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EXHIBIT 10(B)
FIFTH AMENDMENT TO LOAN AGREEMENT
AND OTHER LOAN DOCUMENTS
THIS FIFTH AMENDMENT TO LOAN AGREEMENT AND OTHER LOAN DOCUMENTS (this
"Amendment") dated as of June 15, 2001 (the "Effective Date"), is entered into
by XXXXXX INDUSTRIES, INC., a Delaware corporation which is the successor by
merger to Xxxxxx Industries, Inc., an Alabama corporation (the "Borrower"), and
AMSOUTH BANK, an Alabama banking corporation formerly doing business as AmSouth
Bank, N.A., a national banking association, and AmSouth Bank of Alabama, an
Alabama banking corporation (the "Lender").
RECITALS:
A. The Borrower and the Lender are parties to a certain Loan
Agreement dated as of January 7, 1993, as amended by letter of April 5, 1994,
and as assumed and modified by an Assumption and Modification Agreement dated
February 17, 1995, and as further modified and amended by a First Amendment to
Loan Agreement and other Loan Documents dated as of March 15, 1995, and as
further modified and amended by a Second Amendment to Loan Agreement and Other
Documents dated as of March 28, 1996, and as further modified and amended by a
Third Amendment to Loan Agreement and Other Loan Documents dated as of August
28, 1997, and as further modified and amended by a Fourth Amendment to Loan
Agreement and Other Documents dated as of January 1, 2000, and as further
amended by letters of December 29, 2000, January 31, 2001, March 15, 2001, and
May 15, 2001 (the "Loan Agreement").
B. The Borrower and the Lender wish further to amend the Loan
Agreement to make the changes set forth in this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and in
further consideration of the mutual agreements set forth herein, effective as of
the Effective Date, the Borrower and the Lender hereby agree as follows:
1. DEFINITIONS. Capitalized terms used in this Amendment and not
otherwise defined herein have the meanings defined for them in the Loan
Agreement.
2. REPRESENTATIONS AND WARRANTIES OF BORROWER. The Borrower
represents and warrants to the Lender that as of the Effective Date, and giving
effect to this Amendment, no Event of Default (nor any event that upon notice or
lapse of time or both would constitute an Event of Default) exists under the
Loan Agreement or any of the other Loan Documents.
3. AMENDMENTS TO LOAN AGREEMENT AS OF EFFECTIVE DATE. Effective
as of the Effective Date, the Loan Agreement is amended as follows:
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(A) The following new definitions are added in
alphabetical order in Section 1.02:
ELIGIBLE ACCOUNT shall mean and include only Accounts
that are not more than 30 days past due, in each case
according to the terms shown on the invoice (or the
date of the invoice where terms are not specifically
stated) and represent sums payable for services
rendered or goods sold or leased by the Borrower in
the ordinary course of business, as the Lender shall
deem eligible based on such credit and collateral
considerations as the Lender shall deem appropriate.
Without limiting the generality of the foregoing,
there shall be excluded any Account from Eligible
Accounts if and to the extent:
(i) the subject goods have been shipped or
delivered to a Purchaser on a xxxx-and-hold,
guaranteed sale, consignment, approval or sale-or-
return basis or subject to any other repurchase or
return agreement; or
(ii) any material part of the subject goods has
been returned, rejected, lost or damaged; or
(iii) the Purchaser is located outside the United
States; or
(iv) the Purchaser is also the Borrower's
Affiliate, or
(v) the Purchaser is also the Borrower's
supplier or creditor, to the extent of amounts due
from the Borrower to such supplier or creditor; or
(vi) the Account is not evidenced by an invoice
in form acceptable to the Lender; or
(vii) more than 50% in amount of the other
Accounts of the Purchaser are more than 60 days past
due; or
(viii) the Account arises out of transactions with
an employee, officer, agent, director, stockholder or
Affiliate of the Borrower; or
(ix) the general creditworthiness and financial
condition of the Purchaser are not acceptable to the
Lender; or
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(x) the Lender believes, in its sole judgment,
that the collection of such Account is insecure or
that such Account may not be paid by reason of the
Purchaser's financial ability to repay; or
(xi) the Borrower has disclosed to the Lender
that it does not make any of the representations or
warranties set forth in the Security Agreement with
respect to such Account or if any of such
representations or warranties are not true and
correct with respect to such Account; or
(xii) the Account derives from, or is owed to, any
foreign Affiliate or subsidiary of the Borrower.
