FIFTH AMENDMENT TO LOAN AGREEMENT
THIS FIFTH AMENDMENT TO LOAN AGREEMENT (this "Amendment"), made and
entered into as of February 26, 1997, by and among LANCER INDUSTRIES, INC., a
Delaware corporation ("Lancer"), FAIRFIELD MANUFACTURING COMPANY, INC., a
Delaware corporation ("Borrower"), and GENERAL ELECTRIC CAPITAL CORPORATION, a
New York corporation ("GE Capital"), as sole "Lender" under the "Loan Agreement"
hereinafter referred to and as agent for itself and the other "Lenders" who may
hereafter become parties to the Loan Agreement (GE Capital, in such capacity,
the "Agent").
RECITALS:
A. Borrower and GE Capital, as a Lender and as Agent, entered into a
certain Loan Agreement, dated as of July 7, 1993, as amended pursuant to a First
Amendment to Loan Agreement, dated as of September 30, 1994, a Second Amendment
to Loan Agreement, dated March 30, 1995, but effective as of December 31, 1994,
a Third Amendment to Loan Agreement, dated as of March 31, 1995, and a Fourth
Amendment to Loan Agreement, dated as of December 5, 1996 (the "Loan Agreement";
capitalized terms used herein and not defined herein shall have the meanings
ascribed to them in the Loan Agreement), whereby, subject to the terms and
conditions set forth therein, GE Capital, as sole Lender thereunder, made the
Commitment and the Term Loans available to Borrower;
B. Pursuant to the Lancer Pledge Agreement, Lancer pledged to the
Agent all of the issued and outstanding common stock of Borrower.
C. The Lancer Pledge Agreement provides at Section 7(b) thereof that,
without the prior written consent of the Majority Lenders, Lancer will not cause
or permit Borrower to issue any additional shares of capital stock (with certain
exceptions not here applicable).
D. Lancer and Borrower have requested that Lenders consent to the
issuance of (i) up to 50,000 shares of Borrower's Cumulative Exchangeable
Preferred Stock having the terms set forth in Exhibit A (the "New Preferred
Stock") at an issue price of $1,000 per share, (ii) up to 50,000 shares of
another series of Cumulative Exchangeable Preferred Stock of the Borrower having
terms identical in all material respects to the terms of the New Preferred Stock
except that the Exchange Preferred Stock shall not be subject to transfer
restrictions (the "Exchange Preferred Stock") which will be registered under the
Securities Act of 1933, as amended, and will be issued in exchange for the New
Preferred Stock and (iii) shares of Preferred Stock issued from time to time in
lieu of payment of cash dividends on the New Preferred Stock and the Exchange
Preferred Stock in accordance with the terms of the Certificate of Designation
governing the Exchange Preferred Stock or the New Preferred Stock, as the case
may be (the Exchange Preferred Stock, the New Preferred Stock and such
additional shares of Preferred Stock herein, collectively, the "Preferred
Stock").
E. Lancer and Borrower have further requested that Lenders (i) permit a
dividend to be paid by Borrower to Lancer from the proceeds of the issuance of
the New Preferred Stock and (ii) permit dividends to be paid on the Preferred
Stock from time to time in accordance with the terms of the Certificate of
Designations governing the New Preferred Stock or the Exchange Preferred Stock,
as the case may be.
F. Subject to the terms and conditions set forth herein, Lenders
are willing to permit Borrower to issue the Preferred Stock and to pay
such dividends.
G. In connection therewith, Lancer and Borrower understand and agree
that from and after the effective date of this Amendment as provided herein,
Borrower shall no longer be permitted to pay Permitted Dividends to Lancer.
H. Borrower and GE Capital, as Agent and sole Lender under the Loan
Agreement, desire to enter into this Amendment in order to (i) permit the
issuance of the New Preferred Stock as described generally in paragraph D of
these recitals and described more particularly herein, (ii) permit the payment
of certain dividends by Borrower on the New Preferred Stock as described
generally in paragraph E of these recitals and described more particularly
herein, (iii) delete provisions of the Loan Agreement permitting the payment of
Permitted Dividends, and (iv) amend the Loan Agreement in certain other respects
as hereinafter set forth.
In consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto covenant and agree as follows:
1. Consent to Issuance of New Preferred Stock. Effective upon
fulfillment, to the satisfaction of Lenders, of the conditions precedent set
forth in Section 3 hereof, and subject to the terms of the Loan Agreement, as
amended by this Amendment (including, without limitation, as to the use of the
proceeds of the issuance of the New Preferred Stock), as required pursuant to
Section 7(b) of the Lancer Pledge Agreement and Section 6.8 of the Loan
Agreement, Lenders hereby consent to the issuance of (i) up to 50,000 shares of
the New Preferred Stock at an issue price of $1,000 per share, (ii) up to 50,000
shares of the Exchange Preferred Stock in exchange for shares of the New
Preferred Stock and (iii) shares of Preferred Stock issued from time to time in
lieu of payment of cash dividends on the Preferred Stock in accordance with the
terms of the Certificate of Designation governing the New Preferred Stock or the
Exchange Preferred Stock, as the case may be; provided, however, that such
consent is expressly limited to such issuance and shall not be or be deemed to
be a consent to any other matter prohibited by the Lancer Pledge Agreement, the
Loan Agreement or any of the other Loan Documents, including, without
limitation, the issuance of the "Exchange Debentures" (as such term is defined
in the Offering Memorandum draft dated February 21, 1997 relating to such
issuance), or a waiver of any Default or Event of Default presently or hereafter
existing (other than those Defaults or Events of Default which would have
occurred but for the consent and amendments set forth herein solely as a result
of the transactions contemplated hereby).
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2. Amendments to Loan Agreement. Effective on the Fifth Amendment
Date the Loan Agreement shall be deemed to be amended as follows:
(a) Amendments to Section 1.1 of the Loan Agreement.
(i) Section 1.1 of the Loan Agreement shall be deemed to be
amended by deleting the definitions of "Agreement," "Loan Documents,"
and "Monthly Payment Date" therein in their entirety and substituting
in lieu thereof the following revised definitions of "Agreement," "Loan
Documents," and "Monthly Payment Date".
"Agreement" means this Loan Agreement, either as originally
executed or as it may from time to time be supplemented,
modified, amended, renewed, extended or supplanted (including,
without limitation, by the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment and the
Fifth Amendment).
"Loan Documents" means, collectively, this Agreement, the
First Amendment, the Second Amendment, the Third Amendment,
the Fourth Amendment, the Fifth Amendment, the Notes, the
Blocked Account Agreements, the Subsidiary Guaranty, the
Collateral Documents, the Lancer Pledge Agreement and any
other agreements of any type or nature heretofore or hereafter
executed and delivered by Borrower or any of its Affiliates in
favor of the Agent or Lenders in any way relating to or in
furtherance of this Agreement, in each case either as
originally executed or as the same may from time to time be
supplemented, modified, amended, restated, extended or
supplanted.
"Monthly Payment Date" means the fifteenth day of each
calendar month after the Closing Date and shall also include
the Commitment Termination Date.
(ii) Section 1.1 of the Loan Agreement shall be deemed to be
further amended by deleting clause (h) of the definition of
"Consolidated Excess Cash Flow" therein and substituting in lieu
thereof the following revised clause (h):
(h) Permitted Preferred Stock Dividends declared and
paid in cash during such period.
(iii) Section 1.1 of the Loan Agreement shall be deemed to be
further amended by adding after the paranthetical in clause (e) of the
definition of Consolidated Fixed Charges the phrase "other than the
Offering Dividend and Permitted Preferred Stock Dividends".
(iv) Section 1.1 of the Loan Agreement shall be deemed further
amended by adding therein, in appropriate alphabetical order, the
following additional definitions:
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"Certificates of Designation" means (i) in the case of the New
Preferred Stock, the Certificate of Designation relating to
the New Preferred Stock, in the form received by Lender
pursuant to Section 3(h), as in effect on the Fifth Amendment
Date and (ii) in the case of the Exchange Preferred Stock, the
Certificate of Designation relating to the Exchange Preferred
Stock, in the form received by Lender pursuant to Section
3(h), as in effect in the date of issuance of the Exchange
Preferred Stock.
"Draft Offering Memorandum" means the draft Offering
Memorandum, dated February 21, 1997, relating to the Offering,
a copy of which was delivered to Lender.
"Exchange Debentures" has the meaning given to such term in
the Draft Offering Memorandum.
"Exchange Preferred Stock" means Borrower's Cumulative
Exchangeable Preferred Stock, with par value $.01 per share
and a liquidation value of $1,000 per share which will have
terms identical in all material respects to the New Preferred
Stock (except for the absence of transfer restrictions) and
will be exchanged for shares of the New Preferred Stock.
