Exhibit 10.23
WAKEFIELD ENGINEERING, INC.
00 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
As of January 30, 0000
XXXXX XXXXXXXX XXXX XX XXXXXXXXXXXXX
f/k/a Shawmut Bank, N.A.
Xxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Re: Second Amendment to Loan Agreement
Ladies and Gentlemen:
Reference is made to the Loan and Security Agreement dated June 22, 1994,
as amended by the First Amendment thereto dated May 5, 1995 (together the "Loan
Agreement") and all promissory notes, agreements, documents and instruments
entered into by Wakefield Engineering, Inc. (the "Borrower") and any other
person or obligor pursuant thereto (collectively, the "Loan Documents") with or
for the benefit of Fleet National Bank of Massachusetts (f/k/a Shawmut Bank,
N.A.) ("Bank"). Except as otherwise defined herein, capitalized terms used
herein shall have the meanings given them in the Loan Agreement. This Second
Amendment to Loan Agreement is referred to as the "Second Amendment".
Background. The Borrower which owns Specialty Extrusion Corp., a California
corporation ("Specialty") which acquired substantially all of the assets of
Specialty Extrusion, Ltd., and has requested that the Bank agree to make
Specialty a co-borrower under the Loan Agreement and extend Revolving Loans to
Specialty. In addition, the Borrower has requested that the Bank increase the
limit on Revolving Loans that may be made to the Borrower and Specialty and make
available a $200,000 Equipment Facility Loan to Specialty to repay, in part, a
loan made by Wakefield that was used to acquire certain equipment.
Subject to the satisfaction of the terms and conditions hereof, Bank and
Borrower have agreed that the Loan Agreement shall be amended as follows:
1. Specialty Designated as Additional Borrower. Specialty is, and hereby
shall be, a Borrower under the Loan Agreement, jointly and severally with
Wakefield Engineering, Inc. ("Wakefield") with respect to all now existing and
hereafter Obligations and all references to Borrower in the Loan Agreement shall
mean Wakefield and Specialty, jointly and severally.
Fleet Capital Corporation
January 30, 1996
Page 2
Throughout the Loan Agreement and other Loan Documents all references to the
singular shall also mean the plural and all references to the plural shall also
mean the singular.
2. Amendments to the Loan Agreement.
2.1. Section 1, Certain Definitions, is hereby amended as follows:
(a) The definition of "Borrowing Base" is deleted and the following is
inserted in place thereof:
"Borrowing Base" means the sum of the following (as shown on
Bank's records at any time):
(a) eighty-five percent (85%) of the unpaid face amount of
Wakefield's Eligible Accounts; PLUS
(b) the lesser of (A) $3,000,000 or (B) fifty-five percent (55%)
of the first-in, first-out cost or market value, whichever is
lower, of Wakefield's Eligible Inventory; PLUS
(c) as to Specialty the lesser of (i) $1,500,000.00 and (ii) the
sum of (A) eighty-five percent (85%) of the unpaid face amount of
Specialty's Eligible Accounts plus (B) the lesser of (1) all
outstanding Revolving Loans made in respect of Specialty's
Eligible Accounts or (2) fifty-five percent (55%) of the first-
in, first-out or market value, whichever is lower, of Specialty's
Eligible Inventory.
PROVIDED THAT Bank at all times reserves the right exercisable in
Bank's reasonable credit judgment, based on circumstances then
existing, to adjust any of the percentages on the amounts set
forth above upon fifteen (15) days notice to Borrower.
(b) The definition of Excess Availability is amended by deleting
the number "$7,000,000" contained therein and substituting in
lieu thereof the number "$9,000,000".
(b) The definition of Termination Date is amended by deleting the
words and number "May 5, 1997" contained therein and substituting in lieu
thereof the words and number "April 30, 1997".
Fleet Capital Corporation
January 30, 1996
Page 3
2.2 Section 2, Loans is amended by deleting the words and number "(x) Seven
Million Dollars ($7,000,000.00)" in the last sentence of the Section and
substituting in lieu thereof the following:
"(x)(A) with respect to Wakefield, $7,500,000.00 and (B) with respect
to Specialty, $1,500,000.00,"
2.3 Section 4(n) is amended to add the following location to the list of
locations set forth therein:
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
2.4 Section 8(a) of the Loan Agreement is amended by deleting the Section
in its entirety and by substituting in place thereof the following:
"(a) Tangible Capital Base. Permit its Tangible Capital Base to be
less than the following amounts at the end of the respective periods (measured
in fiscal quarters) set forth below:
Period Minimum Tangible Capital Base
------ -----------------------------
3 months ending January 28, 1996 $5,000,000
6 months ending April 28, 1996 $6,000,000
9 months ending July 28, 1996 $7,000,000
12 months ending October 27, 1996 $8,000,000
3 months ending January 26, 1997 $9,000,000
2.5. Section 8(b) is amended by deleting the Section in its entirety and
inserting in place thereof the following:
"8(b) Debt Service and Unfinanced Capital Expenditures Coverage Ratio.
Permit the ratio of the aggregate of (A)(i) EBITDA minus (ii) unfinanced capital
expenditures and minus (iii) permitted payments on Subordinated Indebtedness and
any permitted Dividends to (B) the sum of (i) interest expense and (ii) CMLTD
for any fiscal quarter of the Borrower to be less than 1.00 to 1.00 at the end
of any fiscal quarter of Borrower through and inclusive of the fiscal quarter
ending April 30, 1996, 1.25 to 1.00 at the end of any fiscal quarter for the
fiscal quarters of Borrower ending on July 31, 1996 and October 31, 1996 and
1.50 to 1.00 at the end of any fiscal quarter thereafter. The one-time repayment
of up to $1,000,000 of subordinated debt to
Fleet Capital Corporation
January 30, 1996
Page 4
Alpha made in connection with the Second Amendment shall not be included in the
foregoing computation."
