THIRD AMENDMENT TO
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AND SECURITY
AGREEMENT (the "Amendment') is dated as of April 30, 1997 and is by and between
WASHINGTON SCIENTIFIC INDUSTRIES, INC. (the "Borrower") and FBS BUSINESS FINANCE
CORPORATION (the "Lender"). Terms not otherwise expressly defined herein shall
have the meanings set forth in the Credit Agreement.
RECITALS
WHEREAS, the Borrower and the Lender are parties to an Amended and
Restated Credit and Security Agreement, dated as of March 31, 1995 as amended by
that certain First Amendment to Amended and Restated Credit and Security
Agreement dated as of April 20, 1995 and by a Waiver and Second Amendment to
Amended and Restated Credit and Security Agreement dated as of October 31, 1996
(as so amended, the "Credit Agreement") under which the Lender has agreed to
make Advances to the Borrower; and
WHEREAS, the Borrower and the Lender desire to amend the Credit
Agreement as hereinafter set forth.
NOW THEREFORE, for value received, the Borrower and the Lender agree as
follows.
ARTICLE I - AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS.
Supplement A to the Credit Agreement is hereby amended to read
in its entirety in the form of Supplement A attached hereto as Exhibit
A.
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.
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
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 as of 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 EXECUTION OF AMENDMENT, EXTENSION OF MORTGAGE AND SUPPLEMENT A. The
Borrower and the Lender shall have executed this Amendment, the Extension of
Mortgage in the form of Exhibit B hereto and initialled Supplement A as amended
pursuant hereto.
4.2 WARRANTIES. Before and after giving effect to this Amendment, the
representations and warranties in Article IV 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.
4.3 DEFAULTS. After giving effect to this Amendment, no Event of
Default and no Unmatured 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.
4.4 DOCUMENTS. The following shall have been delivered to the Lender,
each duly executed and dated, or certified, as of the date hereof, as the case
may be:
(a) RESOLUTIONS. Certified copies of resolutions of the Board
of Directors of the Borrower authorizing or ratifying the execution,
delivery and performance, respectively, of this Amendment and other
documents (if any) provided for in this Amendment.
(b) CONSENTS. Certified copies of all documents evidencing any
necessary corporate action, consent or governmental or regulatory
approval (if any) with respect to this Amendment.
(c) INCUMBENCY AND SIGNATURES. A certificate of the Secretary
or an Assistant Secretary of the Borrower certifying the names of the
officer or officers of the Borrower authorized to sign this Amendment
and other documents provided for in this Amendment, together with a
sample of the true signature of each such officer.
(d) GOOD STANDING CERTIFICATES. Certificates of good standing
as to the Borrower issued by the Secretary of State of the state in
which the Borrower is organized, and each other state in which the
failure of the Borrower to be in good standing would constitute an
Adverse Event or have a material adverse effect on the Lender's rights
in any Collateral.
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 this 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 hereunder,
which obligations of the Borrower shall survive any termination of the Credit
Agreement.
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.
WASHINGTON SCIENTIFIC
INDUSTRIES, INC.
By: /S/ Xxxxxxx X. Xxxxx
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Title: President/CEO
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FBS BUSINESS FINANCE
CORPORATION
By: /S/ Xxxxxxx X. Xxxxxxx
----------------------------
Title: VP
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EXHIBIT A
SUPPLEMENT A
(AMENDED APRIL 30, 1997)
TO
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
DATED AS OF MARCH 31, 1995 BETWEEN
FBS BUSINESS FINANCE CORPORATION (THE "LENDER")
AND
WASHINGTON SCIENTIFIC INDUSTRIES, INC. (THE "BORROWER")
1. CREDIT AGREEMENT REFERENCE. This Supplement A, as it may be amended
or modified from time to time, is a part of the Amended and Restated Credit and
Security Agreement, dated as of March 31, 1995, between the Borrower and the
Lender (together with all amendments, modifications and supplements thereto, the
"Credit Agreement"). Capitalized terms used herein which are defined in the
Credit Agreement shall have the meanings given such terms in the Credit
Agreement unless the context otherwise requires.
2. DEFINITIONS.
2.1 REVOLVING CREDIT AMOUNT. The term "Revolving Credit
Amount" shall mean the maximum amount of Revolving Loans which the
Lender will make available to the Borrower which amount shall not
exceed ONE MILLION AND NO/100 DOLLARS ($1,000,000); provided, however,
that the aggregate outstanding principal balance of the Revolving Loans
plus the Letter of Credit Obligations shall not exceed the Revolving
Credit Amount.
2.2 BORROWING BASE.
(a) DEFINITION. The term "Borrowing Base" shall mean
an amount of up to 80% of the net amount (as determined by the
Lender after deduction of such reserves and allowances as the
Lender deems proper and necessary) of the Borrower's Eligible
Accounts Receivable.
(b) LENDER'S RIGHTS. The Borrower agrees that nothing
contained in this Supplement A (a) shall be construed as the
Lender's agreement to resort or look to a particular type or
item of Collateral or as security for any specific Loan or
advance or in any way limit the Lender's right to resort to
any or all of the Collateral or as security for any of the
Obligations, (b) shall be deemed to limit or reduce any lien
on or any security interest in or upon any portion of the
Collateral or other security for the Obligations or (c) shall
supersede Section 2.10 of the Credit Agreement.