"Fifth Amendment" means the Fifth Amendment to the Loan
Agreement, dated as of February 26, 1997, among Borrower, the
Agent and GE Capital, as sole Lender.
"Fifth Amendment Date" means the Issue Date provided that all
conditions precedent set forth in Section 3 hereof shall have
been satisfied on or prior to such date
"Issue Date" means the date on which the New Preferred Stock
is to be issued..
"New Preferred Stock" means Borrower's Cumulative Exchangeable
Preferred Stock, with a par value of $.01 per share and a
liquidation preference of $1,000 per share, and having such
other terms as are set forth on Exhibit A to the Fifth
Amendment.
"Offering" means the offering under Rule 144A under the
Securities Act pursuant to which Borrower will issue and sell
up to 50,000 shares of the New Preferred Stock.
"Offering Dividend" has the meaning set forth in clause (j)
of Section 6.3.
"Permitted Preferred Stock Dividends" has the meaning set
forth in clause (k) of Section 6.3.
(v) Section 1.1 of the Loan Agreement shall be deemed further
amended by deleting therefrom the definitions of "Special Loan",
"Special Dividend" and "Permitted Dividends".
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(b) Amendment to Section 3.3 of the Loan Agreement. (i) Section 3.3
of the Loan Agreement shall be deemed to be amended by deleting the last
sentence of clause (c) thereof and substituting in lieu thereof the following
sentence:
In addition, the Term Loans shall be prepaid in amounts equal to one
hundred percent (100%) of the Net Proceeds, or any portion thereof, of
any disposition of Property by Borrower or any of its Subsidiaries
permitted pursuant to Section 6.1(a)(ii) to the extent that such Net
Proceeds, or any portion thereof, are not applied to the purchase price
of replacement Equipment within one hundred eighty (180) days after the
date of disposition, and in any event, to the extent that such Net
Proceeds exceed the sum of One Million Five Hundred Thousand Dollars
($1,500,000) in the aggregate in any Fiscal Year.
(ii) Section 3.3 of the Loan Agreement shall be deemed further
amended by adding at the end of clause (d) thereof the following
sentence:
Notwithstanding anything in this clause (d) to the contrary,
the Borrower shall not be required to prepay the Term Loans as
the result of its receipt of the Net Proceeds from the
Offering.
(c) Amendment to Section 4.20 of the Loan Agreement. Section 4.20 of
the Loan Agreement shall be deemed to be amended by deleting such Section in its
entirety and substituting in lieu thereof the following revised Section 4.20:
4.20 Solvency. After giving effect to the entering into by
Borrower of this Agreement, the Fifth Amendment and the other Loan
Documents, the making of any Advance, the incurrence of any Letter of
Credit Obligation, the declaration and payment of the Offering
Dividend, and the declaration and payment of any Permitted Preferred
Stock Dividend, Borrower and each Subsidiary is Solvent.
(d) Amendment to Section 4.21 of the Loan Agreement. Section 4.21 of
the Loan Agreement shall be deemed to be amended by deleting such Section in its
entirety and substituting in lieu thereof the following revised Section 4.21:
4.21 Subordination of Subordinated Indebtedness. This
Agreement, as amended by the First Amendment, the Second Amendment, the
Third Amendment, the Fourth Amendment and the Fifth Amendment, and the
other Loan Documents to which Borrower or any Subsidiary is party, and,
to the extent permissible under Section 1010 of the Senior Subordinated
Note Indenture, all further amendments, amendments and restatements,
renewals, extensions, restructurings, supplements, modifications,
refinancings, refundings, or replacements hereof and thereof
constitute the "Credit Agreement" within the meaning of the Senior
Subordinated Note Indenture, and the Term Loans, the Revolving Credit
Loan, the Letter of Credit Obligations and all other Obligations of
Borrower to the Agent and the
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Lenders under this Agreement, the Notes and any of the other Loan
Documents, and, to the extent permissible pursuant to Section 1010 of
the Senior Subordinated Note Indenture, all further amendments,
amendments and restatements, renewals, extensions, restructurings,
supplements, modifications, refinancings, refundings and replacements
of any of the foregoing, constitute "Senior Indebtedness" of Borrower
within the meaning of the Senior Subordinated Note Indenture, and the
holders thereof from time to time shall be entitled to all of the
rights of a holder of "Senior Indebtedness" pursuant to Article 13 of
the Senior Subordinated Note Indenture.