ELIGIBLE FINISHED GOODS INVENTORY shall mean and
include only Inventory of finished goods that is
located at one of the locations within the United
States specified in the Security Agreement as the
places at which Inventory is to be maintained, that
is saleable in the ordinary course of the Borrower's
business, and that meets all standards imposed by any
Governmental Authority having regulatory authority
over such goods or over their sale, and as the
Lender, in its sole judgment, shall deem eligible,
based on such credit and collateral considerations as
the Lender shall deem appropriate. Without limiting
the generality of the foregoing, the Lender may
exclude any Inventory from Eligible Finished Goods
Inventory if such Inventory is obsolete, or the
Borrower has disclosed to the Lender that it does not
make any of the representations or warranties set
forth in the Security Agreement with respect to such
Inventory or any of such representations and
warranties are not true and correct with respect to
such Inventory. The collateral value of Eligible
Finished Goods Inventory shall be computed at the
lower of cost or market and on a "first-in,
first-out" (FIFO) basis.
ELIGIBLE RAW MATERIAL INVENTORY shall mean and
include only Inventory of raw materials and purchased
parts that is located at one of the locations within
the United States specified in the Security Agreement
as the places at which Inventory is to be maintained
, that is saleable in the ordinary course of the
Borrower's business, and that meets all standards
imposed by any Governmental Authority having
regulatory authority over such goods or over their
sale, and as the Lender, in its sole judgment, shall
deem eligible, based on such credit and collateral
considerations as the Lender shall deem appropriate.
Without limiting the generality of the
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foregoing, the Lender may exclude any Inventory from
Eligible Raw Material Inventory if such Inventory is
obsolete, or the Borrower has disclosed to the Lender
that it does not make any of the representations or
warranties set forth in the Security Agreement with
respect to such Inventory or any of such
representations and warranties are not true and
correct with respect to such Inventory. The
collateral value of Eligible Raw Material Inventory
shall be computed at the lower of cost or market and
on a "first-in, first-out" (FIFO) basis.
FIFTH AMENDMENT shall mean the Fifth Amendment to
Loan Agreement and Other Loan Documents between the
Borrower and the Lender as of June 15, 2001, which
document amends certain of the provisions of this
Agreement.
(B) The following definitions in Section 1.02 are amended
as follows:
BORROWING BASE shall mean the sum of (a) 80% of the
Net Outstanding Amount of Eligible Accounts plus (b)
35% of the collateral value of Eligible Finished
Goods Inventory, plus (c) 28% of the collateral value
of Eligible Raw Material Inventory.
MAXIMUM LINE OF CREDIT shall mean the lesser of (i)
the Borrowing Base then in effect and (ii)
$11,000,000, prior to October 31, 2001, or
$6,000,000, from and after October 31, 2001.
(C) The definitions of the following terms in Section
1.02 are deleted: "Eligible Inventory", "LIBOR-Based Rate" and "LIBOR
Reserve Requirement".
(D) The date "May 31, 1993" in the definition of "Line of
Credit Termination Date" in Section 1.02, which was previously extended
to June 15, 2001, is further amended to read "January 1, 2002."
(E) Section 2.02 is amended to read as follows:
SECTION 2.02. TERM NOTE; PRINCIPAL REPAYMENT. The
Term Loan shall be evidenced by a promissory note,
payable to the order of the Lender, duly authorized
and executed on behalf of the Borrower, dated the
date hereof, in the principal amount of the Term Loan
and in the form of EXHIBIT A to the Fifth Amendment
(the "Term Note"). The principal amount of the Term
Note that remains outstanding as of June 15, 2001
shall be payable in 15 consecutive monthly
installments of $158,959.68 each, the first of which
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shall be due and payable on July 15, 2001, and one of
which shall be payable on the 15th day of each
succeeding month, to and including September 15,
2002, on which date the entire remaining principal
balance of the Term Loan, together with accrued
interest thereon and reimbursable costs, shall be due
and payable.
