Exhibit 10.2
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
AND WAIVER
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER (this
"Amendment"), dated as of March 25, 2002, amends and modifies a certain Loan and
Security Agreement dated as of June 28, 2001 as amended by First Amendment to
Loan and Security Agreement dated as of December 20, 2001 (as amended, the
"Credit Agreement") by and between PEMSTAR INC. (the "Borrower") and U.S. BANK
NATIONAL ASSOCIATION (the "Lender"). Terms not otherwise expressly defined
herein shall have the meanings set forth in the Credit Agreement. The Line of
Credit Amount under the Credit Agreement was reduced pursuant to a letter dated
as of February 13, 2002 (the "Waiver Letter").
FOR VALUE RECEIVED, the Borrower and the Lender agree that the Credit
Agreement is amended as follows.
ARTICLE I - AMENDMENTS TO THE CREDIT AGREEMENT
Section 1.1 Amendments.
(a) Section 1.1 of the Credit Agreement is amended as follows:
(1) The definition of "Adjusted Total Liabilities" is amended
to read as follows:
"`Adjusted Total Liabilities' means total
Indebtedness of the Borrower and its Subsidiaries minus
Subordinated Debt."
(2) The definition of "Applicable Margin" is amended to read
as follows:
"`Applicable Margin' shall mean, for the period from
the date hereof until the date on which the applicable margin
changes in accordance with the following provisions, 3.25% per
annum for Eurodollar Advances and 1.00% per annum for Prime
Rate Advances, and thereafter, for any period, the applicable
percentage set forth below:
Applicable Margin
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Prime Rate Eurodollar
Fixed Charge Coverage Ratio: Advances: Advances:
----------------------------- ---------- ----------
Less than or equal
to 1.25 to 1.00 1.00% 3.25%
Greater than or equal to
1.25 to 1.00 but less
than 1.50 to 1.00 0.75% 3.00%
Greater than or equal to
1.50 to 1.00 but less
than 1.75 to 1.00 0.50% 2.75%
Greater than or equal to
1.75 to 1.00 0.25% 2.50%
The Applicable Margin shall be determined by the Lender based
upon the information set forth in the quarterly or annual
consolidated financial statements of the Borrower and the
Subsidiaries furnished to lender pursuant to Section 7.1(a) or
(c) for the period of four consecutive fiscal quarters ending
on the date of such financial statements beginning with the
quarter ending September 30, 2002; provided, that with respect
to the fiscal quarter ending on September 30, 2002, the
Applicable Margin shall be determined based on the period of
two (2) consecutive fiscal quarters ending on such date and
with respect to the fiscal quarter ending on December 31,
2002, the Applicable Margin shall be determined based on
period of three (3) consecutive fiscal quarters ending on such
date. Any change in the Applicable Margin shall affect all
outstanding and future Loans and shall take effect on the
first day of the month following the date of Lender's receipt
of the applicable financial statement. Upon any failure of the
Borrower to deliver to the Lender the financial statements
within the time provided by Section 7.1(a) or (c), the
Applicable Margin shall be the highest Applicable Margin set
forth above and such Applicable Margin shall remain in effect
until the first day following the date Lender receives the
applicable financial statements requiring a lower Applicable
Margin."
(3) The definition of "Fixed Charge Coverage Ratio" is amended
to read as follows:
"`Fixed Charge Coverage Ratio' shall mean the ratio,
for each period of twelve consecutive calendar months,
calculated as of the last day of such period, of:
(a) the remainder of (i) EBITDA for such period,
minus (ii) taxes paid in cash during such period,
minus (iii) dividends and other distributions in
respect of stock of the Borrower paid in cash during
such period, and minus (iv) Unfinanced Capital
Expenditures and Business Acquisitions during such
period;
to
(b) the total of (i) Interest Expense during such
period, plus (ii) mandatory or scheduled principal
payments of Funded Debt during such period."
(4) The definition of "Letter of Credit Sublimit" is amended
to read as follows:
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"`Letter of Credit Sublimit' shall mean (a)
$10,000,000, minus (b) the amount of any reduction of the face
amount of any Letter of Credit after March 19, 2002, and minus
(c) the face amount of any Letter of Credit outstanding as of
March 19, 2002 which is terminated or expires by its terms or
for any other reason (whether or not such Letter of Credit is
drawn upon) but excluding any such Letter of Credit which the
Lender, in the exercise of its sole and absolute discretion
under Section 2.13 hereof, elects to renew or extend, whether
by amendment of such Letter of Credit or by issuance of a
replacement Letter of Credit. Any such renewal or extension
may be conditioned upon, among other things, modification of
the terms of such Letter of Credit to provide for the
automatic, periodic reduction of the face amount thereof, and
each such reduction shall constitute a reduction of the Letter
of Credit Sublimit hereunder.