(e) Amendment to Section 4.26 of the Loan Agreement. Section 4.26 of
the Loan Agreement shall be deemed to be amended by deleting such Section in its
entirety and substituting in lieu thereof the following revised Section 4.26:
4.26. The declaration and payment of the Offering Dividend by
Borrower to Lancer on the Fifth Amendment Date and the use of the
proceeds thereof by Lancer for the purpose set forth in Section 6.3(j)
are within the corporate powers of Borrower and Lancer, respectively,
and the declaration and payment of each Permitted Preferred Stock
Dividend subsequent to the Fifth Amendment Date will be within the
corporate powers of Borrower, each of such actions has been and will be
duly authorized by all requisite corporate action on the part of
Borrower and, with regard to the use of proceeds of the Offering
Dividend, Lancer, and none of such actions do or will (a) require any
consent or approval of any stockholder, security holder or creditor of
Borrower or Lancer (including, without limitation, the holders of the
Senior Subordinated Notes) not heretofore or theretofore obtained, (b)
violate or conflict with any provision of the certificate of
incorporation or by-laws of Borrower or Lancer, (c) result in or
require the creation of any Lien or Right of Others upon or with
respect to any Property of Borrower or Lancer, other than in favor of
Lenders, (d) violate any provision of Law applicable to Borrower or
Lancer, (e) contravene or conflict with any judgment, award, decree,
writ or determination of any Governmental Agency applicable to or
binding upon Borrower or Lancer or any of their respective Property or
to which Borrower or Lancer or any of their respective Property is
subject or (f) conflict with, result in a breach of or default under,
or with the giving of notice or the lapse of time or both, constitute a
breach of or default under, or cause or permit the acceleration of any
obligation owed under or require the termination of (i) the Senior
Subordinated Note Indenture, or the Senior Subordinated Notes or (ii)
any other Contractual Obligation of any Borrower or Lancer other than,
in the case of clause (ii), conflicts, breaches or defaults which,
either singly or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(f) New Text at End of Article 4 of the Loan Agreement. Article 4 of
the Loan Agreement is hereby further amended by adding the following paragraph
at the end thereof:
In connection with its execution and delivery of the Fifth
Amendment, Borrower hereby affirms that each of the representations and
warranties of Borrower contained in this
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Agreement or in any of the other Loan Documents is correct in all
material respects as of the Fifth Amendment Date and after giving
effect to the Fifth Amendment (except to the extent that such
representations and warranties relate solely to an earlier date and
except as affected by transactions expressly contemplated by this
Agreement). In addition to induce GE Capital to enter into the Fifth
Amendment, Borrower represents and warrants to the Agent and Lenders as
follows:
(a) Financial Statements. Borrower has furnished to the
Lenders (i) Borrower's audited consolidated balance sheets for its
Fiscal Year ending December 31, 1995 and Borrower's related audited
consolidated statements of operations, stockholders' equity and cash
flows for its Fiscal Year ending December 31, 1995, (ii) Borrower's
unaudited consolidated balance sheet for the month ending December 31,
1996 and Borrower's related consolidated statements of operations,
stockholders' equity and cash flows for such month and for Borrower's
1996 Fiscal Year, and (iii) Borrower's operating and financial plan for
the five Fiscal Years ending after the date hereof, including projected
balance sheets, state ments of operations, and statements of cash flow.
The financial statements described in clauses (i) and (ii) above fairly
present the financial position and results of operations of Borrower,
on a consolidated basis, as at the dates and for the periods indicated
in accordance with GAAP consistently applied. The projections referred
to in clause (iii) above were prepared on the basis of the estimates
and assumptions stated therein and represented, at the date thereof,
Borrower's good faith projections of its future financial performance
prepared after reasonable investigations; such estimates, assumptions
and projections reflected Borrower's estimates of the most likely
future financial results and condition of Borrower, in the light of
business conditions existing at the date thereof; and any such
estimates, assumptions and projections, if prepared as of the Fifth
Amendment Date, would contain estimates of the future financial
performance of Borrower which would not materially and adversely differ
from the respective estimates contained in such financial projections.
As of the Fifth Amendment Date, no material developments have occurred
since the date of such projections which would lead Borrower to believe
that such projections, taken as a whole, are not reasonably attainable,
subject to the uncertainties and approximations inherent in any
projection.
(b) No Other Liabilities; No Material Adverse Effect. Neither
Borrower nor any Subsidiary has any liability or contingent liability
that is material to Borrower or such Subsidiary that is not reflected
in, reserved for or against or otherwise disclosed in the financial
statements described in clause (a) above, and, since December 31, 1996,
no event or circumstance has occurred that could reasonably be expected
to have a Material Adverse Effect.