(F) Section 2.03(a) is amended to read as follows:
The Term Loan shall bear interest from and after the
Effective Date of the Fifth Amendment at the rate per
annum ("Prime-Based Rate") equal to one percentage
point (100 basis points) in excess of the Prime Rate
in effect from time to time (computed on an
Actual/360 Basis), payable monthly in arrears on the
15th day of each month for the period ending on the
last day of the immediately preceding calendar month,
commencing on June 15, 2001, and upon September 15,
2002.
(G) Section 2.03(c) is amended to read as follows:
Upon the occurrence and during the continuance of any
Event of Default, the Term Note shall bear interest
(as liquidated damages and not as a penalty) at a
default interest rate equal to one percentage point
(100 basis points) in excess of the interest rate
that would otherwise be applicable.
(H) The word "semiannual" that appears in the last
sentence of Section 2.04 is deleted.
(I) The figure "$15,000,000" that appears in the fourth
line of Section 3.02, which was previously amended to "$10,000,000", is
further amended to read "$11,000,000".
(J) Section 3.03(a) is amended to read as follows:
(a) Commencing on the Effective Date of the
Fifth Amendment and continuing until payment
in full, interest shall accrue on the Line
of Credit Note (i) on the amount outstanding
thereunder from time to time up to and
including $10,000,000 at the rate per annum
equal to one percentage point (100 basis
points) in excess of the Prime Rate in
effect from time to time, and (ii) on the
amount outstanding thereunder from time to
time in excess of $10,000,000 at the rate
per annum equal to three percentage points
(300 basis
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points) in excess of the Prime Rate in
effect from time to time. All interest shall
be computed on an Actual/360 Basis and shall
be payable monthly in arrears on the 15th
day of each month in each year for the
period ending on the last day of the
immediately preceding calendar month,
commencing on June 15, 2001, and on the Line
of Credit Termination Date. Any change in
the interest rate on the Line of Credit Note
because of a change in the Prime Rate shall
take effect on the effective date of such
change in the Prime Rate as announced by the
Lender without notice to the Borrower and
without any further action by the Lender.
(K) Paragraphs (d), (e) and (f) of Section 3.03 are
deleted.
(L) Section 3.06 is amended to read as follows:
SECTION 3.06. AVAILABILITY FEE. The Borrower shall
pay to the Lender an availability fee (the
"Availability Fee") that shall be computed at the
rate of fifty (50) basis points per annum times the
daily average difference between (i) the Maximum Line
of Credit amount and (ii) the sum of the aggregate
outstanding principal amount of the Advances made by
the Lender. The Availability Fee shall be payable in
arrears on the 15th day of each month in each year
for the period ending on the last day of the
immediately preceding calendar month and on the Line
of Credit Termination Date. The Availability Fee
shall be computed on an Actual/360 Basis. Subject to
the terms and conditions otherwise applicable to the
making of Advances hereunder, the Borrower may
request and receive Advances to pay the Availability
Fee under this Section 3.06.
(M) The following new Section 3.07 is added immediately
following Section 3.06:
SECTION 3.07. LOCKBOX ACCOUNT. The Borrower shall
establish and maintain with Lender a lockbox account
("Lockbox"). The Borrower shall instruct all Eligible
Account account debtors to pay all proceeds of
Eligible Accounts to a post office box designated by
the Lender for deposit directly into the Lockbox.
Borrower shall not (without Lender's prior written
consent) collect any proceeds of sales or proceeds of
Eligible Accounts. If any payments of proceeds of
sales or any proceeds of Eligible Accounts are paid
directly to Borrower, then Borrower shall immediately
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forward same to the Lockbox. All funds deposited into
the Lockbox shall be under the dominion and control
of Lender and shall be applied by the Lender on a
daily basis directly to the amount outstanding under
the Line of Credit. In the event that the Lender
refuses for any reason to deposit into the Lockbox
any remittance received as payment of an Eligible
Account, the Lender shall notify the Borrower within
three business days following the receipt of the
refused remittance.
