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Exhibit 10.1
THIRD MODIFICATION AGREEMENT
This Third Modification Agreement (the "Agreement") is made and entered
into this 17th day of May, 2000, by and between FIRSTAR BANK, N.A., formerly
known as Star Bank, N.A., a national banking corporation, with an office located
at 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxx, Xxxx 00000 (the "Bank"), and PH GROUP INC.,
an Ohio corporation formerly known as Resource General Corporation, and
successor by merger to PH Hydraulics and Automation, Inc., whose address is 0000
XxxxXxxx Xxxxx, Xxxxxxxx, Xxxx 00000 (the "Borrower"), and PHOENIX MANAGEMENT,
LTD., an Ohio limited liability company, whose address is 0000 XxxxXxxx Xxxxx,
Xxxxxxxx, Xxxx 00000, and XXXXXXX X. XXXXXXX, individually, who resides at 000
Xxxxxxxx Xxxxxx, Xxxxxx, Xxxx 00000 (collectively the "Guarantors").
RECITALS:
A. On April 28, 1997, the Borrower and the Bank entered into an Amended
and Restated Revolving Credit/Term Loan Agreement which provided the terms and
conditions under which the Bank agreed to extend to the Borrower a revolving
line of credit in the amount of $2,500,000.00, a term loan in the amount of
$500,000.00, and a term loan in the amount of $600,000.00. Each of these loans
was evidenced by a separate promissory note and secured by a security interest
in all of the business assets of the Borrower as evidenced by security
agreements and perfected by financing statements filed with the Secretary of
State of Ohio and with the Recorder of Franklin County, Ohio.
B. On June 29, 1998, the Borrower and the Bank entered into a Second
Amended and Restated Revolving Credit/Term Loan Agreement (the "Credit
Agreement"), by the terms of which the Bank agreed to replace the revolving line
of credit for $2,500,000.00 with a new revolving line of credit in the amount of
$3,500,000.00 (the "Revolving Loan"), and also agreed to consolidate the
outstanding balances on the term loans, along with approximately $500,000.00 of
outstanding indebtedness on the existing revolving line of credit, into one
consolidated term loan in the amount of $1,200,000.00 (the "Term Loan").
C. The Credit Agreement provided that, subject to there being no event of
default, as described in the Credit Agreement, or any circumstance which would,
with the passage of time or the giving of notice, become an event of default,
the Bank would make advances to the Borrower on the Revolving Loan according to
the terms of the Credit Agreement, up to a maximum amount of $3,500,000.00,
which line of credit would remain in effect until June 30, 2000 (the "Maturity
Date").
D. The Credit Agreement further provided that the amounts outstanding
under the Revolving Loan would accrue interest pursuant to either the "Prime
Interest Rate" option, or the "LIBOR Interest Rate" option, as described in the
Credit Agreement.
E. The Credit Agreement further provided that both the Revolving Loan and
the Term Loan, as well as all other obligations as described in the Credit
Agreement, would be secured by the following:
(1) A first priority security interest in all of the Borrower's accounts
receivable, inventory, equipment, fixtures and furniture, whether
then owned or thereafter acquired, as well as their proceeds (cash
or non-cash), and any insurance proceeds related thereto;
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(2) A Collateral Assignment of Life Insurance covering a policy on the
life of Xxxxxxx X. Xxxxxxx in the amount of $500,000.00, which
assignment would be a first and best assignment;
(3) A first mortgage lien on approximately 505 acres of real property
owned by the Borrower and located in Perry County, Ohio; and
(4) Provisions, by the terms of which all obligations of the Borrower
to the Bank shall be cross-collateralized and cross-defaulted to
all other existing debt owed by the Borrower to the Bank.
In addition, the Revolving Loan and the Term Loan were to be secured by
the guarantys of Xxxxxxx X. Xxxxxxx, the President of the Borrower, and by
Phoenix Management, Ltd., a limited liability company. All of the collateral,
including the guarantys, is collectively referred to as the "Collateral".