(g) Amendment to Section 6.1 of the Loan Agreement. Section 6.1 of the
Loan Agreement shall be deemed amended by deleting the words and figure "Five
Hundred Thousand Dollars ($500,000)" from clause (ii) thereof and substituting
in lieu thereof the words and figure "One Million Five Hundred Thousand Dollars
($1,500,000)".
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(h) Amendment to Section 6.3 of the Loan Agreement.
(i) Section 6.3 of the Loan Agreement shall be deemed to be
amended by deleting in words "not in excess of $750,000 in the
aggregate in any Fiscal Year" from clause (c) thereof and substituting
in lieu thereof the words "not in excess of $850,000 in the aggregate
in any Fiscal Year (inclusive of the amount not in excess of $100,000
in any Fiscal Year permitted to be retained and paid by T-H Licensing
as provided in clause (A) (2) of the second paragraph of Section 6.9(c)
hereof)".
(ii) Section 6.3 of the Loan Agreement shall be deemed to be
amended by deleting clauses (j) and (k) thereof and substituting in
lieu thereof the following revised clauses (j) and (k):
(j) a special cash dividend in the amount of up to $50,000,000, to be
declared and paid by Borrower to Lancer on the Fifth Amendment Date
from the proceeds of the issuance of the New Preferred Stock pursuant
to the Offering (the "Offering Dividend"), the proceeds of which are to
be used by Lancer, together with other funds of Lancer, solely for the
purpose of redeeming a portion of Lancer's outstanding Series C
Preferred Stock; and (k) cash dividends declared and paid by Borrower
on the New Preferred Stock subsequent to the Fifth Amendment Date;
provided that (A) such dividends are declared and paid in accordance
with the terms of the Certificate of Designations as in effect on the
Fifth Amendment Date; (B) no Default or Event of Default has occurred
and is continuing hereunder or would result from the declaration and
payment of such dividend; (C) such dividends are permitted to be paid
under Section 1011 of the Senior Subordinated Note Indenture as in
effect on the Closing Date (without requiring the obtaining of any
waiver or consent from the holders of the Senior Subordinated Notes);
and (D) the Agent shall have received all of the following prior to the
declaration and payment of each such dividend, all in form and
substance satisfactory to the Agent and legal counsel for the Agent:
(1) an Officer's Certificate affirming that the conditions set forth in
clauses (A), (B) and (C) above have been satisfied with respect to such
dividend (and attaching all calculations necessary to demonstrate
satisfaction of the condition set forth at clause (C) above); (2) such
documentation as the Agent may request to confirm that such dividend
has been duly authorized, including certificates of corporate
resolutions, certificates of Responsible Officials and the like; (3)
upon the written request of the Agent, the legal opinion of Debevoise &
Xxxxxxxx, special counsel to Borrower, with respect to such dividend
substantially in the form of paragraph 9 of Exhibit 1 to the Fifth
Amendment, together with copies of all factual certificates and legal
opinions upon which such counsel has relied; and (4) upon the written
request of the Agent, the favorable written opinion of Chartered
Capital Advisors, Inc., valuation consultants to Borrower or other
valuation consultants selected by Borrower and acceptable to Lender, as
to the solvency of Borrower after giving effect to the declaration and
payment of such dividend (any such dividend meeting the requirements of
clauses (A)-(D) above, a "Permitted Preferred Stock Dividend").
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(iii) Section 6.3 of the Loan Agreement shall be deemed to be
further amended by adding a new clause (l) thereof to read as follows:
(l) loans from Borrower to Lancer in an amount not in excess of
$5,000,000 at any time outstanding; provided, that (i) such loans
are on terms satisfactory to Lender, (ii) such loans are evidenced
by promissory notes, in form and substance satisfactory to Lender,
which notes have been endorsed in favor of, and delivered to
Lender, (iii) the proceeds of such loans are used by Lancer solely
for the purpose of redeeming its Series C Preferred Stock, (iv)
each such loan is permissible pursuant to Sections 1011 and 1016 of
the Senior Subordinated Note Indenture and Lender has received such
assurances in regard thereto as it shall request, including,
without limitation, certifications of Borrower and opinion of
Borrower's counsel with regard to such matters, each to be in form
and substance satisfactory to Lenders and (v) upon the written
request of the Agent, a solvency opinion in form and substance
satisfactory to Lenders.
