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EXHIBIT 10.11(a)
WAKEFIELD ENGINEERING, INC.
00 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
As of October 11, 1996
FLEET NATIONAL BANK
Xxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Re: Fourth Amendment to Loan Agreement
Ladies and Gentlemen:
Reference is made to the Loan and Security Agreement dated June 22,
1994, as amended by the First Amendment thereto dated May 5, 1995, a Second
Amendment thereto dated as of January 30, 1996 and a Third Amendment thereto
dated as of March 29, 1996 (together the "Loan Agreement") and all promissory
notes, agreements, documents and instruments entered into by Wakefield
Engineering, Inc. ("Wakefield") and Specialty Extrusion Corp. ("Specialty") and
any other person or obligor pursuant thereto (collectively, the "Loan
Documents") with or for the benefit of Fleet National Bank (f/k/a Fleet
National Bank of Massachusetts) ("Bank"). Except as otherwise defined herein,
capitalized terms used herein shall have the meanings given them in the Loan
Agreement. This Fourth Amendment to Loan Agreement is referred to as the
"Fourth Amendment".
Background. Xxxxxxxx Industries, Inc., a California corporation
formerly known as Lockie Acquisition Corp. ("Xxxxxxxx") has become a
wholly-owned subsidiary of Wakefield. Wakefield has requested that the Bank
(a) agree to make Xxxxxxxx a co-borrower under the Loan Agreement and extend
Revolving Loans to Xxxxxxxx, (b) increase the maximum amount of Revolving Loans
that may be available to Wakefield, Specialty and Xxxxxxxx from $9,000,000 to
$12,500,000 and to increase the inventory sublimit thereunder from $4,500,000
to $5,500,000, (c) consolidate the outstanding term loans into a $2,250,000
term loan, (d) make available a $2,500,000 equipment acquisition line of which
$_________ will be drawn on as of the date hereof as an Equipment Loan on
Xxxxxxxx'x equipment, and (e) permit Wakefield to use up to $506,000 of the
Revolving Loan proceeds to repay advances made by Alpha.
Wakefield also has requested that the Bank consent to the acquisition
of Xxxxxxxx on August 21, 1996 and, subject to the terms and conditions hereof,
the Bank hereby consents to that acquisition.
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1. Subject to the satisfaction of the terms and conditions hereof, Bank
and Borrower have agreed that the Loan Agreement shall be amended as follows:
(a) Xxxxxxxx Designated as Additional Borrower. Xxxxxxxx is, and
hereby shall be, a Borrower under the Loan Agreement, jointly and severally
liable with Wakefield and Specialty for all now existing and hereafter arising
Obligations and all references in the Loan Agreement to Borrower or Borrowers
shall mean and include Wakefield and Specialty and Xxxxxxxx, jointly and
severally.
(b) Amendments to Definitions.
(1) Definition of Borrowing Base. The definition of
"Borrowing Base" in Section 1 of the Agreement is deleted and the following
definition is substituted in place thereof:
'"Borrowing Base" means the sum of the following (as shown on the
Bank's records at any time):
(a) eighty-five percent (85%) of the unpaid face value of
all Eligible Accounts, PLUS
(b) the lesser of (i) fifty-five percent (55%) of the
first-in, first-out cost or market value, whichever is lower, of all Eligible
Inventory, or (ii) $5,500,000.00, LESS
(c) the face amount of all letters of credit issued by
the Bank on behalf of a Borrower, with the maximum amount of such letters of
credit not to exceed $1,000,000.00, plus all Bank's customary fees and charges
with respect thereto;
PROVIDED that Bank at all times reserves the right, exercisable in
Bank's reasonable credit judgment, based upon circumstances then existing, to
adjust any of the percentages or the amounts set forth above upon fifteen (15)
days' notice to Borrower.'
(2) Definition of Current Liabilities. The definition of
Current Liabilities is deleted and the following definition is substituted in
place thereof:
'"Current Liabilities" means for any period all liabilities
which would, in accordance with GAAP, be classified as current liabilities plus
the outstanding amount of the Revolving Loans.'
(3) Definition of Excess Availability. The definition of
Excess Availability is amended by deleting the number "$9,000,000" and by
substituting in lieu thereof the term "Revolving Loan Limit."
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(4) Definition of "Revolving Loan Limit". An additional
defined term and definition are inserted in Section 1 in appropriate
alphabetical order as follows:
'"Revolving Loan Limit" means $12,500,000.00 in the aggregate for the
Borrowers.'