(N) The following new Section 3.08 is added immediately
following Section 3.07:
SECTION 3.08. BORROWING BASE CERTIFICATION;
NEW INVOICES.
(a) On the third business day of each week, the
Borrower shall provide Lender with a
borrowing base certificate in the form of
EXHIBIT B to the Fifth Amendment (or such
other form as Lender may require) as of the
last business day of the immediately
preceding week, signed by the Borrower's
president, chief financial officer, director
of finance or other officer acceptable to
Lender, and certifying a Borrowing Base of
not less than the then outstanding balance
under the Line of Credit Note.
(b) On each business day, the Borrower shall
submit to Lender by facsimile transmission a
report on all invoices sent to the
Borrower's customers on the immediately
preceding business day. Not less than
weekly, the Borrower shall provide to Lender
by U.S. Mail photocopies of the invoices
sent to the Borrower's customers during the
immediately preceding week.
(O) Section 7.17, which requires a period of at least
sixty (60) consecutive days during each calendar year during which the
Borrower will cause the outstanding advances under the Line of Credit
to be paid in full and shall maintain the principal balance of the Line
of Credit at zero, is deleted.
(P) The following new Section 7.18 is added immediately
following Section 7.17:
SECTION 7.18. LOAN SERVICE FEE. The Borrower shall
pay to Lender a monthly loan service fee ("Loan
Service Fee") that shall be computed at the rate of
fifty (50) basis points per annum times the sum of
(i) the average daily
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balance outstanding under the Term Loan and (ii) the
average daily balance outstanding under the Line of
Credit Note. The Loan Service Fee shall be payable in
arrears on the 15th day of each month in each year
for the one month period ending on the last day of
the immediately preceding calendar month. The Loan
Service Fee shall be computed on an Actual/360 Basis.
Subject to the terms and conditions otherwise
applicable to the making of Advances hereunder, the
Borrower may request and receive Advances to pay the
Loan Service Fee under this Section 7.18.
(Q) The following new Section 7.19 is added immediately
following Section 7.18:
SECTION 7.19. STRATEGIC ALTERNATIVES. The Borrower is
considering and pursuing various available strategic
alternatives, including one or more of the sale of
equity securities in the Borrower in a private
placement, the sale of some or all of the Borrower's
operating divisions, product lines or assets, or a
sale of the Borrower. The Borrower has engaged
McDonald Investments, an affiliate of Key Corp. and
full service investment banking firm headquartered in
Cleveland, Ohio ("McDonald"), to assist the Borrower
in exploring its strategic alternatives. The Borrower
will use its reasonable best efforts to pursue one or
more of the available strategic alternatives.
Although there can be no assurance that any specific
transaction or other strategic alternative will occur
or as to the form that any possible transaction or
other strategic alternative might take, the Borrower
covenants and agrees that by not later than August
15, 2001, the Borrower shall have either (a) made
material progress toward the implementation of a
strategic alternative, as reasonably determined by
the Lender, or (b) obtained a letter of intent from
an alternate lender to refinance and pay in full the
indebtedness of the Borrower then outstanding to the
Lender under the Loan Agreement. The Borrower does
not currently expect to publicly disclose
developments regarding its pursuit of strategic
alternatives unless and until it is in a position to
announce it has decided upon a definitive transaction
or strategic alternative. The Lender acknowledges
that it is aware, and that it will advise its
officers, employees, agents and representatives who
become aware of material, non-public information
concerning the Borrower, that the United States
securities laws prohibit them from purchasing or
selling securities of the Borrower while in
possession of such material, non-public information.