(i) Amendment to Section 6.4 of the Loan Agreement. Section 6.4 of the
Loan Agreement shall be deemed to be amended by deleting the word "or" before
clause (b) thereof and by adding the word "or" after clause (b) thereof followed
by the following clause (c):
(c) amend, modify or change, or consent or agree to any
amendment, modification or change to, the Certificate of Designations
or any of the terms relating to the New Preferred Stock.
(j) Amendment to Section 6.9 of the Loan Agreement. Section 6.9 of the
Loan Agreement shall be deemed to be amended by deleting clause (c) thereof in
its entirety and substituting in lieu thereof the following revised clause (c):
(c) Borrower may pay royalties to T-H Licensing on a quarterly or
annual basis in the amounts provided in that certain letter agreement
dated as of December 29, 1989 between Borrower and T-H Licensing as in
effect on the Closing Date; provided that (i) except as provided below,
any such payment is returned by T-H Licensing to Borrower as a loan
within forty-five (45) days after receipt by T-H Licensing, (ii) no
principal, interest or other payment is payable or paid on any such
loans until the Obligations have been paid in full and the Loan
Agreement has been terminated, except that Borrower may pay interest to
T-H Licensing on such loans at a rate not in excess of the rate then in
effect with respect to the New Term Loans so long as, except as
provided below, any such interest payment is returned by T-H Licensing
to Borrower as a loan within sixty (60) days after receipt by T-H
Licensing and (iii) each such loan is evidenced by a promissory note
which is delivered by T-H Licensing to the Agent as additional
collateral under the Subsidiary Security Agreement.
Notwithstanding the foregoing, (A) T-H Licensing may retain from the
amounts otherwise required to be loaned to Borrower as provided in
clause (i) above, (1) amounts not in excess
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of $100,000 per quarter and $500,000 in the aggregate during the term
of this Agreement so long as all such amounts are deposited in T-H
Licensing's Account No. 28096 at Wilmington Trust Company and are not
withdrawn by T-H Licensing for any purpose and (2) an amount not in
excess of $100,000 per year which may be used by T-H Licensing for the
purpose of making the payments to Lancer and its Affiliates specified
in clause (c) of Section 6.3 hereof (subject to the aggregate
limitation of $850,000 on all such payments by Borrower and its
Subsidiaries specified therein) and (B) T-H Licensing may retain from
the amounts otherwise required to be loaned to Borrower as provided in
clause (ii) above, amounts required to pay its patent registration fees
and reasonable legal expenses incurred in the ordinary course of
business.
(k) Amendment to Section 6.20 of the Loan Agreement. Section 6.20 of
the Loan Agreement shall be deemed to be amended by deleting such Section in its
entirety and substituting in lieu thereof the following revised Section 6.20:
6.20 Current Ratio. Borrower will not permit (as of the end of any
Fiscal Quarter) the ratio of Consolidated Current Assets to
Consolidated Current Liabilities (excluding the loans described in
Section 6.3(l)) to be less than the ratio set forth below next to the
Fiscal Year in which such Fiscal Quarter occurs:
FISCAL YEAR ENDING RATIO
------------------- ------
December 31, 1997 1.25:1.00
December 31, 1998 1.50:1.00
December 31, 1999 1.50:1.00
Each Fiscal Year thereafter 1.50:1.00
(l) Amendment to Section 9.1 of the Loan Agreement. Section 9.1 of the
Loan Agreement shall be deemed to be amended by changing the period at the end
of clause (q) thereof to a semicolon followed by the word "or" and by adding to
such Section a new clause (r) to read as follows:
(r) Board of Directors. The holders of the New Preferred Stock
become entitled to, and exercise their right to, elect any member of
Borrower's board of directors.