(c) Amendment to Section 2(a). The amount set forth in Section
2(a)(i)(x) of "Nine Million Dollars ($9,000,000.00)" is deleted and the term
"Revolving Loan Limit" is substituted therefore.
(d) Amendments to Section 2(b). On the date that the conditions
to this Fourth Amendment are satisfied, Lender shall make a Term Loan to
Borrowers in the original principal amount of Two Million Two Hundred Fifty
Thousand Dollars ($2,250,000). The proceeds of this Term Loan shall be used to
repay all five outstanding equipment loans and term loans and, to the extent of
any excess, Revolving Loans made to the Borrowers by the Bank and shall be
evidenced and repaid in accordance with the Term Note attached as Exhibit B to
this Fourth Amendment.
(e) Amendments to Section 2(c). Section 2(c)(i) is amended to
provide that the aggregate amount of Equipment Loans that may be made to the
Borrowers during the Commitment Period shall not exceed Two Million Five
Hundred Thousand Dollars ($2,500,000.00). Section 2(c)(ii) is amended to
provide that the minimum amount of each Equipment Loan shall be $250,000.00.
Upon the closing under this Fourth Amendment, the Lender will make an Equipment
Loan to Borrowers of an amount equal to eighty (80%) of the Hard Cost of
Capital Equipment purchased by Borrower from February 1996 to July 1996.
Borrowers shall pay to Lender a funding fee of one percent (1%) of the amount
of each Equipment Loan made hereunder, due and payable and fully earned upon
the funding of each such Equipment Loan by the Bank.
(f) Interest Rates Amendment. Subsections 2(d)(i) (A) and (B) of
the Loan Agreement are hereby deleted and the following is substituted in place
thereof:
"(A) For each Prime Rate Advance, the Prime Rate
plus one quarter of one percent (1/4%), and
(B) For each LIBOR Rate Advance, the relevant
Adjusted LIBOR Rate for the applicable Interest Period selected
by Borrower in conformity with this Agreement plus 225 basis
points."
6. Unused Line. The Borrowers shall pay to the Bank an unused line
fee equal to one quarter of one percent (1/4%) per annum on the difference
between $12,500,000 and the greater of (a) the average daily outstanding
principal balance of Revolving Loans during each of Borrowers' fiscal quarters
and (b) $10,500,000, payable quarterly in arrears on the first day of each
fiscal quarter of Borrowers.
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(g) Financial Covenants Amendments and Restatements.
(1) Section 8(a) of the Loan Agreement is amended by
deleting the Section in its entirety and by substituting in place thereof the
following:
"(a) Tangible Capital Base. Permit Borrowers' Tangible
Capital Base to be less than the following amounts at the end of the respective
periods set forth below:
Period Minimum Tangible Capital Base
------ -----------------------------
9 months ending July 31, 1996 $5,800,000
12 months ending October 31, 1996 $6,000,000
3 months ending January 31, 1997 $*
6 months ending April 30, 1997 $*
9 months ending July 31, 1997 $*
12 months ending October 31, 1997 $6,800,000"
*These amounts will be determined by the Bank based upon financial forecasts to
be provided by Borrowers to the Bank within 30 days of the date of the Fourth
Amendment.
For purposes of calculating Tangible Capital Base, all Subordinated
Indebtedness hereafter provided to the Borrowers by Alpha and subject to the
Subordination Agreement between Alpha and Bank shall be added to the Minimum
Tangible Capital Base amounts set forth above.
(2) Section 8(b) is amended by deleting the Section in
its entirety and inserting in place thereof the following:
"8(b) Debt Service and Unfinanced Capital Expenditures Coverage
Ratio. Permit the ratio of (A) the aggregate of (i) EBITDA minus (ii)
unfinanced capital expenditures and minus (iii) permitted payments on
Subordinated Indebtedness and any permitted Dividends to (B) the sum of (i)
interest expense and (ii) CMLTD for the prior four fiscal quarters of the
Borrower to be less than 1.35 to 1.00 as measured at the end of each fiscal
quarter of Borrower."
(3) Section 8(c) is amended by deleting the Section in
its entirety and by substituting the following in place thereof:
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(c) Senior Debt to Tangible Capital Base Ratio. Permit the ratio of
Borrowers' Senior Indebtedness to Tangible Capital Base to be more than the
following amounts on the dates set forth below:
Date Ratio
---- -----
July 31, 1996 3.25 to 1.00
October 31, 1996 3.25 to 1.00
Each fiscal quarter and thereafter. 3.00 to 1.00
(4) Section 8(d) of the Loan Agreement is deleted in its
entirety and the following is inserted in lieu thereof.