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(R) Section 8.09 is amended to read as follows:
SECTION 8.09 DEBT SERVICE COVERAGE RATIO. The
Borrower will not permit its ratio of Net Cash Flow
Before Interest Expense to Debt Service for the
fiscal quarter to be less than the applicable ratio
as of the following fiscal quarter end dates:
Fiscal Quarter End
Date Ratio
------------------ -----------
June 30, 2001 (9.57) to 1
September 29, 2001 2.13 to 1
December 31, 2001 3.12 to 1
(S) Section 8.11 is amended to read as follows:
SECTION 8.11 WORKING CAPITAL RATIO. The Borrower will
not permit its ratio of Current Assets to Current
Liabilities as of the following fiscal period end
dates to be less than the applicable ratio:
Fiscal Period End
Date Ratio
------------------ ---------
June 30, 2001 0.89 to 1
September 29, 2001 0.94 to 1
December 31, 2001 1.02 to 1
(T) Section 8.12 is amended to read as follows:
SECTION 8.12 LEVERAGE RATIO. The Borrower will not
permit its ratio of Total Liabilities to Net Worth as
of the following fiscal period end dates to be
greater than the applicable ratio:
Fiscal Period End
Date Ratio
------------------ ---------
June 30, 2001 2.02 to 1
September 29, 2001 1.82 to 1
December 31, 2001 1.42 to 1
(U) Section 8.13 is amended to read as follows:
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SECTION 8.13 TANGIBLE NET WORTH. The Borrower will
not permit its Tangible Net Worth as of the following
fiscal period end dates to be less than the
applicable amount:
Fiscal Period End
Date Amount
------------------ -----------
June 30, 2001 $11,865,000
September 29, 2001 $12,597,000
December 31, 2001 $13,914,000
(V) The reference to Section 8.02 that appears in the
final clause of Section 8.19 is amended to read "Section 7.01."
(W) The following new Section 8.20 is added immediately
following Section 8.19:
SECTION 8.20. EBITDA. (a) The Borrower will not
permit its monthly earnings before interest, taxes,
depreciation and amortization as of the following
dates to be less than the applicable amount:
Month End
Date Amount
------------------ ---------
June 30, 2001 $(476,000)
August 4, 2001 $ 248,000
September 1, 2001 $ 429,000
September 29, 2001 $ 860,000
October 27, 2001 $ 639,000
November 24, 2001 $ 683,000
December 31, 2001 $ 743,000
(b) The Borrower will not permit its earnings before
interest, taxes, depreciation and amortization for
the fiscal quarter to be less than the applicable
amount as of the following fiscal quarter end dates:
Fiscal Quarter End
Date Amount
------------------ ------------
June 30, 2001 $(2,418,000)
September 29, 2001 $ 1,537,000
December 31, 2001 $ 2,065,000
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4. MODIFIED TERM NOTE. To evidence certain of the changes
effected by this Amendment, the Borrower shall execute and deliver to the Lender
a Modified, Amended and Restated Term Note substantially in the form attached
hereto as EXHIBIT A (the "Modified Term Note"). Commencing on the Effective
Date, the Modified Term Note shall be the "Term Note" referred to in the Loan
Agreement and other Loan Documents. The Lender may retain the original Term Note
dated January 7, 1993, in its file along with the Modified Term Note of even
date herewith until the indebtedness evidenced thereby has been paid in full.
5. MODIFIED LINE OF CREDIT NOTE. To evidence certain of the
changes effected by this Amendment, the Borrower shall execute and deliver to
the Lender a Modified, Amended and Restated Line of Credit Note substantially in
the form attached hereto as EXHIBIT C (the "Modified Line of Credit Note").
Commencing on the Effective Date, the Modified Line of Credit Note shall be the
"Line of Credit Note" referred to in the Loan Agreement and other Loan
Documents. The Lender may retain the original Line of Credit Note dated January
7, 1993, the Modified, Amended and Restated Line of Credit Note dated March 15,
1995, the Modified, Amended and Restated Line of Credit Note dated August 28,
1997, and the Modified, Amended and Restated Line of Credit Note dated January
1, 2000, in its file along with the Modified, Amended and Restated Line of
Credit Note of even date herewith until the indebtedness evidenced thereby has
been paid in full and the Line of Credit has been terminated as set forth in the
Loan Agreement.
