FIFTH AMENDMENT TO LOAN AGREEMENT
This FIFTH AMENDMENT TO LOAN AGREEMENT ("Fifth Amendment"), dated as of
October 28, 1997, by and among FIRST UNION NATIONAL BANK, successor to First
Fidelity Bank, N.A., a national banking association with offices at 000 Xxxxx
Xxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000 (the "Bank"), CENTRAL SPRINKLER COMPANY, a
Pennsylvania corporation with offices located at 000 Xxxxxx Xxxxxx, Xxxxxxxx, XX
00000 ("Borrower"), CENTRAL SPRINKLER CORPORATION, a Pennsylvania corporation
with offices located at 000 Xxxxxx Xxxxxx, Xxxxxxxx, XX 00000 (the "Existing
Guarantor") and CENTRAL SPRINKLER EXPORT CORPORATION, a Barbados corporation
with offices located at 000 Xxxxxx Xxxxxx, Xxxxxxxx, XX 00000 (the "New
Guarantor," and, together with the Existing Guarantor, the "Guarantors"). The
Borrower and the Guarantors are referred to collectively herein as the
"Obligors").
BACKGROUND
A. The Bank, the Borrower and the Existing Guarantor are parties to
that certain Loan Agreement dated as of April 15, 1994, as amended from time to
time (the "Loan Agreement"). Capitalized terms not otherwise defined herein
shall have the meaning ascribed to such terms in the Loan Agreement.
B. The Obligors and certain other related entities intend to enter into
a financing arrangement with CoreStates Bank, N.A. and a syndicate of banks,
pursuant to which the Obligors will obtain financing in the maximum original
principal amount of $55,000,000 (the "CoreStates Financing").
C. As a condition to the CoreStates Financing, the lenders have
required that all of the Obligors' existing lenders, including the Bank, modify
certain terms and conditions of their existing financing arrangements to conform
said terms and conditions to certain terms and conditions of the CoreStates
Financing.
D. In light of the foregoing, the Obligors have requested the Bank to
amend certain provisions of the Loan Agreement, and the Bank has agreed to do
so, subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, incorporating the Background herein, the Bank and the
Obligors, each intending to be legally bound hereby and for good and valuable
consideration, agree as follows:
1. AMENDMENTS.
a. New Definitions. The following defined terms are hereby
added to Section 1.01 of the Loan Agreement:
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"Consolidated Corporations" means the Parent and its
Subsidiaries.
"Net Income" means, for any relevant period, the net income
after taxes for such period of the Consolidated Corporations
on a consolidated basis, as determined in accordance with
GAAP.
b. Existing Definitions. "Loan Documents" means the Loan
Documents, as the same have been or may be modified, extended, renewed or
amended from time to time and shall also be deemed to include that certain
Guaranty Agreement executed by the New Guarantor and that certain Security
Agreement executed by the Obligors each as of the date hereof, together with all
other documents delivered and/or executed in connection with this Fifth
Amendment.
c. Amended Covenants. The covenants set forth in Section 5 of
the Loan Agreement are hereby amended as follows:
(1) Section 5.11(b) is hereby amended and modified by
deleting "and" as it appears in the 4th line therein and adding the following
prior to the period in the 16th line therein: "; and (iii) in existence on the
date of this Fifth Amendment relating to the CoreStates Financing".
(2) Schedule A attached hereto shall amend and
supplement the Schedule A attached to the Fourth Amendment to reflect the
permitted indebtedness and guarantee obligations, if any, incurred in connection
with the CoreStates Financing.
(3) Section 5.12(h) is hereby amended and restated in
its entirety as follows: "indebtedness in the form of unsecured revolving lines
of credit under which (1) trade letters of credit and bankers' acceptance may be
issued, and (2) the maximum credit availability thereunder does not exceed
$10,000,000 in the aggregate."
d. Amended and Restated Covenants. The covenants set forth in
Section 5 of the Loan Agreement are hereby amended and restated in their
entirety as follows:
5.15 The Consolidated Corporations shall maintain, on a
consolidated basis, at all times (to be measured as of the
last date of each fiscal quarter and tested in connection with
the delivery of financial statements pursuant to Section 5.01
hereof) a Tangible Net Worth of no less than (i) Forty-Eight
Million Dollars ($48,000,000) plus (ii) (A) seventy-five
percent (75%) multiplied by (B) the Net Income for each fiscal
year (on a cumulative basis) commencing with the fiscal year
ending October 31, 1997; provided, however, no change shall be
made hereto by reason of clause (ii) if the Net Income is
negative for any fiscal year.
5.16 The Consolidated Corporations shall maintain, on a
consolidated basis, (as of the last date of each fiscal
quarter and tested in connection with the delivery of
financial statements pursuant to Section 5.01 hereof and the
delivery of a
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certification of the Chief Financial Office of the Borrower
certifying the outstanding principal balance of the CoreStates
Financing as of the last date of each fiscal quarter) a ratio
of (i) consolidated current assets to (ii) (a) consolidated
current liabilities plus (b) the outstanding principal balance
of the revolving credit facility under the CoreStates
Financing, of not less than 1.00:1.00.
