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EXHIBIT 10.1(a)
MODIFICATION AGREEMENT
DATE: JUNE 30, 1997
PARTIES: Borrower: XXXXXX STEEL COMPANY,
a Delaware corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association
RECITALS:
A. Bank has extended to Borrower credit ("Loan") in the principal
amount of $6,500,000.00 pursuant to the Revolving Line of Credit Loan Agreement
(Accounts Receivable and Inventory), dated June 30, 1995 ("Loan Agreement"),
and evidenced by the Revolving Line of Credit Note (Variable Rate), dated June
30, 1995 ("Note"). The unpaid principal of the Loan as of the date hereof is
$0.00.
B. The Loan and/or guaranty of Loan is secured by, among other things,
(i) the Continuing Security Agreement Inventory, Receivables and Rights to
Payment, dated September 15, 1994, and (ii) the Security Agreement Consumer
Goods, Equipment and Farm Equipment, including Titled Vehicles, dated September
15, 1994, both by Borrower for the benefit of Bank (the agreements, documents,
and instruments securing the Loan and the Note are referred to individually and
collectively as the ("SECURITY DOCUMENTS").
C. Bank and Borrower have executed and delivered previously the
following agreements ("MODIFICATIONS") modifying the terms of the Loan, the
Note, the Loan Agreement, and/or the Security Documents: (i) Modification
Agreement, dated June 30, 1996, (ii) Modification Agreement, dated March 31,
1997, and (iii) Letter Agreement, dated May 7, 1997. (The Note, the Loan
Agreement, the Security Documents, any arbitration resolution, and all other
agreements, documents, and instruments evidencing, securing, or otherwise
relating to the Loan, as modified in the Modifications, are sometimes referred
to individually and collectively as the "LOAN DOCUMENTS". Hereinafter, "NOTE",
LOAN AGREEMENT", and "SECURITY DOCUMENTS" shall mean such documents as modified
in the Modifications.)
D. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the
Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
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For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
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Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
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2.1 The Loan Documents are modified as follows:
2.1.1 The maturity date of the Loan and the Note is changed from June
30, 1998 to June 30, 1999. On the maturity date Borrower shall pay to Bank the
unpaid principal, accrued and unpaid interest, and all other amounts payable by
Borrower under the Loan Documents as modified herein.
2.1.2 The reference to Section 1.1 "Expiration Date" in Section 13 of
the Loan Agreement is modified to read in its entirety as follows:
1.1 Expiration Date: June 30, 1999
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2.1.3 The amount of the Loan and the Note, and the maximum principal
amount that may at any time be outstanding thereunder, is changed from
$6,500,000.00 to $10,000,000.00 and Borrower may obtain, and Bank shall be
obligated to make, further advances under the Loan Documents subject to the
terms and conditions of the Loan Documents applicable to advances.
2.1.4 Section 1.2 of the Loan Agreement is hereby deleted in its
entirety and replaced with the following:
1.2 ADVANCES. Subject to the terms and conditions hereof,
Advances of the Loan will be made in amounts not to exceed the
amount ("Borrowing Base") calculated as the "Advance available" in
accordance with the formula set forth in the Contractor Borrowing
Base Reconciliation Certificate attached hereto as Exhibit A and by
this reference incorporated herein. In calculating the Borrowing
Base, the following terms shall have the hereinafter described
meanings:
"Billing" or "Progress Billing" is an amount owing to
Borrower and B & K Steel Fabrications, Inc., an Arizona
corporation, (collectively, "Entities"), which has arisen from
the delivery and/or shipment of products previously made and
from services rendered for which an invoice has been issued by
the Entities to its customer ("Customer") with respect to a
specific job contracted for by the Customer ("Job"), and which
amount is subject to a perfected security interest in favor of
Bank and is not subject to any other security interest, lien,
claim or encumbrance.
"Retention" is the amount of a Billing for which the
Entities will not receive payment from its Customer until the
related Job has been totally completed by the Entities.
"Ineligible" is that Billing, or that part of a Billing, as
determined by Bank in its sole and absolute discretion: (a)
which is subject to any offset, counterclaim or defense
asserted by the Customer, (b) which has remained unpaid for
more than the number of days set forth in Section 13 after the
date due under the terms of the related invoice, (c) where more
than fifteen percent (15%) of the total amount owing from the
Customer with respect to the related Job has remained unpaid
for more than the number of days set forth in Section 13 after
the date due under the terms of the related invoices, (d) which
is an uninsured amount owing from a Customer located in a
foreign country, or (e) which is owing from the United States
of America or any agency, department or subdivision thereof,
unless a properly executed assignment of claims has been
received by Bank.
