EXHIBIT 99.03
FIFTH AMENDMENT TO CREDIT AND
SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT ("Amendment"),
dated as of May __, 2000, is made by and between P.G. DESIGN ELECTRONICS, INC.,
a Delaware corporation (the "Borrower") and XXXXX FARGO BUSINESS CREDIT, INC., a
Minnesota corporation formerly known as NORWEST BUSINESS CREDIT, INC. (the
"Lender").
RECITALS:
The Borrower and Lender have entered into a Credit and Security
Agreement dated as of December 31, 1998, as amended (the "Credit Agreement").
Capitalized terms used in this Amendment have the meanings given to them in the
Credit Agreement unless otherwise specified.
The Borrower has requested certain amendments be made to the Credit
Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained, it is agreed as follows:
1. Definition of Security Documents. The definition of "Security
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Documents" in the Credit Agreement is hereby amended and restated as follows:
"Security Documents" means this Agreement, the Collateral
Account Agreement, the Lockbox Agreement, the Newco
Guaranty, the Newco Security Agreement, the Old Zecal Pledge
Agreement, the Replacement Security Documents, and any other
document delivered to the Lender from time to time to secure
the Obligations, as the same may hereafter be amended,
supplemented or restated from time to time.
2. Proposed Zecal Reorganization. Reference is made to Section 7.6
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of the Credit Agreement. Borrower has given Lender prior notice of the planned
transactions (the "Proposed Zecal Reorganization") whereby Zecal shall sell all
of its assets to Zecal Technology, LLC ("Newco") in return for (i) common
ownership interests of Newco initially representing 50% of Newco's total
ownership interests and (ii) Newco's execution and delivery of that certain
Letter Agreement attached hereto as Exhibit A (the "Letter Agreement"), by and
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between Newco and Lender pursuant to which, among other matters, Newco will
guaranty (the "Newco Guaranty") the lesser of (a) $1,450,000 of Borrower's
Obligations pursuant to the Credit Agreement or (b) the remaining balance of
Borrower's Obligations pursuant to the Credit Agreement, which guaranty
obligation shall in either case be reduced on a dollar for dollar basis to the
extent of any proceeds
paid to Lender pursuant to Section 6.14 of the Credit Agreement, as amended
hereby. In addition, pursuant to the Letter Agreement, Newco and Lender shall
enter into a security agreement (the "Newco Security Agreement") pursuant to
which, to secure Newco's obligations under the Newco Guaranty, Newco shall grant
to Lender a first priority security interest in all equipment conveyed by Zecal
to Newco pursuant to the Proposed Zecal Reorganization. Contemporaneously with
the consummation of the Proposed Zecal Reorganization, Zecal shall change its
name to "HTI Z Corp".
3. Amendment of Section 6.14. Section 6.14 of the Credit Agreement
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is amended and restated as follows:
"Section 6.14. Receipt of Proceeds on Zecal's Investment in
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Newco. In the event Zecal receives any cash proceeds on account
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of its ownership interest in Newco (whether by sale, distribution
or otherwise), the Borrower shall cause to be paid to Lender for
application to the Obligations, in any order or manner of
application satisfactory to the Lender, the lesser of (i) the
amount of the proceeds received up to $1,450,000 or (ii) the
remaining balance of the Obligations."
4. Agreements Regarding Section 7.6. Lender acknowledges and agrees
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that, prior to giving any effect to the amendment of Section 7.6 effected
hereby:
(a) the consummation of the Proposed Zecal Reorganization shall be
deemed to be a transfer of property for present receipt of full and adequate
consideration, as required by Section 7.6 of the Credit Agreement;
(b) the consummation of the Proposed Zecal Reorganization as
described in Section 2 of this Amendment satisfies the requirements of Section
7.6(a) of the Credit Agreement;
(c) the conditions of Section 7.6(b)(i) and Section 7.6(b)(iv) of the
Credit Agreement have been satisfied; and
(d) the conditions of Section 7.6(b)(ii) of the Credit Agreement
shall be deemed satisfied solely by (i) the pledge of 100% of Zecal's ownership
interests in Newco (as evidenced by the Pledge Agreement executed and delivered
by Zecal in favor of Lender on or about the date hereof, and referred to as the
"Old Zecal Pledge Agreement"), (ii) Newco's execution and delivery of the Newco
Guaranty and (iii) Newco's execution and delivery of the Newco Security
Agreement, and, except to the extent described in the Newco Guaranty and the
Newco Security Agreement, Lender shall have no rights or interests in any of the
assets of Newco and no rights or interests in any ownership interests of any
other owner of Newco other than Zecal.