F. On June 29, 1998, in accordance with the terms of the Credit Agreement,
the Borrower executed and delivered to the Bank its Promissory Note in the
amount of $3,500,000.00 (the "Revolving Note"). The Revolving Note provided that
the principal amount outstanding thereunder would accrue interest as described
therein, and in the Credit Agreement, and further, that the Borrower would make
regular monthly payments of the accrued and unpaid interest on the 30th day of
each month beginning July 30, 1998, and continuing until June 30, 2000, at which
time the principal amount, plus any remaining accrued and unpaid interest, will
be paid in full. The Credit Agreement provided that if the LIBOR Interest Rate
option is selected, interest will be paid on the Maturity Date of each contract
for a LIBOR Rate Advance, as defined in the Credit Agreement.
G. On June 29, 1998, in accordance with the terms of the Credit Agreement,
the Borrower executed and delivered to the Bank its Promissory Note in the
amount of $1,200,000.00 (the "Term Note"). The Term Note provided that the
amounts outstanding thereunder will bear interest at a fixed rate of 8.070% and
be paid in eighty-three (83) principal payments of $14,285.71 plus interest,
followed by one payment of $14,385.35, plus interest, with the first payment
being due on July 30, 1998, and such payments continuing on the same day of each
month thereafter until June 30, 2005, at which time any remaining principal and
interest are to be paid in full.
H. On June 29, 1998, Xxxxxxx X. Xxxxxxx, individually, executed and
delivered to the Bank his Commercial Guaranty, by the terms of which he
absolutely and unconditionally guaranteed the payment to the Bank of all of the
obligations of the Borrower to the Bank; provided, however, that his maximum
liability would not exceed the principal sum of $600,000.00, plus all interest
thereon, and such other costs, expenses and attorney fees as described in the
Commercial Guaranty.
I. On June 29, 1998, Phoenix Management, Ltd., an Ohio limited liability
company, executed and delivered to the Bank its Commercial Guaranty, by the
terms of which it absolutely and unconditionally guaranteed the payment to the
Bank of all of the obligations of the Borrower in an amount not to exceed the
principal sum of $4,700,000.00, plus all interest thereon, and such other costs,
expenses and fees as described in the Commercial Guaranty.
J. On July 1, 1999, the Bank, the Borrower and the Guarantors entered into
a Modification Agreement (the "Modification Agreement"), by the terms of which
the parties agreed that the Borrower was in default pursuant to various
provisions of the Credit Agreement, Revolving Note and Term Note, which defaults
were referred to as the "Covenant Defaults". The Modification Agreement also
reflected the commitment of the Borrower to pursue the acquisition of additional
equity and/or subordinated debt in order to strengthen the capital base of the
Borrower. The Modification Agreement also indicated the Bank's unwillingness to
continue the
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Revolving Loan in the absence of such equity or debt. The Bank agreed to waive
the Covenant Defaults contingent upon the execution of the Modification
Agreement by all of the parties.
K. The Modification Agreement reduced the Revolving Loan and the Revolving
Note, effective on the date of the Modification Agreement, to $3,000,000.00 and
accelerated the Maturity Date to September 30, 1999. It also provided that until
that time the Bank would continue to make available to the Borrower loan
proceeds in an amount not to exceed $3,000,000.00 pursuant to the Borrowing Base
requirements as set forth therein. Included in the Borrowing Base was a special
temporary advance of $250,000.00 (the "Special Temporary Advance"). The
Modification Agreement also provided for the principal amounts outstanding
thereunder to bear interest at either the Prime Interest Rate option or the
LIBOR Interest Rate option as described in the Credit Agreement. Further, the
Bank waived all of the Covenant Defaults and in consideration for this waiver,
the Borrower paid to the Bank a waiver fee of $5,000.00 at the time of the
execution of the Agreement. In addition, COVENANT (J) of the Credit Agreement
entitled "TANGIBLE NET WORTH" was deleted and replaced with a new section.