3. Conditions Precedent. This Amendment shall become effective on
the Issue Date, provided that each of the following conditions precedent shall
have been fulfilled, to Lenders' and its counsel's satisfaction on or prior to
such date:
(a) Documents. The Agent shall have received all of the following, each
dated as of the date hereof and all in form and substance satisfactory to the
Agent and legal counsel for the Agent:
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(i) a reaffirmation of the Subsidiary Guaranty and Subsidiary
Security Agreement signed by T-H Licensing;
(ii) an Officer's Certificate affirming that the conditions
set forth in clauses (b), (c), (d) and (e) below have been satisfied;
(iii) such documentation as the Agent may reasonably require
to confirm the good standing of Borrower in the state of its
incorporation, the qualification of Borrower to engage in business in
each jurisdiction in which it is engaged in business or required to be
so qualified, its authority to execute, deliver and perform this
Amendment and any other Loan Documents to be executed and delivered in
connection herewith to which it is party, certificates of good standing
and of qualification to engage in business, certificates of corporate
resolutions, incumbency certificates, certificates of Responsible
Officials and the like;
(iv) the legal opinion of Debevoise & Xxxxxxxx, special
counsel to Borrower, substantially in the form of Exhibit 1 to this
Amendment, together with copies of all factual certificates and legal
opinions upon which such counsel has relied;
(v) such other assurances, certificates, documents, consents
or opinions (in addition to those described hereinbelow) as the Agent
may reasonably require.
(b) Representations and Warranties. The representations and warranties
contained in Article 4 of the Loan Agreement (as amended hereby) shall be true
and correct in all material respects on and as of the date hereof as though made
on and as of that date (except to the extent that such representations and
warranties relate solely to an earlier date and except as affected by
transactions expressly contemplated by the Loan Agreement).
(c) Absence of Litigation. There shall not be pending or, to the best
knowledge of Borrower, threatened, any litigation, arbitration, injunction,
proceeding, governmental investigation or inquiry against or affecting Borrower
or any Property of Borrower before any Governmental Agency that could reasonably
be expected to have a Material Adverse Effect.
(d) No Default. After giving effect to this Fifth Amendment, Lancer,
Borrower and T-H Licensing shall be in compliance with all the terms and
provisions of the Loan Documents to which they are party, and no Default or
Event of Default shall have occurred and be continuing.
(e) No Material Adverse Effect. Since December 31, 1996, there shall
not have occurred: (1) any event or circumstance that could reasonably be
expected to have a Material Adverse Effect, or (2) any dividends or other
distributions made to the stockholders of Borrower, except as permitted by
Section 6.3 of the Loan Agreement and Section 7(b) of the Lancer Pledge
Agreement.
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(f) Compliance with Laws. Lenders shall be satisfied that Borrower and
its Subsidiaries are in compliance with all applicable Laws, including, without
limitation, all Environmental Laws and all Laws pertaining to labor,
occupational safety and health and ERISA matters except to the extent that
noncompliance could not reasonably be expected to have a Material Adverse
Effect. Lenders shall be satisfied that the execution and delivery of this Fifth
Amendment and the consummation of the transactions contemplated hereby will not
cause Borrower or any Subsidiary to violate any Contractual Obligation to which
it is party or by which it is bound or any Laws applicable to it.
(g) Senior Indebtedness. Lenders shall be satisfied that (i) Borrower's
issuance of the New Preferred Stock in the Offering is permissible pursuant to
the Senior Subordinated Note Indenture (without requiring the obtaining of any
waiver or consent from the holders of the Senior Subordinated Notes) and that
after giving effect thereto, each of the representations and warranties set
forth in Section 4.21 of the Loan Agreement shall continue to be true and
correct in all respects, and (ii) the Offering Dividend is permissible pursuant
to Section 1011 of the Senior Subordinated Note Indenture (without requiring the
obtaining of any waiver or consent from the holders of the Senior Subordinated
Notes); and Lenders shall have received such assurances in regard to each of
clauses (i) and (ii) above as Lenders shall request, including without
limitation, certifications of Borrower and an opinion of Borrower's counsel with
regard to such matters, each to be in form and substance satisfactory to
Lenders.
(h) New Preferred Stock. Lenders shall have received copies of (i) the
final Offering Memorandum relating to the Offering and (ii) the forms of
Certificates of Designation relating to each of the New Preferred Stock and the
Exchange Preferred Stock and (A) such final Offering Memorandum shall not
contain terms or provisions which, in the reasonable judgment of Lender, are
materially adversely different from the terms and provisions contained in the
Draft Offering Memorandum and (B) such Certificates of Designation shall not
contain terms or provisions which in the reasonable judgment of Lender are
materially adversely different form the terms contained in the Draft Offering
Memorandum and the Certificates of Designation shall otherwise be in form and
substance satisfactory to Lender in all material respects. No such approval by
Lender of the final Offering Memorandum or the Certificates of Designation shall
be deemed to be an approval by Lender of the issuance of the Exchange Debentures
which shall continue to be prohibited under the Lancer Pledge Agreement and the
Loan Agreement.