2.3 LETTER OF CREDIT SUBLIMIT. The term "Letter of Credit
Sublimit" shall mean $300,000.
2.4 TERMINATION DATE. The term "Termination Date" shall mean
March 31, 2000.
3. INTEREST; FEES.
3.1 LOANS.
(a) INTEREST TO MATURITY. The unpaid principal
balance of the Revolving Loans shall bear interest to maturity
at the Reference Rate in effect from time to time plus 0.50%
per annum. The unpaid principal balance of the Term Loan shall
bear interest to maturity at the Reference Rate in effect from
time to time plus 0.75% per annum.
(b) DEFAULT RATE. If any amount of the Loans is not
paid when due, whether by acceleration or otherwise, the
entire unpaid principal balance of the Loans (other than
Overdraft Loans and Over Advances) shall bear interest until
paid at a rate per annum equal to the greater of (i) the
Reference Rate from time to time in effect plus 4% or (ii) 4%
above the Reference Rate in effect at the time such amount
became due.
3.2 OVERDRAFT LOANS; OVER ADVANCES. Overdraft Loans and Over
Advances shall bear interest at the rate(s) determined pursuant to
Section 2.7 or Section 2.8 of the Credit Agreement, as applicable.
3.3 COMMITMENT FEE. The Borrower shall pay to the Lender a
commitment fee for the period from the date hereof to the date the
Credit terminates in an amount equal to .50% per annum on the average
daily Unused Revolving Credit Amount.
3.4 LETTER OF CREDIT FEES. The Borrower shall pay the Lender,
or any Affiliate, a commission on the undrawn amount of each Letter of
Credit and on each L/C Draft accepted by the Lender, or such Affiliate,
in an amount equal to 2.0% per annum.
3.5 PREPAYMENT FEE. Upon prepayment in full of the Term Loan
pursuant to any third party refinancing of the same or in connection
with a sale of the Borrower or substantially all of its assets, the
Borrower shall pay to the Lender a prepayment fee in an amount equal to
one percent (1%) of the outstanding principal balance of the Term Loan;
provided, that if at the time of such prepayment the advance rate then
applicable to Eligible Accounts Receivable pursuant to Section 2.2(a)
of this Supplement A is less than 75%, the prepayment fee shall not be
applicable.
4. ELIGIBLE ACCOUNT RECEIVABLE REQUIREMENTS.
(a) For Accounts Receivable which are due and payable in full
within 30 days of the date of the invoice evidencing such Account
Receivable, such Account Receivable must not be unpaid on the date that
is 60 days after the due date. For Accounts Receivable which are due
and payable in full within 60, 90 or 120 days of the date of the
invoice evidencing such Account Receivable, such Account Receivable
must not be unpaid on the date that is 30 days after the due date.
(b) If invoices representing 10% or more of the unpaid net
amount of all Accounts Receivable from any one Account Debtor are
unpaid more than the number of days set forth in Section 4(a) above for
such Accounts Receivable, then all Accounts Receivable relating to such
Account Debtor shall cease to be Eligible Accounts Receivable.
5. ADDITIONAL COVENANTS. From the date of the Credit Agreement and
thereafter until all of the Borrower's Obligations under the Credit Agreement
are paid in full, the Borrower agrees that, unless the Lender shall otherwise
consent in writing, it will not, and will not permit any Subsidiary to, do any
of the following:
5.1 NET WORTH. Permit the Borrower's Net Worth at any time to
be less than $3,000,000.
5.2 LIABILITIES TO NET WORTH RATIO. Permit the ratio, as of
the last day of any fiscal quarter, of the Borrower's consolidated
total liabilities to the Borrower's Net Worth to exceed 4.0 to 1.0.
5.3 CAPITAL EXPENDITURES.
(a) Make Capital Expenditures in an amount exceeding
$3,000,000 on a consolidated basis in any fiscal year.
(b) Fund any Capital Expenditures with Revolving
Loans in an amount exceeding $1,000,000 in any fiscal year.
5.4 CASH FLOW COVERAGE RATIO.
(a) Permit the ratio of the Borrower's EBITDA to the sum of
(i) its consolidated interest expense (including, without limitation,
imputed interest expense on Capitalized Leases), plus (ii) mandatory
principal payments on Long Term Debt, plus (iii) income taxes actually
paid during such period, to be less than (x) 0.75 to 1.0 as of
November 24, 1996, for the four consecutive fiscal quarters ending on
that date and (y) 1.1 to 1.0 as of February 23, 1997, for the four
consecutive fiscal quarters ending on that date.
(b) Subsequent to February 23, 1997, permit the ratio, as of
the last day of any fiscal quarter, of the Borrower's EBITDA for the
four consecutive fiscal quarters ending on that date to the sum of
(a) its consolidated interest expense (including, without limitation,
imputed interest expense on Capitalized Leases), plus (b) mandatory
principal payments on Long Term Debt, plus (c) cash Capital
Expenditures not financed by Long Term Debt, plus (d) income taxes
actually paid during such period, to be less than 1.1 to 1.0.
Borrower's Initials /S/ Xxxxxxx X. Xxxxx
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Lender's Initials /S/ Xxxxxxx X. Xxxxxxx
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Dated as of April 30, 1997