L. The Modification Agreement further provided that the Borrower and the
Guarantors would exercise their best efforts to obtain a commitment for the
injection of additional equity or subordinated debt into the Borrower. The
Borrower and the Guarantors further agreed that if no commitment for additional
equity or subordinated debt satisfactory to the Bank in all respects had been
obtained by the Borrower by July 31, 1999, then they would pay the Bank a fee of
$10,000.00, and in addition the Bank would select an appraiser who would conduct
an appraisal of the Borrower's fixed assets. It further provided that if no such
commitment had been entered into by the Borrower, or if entered into, but not
consummated, by September 30, 1999, then the Borrower would pay the Bank another
$10,000.00 fee. The Borrower was unable to obtain a commitment for additional
equity or subordinated debt by July 31, 1999 and, therefore, paid the $10,000.00
fee which was due. By September 30, 1999, the Borrower had still not obtained
the commitment, and was unable to pay the required $10,000.00 fee.
M. On December 22, 1999, the Bank, the Borrower and the Guarantors entered
into a Second Modification Agreement by the terms of which the Maturity Date of
the Revolving Loan and the Revolving Note was extended to February 29, 2000. It
also provided that until that time the Bank would make available to the Borrower
loan proceeds in an amount not to exceed $2,476,000.00 pursuant to the terms of
the Credit Agreement, except as modified by the Modification Agreement and the
Second Modification Agreement. It further provided that the amount outstanding
under the Revolving Loan would, at all times, be supported by the Borrowing Base
as described therein, and that on the first day of each month the Borrower would
submit to the Bank a Borrowing Base Certificate in the form attached to the
Second Modification Agreement.
N. The Second Modification Agreement also provided that the amounts
outstanding under the Revolving Loan would accrue interest at a rate equal to
the Prime Commercial Rate of the Bank (as defined in the Credit Agreement), plus
one and three-quarters of one percent (1.75%), and also that COVENANT (J) of the
Credit Agreement, entitled "Tangible Net Worth", was deleted in its entirety.
O. The Second Modification Agreement further provided for the payment at
the time of signing of a $5,000.00 renewal fee by the Borrower and the payment
of the additional $10,000.00 fee that was due September 30, 1999. Further,
Borrower agreed to pay to the Bank at the time of signing, $25,000.00 to be
applied to the Term Note and also agreed to pay an additional $25,000.00 on the
Term Note on January 31, 2000, and an additional $50,000.00 on February 28,
2000. All of these payments have been made except for the $50,000.00 due on
February 28, 2000.
P. The Second Modification Agreement further provided that the Revolving
Note and the Term Note would continue to be secured by all of the Collateral
except for the mortgage on
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the Perry County property which had previously been released. It further
provided that the Bank waived the defaults by the Borrower in relation to the
"Fifth Third Loan" as described therein.
Q. There is an outstanding principal balance on the Revolving Loan and the
Revolving Note as of March 2, 2000 of $2,474,715.85. There is an outstanding
principal balance on the Term Loan and the Term Note of $639,003.68 as of March
2, 2000, and the next payment of principal and interest is due March 30, 2000.
R. The Bank has continued to express to the Borrower its unwillingness to
extend credit under the terms of the Revolving Loan and, therefore, has
encouraged the Borrower to look elsewhere for its financing needs. The Borrower
and the Guarantors are seeking new financing from another source in order to pay
off the indebtedness owed to the Bank, but have requested additional time from
the Bank in order to accomplish this. The Bank has agreed to this additional
extension of time to find new financing contingent upon the execution of this
Agreement by all of the parties.
NOW, THEREFORE, based on the foregoing recitals (which are incorporated
herein as agreements, representations, warranties and covenants of the
respective parties, as the case may be), and for other good and valuable
consideration, receipt of which is hereby mutually acknowledged, the parties
hereto agree as follows:
1. The Maturity Date of the Revolving Loan and the Revolving Note are, as
of the date of this Agreement, extended to May 31, 2000 (the "New Maturity
Date"). Until that time, the Bank will make available to the Borrower loan
proceeds in an amount not to exceed $2,476,000.00, pursuant to the terms of the
Credit Agreement, except as modified by the Modification Agreement, the Second
Modification Agreement and herein. The Borrower may borrow, repay and reborrow
up to the "Maximum Amount", which shall be the lesser of: a) the sum of 80% of
billed accounts receivable acceptable to the Bank which are outstanding less
than ninety (90) days from date of invoice, plus 50% of raw materials (up to a
maximum raw materials advance of $250,000.00), plus 20% of work-in-process (up
to a maximum work-in-process advance of $500,000.00), plus 60% of finished
goods, (subject, however, to an overall limitation of $1,500,000.00 on all
advances for raw materials, work-in-process and finished goods), (the sum of
which shall be called the "Borrowing Base"); or b) $2,476,000.00. At all times,
the Maximum Amount outstanding must be supported by the Borrowing Base.
