Schedule A attached to the Fourth Amendment, as such
guarantees may be extended or renewed in connection
with the renewal, extension or refinancing of
indebtedness in accordance with Section 5.12(a);
(b) by endorsement of negotiable instruments
for deposit in the normal course of business;
(c) guarantees issued in favor of the Bank;
(d) guarantees issued by either or both of
the Guarantors in favor of CoreStates Bank, N.A. in
connection with a Second CoreStates Loan; and
(e) additional unsecured guarantees for
indebtedness, provided that the amount of
indebtedness guaranteed shall not exceed $3,500,000
in the aggregate at any time; and
(f) guarantees of the indebtedness permitted
pursuant to Section 5.12(i) hereof.
f. Sections 5.15 through 5.18 of the Loan Agreement
are hereby amended and restated in their entirety to read as follows:
Section 5.15. The Parent and its consolidated Subsidiaries
will maintain at all times, from and after October 31, 1996, a
consolidated Tangible Net Worth of at least $41,000,000, to be
tested on a quarterly basis in connection with the delivery of
financial statements pursuant to Section 5.01.
Section 5.16. The Parent and its consolidated Subsidiaries
will maintain at all times, a ratio of consolidated current
assets to consolidated current liabilities (a) not less than
1.40 to 1.0, from October 31, 1996 through October 30, 1997,
and (b) not less than 1.75 to 1.0, from and after October 31,
1997, to be tested on a quarterly basis in connection with the
delivery of financial statements pursuant to Section 5.01.
Section 5.17. The Parent and its consolidated Subsidiaries
will maintain at all times, (a) a ratio of (i) cash,
Investments and accounts receivable to (ii) current
liabilities (x) not less than 0.69 to 1.0, from October 31,
1996 through October 30, 1997, and (y) not less than 0.87 to
1.0, from and after October 31, 1997, and (b) cash and
Investments in an amount not less than $5,000,000, to be
tested on a quarterly basis in connection with the delivery of
financial statements pursuant to Section 5.01.
Section 5.18. The Parent and its consolidated Subsidiaries
will maintain at all times, a ratio of (a) Consolidated Funded
Indebtedness, to (b) consolidated Tangible Net Worth (i) not
greater than 1.37 to 1.0, from October 31, 1996 through
October 30, 1997, and (ii) not greater than 1.2 to 1.0, from
and after October 31, 1997, to be tested on a quarterly basis
in connection with the delivery of financial statements
pursuant to Section 5.0l."
3. Conditions Precedent. The effectiveness of this
Fourth Amendment and the Bank's obligations hereunder are conditioned upon the
satisfaction of the following conditions precedent:
a. The Obligors shall have delivered to the Bank this
Fourth Amendment, duly executed by each of the Obligors.
b. All proceedings required to be taken by the Obligors
in connection with the transactions contemplated by this Fourth Amendment shall
be satisfactory in form and substance to the Bank and its counsel, and the Bank
shall have received all such counterpart originals or certified or other copies
of such documents as the Bank may reasonably request.
c. The Obligors shall have executed and delivered to
the Bank such other documents, instruments and agreements as the Bank may
reasonably request.
4. Representations and Warranties. In order to induce the Bank
to enter into this Fourth Amendment, the Obligors hereby represent and warrant
to the Bank as follows:
a. The representations and warranties contained in
the Loan Documents are true and correct on and as of the date of this Fourth
Amendment and after giving effect hereto, no Event of Default, or event which,
with the passage of time, the giving of notice, or both, would be or become an
Event of Default, will be in existence or will occur as a result of giving
effect hereto.
b. The execution, delivery and performance of this
Fourth Amendment will not violate any provision of any law or regulation or of
any writ or decree of any court or governmental instrumentality, or any of the
Obligors' certificate or articles of incorporation, by-laws, or other similar
organizational documents.
c. Each of the Obligors has the power to execute,
deliver and perform this Fourth Amendment and each of the documents, instruments
and agreements to be executed and/or delivered in connection herewith and has
taken all necessary action to authorize the execution, delivery and performance
of this Fourth Amendment and each of the documents, instruments and agreements
executed and/or delivered in connection herewith and the performance of the Loan
Agreement as amended hereby.
d. The execution, delivery and performance of this
Fourth Amendment and each of the documents, instruments and agreements to be
executed and/or delivered in connection herewith does not require the consent of
any other party or the consent, license, approval or authorization of, or
registration or declaration with, any governmental body, authority, bureau or
agency and the Loan Documents, this Fourth Amendment and each of the documents,
instruments and agreements executed and/or delivered in connection herewith
constitute legal, valid and binding obligations of each of the Obligors,
enforceable in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and except as enforcement may be subject to
general equitable principles.