5. Amendment of Section 7.6. Section 7.6 of the Credit Agreement
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shall be amended as follows:
(a) except to the extent described in the Newco Guaranty and the
Newco Security Agreement, Section 7.6(b)(iii) of the Credit Agreement shall be
deleted and of no further force and
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effect, and Newco shall have no obligation to assume (i) Zecal's obligations to
the Borrower for amounts lent to Zecal by the Borrower or (ii) Zecal's
obligations to Lender pursuant to Zecal's guaranty in favor of Lender; and
(b) Section 7.6(v) of the Credit Agreement shall be deleted in its
entirety and replaced with the following: "in the event Zecal receives any cash
proceeds on account of its ownership interest in Newco (whether by sale,
distribution or otherwise), the Borrower shall pay over such proceeds in
accordance with Section 6.14 hereof.".
6. Termination of Certain Security Interests; Transfer of Assets
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Free of Zecal Liens. Except for the pledge of Zecal's ownership interests in
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Newco pursuant to the Old Zecal Pledge Agreement, upon the effectiveness of this
Amendment, Lender hereby terminates and releases all of its security interests
in Zecal's assets which are being transferred to Newco, including, without
limitation, any security interests granted or evidenced by: (i) that certain
Security Agreement dated as of December 31, 1998, as amended, between Zecal and
Lender, (ii) any financing statement executed by Zecal in favor of Lender,
including, without limitation, those financing statements set forth on Annex 1
attached hereto, (iii) that certain Collateral Account Agreement dated as of
December 31, 1998, as amended, among Zecal, Lender and Norwest Bank Wisconsin,
National Association, (iv) that certain Agreement As To Lockbox Service, dated
as of December 31, 1998, as amended, among Zecal, Lender and Norwest Bank
Wisconsin, National Association and (v) that certain Waiver and Consent dated
August 24, 1998, as amended, by and between County of Monroe Industrial
Development Agency, Empire State Development Corporation, Zecal and General
Electric Capital Corporation, as assigned to Lender pursuant to that certain
undated Assignment of Waiver and Consent, between General Electric Capital
Corporation and Lender (any of the security interests described in this sentence
referred to herein as the "Zecal Security Interests"). Upon the effectiveness of
this Amendment, Lender shall deliver to Newco executed UCC termination
statements and such other documents as may be necessary to terminate and release
all of the Zecal Security Interests.
As a result of the aforementioned security interest termination, as part of
the Proposed Zecal Reorganization, Zecal may transfer all of its assets to
Newco, free and clear of any and all liens or encumbrances of any kind or nature
granted by Zecal to Lender on or prior to the date hereof, including, without
limitation, (i) any assets previously subject to any of the Zecal Security
Interests and (ii) the equipment described in the Newco Security Agreement.
7. Replacement Guaranty and Security Agreement. In connection with
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Zecal's change of corporate name to "HTI Z Corp." and the termination of the
Zecal Security Interests, Zecal and Lender shall contemporaneously herewith
enter into replacement security documents and a replacement guaranty (the
"Replacement Security Documents"), and such Replacement Security Documents shall
constitute "Security Documents" under the Credit Agreement.
8. No Other Changes. Except as explicitly amended by this Amendment,
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all of the terms and conditions of the Credit Agreement shall remain in full
force and effect and shall apply to any advance or letter of credit thereunder.
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9. Conditions Precedent. This Amendment shall be effective when the
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Lender shall have received an executed original hereof, together with each of
the following, each in form and substance satisfactory to Lender:
(a) The Letter Agreement.
(b) The Newco Guaranty.
(c) The Newco Security Agreement and evidence of insurance of the
collateral required therein.
(d) Certificate of Secretary of Limited Liability Company Guarantor
and all attachments thereto.
(e) Evidence that Lender's security interest in Newco's equipment
granted pursuant to the Newco Security Agreement has been perfected.
(f) The Old Zecal Pledge Agreement and the Replacement Security
Documents and evidence that Lender's security interests in Old Zecal's assets
has been perfected.
(g) The Acknowledgment and Agreement of Guarantors set forth at the
end of this Amendment, duly executed by each Guarantor.
(h) Executed copies of (i) the definitive asset purchase agreement
evidencing the Proposed Zecal Reorganization (the "Asset Purchase Agreement")
and the xxxx of sale delivered in connection therewith, (ii) the Members
Agreement delivered in connection with the Asset Purchase Agreement, (iii) the
Limited Liability Company Agreement delivered in connection with the Asset
Purchase Agreement and (iv) evidence of the change in Zecal's corporate name to
"HTI Z Corp."
Upon satisfaction of each of the conditions precedent to the
effectiveness of this Amendment, Lender shall deliver written notice thereof to
Borrower and to Newco.
