EXHIBIT 10.5
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT (this "Amendment"), dated as of September 24,
2003, amends and modifies a certain Credit Agreement, dated as of September 21,
2001 (the "Credit Agreement"), by and between Aero Systems Engineering, Inc.
(the "Borrower") and National City Bank of Minneapolis, now known as M&I
Xxxxxxxx & Xxxxxx Bank (the "Bank"). Terms not otherwise expressly defined
herein shall have the meanings set forth in the Credit Agreement.
FOR VALUE RECEIVED, the Borrower and the Bank agree that the Credit
Agreement is amended as follows.
ARTICLE I - AMENDMENTS TO THE CREDIT AGREEMENT
1.1 All references to "Bank" shall now mean M&I Xxxxxxxx & Ilsley
Bank.
1.2 Section 1.1(e)(ii) is amended to read as follows:
(ii) "Letter of Credit Borrowing Base" shall mean with
respect to issuing letters of credit and making additional term loans,
an amount equal to the sum of
a) 75% of the Value of Eligible Domestic
Accounts,
b) a percentage of the Value of Qualified
Foreign Accounts to be determined by the Bank in its sole
discretion, but never less than 10% nor more than 75%
quarterly for each account and which will change no more
frequently than quarterly, on at least thirty (30) days prior
written notice by the Bank to the Borrower,
c) 50% of the Value of Eligible Inventory,
d) 75% of the Forced Liquidation Value of
Machinery and Equipment, and
e) 70% of the fair market value of the property
encumbered by the Mortgage (the "Mortgaged Property").
(less any amounts necessary to support outstanding Advances)
made under the Direct Borrowing Base on the basis of clauses
(a) - (d).
1.3 In Section 2.1 of the Credit Agreement, the date "September
21, 2003" is deleted and the date "April 30, 2004" is substituted therefor and
the sublimit for Letters of Credit is increased to $9,000,000.
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1.4 Section 5.2(f) is amended to read as follows:
(f) Capital Expenditures. Make or incur annual capital
expenditures in excess of $900,000.
1.5 The Borrowing Base Certificate form is replaced by Exhibit A
attached hereto.
1.6 The Compliance Certificate form is replaced by Exhibit B
attached hereto.
1.7 Construction; Effectiveness. 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.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Amendment and to make and
maintain the loans described in the Credit Agreement as amended hereby, the
Borrower hereby warrants and represents to the Bank that:
2.1 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.
2.2 As of the date hereof, the Borrower has no defenses or rights
of set-off against the enforcement by the Bank of the Borrower's obligations
under the Credit Agreement as amended hereby, and no events have occurred which,
with the giving of notice or passage of time, or both, would entitle the
Borrower to any such defenses or rights of set-off.
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. Before and after giving effect to this Amendment,
the representations and warranties in Article IV 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 Event of
Default, or event which would become an Event of Default with the passage of
time or giving of notice or both, 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.
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3.3 Documents and Legal Fees. This Amendment shall have been duly
executed and delivered to the Bank and the Borrower shall have reimbursed the
Bank for legal fees incurred in connection with the preparation of this
Amendment.
ARTICLE IV - GENERAL
4.1 Expenses. The Borrower agrees to reimburse the Bank upon
demand for all reasonable expenses (including reasonable attorneys' fees and
legal expenses) incurred by the Bank 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 Bank 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.
4.5 Waiver. Notwithstanding any provision of this Amendment to the
contrary, no provision of this Amendment is intended, or shall be construed, to
be a waiver by the Bank of any rights or remedies that the Bank may have due to
the occurrence of any default under the Credit Agreement as amended hereby, that
may have occurred heretofore or which may occur hereafter.
4.6 Successors; Enforceability. This Amendment shall be binding
upon the Borrower and the Bank and their respective successors and assigns, and
shall inure to the benefit of the Borrower and the Bank and the successors and
assigns of the Bank. Except as hereby amended, the Credit Agreement shall remain
in full force and effect and is hereby ratified and confirmed in all respects.
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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.
BORROWER:
AERO SYSTEMS ENGINEERING, INC.
By: /s/ Xxxxxxx Xxxx
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Title: President & CEO
BANK:
M&I XXXXXXXX & ILSLEY BANK
By: /s/ Xxxx X. Xxxxxxxx
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Title: Vice President
And by: /s/ B. Xxxxxxx Xxxxxx
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Title: Vice President
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