"Inventory" is an amount (determined on the basis of the
lower of cost or market value) equal to the inventory of the
Entities (consisting of those items within the categories set
forth in Section 13), as determined by Bank in its sole and
absolute discretion, to be (a) in good condition and salable in
the ordinary course of the Entities' business, (b) owned by the
Entities free and clear of any mortgages, liens, security
interests, claims, encumbrances or rights of others, excepting
only the security interests in favor of Bank, (c) located at a
location identified in a Security Agreement (hereinafter
defined), (d) subject to a perfected security interest in favor
of Bank, (e) not subject to any consignment to any Customer,
and (f) not acquired by the Entities in or as part of a bulk
transfer of sale or assets unless the Entities have complied
with all applicable bulk sales or bulk transfer laws.
"Book Overdrafts" is the amount by which the aggregate
amount of checks of the Entities that are outstanding exceeds
the balance of the Entities' general ledger.
"Advance Multiplier" is the percentage set forth in Section
13 hereof as the "Eligible Receivables Percentage."
"Fixed Assets" is according to generally accepted accounting
principles consistently applied.
2.1.5 From and after June 30, 1997, interest shall accrue on the
unpaid principal of the Loan and the Note at the rate per annum equal to the
sum of (i) zero percent (0.00%) per annum, and (ii) the rate per annum most
recently publicly announced by Bank, or its successors, in Phoenix, Arizona, as
its "prime rate," as in effect from time to time. The rate per annum will
change on each day that such "prime rate" changes. The "prime rate" is not
necessarily the best or lowest rate offered by Bank, and Bank may lend to its
customers at rates that are at, above, or below its "prime rate."
2.1.6 The reference to Section 4.1(b) in Section 13 of the Loan
Agreement is hereby deleted and replaced with the following:
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4.1(b) Non-Utilization Fee: 0.25% per annum
2.1.7 Sections 6.1(d)(i) and (ii) of the Loan Agreement are modified
to read in their entirety as follows:
(i) a minimum Tangible Net Worth shall be maintained in the
amount set forth in Section 13 hereof, where Tangible Net Worth
shall mean Net Worth plus Subordinated Indebtedness. "Net
Worth" shall mean the sum of the following: capital, capital
surplus and retained earnings, less the sum of the value of
Borrower's books of all intangible assets, including, but not
limited to, goodwill, patents, franchises, trademarks,
copyrights and the write-up in the book value of any assets
resulting therefrom after acquisition. "Subordinated
Indebtedness" shall mean any and all indebtedness of Borrower
to any other Creditor, the repayment of which, is subordinated
in writing to Bank.
(ii) a minimum Owner's Equity shall be maintained on the dates
and of the percentage set forth in Section 13 hereof, where
"Owner's Equity" shall mean the results obtained by dividing
(A) Tangible Net Worth (as herein defined) by (B) Borrower's
Total Assets less Intangibles.
2.1.8 The reference to Section 6.1(d)(i) in Section 13 of the Loan
Agreement is hereby deleted in its entirety and replaced with the following:
6.1(d)(i) Minimum Tangible Net Worth: $19,000,000.00
2.1.9 The reference to Section 6.1(d)(ii) in Section 13 of the Loan
Agreement is hereby deleted in its entirety and replaced with the following:
6.1(d)(ii) Owner's Equity: at June 30, 1997 and September
30, 1997 - 33%
at December 31, 1997 and
forward - 40%
2.1.10 Section 6.1(d)(iv) of the Loan Agreement is hereby deleted in
its entirety.
2.1.11 Section 6.1(d)(vi) of the Loan Agreement is hereby deleted in
its entirety and replaced with the following:
(vi) a minimum Debt Coverage Ratio shall be maintained in the
amount set forth in Section 13 hereof, where "Debt Coverage
Ratio" shall mean the results obtained by dividing (A) net
profit after taxes plus Depreciation and Amortization plus or
less change in Deferred Taxes by (B) prior period Current
Maturities and Long Term Debt.
