FIRST AMENDED AND RESTATED FORBEARANCE AGREEMENT AND FOURTH AMENDMENT TO LOAN AGREEMENT
EXHIBIT 10.11
FIRST
AMENDED AND RESTATED
FORBEARANCE
AGREEMENT AND
FOURTH
AMENDMENT TO LOAN AGREEMENT
This
First Amended and Restated Forbearance Agreement and Fourth Amendment to Loan
Agreement, dated December 8, 2009, is among Xxxxxxx Bank (the “Bank”), Jefferson
Electric, Inc. (“Borrower”), Xxxxxx Xxxxx (“Guarantor”) and Xxxxx X. Xxxxx
(“Xxxxx Xxxxx,” and together with the Borrower and Guarantor, the “Borrower
Parties”).
RECITALS
WHEREAS,
Bank and Borrower are parties to that certain Loan and Security Agreement dated
January 2, 2008, as amended by the Amendment to Loan and Security Agreement
dated January 29, 2008, Second Amendment to Loan and Security Agreement dated
May 2, 2008 and Third Amendment to Loan and Security Agreement dated December 3,
2008 (as amended, the “Loan Agreement”); and
WHEREAS,
Borrower is in material default under the Loan Agreement, including, but not
limited to, failure to pay the Obligations at maturity; and
WHEREAS,
Borrower has informed Bank that it is pursuing certain alternatives for
recapitalizing the Borrower and increasing Borrower’s profitability;
and
WHEREAS,
Bank is entitled to exercise its rights and remedies upon default, including but
not limited to its right to demand payment of the Obligations and realize on its
collateral for the Obligations; and
WHEREAS,
the Borrower Parties and Lender are parties to a certain Forbearance Agreement
and Fourth Amendment to Loan Agreement dated August 28, 2009 (the "Forbearance
Agreement"), pursuant to which Lender agreed to forbear from exercising its
rights and remedies through December 31, 2009, subject to the terms and
conditions set forth in such agreement; and
WHEREAS,
the Borrower Parties have requested that the Bank forbear for an additional
period of time beyond December 31, 2009; and
WHEREAS,
the Bank and the Borrower Parties desire to amend and restate the Forbearance
Agreement.
AGREEMENT
NOW,
THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. (a) Capitalized
terms used but not defined herein shall have the meanings ascribed to such terms
in the Loan Agreement.
(b) As
used herein and in the Loan Agreement as amended hereby, the following terms
shall have the following meanings:
“Additional
Advance Amount” means $700,000; provided that such amount shall be reduced to
$0.00 on the earliest of (i)December 15, 2009 if Borrower has not as of such
date met the requirements of Sections 6(c)(i) and 6(c)(ii) hereof or (ii) the
date of Borrower’s receipt of the Recapitalization Funds.
“Excluded
Mexican Inventory” means Borrower’s Inventory that is located in
Mexico.
“Forbearance
Event of Default” means (a) Bank obtaining knowledge of or the occurrence of any
default or Event of Default under the Loan Agreement not now known to Bank, (b)
any default or Event of Default under the Loan Agreement now known to Bank
increasing in scope or magnitude, or (c) the occurrence of any default under
this Agreement.
“Recapitalization
Funds” means amounts received by Borrower as a result of the transactions
contemplated by Section 6(a) hereof.
2. Interest Rate on the
Revolving Note. Section 2.3.1 of the Loan Agreement is amended
in its entirety to read as follows:
“2.3.1 Interest Rate on the
Revolving Note. The interest rate hereunder on the Revolving
Note shall be equal to 8.00% per annum.
3. Collateral-Obligation
Ratio. Section 2.6.2 of the Loan Agreement is amended in its
entirety to read as follows:
“2.6.2 the sum
of (i) Fifty percent (50%) of Qualified Inventory at cost (determined in
accordance with GAAP) or wholesale market value, whichever is lower, plus (ii)
the Additional Advance Amount; less”
4. Borrowing Base
Certificates. Section 5.1.3 of the Loan Agreement is amended
in its entirety to read as follows:
“5.1.3 On
Monday of each week, based on Qualified Accounts and Qualified Inventory figures
as of the end of the day on the prior Friday, and at such other times as
requested by Bank, a report in the form of the attached Exhibit A, or as
otherwise required by Bank, reflecting the Collateral-Obligation Ratio, showing
the value of the Collateral without the Excluded Mexican Inventory, together
with such information relating to the Collateral as Bank may request, certified
by an authorized signatory of Borrower.”