(d) Earnings. Permit Borrowers' Net Earnings to be less
than the amount set forth below for the respective periods set forth below:
Period Amount
------ ------
Fiscal Year Ending October 31, 1996 $250,000
Fiscal Year Ending October 31, 1997 $800,000
(5) Section 8(e) of the Loan Agreement is deleted in
its entirety and the following is substituted in lieu thereof:
(e) Current Ratio. Permit Borrowers' current ratio for its fiscal
quarter ending July 31, 1996 to be less than .95 to 1.00 and for any fiscal
quarter thereafter to be less than 1.00 to 1.00.
(6) Section 8(f) of the Loan Agreement is restated as
follows:
"(f) Interest Coverage Ratio. Permit the ratio of (i)
Borrowers' EBIT to (ii) Borrowers' interest expense to be less than 2.00 to
1.00 as determined at the end of each fiscal quarter of Borrowers for the prior
four fiscal quarters."
3. Grant of Security Interest. As security for the prompt performance,
observance and payment in full of all Obligations, Xxxxxxxx hereby grants to
Bank a continuing security interest in and lien on and assigns, transfers, sets
over and pledges to the Bank all property of Xxxxxxxx whether now owned by
Xxxxxxxx or hereafter acquired or existing, and wherever located (collectively,
the "Collateral"), including without limitation:
(a) all Accounts;
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(b) all Inventory;
(c) all Equipment;
(d) all General Intangibles;
(e) all Instruments and Documents;
(f) all Related Collateral; and
(g) all accessions to and additions to, substitutions for,
replacements, products and Proceeds to any and all of the foregoing.
The term "Collateral" shall also refer to any other property in which Bank is
granted a Lien to secure any of the Obligations pursuant to an agreement
supplemental hereto or otherwise (whether or not such agreement makes reference
to the Loan Agreement or the Obligations of Borrowers thereunder).
4. Representations and Warranties.
To induce Bank to enter into this Fourth Amendment, each
Borrower jointly and severally warrants, represents and covenants to Bank that:
(a) Organization and Qualification. Each Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each Borrower is duly qualified
or is authorized to do business and is in good standing as a foreign
corporation in all states and jurisdictions in which the failure of such
Borrower to be so qualified would have a material adverse effect on the
financial condition, business or properties of such Borrower.
(b) Corporate Power and Authority. Each Borrower is duly
authorized and empowered to enter into, execute, deliver and perform this
Fourth Amendment, and each of the Loan Documents to which it is a party. The
execution, delivery and performance of this Fourth Amendment and each of the
other Loan Documents have been duly authorized by all necessary corporate
action and do not and will not (i) require any consent or approval of the
shareholders of any Borrower; (ii) contravene any Borrower's charter or
by-laws; (iii) violate, or cause any Borrower to be in default under, any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award in effect having applicability to such Borrower;
(iv) result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which any
Borrower is a party or by which such Borrower's properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any Lien
(other than Permitted Liens) upon or with respect to any of the properties now
owned or hereafter acquired by any Borrower.
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(c) Legally Enforceable Agreement. This Fourth Amendment
and each of the other Loan Documents delivered under this Fourth Amendment will
be, a legal, valid and binding obligation of each Borrower, enforceable against
each Borrower in accordance with its respective terms subject to bankruptcy,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally.
(d) No Material Adverse Change. Since July 28, 1996, the
date of the last financial statements provided by the Borrowers to the Bank,
there has been no material adverse change in the condition, financial or
otherwise, of Borrowers as shown on the consolidated balance sheet thereof as
of such date and no change in the aggregate value of property and assets owned
by Borrowers, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
(e) Continuous Nature of Representations and Warranties.
Each representation and warranty contained in the Loan Agreement and the other
Loan Documents remains accurate, complete and not misleading in any material
respect on the date of this Fourth Amendment, except for representations and
warranties that explicitly relate to an earlier date and changes in the nature
of Borrowers' business or operations that would render the information in any
exhibit attached thereto either inaccurate, incomplete or misleading, so long
as Bank has consented to such changes or such changes are expressly permitted
by the Loan Agreement.