5.17 The cash, cash equivalents and marketable securities of
the Consolidated Corporations shall not at any time be less
than $10,000,000.
5.18 The Consolidated Corporations shall maintain, on a
consolidated basis, (as of the last date of each fiscal
quarter and tested in connection with the delivery of
financial statements pursuant to Section 5.01 hereof) a ratio
of the Consolidated Funded Indebtedness to (i) the
Consolidated Corporations' Consolidated Funded Indebtedness
plus (ii) the Consolidated Corporations' Tangible Net Worth,
of not greater than 0.65:1.00.
2. CONDITIONS PRECEDENT. The Bank's obligations hereunder are expressly
conditioned upon compliance with, or execution and delivery by the Obligors to
the Bank of, the following in form and substance satisfactory to the Bank and
its counsel:
a. this Fifth Amendment;
b. that certain Second Amendment to Letter of Credit and
Reimbursement Agreement by and among the Bank and the Obligors with respect to
the loan and financial accommodations by the Bank to Castings dated November 1,
1995;
c. that certain Security Agreement by and between the Obligors
and the Bank, together with accompanying UCC-1 financing statements relating
thereto;
d. that certain Guaranty Agreement by and between the
New Guarantor and the Bank;
e. an intercreditor agreement between the Bank and
CoreStates in connection with the CoreStates Financing;
f. delivery by the Obligors and review by the Bank of a true,
correct and complete copy of the closing binder prepared in connection with the
CoreStates Financing;
g. payment of all amounts due and owing by the Obligors to the
Bank pursuant to that certain LOC demand loan by the Bank to CSC and guaranteed
by the remaining Obligors dated November 23, 1993 in the original principal
amount of $10,000,000;
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h. payment of the reasonable fees and costs incurred or
expended by the Bank in connection with the preparation, negotiation, drafting
and execution of this Fifth Amendment and the documents, agreements, instruments
and certificates, if any, executed in connection herewith;
i. a certificate of the Secretary or an Assistant Secretary of
each Obligor dated the date hereof including (i) resolutions duly adopted by
such Obligor authorizing the transactions under the Fifth Amendment; (ii)
evidence of the incumbency and signature of the officers executing on its behalf
the Fifth Amendment and any of the documents executed in connection herewith,
together with evidence of the incumbency of such Secretary or Assistant
Secretary; and (iii) certificates of authority or good standing for such Obligor
from its jurisdiction of incorporation;
j. all such other documents and instruments as the
Bank may reasonably require.
3. REPRESENTATIONS AND WARRANTIES. The Obligors represent and warrant
to the Bank as follows:
a. Each Obligor has the power and authority to execute and
deliver each of the Fifth Amendment and all other documents and instruments
executed and delivered in connection herewith, has taken all necessary action to
authorize the execution, delivery and performance hereof and thereof, and the
Fifth Amendment and other documents and instruments executed in connection
herewith constitute the legal, valid and binding obligations of the Obligors
enforceable in accordance with their respective terms subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforceability of rights of creditors generally, and subject
to the application of equitable principles;
b. The by-laws and articles of incorporation last provided by
the Obligors to the Bank have not been amended, changed or modified in any way
and are in full force and effect as of the date hereof;
c. All the representations and warranties made by the Obligors
in the Loan Documents, as the same have been modified or amended from time to
time, are true and correct as of the date of this Fifth Amendment as if such
representations and warranties had been made on the date hereof; and
d. No Default or Event of Default has occurred which remains
uncured.
4. ACKNOWLEDGMENTS; RATIFICATIONS AND RELEASE.
a. Acknowledgments. The Obligors acknowledge that:
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(1) the Loan Documents are valid and enforceable
against the Obligors in every respect, and all of the terms and conditions
thereof are binding upon the Obligors;
(2) to the extent that any defenses, set-offs or
counterclaims exist to the obligations set forth under the Loan Documents, the
Obligors hereby waive any and all defenses, set-offs, and counterclaims which
they, or any of them, have or may have to the enforcement by the Bank of the
Loan Documents and to the exercise by the Bank of the Bank's rights and remedies
under the Loan Documents, as amended hereby, and/or applicable law;
b. Ratification and Confirmation. Except as amended hereby,
all of the terms and provisions of the Loan Documents and any other documents
executed in connection with the Loan Documents, shall remain in full force and
effect and are hereby ratified, reaffirmed and confirmed and shall continue to
exist, be legal, valid and binding and in full force and effect. The Loan
Documents are not intended to be re-enacted as of the above date, but rather to
be effective as of the original date of each such document. In the event and to
the extent of any conflict between the provisions of this Fifth Amendment and
the provisions of the Loan Documents, the provisions of this Fifth Amendment
with respect thereto shall govern.