5. Prepayment
Premium. If, on or before March 31, 2010, Borrower pays the
Obligations in full and in good funds and the Revolving Credit Facility is
terminated, Bank shall waive the prepayment premium set forth in section 2.9 of
the Loan Agreement.
6. Additional
Covenants. Borrower and Guarantor shall comply with the
following covenants:
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(a) Recapitalization. Borrower
shall diligently pursue recapitalization of the Borrower and (i) on or before
September 30, 2009, provide Lender with a pro forma showing proposed use of the
funds received in such recapitalization, including payment of amounts
satisfactory to Bank on the Revolving Note, (ii) on or before December 31, 2009,
provide Bank with a copy of a letter of intent from a proposed investor who is
satisfactory to Bank reflecting an intent to make a contribution of equity to
Borrower in the amount of at least $3,000,000 on terms and conditions
satisfactory to Bank, and (iii) on or before March 31, 2010, close on such
transaction, obtain additional cash equity in the amount of at least $3,000,000
and make payment on the Revolving Note in the amount of not less than
$700,000. Upon payment of the $700,000 to Bank as required in
this section 6(a), on and after the date of such payment, Borrower must be in
compliance with Section 2.6 of the Loan Agreement as amended hereby, calculated
with the Additional Advance Amount at $0.
(b) Additional
Notices. Borrower shall notify Bank promptly, and in any event
within one business day, if Borrower, in its good faith judgment, at any time
believes that Borrower will not be able to close in its recapitalization on or
before March 31, 2010.
(c) Mexican
Documentation.
(i) Borrower
shall and Borrower and Guarantor shall cause Nexus Magnéticos de Mexico, S. de
X.X. de C.V. to execute and deliver to the Bank, on or before December 15, 2009,
a pledge agreement for all of Borrower's assets located in Mexico (the "Pledge
Agreement"), in order to perfect and protect the Bank's interest in the property
of Borrower and its affiliates that may from time to time be located in Mexico.;
and
(ii) On
or before January 15, 2010, Borrower and Guarantor shall [1] pay all fees, costs
and expenses in connection with the formalization of the Pledge Agreement before
a Mexican notary public and its registration before the Public
Registry of Commerce in Reynosa, Tamaulipas and [2] cause the deed issued by
such notary public to be properly filed for registration with the Public
Registry of Commerce in Reynosa, Tamaulipas.
(d) Inventory
Levels. Borrower shall at all times limit the amount of
inventory located in Mexico to the amount reasonably necessary for the operation
of Borrower’s business. Without limitation of the foregoing, Borrower
shall not at any time transfer any inventory to Mexico (i) if Borrower is not in
compliance with Section 2.6 of the Loan Agreement as amended hereby or if such
transfer will cause Borrower to be out of compliance with Section 2.6 of the
Loan Agreement as amended hereby, or (ii) if after such transfer the value of
inventory located in Mexico will exceed $1,600,000.
(e) Facility
Fee. In addition to all other amounts owing by Borrower to
Bank, Borrower shall pay to Bank a facility fee of $25,000.00 (the “Facility
Fee”). The Facility Fee shall be deemed to have been fully earned and
owing to Bank upon execution of the Forbearance Agreement. The
Facility Fee shall be due and payable on the earlier of the Forbearance
Termination Date (as defined below) or the date of payment in full of the
Obligations and termination of the Revolving Credit Facility.
(f) Debt
Service. Borrower shall maintain for each fiscal month of
Borrower, commencing June, 2009, a ratio of (i) Borrower’s Net Cash Flow, to
(ii) the sum of Borrower’s required principal payments, plus interest expense,
of at least 1.0 to 1.0.