2. On the first day of each month, the Borrower shall continue to submit
to the Bank a Borrowing Base Certificate in the form of "Exhibit A" attached to
the Second Modification Agreement.
3. The principal amount outstanding under the Revolving Loan will continue
to be evidenced by the Revolving Note. However, the principal amounts
outstanding will accrue interest at a rate equal to the Prime Commercial Rate of
the Bank (as defined in the Credit Agreement), plus two percent (2%).
4. The interest on the Revolving Note shall continue to be paid in
consecutive monthly payments with the next one due March 30, 2000, and
continuing thereafter on the same day of each month until the New Maturity Date,
at which time the principal, and any accrued and unpaid interest, shall be paid
in full.
5. At the time of the execution of this Agreement, the Borrower shall pay
to the Bank a renewal fee of $3,000.00, and also pay $25,000.00 of the
$50,000.00 that was due on the Term Note on February 28, 2000, with the
remaining $25,000.00 to be paid on March 31, 2000. The Term Loan will otherwise
continue to be paid as provided in the Term Note. The Borrower
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acknowledges and agrees that the Bank will debit the Borrower's checking account
for each payment on the Term Note when it is due, and apply it on the Term Note.
6. The amounts outstanding under both the Revolving Note and the Term Note
will continue to be secured by the Collateral, except for the mortgage on the
505 acres of real property owned by the Borrower in Perry County, Ohio, which
was previously released. The Borrower will also execute and deliver to Xxxxxx
Industrial LLC, as its landlord, such acknowledgments and agreements as will
then enable Xxxxxx Industrial LLC to execute and deliver to the Bank a
Landlord's Waiver, the form of which has been agreed upon by the Bank and Xxxxxx
Industrial LLC. The Borrower will enter into such additional agreements as the
Bank may require in order to further evidence and perfect its security and lien
interests in the Collateral, including a security agreement and financing
statement covering the overhead cranes installed on the Borrower's premises.
7. The Bank continues to have the right at any time to select an appraiser
to conduct an appraisal of the Borrower's fixed assets and provide the Bank with
both an orderly liquidation value and a forced liquidation value of these
assets. The costs of any such appraisal will be paid by the Borrower.
8. The Bank continues to have the right, at any time, to sell, assign and
transfer to a third party, all of its right, title and interest in and to the
Credit Agreement, Revolving Note, Term Note, Commercial Guaranty, as well as all
other instruments and Collateral documents relating to the Revolving Loan, the
Term Loan and the Collateral.
9. Upon the occurrence of an event of default, and the expiration of any
applicable cure period, including any under the terms of the Credit Agreement,
the Bank, in its sole discretion, shall continue to have the right to establish
a cash collateral deposit account into which all of the proceeds from the sale
of Borrower's inventory and the collection of its receivables shall flow. If the
Bank establishes a cash collateral deposit account, it shall immediately give
the Borrower notice of this fact. The Bank shall have exclusive control over the
account and the exclusive right to make withdrawals and apply the proceeds to
any amounts then due and owing on the Borrower's obligations. Borrower shall
continue to maintain its lockbox with the Bank and in directing its accounts
receivable to remit all payments to the lockbox. In the event the Bank chooses
to establish a cash collateral deposit account, all monies from the lockbox will
flow directly into the account.