6. REFERENCES IN LOAN DOCUMENTS. Effective as of the Effective
Date, all references in the Loan Documents to the "Loan Agreement" shall mean
the Loan Agreement, as heretofore modified and amended and as further modified
and amended by this Amendment, and all references to the "Line of Credit Note"
shall mean the Modified, Amended and Restated Line of Credit Note of even date
referred to in this Amendment, and all references to the "Term Note" shall mean
the Modified Term Note of even date referred to in this Amendment. Effective as
of the Effective Date, the words "fifteen million dollars" and figure
"$15,000,000" as used in any of the Loan Documents to refer to the maximum
principal amount of the Line of Credit Master Note, as amended to "ten million
dollars" and "$10,000,000", as further amended to read "thirty million dollars"
and $30,000,000", as further amended to read "ten million dollars" and
"$10,000,000", are further amended to read "eleven million dollars" and
"$11,000,000", respectively.
7. CLOSING FEE. The Borrower shall pay to Lender a closing fee
("Closing Fee") equal to $66,934 upon the execution of this Amendment. Subject
to the terms and conditions otherwise applicable to the making of Advances under
the Agreement, the Borrower may request and receive an Advance to pay the
Closing Fee.
8. LOAN DOCUMENTS TO REMAIN IN EFFECT. Except as specifically
modified by this Amendment, the Loan Agreement and the other Loan Documents are
incorporated herein by reference as if fully set out and shall remain and/or be
reaffirmed in full force and effect in accordance with their respective terms.
9. FINANCIAL MONITORING. Notwithstanding anything to the contrary
herein or in the Agreement, Borrower shall provide Lender the Financial
Statements and Reports required under the Agreement in Section 7.04 (a), (b),
(d) and (e) and such other information as Lender may reasonably request to
verify the Borrowing Base.
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10. NO NOVATION, ETC. Nothing contained in this Amendment shall be
deemed to constitute a novation of the terms of the Loan Documents, or impair
any Liens granted to the Lender thereunder, or affect any of the rights, powers
or remedies of the Lender thereunder, or constitute a waiver of any provision
thereof, except as specifically set forth in this Amendment.
11. GOVERNING LAW, SUCCESSORS AND ASSIGNS, ETC. This Amendment
shall be governed by and construed in accordance with the laws of the State of
Alabama and shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
12. DATE. The date of this Amendment is intended as and for a date
for the convenient identification of this Amendment and for determining the
Effective Date hereof, and is not intended to indicate that this Amendment was
executed and delivered on said date.
13. SEVERABILITY. If any provision of this Amendment shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
14. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which so executed shall be deemed an original, but all
counterparts shall together constitute but one and the same instrument.
15. NO WAIVER. Nothing contained herein shall be construed as a
waiver, acknowledgment or consent to any breach of, or Event of Default under,
the Agreement and/or the Loan Documents not specifically mentioned herein, and
the consents granted herein are effective only in the specific instance and for
the purposes for which given.
16. RELEASE. The Borrower hereby releases, satisfies, cancels,
waives, acquits, and forever discharges Lender, its directors, officers,
employees, agents, attorneys, successors and assigns, of and from any and all
claims, demands, actions, or causes of action of any kind or character, arising
at any time in the past, up to and including the Effective Date, which relate or
pertain in any way to the indebtedness under the Loan Agreement and/or
collection thereof.
17. AMOUNT OF CURRENT INDEBTEDNESS. The indebtedness owed by the
Borrower to Lender is for the amounts (exclusive of outstanding letters of
credit, ACH exposures and Lender's attorneys fees) herein stated and there are
no defenses, setoffs, or counterclaims with respect to any of them:
Payoff as of
General Description Obligation No. 06/14/01
------------------- -------------- ------------
Term Loan #1 #087445 $
Term Loan #2 #087452 $
Term Loan #3 #524769 $
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18. PAYMENT OF LENDER'S LEGAL FEES. The Borrower agrees to pay to
Lender's counsel, Xxxxxx, Xxx & Xxxx, P.A., on or before July 1, 2001, all of
its attorney's fees incurred in connection with this Amendment.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Amendment to be executed and delivered by their duly authorized representatives,
effective as of the date first set forth above.
XXXXXX INDUSTRIES, INC.,
a Delaware corporation
By /s/ XXXXX X. XXXXXX
----------------------------------------------------
Its Vice President and Chief Financial Officer
----------------------------------------------------
AMSOUTH BANK,
an Alabama banking corporation
By /s/ XXXXXXX XXXXXXXX
----------------------------------------------------
Its Vice President
----------------------------------------------------
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