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7. Defaults; No
Waiver. Material Events of Default have occurred under the
Loan Agreement and are continuing. Bank has agreed that, subject to
the terms hereof, notwithstanding the existing defaults known to Bank, Bank will
forbear from exercising its rights and remedies and continue to advance funds
under the Revolving Credit Facility prior to the earlier of March 31, 2010 or
the occurrence of any Forbearance Event of Default, provided that Bank shall not
at any time be required to advance any amount in excess of the amount permitted
to be advanced under Section 2.6 of the Loan Agreement as amended
hereby. Bank does not waive any Events of Default. Bank’s
agreement to forbear under this Agreement shall terminate on the earlier of (a)
March 31, 2010, or (b) the occurrence of any Forbearance Event of Default (the
earlier to occur of the foregoing, the "Forbearance Termination
Date"). Borrower expressly acknowledges that subject to the terms of
the Loan Agreement as amended hereby, Bank has agreed to forbear exercising its
rights and remedies until the earlier of March 31, 2010 to occurrence of any
Forbearance Event or Default, but in any event, Bank has not agreed to, and is
not obligated to, continue to provide financing to Borrower beyond such
date.
8. Effect of this Agreement on
Loan Documents. Except as amended hereby, the Loan Documents
remain in full force and effect.
9. Effect of this Agreement on
Guaranty. Guarantor hereby consents to this Agreement, and
Guarantor hereby ratifies his Guaranty of the Obligations and all
documents by which any of them has granted collateral for any such Guaranty or
any Obligations.
10. Effect of this Agreement on
Mortgage. Guarantor and Xxxxx Xxxxx hereby ratify the Real
Estate Mortgage securing the Obligations dated December 3, 2008 (the "Xxxxx
Mortgage"). In the event Borrower and Guarantor timely satisfy, to
the satisfaction of Bank, the conditions set forth in sections 6(c)(i) and
6(c)(ii) of this Agreement, Bank shall release the Xxxxx Mortgage.
11. Release of
Bank. Borrower acknowledges that its obligations under the
Loan Documents exist and are enforceable in accordance with their
terms. Each of the Borrower Parties, for themselves and all of their
respective past and present principals, officers, directors, members,
shareholders, employees, affiliated entities, guarantors, heirs, successors and
assigns and all persons acting by, through, under, or in concert with any of
them (the “Releasing
Parties”) do hereby release and discharge Bank and all of the Bank’s
officers, directors, managers, employees, successors, predecessors, and assigns
(each a "Released Party")), of and from any and all manner of action or actions,
cause or causes of action, suits, claims, counterclaims, demands, and expenses
(including attorneys’ fees and costs) whatsoever in law or equity, whether known
or unknown, which they have had, now have, or may in the future have against any
Released Party arising out of or relating to any act or omission by Bank or any
other Released Party, on or before the date of this Agreement.
12. Conditions
Precedent. This Agreement shall not be effective until (a) it
shall have been executed and delivered by the parties hereto and (b) Bank shall
have received from Borrower a copy, certified by the secretary of Borrower to be
true and correct and in full force in effect on the date hereof, of the
resolutions Borrower's board of directors authorizing the execution and delivery
of this Agreement and all documents required to be executed and delivered in
connection herewith.
13. Attorneys’
Fees. The Borrower agrees to pay all reasonable attorneys’
fees of Bank relating to the Forbearance Agreement or this Agreement and all
amendments, modifications and supplements thereto, which attorneys' fees shall
be due and payable on the earlier of (a) the Forbearance Termination Date or (b)
the date of payment in full of the Obligations and termination of the Revolving
Credit Facility.
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14. Law
Governing. This Agreement shall be governed by the laws of the
State of Wisconsin.
15. Binding
Effect. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns.
16. Amendment and
Restatement. The Forbearance Agreement is amended, restated
and superseded by this Agreement.
17. Execution in
Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
18. Electronic and Facsimile
Signatures. Electronic or facsimile copies of any party's
signature hereto shall be deemed effective execution of this Agreement by such
party.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and
year first above written.
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BANK:
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XXXXXXX
BANK
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By:
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/s/ Xxxxx Xxxxxx | |
| Xxxxx Xxxxxx | ||
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BORROWER
PARTIES:
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JEFFERSON
ELECTRIC, INC.
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By:
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/s/ Xxxxxx Xxxxx | |
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Xxxxxx
Xxxxx, President
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| /s/ Xxxxxx Xxxxx | ||
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Xxxxxx
Xxxxx, an individual
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| /s/ Xxxxx X. Xxxxx | ||
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Xxxxx
X. Xxxxx, an individual
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