(5) A definition of "Unfinanced Capital Expenditures and
Business Acquisitions" is added and shall read as follows:
"`Unfinanced Capital Expenditure and Business
Acquisitions' means the total for the relevant period of:
(a)(i) Capital Expenditures made during such period, plus (ii)
Cash Expenditures for Business Acquisitions (as defined in the
definition of `Permitted Investments') made during such
period; minus (b) the sum of (i) the amount of Indebtedness
incurred by the Borrower to finance Capital Expenditures and
Business Acquisitions to the extent used to finance Capital
Expenditures and Business Acquisitions made during such
period, and (ii) net proceeds of issuance by the Borrower of
equity securities, to the extent such net proceeds are
available for, and actually applied to, Capital Expenditures
and Business Acquisitions made during such period."
(b) Section 3.1(a)(ii)(2)(v) of the Credit Agreement is hereby amended
by deleting "$10,000,000" and inserting "5,000,000" in place thereof.
(c) Section 8.11 of the Credit Agreement is amended in its entirety to
read as follows:
"Section 8.11. Financial Covenants.
(a) Adjusted Consolidated Tangible Net Worth. At any
time, permit the Adjusted Consolidated Tangible Net Worth of
the Borrower and the Subsidiaries to be less than the sum of
(i) $150,000,000, plus (ii) the principal amount of
Subordinated Debt incurred by the Borrower on and after March
19, 2002.
(b) Leverage Ratio. As of the last day of any
calendar month, permit the Leverage Ratio to exceed 1.50
to 1.00 at any time.
(c) Fixed Charge Coverage Ratio. As of the last day
of any calendar month, permit the Fixed Charge Coverage Ratio
for any period of twelve
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consecutive calendar months ending on or after March 31, 2003
to be less than 1.25 to 1.00.
(d) Current Ratio. As of the last day of any calendar
month, permit the Current Ratio to be less than 2.00 to 1.00.
(e) Capital Expenditure. Make Capital Expenditures
during any year exceeding, on a consolidated basis for the
Borrower and its Subsidiaries, (i) $40,000,000 during the
fiscal year ending March 31, 2002, or (ii) $18,000,000 during
any other fiscal year.
(f) EBITDA. Permit the EBITDA of the Borrower and the
Subsidiaries to be less than (i) ($11,600,000) for the fiscal
quarter ending Xxxxx 00, 0000, (xx) ($9,200,000) for the
combined fiscal quarters ending March 31, 2002 and June 30,
2002, (iii) ($1,900,000) for the combined fiscal quarters
ending March 31, 2002, June 30, 2002 and September 30, 2002,
and (iv) $7,300,000 for the combined fiscal quarters ending
March 31, 2002, June 30, 2002, September 30, 2002 and December
31, 2002. For purposes of the foregoing, a parenthesis in such
requirement indicating a negative number and `less than'
meaning a larger negative number."
1.2 Construction. All references in the Credit Agreement to "this
Agreement", "herein" and similar references shall be deemed to refer to the
Credit Agreement as amended by this Amendment. The Loans shall continue to be
evidenced by the Note and it is acknowledged that the amount of the Note is
greater than the Line of Credit Amount, as amended hereby.
ARTICLE II - WAIVER
2.1 Non-Compliance. The Borrower has informed the Bank that, for the
twelve-month period ending January 31, 2002, it was not in compliance with
Section 8.11(c) of the Credit Agreement ("Fixed Charge Coverage Ratio") as in
effect prior to this Agreement. The Borrower has further informed the Bank that
its Capital Expenditures for the fiscal year-to-date as of January 31, 2002,
were approximately $36,250,000, which would exceed the $32,000,000 annual limit
on Capital Expenditures in Section 8.11(e) of the Credit Agreement as in effect
prior to this Amendment. The Borrower has requested that the Bank waive such
non-compliance with the Credit Agreement.
2.2 Waiver. Effective as set forth below, the Bank waives (a) the
Borrower's non-compliance with Section 8.11(c) of the Credit Agreement for the
twelve-month period ending January 31, 2002, and (b) the Borrower's
non-compliance with Section 8.11(e) for the fiscal year ending March 31, 2002,
provided, that total Capital Expenditures for the fiscal year ending March 31,
2002 shall not exceed the limitation provided in Section 8.11(e) as amended by
this Amendment. Subject to such provisions and requirements, the Bank waives any
Default or Event of Default arising from the Borrower's failure to comply with
such Sections as expressly described above and, in the case of Section 8.11(e),
subject to such further limit on Capital Expenditures.