(i) Fees and Expenses. All fees and expenses payable by Borrower in
connection with the Offering shall have been paid from the proceeds of the
Offering.
(j) Solvency Opinion. Lenders shall have received the favorable written
opinion of Chartered Capital Advisors, Inc., valuation consultants to Borrower,
as to the solvency of Borrower after giving effect to the execution and delivery
of this Amendment, the Offering and the declaration and payment of the Offering
Dividend.
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4. Other Agreements
(a) Except as set forth expressly herein and above, all terms of the
Loan Agreement and the other Loan Documents shall be and remain in full force
and effect and shall constitute the legal, valid, binding and enforceable
obligations of Borrower to the Agent and Lenders. In furtherance of the
foregoing, Borrower acknowledges that from and after the date hereof, it shall
continue to be bound by all provisions of the Loan Agreement as amended hereby.
To the extent any terms and conditions in any of the other Loan Documents shall
contradict or be in conflict with any terms or conditions of the Loan Agreement,
after giving effect to this Amendment, such terms and conditions are hereby
deemed modified and amended accordingly to reflect the terms and conditions of
the Loan Agreement as modified and amended hereby.
(b) Borrower agrees to pay on demand the reasonable fees and
out-of-pocket expenses of counsel to GE Capital incurred in connection with the
preparation, execution, delivery and enforcement of this Amendment, the closing
hereof, and any other transactions contemplated hereby.
(c) To induce the Agent and Lenders to enter into this Amendment,
Borrower hereby acknowledges and agrees that, as of the date hereof, there
exists no right of offset, defense or counterclaim in favor of Borrower as
against the Agent or Lenders with respect to the Obligations.
(d) This Amendment shall be governed by, and construed in accordance
with the laws of the State of New York applicable to contracts made and
performed in such State and all applicable laws of the United States of America.
(e) This Amendment may be executed in two or more counterparts, all
of which shall constitute one and the same agreement.
5. Refinancings. Borrower reaffirms its agreement set forth in the
Fourth Amendment that Agent and Lender shall have the right of first refusal to
serve as agent and to participate as a lender, respectively, in any debt
refinancing of the Obligations under the Loan Agreement consummated at any time
prior to December 5, 1998, on substantially the same terms and conditions as
offered by any other prospective agent and lender; provided, however, that (i)
such right of first refusal shall not be applicable to any proposed refinancing
of the Obligations (or portion thereof) using the proceeds of subordinated
Indebtedness which is junior in rank to the Obligations and (ii) in the event
that any other Indebtedness of Borrower is refinanced contemporaneously with, or
as part of, any refinancing of the Obligations, such right of first refusal
shall only apply to the refinancing of the Obligations and not such other
Indebtedness.
6. Lancer Pledge Agreement. Lancer acknowledges and agrees that the
Lancer Pledge Agreement shall continue in full force and effect from and after
the execution and delivery of this Amendment without diminution or impairment.
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7. Termination of Amendment. This Amendment shall terminate and be of
no further force or effect on April 30, 1997 unless on or prior to such date (a)
all conditions precedent to the effectiveness hereof set forth in Section 3
hereof have been satisfied and (b) the Offering has occurred.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed under seal by their respective officers thereunto duly authorized, as
of the date first above written.
LANCER INDUSTRIES, INC.
By: /s/Xxxxx X. Xxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxx
Title: President and Secretary
FAIRFIELD MANUFACTURING
COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxx
-----------------------------
Xxxxxxx X. Xxxx
Vice President-Finance
[CORPORATE SEAL]
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
and sole Lender
By:/s/ XXXXXX X. XXXXX
________________________________
Xxxxxx X. Xxxxx
Senior Vice President,
as duly authorized
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ACKNOWLEDGMENT OF GUARANTOR
The undersigned, T-H Licensing, Inc., hereby (a) acknowledges its
receipt of a copy of and consents to the within and foregoing Amendment, (b)
agrees to be bound by the provisions thereof and (c) acknowledges and agrees
that the Subsidiary Guaranty, the Subsidiary Security Agreement and all other
Loan Documents to which the undersigned is a party shall continue in full force
and effect from and after the execution and delivery of the within and foregoing
Amendment without diminution or impairment.
IN WITNESS WHEREOF, the undersigned has set its hand and seal as of the
26th day of February, 1997.
T-H LICENSING, INC.
By: /s/ XXXXX X. XXXXXX
_________________________________
Xxxxx X. Xxxxxx
Vice President and Secretary
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