2.1.12 Section 13 of the Loan Agreement is hereby modified to include
a reference to Section 6.1(d)(vi) as follows:
6.1(d)(vi) Debt Coverage Ratio: 1.50:1.0
2.2 Each of the Loan Documents is modified to provide that it shall
be a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein is materially incomplete, incorrect, or misleading
as of the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan
Documents shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Loan Documents shall remain as
security for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents
as modified herein, nor any event, that, with the
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giving of notice or the passage of time or both, would be a default or an event
of default under the Loan Documents as modified herein has occurred and is
continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the
Loan Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified
herein. The execution and delivery of this Agreement and the performance of the
Loan Documents as modified herein have been duly authorized by all requisite
action by or on behalf of Borrower. This Agreement has been duly executed and
delivered on behalf of Borrower.
5. BORROWER COVENANTS.
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Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by
Bank to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in
law or equity of Borrower, whether now known or unknown to Borrower, (i) in
respect of the Loan, the Loan Documents, or the actions or omissions of Bank in
respect of the Loan or the Loan Documents and (ii) arising from events
occurring prior to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower under
the Loan Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred
by Bank in connection with this Agreement (including, without limitation,
inside and outside attorneys, title, filing, and recording costs, expenses, and
fees).
5.3.3 A commitment fee of $12,500.00 due annually.
5.3.4 A documentation fee of $150.00.
5.4 Contemporaneously with the execution and delivery of this
Agreement, Bank has released the following Continuing Guarantys: (i) Continuing
Guaranty, dated June 30, 1995, by Xxxxx X. and Xxxxx X. Xxxxxx, and (ii)
Continuing Guaranty, dated June 30, 1995, by Xxxxx X. Xxxxxx.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
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Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) if required by Bank, Borrower
and any guarantor(s) of the Loan have executed and delivered to Bank an
arbitration resolution, and (iv) each guarantor of the Loan has executed the
Consent of Guarantor(s) below.
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7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
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The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
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The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their respective successors and assigns.
9. CHOICE OF LAW.
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This Agreement shall be governed by and construed in accordance with the laws
of the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
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This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
XXXXXX STEEL COMPANY,
a Delaware corporation
By /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, Chairman
BANK ONE, ARIZONA, NA,
a national banking association
By /s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx, Vice president
CONSENT OF GUARANTOR(S)
The undersigned (i) consent to the modification of the Loan Documents and all
other matters in the foregoing Agreement, (ii) reaffirm the Continuing
Guaranty, dated March 31, 1997 and any other agreements, documents and
instruments securing or otherwise relating thereto ("Guarantor Documents"),
(iii) acknowledge that the Guarantor Documents continue in full force and
effect, remain unchanged, except as specifically modified hereby, and are
valid, binding and enforceable in accordance with their respective terms,
(iv) agree that all references, if any, in the Guarantor Documents to any of
the Loan Documents are modified to refer to those documents as modified by the
Agreement, and (v) agree to be bound by the release of Bank set forth in the
Agreement.
Dated as of the date of the Agreement.
B & K STEEL FABRICATIONS, INC.,
an Arizona corporation
By /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, President
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EXHIBIT "A"
CONTRACTOR BORROWING BASE RECONCILIATION CERTIFICATE
XXXXXX STEEL COMPANY
1. Total Progress Billings $____________
2. Less: Ineligible Billings (____________)
3. Less: Retention (____________)
4. Eligible Progress Billings as of ______ $____________
5. Add: Inventory
6. Less: Accounts Payable (____________)
7. Less: Billings in Excess of Cost (____________)
8. Less: Book Overdrafts (____________)
9. Add: Cost in Excess of Xxxxxxxx ____________
10. Add: Unbilled Billings ____________
11. Add: Retention Payables (not to exceed
Retention Receivables) ____________
12. Total Cost as of _________ $____________
13. New Eligible Progress Billings
(Ln #4 - Ln #12) $____________
14. Borrowing Base Advance Potential
(Ln #13 x 75%, not to exceed $10MM) _____________
15. Less: RLC Balance (_____________)
16. Less: LOC Balance (_____________)
17. Maximum Borrower Base Advance _____________
18. 50% of Depreciated Book Value of Fixed Assets _____________
19. 75% of appraised FMV of Fixed Assets _____________
20. Fixed Assets Advance Potential (greater of
Ln #18, Ln #19 or $5MM) _____________
21. Maximum Advance (greater of Ln #17 or Ln #20) $_____________
XXXXXX STEEL COMPANY
By________________________
Its_______________________