10. Representations and Warranties. The Borrower hereby represents
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and warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to execute
this Amendment and to perform all of its obligations hereunder, and this
Amendment has been duly executed and delivered by the Borrower and constitutes
the legal, valid and binding obligation of the Borrower, enforceable in
accordance with its terms.
(b) The execution, delivery and performance by the Borrower of this
Amendment has been duly authorized by all necessary corporate action and does
not (i) require any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) violate any provision of any law, rule or regulation or of any
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order, writ, injunction or decree presently in effect, having applicability to
the Borrower, or the certificate of incorporation or bylaws of the Borrower, or
(iii) 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 the
Borrower is a party or by which it or its properties may be bound or affected.
(c) All of the representations and warranties contained in Article V
of the Credit Agreement are correct on and as of the date hereof as though made
on and as of such date, except to the extent that such representations and
warranties relate solely to an earlier date.
11. References. All references in the Credit Agreement to "this
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Agreement" shall be deemed to refer to the Credit Agreement as amended hereby;
and any and all references in the Security Documents to the Credit Agreement
shall be deemed to refer to the Credit Agreement as amended hereby.
12. No Waiver. The execution of this Amendment and acceptance of any
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documents related hereto shall not be deemed to be a waiver of any Default or
Event of Default under the Credit Agreement or breach, default or event of
default under any Security Document or other document held by the Lender,
whether or not known to the Lender and whether or not existing on the date of
this Amendment.
13. Release. The Borrower, and each Guarantor by signing the
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Acknowledgment and Agreement of Guarantors set forth below, each hereby
absolutely and unconditionally releases and forever discharges the Lender, and
any and all participants, parent corporations, subsidiary corporations,
affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents and
employees of any of the foregoing, from any and all claims, demands or causes of
action of any kind, nature or description, whether arising in law or equity or
upon contract or tort or under any state or federal law or otherwise, which the
Borrower or such Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Amendment, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
14. Costs and Expenses. The Borrower hereby reaffirms its agreement
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under the Credit Agreement to pay or reimburse the Lender on demand for all
costs and expenses incurred by the Lender in connection with the Credit
Agreement, the Security Documents and all other documents contemplated thereby,
including without limitation all reasonable fees and disbursements of legal
counsel. Without limiting the generality of the foregoing, the Borrower
specifically agrees to pay all fees and disbursements of counsel to the Lender
for the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto (including,
without limitation, the Letter Agreement, the Newco Guaranty and the Newco
Security Agreement). The Borrower hereby agrees that the Lender may, at any time
or from time to time in its sole discretion and without further authorization by
the Borrower, make a loan to the Borrower under the Credit Agreement, or apply
the proceeds of any loan, for the purpose of paying any such fees,
disbursements, costs and expenses.
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15. Miscellaneous. This Amendment and the Acknowledgment and
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Agreement of Guarantors may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which counterparts, taken together, shall constitute one and the same
instrument.
16. Third Party Beneficiary. Each of the parties hereto acknowledges
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and agrees that Zecal Technology, LLC shall be a third party beneficiary of this
Amendment and shall be entitled to enforce its rights and benefits conferred
hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first written above.
XXXXX FARGO BUSINESS CREDIT, INC. P.G. DESIGN ELECTRONICS, INC.
By: _______________________________ By: _____________________________
Its: _______________________________ Its: _____________________________
ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS
The undersigned, each a guarantor of the indebtedness of P.G. Design
Electronics, Inc. (the "Borrower") to Xxxxx Fargo Business Credit, Inc.,
formerly known as Norwest Business Credit, Inc. (the "Lender") pursuant to a
separate Guaranty (in the case of Heartland Technology, Inc., dated December 31,
1998 and, in the case of HTI Z Corp., dated on or about May __, 2000) (each a
"Guaranty"), hereby (i) acknowledges receipt of the foregoing Amendment; (ii)
consents to the terms (including without limitation the release set forth in
paragraph 13 of the Amendment) and execution thereof; (iii) reaffirms its
obligations to the Lender pursuant to the terms of its Guaranty; and (iv)
acknowledges that the Lender may amend, restate, extend, renew or otherwise
modify the Credit Agreement and any indebtedness or agreement of the Borrower,
or enter into any agreement or extend additional or other credit accommodations,
without notifying or obtaining the consent of the undersigned and without
impairing the liability of the undersigned, under its Guaranty for all of the
Borrower's present and future indebtedness to the Lender.
HEARTLAND TECHNOLOGY, INC.
By: _______________________________
Its: _______________________________
HTI Z CORP., formerly known as ZECAL CORP.
By: _______________________________
Its: _______________________________
ANNEX 1
FINANCING STATEMENTS TO BE TERMINATED
See attached.
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