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2.3 No Further Waiver. Except as expressly provided herein, all
provisions of the Credit Agreement remain in full force and effect and this
waiver shall not apply to any other or subsequent failure to comply with such
Sections or any other provision of the Credit Agreement.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Amendment and to make and
maintain the Loans under the Credit Agreement as amended hereby, the Borrower
hereby warrants and represents to the Lender that it is duly authorized to
execute and deliver this Amendment, and to perform its obligations under the
Credit Agreement as amended hereby, and that this Amendment constitutes the
legal, valid and binding obligation of the Borrower, enforceable in accordance
with its terms.
ARTICLE IV - CONDITIONS PRECEDENT
This Amendment shall become effective on the date first set forth
above, provided, however, that the effectiveness of this Amendment is subject to
the satisfaction of each of the following conditions precedent:
4.1 Warranties. After giving effect to this Amendment, the
representations and warranties in Article 6 of the Credit Agreement shall be
true and correct as though made on the date hereof, except for changes that are
permitted by the terms of the Credit Agreement. The execution by the Borrower of
this Amendment shall be deemed a representation that the Borrower has complied
with the foregoing condition.
4.2 Defaults. After giving effect to this Amendment, no Default and no
Event of Default shall have occurred and be continuing under the Credit
Agreement. The execution by the Borrower of this Amendment shall be deemed a
representation that the Borrower has complied with the foregoing condition.
4.3 Documents. This Amendment and the acknowledgment by the Guarantor
in the form attached hereto shall have been executed and delivered by the
appropriate parties.
4.4 Fee. The Borrower shall have paid a non-refundable fee of $10,000
to the Bank.
ARTICLE V - GENERAL
5.1 Expenses. The Borrower agrees to reimburse the Lender upon demand
for all reasonable expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Lender in the preparation, negotiation and execution
of this Amendment and any other document required to be furnished herewith, and
in enforcing the obligations of the Borrower hereunder, and to pay and save the
Lender harmless from all liability for, any stamp or other taxes which may be
payable with respect to the execution or delivery of this Amendment, which
obligations of the Borrower shall survive any termination of the Credit
Agreement.
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5.2 Counterparts. This Amendment may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original but all such counterparts shall constitute but one and the
same instrument.
5.3 Severability. Any provision of this Amendment which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
5.4 Law. This Amendment shall be a contract made under the laws of the
State of Minnesota, which laws shall govern all the rights and duties hereunder.
5.5 Successors; Enforceability. This Amendment shall be binding upon
the Borrower and the Lender and their respective successors and assigns, and
shall inure to the benefit of the Borrower and the Lender and the successors and
assigns of the Lender. Except as hereby amended, the Credit Agreement shall
remain in full force and effect and is hereby ratified and confirmed in all
respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed at Minneapolis, Minnesota by their respective officers thereunto duly
authorized as of the date first written above.
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Xxxxxxxxxxx X. Xxxxxx
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Title: Vice President
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PEMSTAR INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
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Title: CFO
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GUARANTOR'S ACKNOWLEDGEMENT
The undersigned has guaranteed payment and performance of obligations
of PEMSTAR INC. (the "Borrower") to U.S. Bank National Association (the
"Lender") pursuant to the terms of a Guaranty, dated as of June 28, 2001 (the
"Guaranty"), which obligations include without limitation obligations under that
certain Loan and Security Agreement, dated as of June 28, 2001, between the
Borrower and the Lender as amended by First Amendment to Loan and Security
Agreement dated as of December 20, 2001 (as amended, the "Credit Agreement").
The undersigned acknowledges that it has received a copy of the proposed Second
Amendment to the Credit Agreement, to be dated on or about March 25, 2002 (the
"Amendment"). The undersigned agrees and acknowledges that the Amendment shall
in no way impair or limit the right of the Lender under the Guaranty, and
confirms that by the Guaranty, the undersigned continues to guaranty payment and
performance of the obligations of the Borrower to the Lender, including without
limitation obligations under the Credit Agreement as amended pursuant to the
Amendment. The undersigned hereby confirms that the Guaranty remains in full
force and effect, enforceable against the undersigned in accordance with its
terms.
TURTLE MOUNTAIN CORPORATION
By: /s/ Xx Xxxxxxx
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Title: CEO
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and
By: /s/
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Title: VP GM Pemstar Rochester
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