10. The Borrower and the Guarantors jointly and severally acknowledge and
agree that their obligations under the Revolving Loan and the Term Loan, as
evidenced by the Credit Agreement, Revolving Note, Term Note, the security
agreements and financing statements, and all other documents related thereto as
modified by this Agreement (the "Loan Documents"), and all other obligations of
any one or more of them to the Bank, are owing without setoff, recoupment,
defense or counterclaim, in law or in equity, of any nature or kind; that the
obligations are secured by valid, perfected, indefeasible, and enforceable first
priority liens in all of the assets of the Borrower, as more specifically
described in the Loan Documents.
11. The Borrower and each of the Guarantors represent and warrant that
they are not aware of, and do not possess, any claims or causes of action
against the Bank. Notwithstanding the representation, and as further
consideration for the agreements and understandings herein, the Borrower and
each of the Guarantors, in every capacity including without limitation,
shareholders, officers, partners, directors, investors or creditors, or any one
or more of the parties, and each of their employees, agents, executors,
successors and assigns, hereby release the Bank and its officers, directors,
employees, agents, attorneys, affiliates, subsidiaries, successors and assigns
from any liability, claim, right or cause of action which now exists, or
hereafter arises, whether known or unknown, arising from or in any way related
to facts in existence as of the date hereof.
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12. No failure or delay on the part of the Bank in the exercise of any
power or right, and no course of dealing between any one or more of the
Borrower, the Guarantors and the Bank operates as a waiver of such power or
right, nor shall any single or partial exercise of any power or right preclude
other or further exercise thereof or the exercise of any other power or right.
The remedies provided for in the Loan Documents are cumulative and not exclusive
of any remedies which may be available to the Bank at law or in equity.
13. The Borrower and the Guarantors represent and warrant that the
execution, delivery and performance of this Agreement by the Borrower and the
Guarantors, and all agreements and documents delivered in conjunction herewith
have been duly authorized by all necessary corporate or limited liability
company action and do not and will not require any consent or approval of
stockholders or members, nor violate any provision of any law, rule, regulation,
order, writ, judgment, injunction or decree presently in effect having
applicability to the Borrower or the Guarantors, or the governing documents of
either, or 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 or the Guarantors are a party or by which they or their properties
may be bound or affected.
14. Except as expressly modified and amended by the terms of this
Agreement, all other terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and are hereby ratified,
confirmed and approved. If there is an express conflict between the terms of
this Agreement and the terms of the Credit Agreement or the other Loan
Documents, the terms of this Agreement govern and control.
15. This written Agreement represents the final agreement between the
Borrower, the Guarantors and the Bank and may not be contradicted by evidence of
prior contemporaneous or subsequent oral agreements by the parties. All prior
and contemporaneous oral agreements, if any, between the Bank on the one hand,
and any one or more of the Borrower or any of the Guarantors on the other hand,
are merged into this Agreement and do not survive the execution of this
Agreement. Modifications or amendments to this Agreement must be in writing and
signed by all parties in order to be effective.
16. The Borrower and the Guarantors agree that they shall pay the costs
and expenses, including attorney fees, incurred by the Bank arising from or
relating in any way to the Loan Documents, this Agreement, or any subsequent
negotiations, agreements and disputes. Furthermore, the costs and expenses shall
constitute a part of the obligation under the Credit Agreement and shall be
secured by all of the Collateral securing the Revolving Loan and the Term Loan.
The Revolving Loan and the Term Loan shall continue to be cross-collateralized
and cross-defaulted in all respects.
17. This Agreement is governed by the laws of the State of Ohio and is
binding on each party and their respective successors, assigns, heirs and
personal representatives, and shall inure to the benefit of the Bank and its
successors and assigns. If any provision of this Agreement conflicts with any
applicable statute or law, or is otherwise unenforceable, such offending
provision is null and void only to the extent of such conflict or
unenforceability, and is deemed separate from and does not invalidate any other
provision of this Agreement.
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IN WITNESS WHEREOF, this Agreement is effective on the date indicated on
the first page.
BORROWER: BANK:
PH Group Inc. Firstar Bank, N.A.
By: By:
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Xxxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxx
President Assistant Vice President
GUARANTORS:
Phoenix Management, LTD.
By:
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Xxxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxx,
Member
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