5. Consents. Subject to, and conditioned upon the Obligors'
compliance with the provisions of Paragraph 7 hereof, the Bank hereby
consents to the following:
a. the merger of Sprink into Castings, which consent
is granted pursuant to Sections 5.03 and 5.14(d) of the Loan Agreement;
b. the creation of CPVC and Export as wholly-owned
subsidiaries of the Borrower, which consent is granted pursuant to Section 5.14
of the Loan Agreement;
c. the creation of additional liens disclosed on
Schedule A hereto, which consent is granted pursuant to Section 5.11 of the Loan
Agreement; and
d. the incurrence of the additional indebtedness
identified on Schedule A hereto, which consent is granted pursuant to Section
5.12 of the Loan Agreement; and
e. the guaranty by Borrower or Guarantors of the
additional indebtedness identified on Schedule A hereto, which consent is
granted pursuant to Section 5.13 of the Loan Agreement.
6. Waivers. Subject to, and conditioned upon the Obligors'
compliance with the provisions of Paragraph 7 hereof, the Bank hereby waives the
Event of Default under Section 6.01(g) of the Loan Agreement resulting from the
merger of Sprink into Castings.
7. Delivery of Additional Agreements and Instruments. Obligors
covenant and agree that, within ten (10) days after the date hereof, they will
deliver or will cause to be delivered to the Bank the Guaranty Agreement by CPVC
in favor of the Bank, each in form and substance satisfactory to the Bank.
8. Reaffirmation. Except as amended hereby, all of the terms,
covenants and conditions of the Loan Agreement and each of the other Loan
Documents (including, but not limited to, provisions relating to any authority
granted to the Bank to confess judgment against the Borrower and any waiver of
the right to trial by jury, if any) are ratified, reaffirmed and confirmed and
shall continue in full force and effect as therein written and are not intended
to be re-enacted as of the above date, but rather to be effective as of the
original date of such documents.
9. Confirmation of Guaranties. Each of the Original Guarantors
(other than Sprink) hereby reaffirms and ratifies all of the terms, covenants,
and conditions contained in each of their respective Guarantees and confirms
that such Guarantees are binding and enforceable against the Guarantors as if
such Guarantees had been executed as of the date hereof.
10. Binding Effect. This Fourth Amendment shall be binding
upon and inure to the benefit of the Obligors and the Bank and their respective
successors and assigns; provided, however, that the Obligors may not assign any
of their rights, nor delegate any of their obligations, under this Fourth
Amendment without the prior written consent of the Bank and any purported
assignment or delegation absent such consent shall be void. The Bank may at any
time assign or otherwise transfer (by participation or otherwise) any or all of
its rights, or delegate any or all of its obligations, hereunder.
11. Counterparts: Effectiveness. This Fourth Amendment may be
executed in any number of counterparts and by the different parties on separate
counterparts. Each such counterpart shall be deemed to be an original, but all
such counterparts shall together constitute one and the same agreement. This
Fourth Amendment shall be deemed to have been executed and delivered when the
Bank has received counterparts hereof executed by all parties listed on the
signature page(s) hereto.
12. Amendment and Waiver. No amendment or modification of this
Fourth Amendment, and no waiver of any one or more of the provisions hereof
shall be effective unless set forth in a writing and signed by the parties
hereto.
13. Governing Law. This Fourth Amendment shall be governed by
and construed in accordance with the internal laws of the Commonwealth of
Pennsylvania without reference to conflict of laws principles.
14. Severability. Any provision of this Fourth Amendment that
is held to be inoperative, unenforceable, voidable or invalid in any
jurisdiction shall, as to that jurisdiction, be ineffective, unenforceable, void
or invalid without affecting the remaining provisions in that or any other
jurisdiction, and to this end the provisions of this Fourth Amendment are
declared to be severable.
15. Judicial Proceedings. Each party to this Fourth Amendment
agrees that any suit, action or proceeding, whether claim or counterclaim,
brought or instituted by any party hereto or any successor or assign of any
party, on or with respect to this Fourth Amendment, the documents, instruments
and agreements executed in connection herewith, the Loan Documents or the
dealings of the parties with respect hereto and thereto, shall be tried only by
a court and not by a jury. EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR
PROCEEDING. Further, each party waives any right it may have to claim or
recover, in any such suit, action or proceeding, any special, exemplary,
punitive or consequential damages or damages other than, or in addition to,
actual damages. THE OBLIGORS ACKNOWLEDGE AND AGREE THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS Fourth AMENDMENT AND THAT THE BANK WOULD
NOT ENTER INTO THIS Fourth AMENDMENT IF THE WAIVERS SET FORTH IN THIS SECTION
WERE NOT A PART OF THIS Fourth AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed and delivered as of the day and year first above
written.
ATTEST: CENTRAL SPRINKLER COMPANY
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: CEO Title: E.V.P. - Finance
ATTEST: CENTRAL SPRINKLER CORPORATION
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: CEO Title: E.V.P. - Finance
ATTEST: CENTRAL CPVC CORPORATION
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: CEO Title: E.V.P. - Finance
FIRST UNION NATIONAL BANK
By: /s/ ▇▇▇▇▇▇▇ ▇. Storm
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Name: ▇▇▇▇▇▇▇ ▇. Storm
Title: Senior Vice President