5. CONFLICTS WITH CORESTATES FINANCING DOCUMENTS.
As of the date of this Fifth Amendment, the Bank acknowledges and
agrees that: (i) it consents to the CoreStates Financing as entered into as of
the date hereof; and (ii) that it is the intent of the Bank and the Obligors to
conform the covenants contained in the Loan Agreement (individually, a "First
Union Covenant," and collectively, the "First Union Covenants") to those
covenants contained in the Credit Agreement executed in connection with the
CoreStates Financing as of the date hereof (individually, a "CoreStates
Covenant," and collectively, the "CoreStates Covenants"). To the extent that
there is any conflict between any First Union Covenant and the corresponding
CoreStates Covenant, the Bank agrees that the CoreStates Covenant shall govern
and that the Loan Agreement shall be deemed amended to include such CoreStates
Covenant; provided, however, that this paragraph 5 shall apply only to the
extent any applicable CoreStates Covenant has not been amended or modified at
any time following the date hereof without the prior written consent of the
Bank.
6. MISCELLANEOUS.
a. The Obligors agree to do such further acts and to execute
and deliver such additional agreements, instruments and documents as may be
reasonably required by the Bank to carry out the purpose of this Fifth
Amendment.
b. This Fifth Amendment may be executed in any number of
counterparts and each such counterpart shall be deemed an original, but all such
counterparts shall constitute but one and the same agreement.
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c. This Fifth Amendment may be modified or amended by the
Obligors and the Bank only by written agreement executed by the Bank and the
party against whom a change is to be enforced.
d. This Fifth Amendment shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without reference
to conflict of law principles.
e. This Fifth Amendment constitutes the sole agreement of the
parties with respect to the subject matter hereof and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof and
thereof.
f. This Fifth Amendment (i) shall be binding upon the Bank and
the Obligors and upon their respective nominees, successors and assigns, and
(ii) shall inure to the benefit of the Obligors and the Bank and to their
respective nominees, successors and assigns, provided that the Obligors may not
assign their rights hereunder or any interest herein without obtaining the prior
written consent of the Bank, and any such assignment or attempted assignment
shall be void and of no effect with respect to the Bank.
g. Any provision of this Fifth Amendment that is held to be
inoperative, unenforceable, void or invalid in any jurisdiction shall, as to
that jurisdiction, be ineffective, unenforceable, void or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability or validity of that provision in any other jurisdiction, and to
this end the provisions of this Fifth Amendment are declared to be severable.
h. Each party to this Fifth 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 Fifth Amendment or any of the Loan Documents or the dealings of the parties
with respect hereto, or 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 any
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 AGREEMENT
AND THAT THE BANK WOULD NOT ENTER INTO THIS FIFTH AMENDMENT IF THE WAIVERS SET
FORTH IN THIS SECTION WERE NOT A PART OF THIS FIFTH AMENDMENT.
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IN WITNESS WHEREOF, the undersigned have caused this Fifth Amendment to
be executed by their duly authorized officers on the date first above written.
ATTEST: CENTRAL SPRINKLER COMPANY
By: /s/ Xxxxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxx
----------------------------- -------------------------------
Name: Xxxxxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxx
Title: Secretary Title: Executive Vice President
ATTEST: CENTRAL SPRINKLER CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxx
----------------------------- -------------------------------
Name: Xxxxxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxx
Title: Assistant Secretary Title: Executive Vice President
ATTEST: CENTRAL SPRINKLER EXPORT
CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxx
----------------------------- -------------------------------
Name: Xxxxxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxx
Title: Secretary Title: Executive Vice President
FIRST UNION NATIONAL BANK
By: /s/ Xxxxxxx Xxxxx
-------------------------------
Name: Xxxxxxx Xxxxx
Title: Senior Vice President
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Schedule "A" - Liens Granted and Indebtedness Incurred Relative To CoreStates
Financing
Central Sprinkler Company ("Central Sprinkler") is the Borrower and Central
Sprinkler Corporation ("CSC") and Central Castings Corporation ("Castings") are
Co-Borrowers of up to a maximum original principal amount of $55,000,000, under
a Revolving Credit Facility, pursuant to the Credit Agreement, dated October 28,
1997, among Central Sprinkler, CSC, Castings, Central CPVC Corporation, Central
Sprinkler Export Corporation ("Export") and CoreStates Bank, N.A., as Agent (the
"Agent") and the Lenders identified therein (the "Credit Agreement"). Pursuant
to the Credit Agreement, the Agent and the Lenders have a security interest in
certain of the assets of Central Sprinkler, CSC and Export (the "Secured
Borrowers"), pursuant to the terms of the Security Agreement between the Agent
and the Secured Borrowers, dated as of even date therewith.
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