5. Conditions Precedent.
Notwithstanding any other provision of this Fourth Amendment
or any of the other Loan Documents, and without affecting in any manner the
rights of Bank under the other sections of this Fourth Amendment, this Fourth
Amendment shall not be effective as to Bank unless and until each of the
following conditions has been and continues to be satisfied:
(a) Documentation. Bank shall have received, in form and
substance satisfactory to Bank and its counsel, a duly executed copy of this
Fourth Amendment, the Second Amended and Restated Revolving Credit Note in the
form attached on Exhibit A hereto and the Term Note, the Unlimited Guaranty of
Xxxxxxxx in the form of Exhibit B hereto, the completed Perfection Certificate
in the form of Exhibit C hereto, the UCC-1 Financing Statements of Xxxxxxxx,
together with such additional documents, instruments and certificates as Bank
and its counsel shall require in connection therewith, all in form and
substance satisfactory to Bank and its counsel.
(b) No Default. No Event of Default shall exist.
(c) No Litigation. Except as previously disclosed to and
consented to by Bank, no action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency or legislative
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body to enjoin, restrain or prohibit, or to obtain damages in respect of, or
which is related to or arises out of the Loan Agreement or this Fourth
Amendment or the consummation of the transactions contemplated thereby or
hereby.
6. Repayment of Alpha Advances. Bank consents to the use of
$506,000 of the proceeds of Revolving Loans for the repayment of advances made
by Alpha in connection with the Xxxxxxxx merger transaction.
7. Acknowledgment of Obligations.
Each Borrower hereby (1) reaffirms and ratifies all of the
promises, agreements, covenants and obligations to Bank under or in respect of
the Loan Agreement and other Loan Documents as amended hereby and (2)
acknowledges that it is unconditionally liable for the punctual and full
payment of all Obligations, including, without limitation, all charges, fees,
expenses and costs (including reasonable attorneys' fees and expenses) under
the Loan Documents, as amended hereby, and that it has no defenses,
counterclaims or setoffs with respect to full, complete and timely payment and
performance of all Obligations. Wakefield and Specialty specifically
acknowledge and agree that Xxxxxxxx shall be deemed to be an Obligor under
their respective Guaranty Agreements in favor of Lender.
8. Confirmation of Liens.
Each Borrower acknowledges, confirms and agrees that the Loan
Documents, as amended hereby, are effective to grant to Bank duly perfected,
valid and enforceable first priority security interests and liens in the
Collateral described therein, except for Permitted Liens, and that the
locations for such Collateral specified in the Loan Documents have not changed
except as provided herein. Each Borrower further acknowledges and agrees that
all Obligations of Borrowers are and shall be secured by the Collateral.
9. Miscellaneous.
Except as set forth herein, the undersigned confirms and
agrees that the Loan Documents remain in full force and effect without
amendment or modification of any kind. The execution and delivery of this
Fourth Amendment by Bank shall not be construed as a waiver by Bank of any
Default or Event of Default under the Loan Documents. This Fourth Amendment,
together with the Loan Agreement and other Loan Documents, constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior dealings, correspondence, conversations or
communications between the parties with respect to the subject matter hereof.
This Fourth Amendment and the transactions hereunder shall be deemed to be
consummated in the Commonwealth of Massachusetts and shall be governed by and
interpreted in accordance with the laws of that state. Any reference in any of
the Loan Documents to Lender shall be deemed to be a reference to the Bank.
This Fourth Amendment and the
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agreements, instruments and documents entered into pursuant hereto or in
connection herewith shall be "Loan Documents" under and as defined in the Loan
Agreement.
Executed under seal on the date set forth above.
ATTEST: WAKEFIELD ENGINEERING, INC.
/s/ Xxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxxxxxx
--------------------------------- ---------------------------------
Name: Xxxxx X. Xxxxxxxxxxx
------------------------
Title: Vice President - Finance
------------------------
ATTEST: SPECIALTY EXTRUSION CORP.
/s/ X. X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------- ---------------------------------
Name:
--------------------------
Title:
--------------------------
ATTEST: XXXXXXXX INDUSTRIES, INC.
/s/ X. X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------- ---------------------------------
Name:
--------------------------
Title:
--------------------------
Accepted in Boston, Massachusetts
on _____________ __, 1996
FLEET NATIONAL BANK
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------------------
Name: Xxxxx X. Xxxxxxxxx
-----------------------------------------
Title: Vice President
-----------------------------------------
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List of Exhibits and Schedules
------------------------------
Exhibit A Second Amended and Restated Revolving Credit Note
Exhibit B Xxxxxxxx Industries, Inc. Guarantee
Exhibit C Perfection Certificate
Schedule 1 Xxxxxxxx Industries, Inc. Ownership