2.6. Section 8(e) of the Loan Agreement is amended by deleting the number
"2.00" contained herein and substituting in lieu thereof the number "1.50".
2.7. Section 8(f) of the Loan Agreement is amended by deleting the Section
in its entirety and substituting in lieu thereof the following:
"(f) Interest Coverage Ratio. Permit the ratio of (i) Borrower's EBIT
for each fiscal quarter to (ii) Borrower's interest expense for each fiscal
quarter to be less than 2.00 to 1.00."
3. Grant of Security Interest. As security for the prompt performance,
observance and payment in full of all Obligations, Specialty hereby grants to
Bank a continuing security interest in and lien on all assigns, transfers, sets
over and pledges to the Bank all property of Specialty whether now owned by
Specialty or hereafter acquired or existing, and wherever located (collectively,
the "Collateral"), including without limitation:
(a.) all Accounts;
(b.) all Inventory;
(c.) all Equipment;
(d.) all General Intangibles;
(e.) all Instruments and Documents;
(f.) all Related Collateral; and
(g.) all accessions to and additions to, substitutions for, replacements,
products and Proceeds to any and all of the foregoing.
The term "Collateral" shall also refer to any other property in which Bank is
granted a Lien to secure any of the Obligations pursuant to an agreement
supplemental hereto or otherwise (whether or not such agreement makes reference
to the Loan Agreement or the Obligations of Borrower thereunder).
4. Representations and Warranties.
To induce Bank to enter into this Second Amendment, each Borrower jointly
and severally warrants, represents and covenants to Bank that:
Fleet Capital Corporation
January 30, 1996
Page 5
(a) Organization and Qualification. Each Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each Borrower is duly qualified or is
authorized to do business and is in good standing as a foreign corporation in
all states and jurisdictions in which the failure of such Borrower to be so
qualified would have a material adverse effect on the financial condition,
business or properties of such Borrower.
(b) Corporate Power and Authority. Each Borrower is duly authorized and
empowered to enter into, execute, deliver and perform this Second Amendment, and
each of the Loan Documents to which it is a party. The execution, delivery and
performance of this Second Amendment and each of the other Loan Documents have
been duly authorized by all necessary corporate action and do not and will not
(i) require any consent or approval of the shareholders of any Borrower; (ii)
contravene any Borrower's charter or by-laws; (iii) violate, or cause any
Borrower to be in default under, any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award in effect
having applicability to such Borrower; (iv) result in a breach of or constitute
a default under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which any Borrower is a party or by which such
Borrower's properties may be bound or affected; or (v) result in, or require,
the creation or imposition of any Lien (other than Permitted Liens) upon or with
respect to any of the properties now owned or hereafter acquired by any
Borrower.
(c) Legally Enforceable Agreement. This Second Amendment and each of the
other Loan Documents when delivered under this Second Amendment will be, a
legal, valid and binding obligation of each Borrower, enforceable against each
Borrower in accordance with its respective terms subject to bankruptcy,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally.
(d) No Material Adverse Change. Since December 31, 1995, the date of the
last financial statements provided by the Borrower to the Bank, there has been
no material adverse change in the condition, financial or otherwise, of Borrower
as shown on the consolidated balance sheet thereof as of such date and no change
in the aggregate value of property and assets owned by Borrower, except changes
in the ordinary course of business, none of which individually or in the
aggregate has been materially adverse.
(e) Continuous Nature of Representations and Warranties. Each
representation and warranty contained in the Loan Agreement and the other Loan
Documents remains accurate, complete and not misleading in any material respect
on the date of this Second Amendment, except for representations and warranties
that explicitly relate to an earlier date and changes in the nature of
Borrower's business or operations that would render the information in any
exhibit attached thereto either inaccurate, incomplete or misleading, so long as
Bank has consented to such changes or such changes are expressly permitted by
the Loan Agreement.
Fleet Capital Corporation
January 30, 1996
Page 6
(f) Perfection Certificate. The attached Perfection Certificate
(Exhibit C hereto) is true, accurate and complete in all respects.
5. Conditions Precedent.
Notwithstanding any other provision of this Second Amendment or any of
the other Loan Documents, and without affecting in any manner the rights of Bank
under the other sections of this Second Amendment, this Second Amendment shall
not be effective as to Bank unless and until each of the following conditions
has been and continues to be satisfied:
(a) Documentation. Bank shall have received, in form and substance
satisfactory to Bank and its counsel, a duly executed copy of this Second
Amendment, the endorsements by Specialty to the Notes in the form attached as
Exhibit A hereto, the Unlimited Guaranty of each of Wakefield and Specialty in
the form of Exhibit B hereto, the completed Perfection Certificate in the form
of Exhibit C hereto, the UCC-1 Financing Statements of Specialty, together with
such additional documents, instruments and certificates as Bank and its counsel
shall require in connection therewith, all in form and substance satisfactory to
Bank and its counsel.
(b) No Default. No Event of Default shall exist.
(c) No Litigation. Except as previously disclosed to and consented to by
Bank, no action, proceeding, investigation, regulation or legislation shall have
been instituted, threatened or proposed before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain damages in
respect of, or which is related to or arises out of the Loan Agreement or this
Second Amendment or the consummation of the transactions contemplated thereby or
hereby.
6. Acknowledgement of Obligations.
Each Borrower hereby (1) reaffirms and ratifies all of the promises,
agreements, covenants and obligations to Bank under or in respect of the Loan
Agreement and other Loan Documents as amended hereby and (2) acknowledges that
it is unconditionally liable for the punctual and full payment of all
Obligations, including, without limitation, all charges, fees, expenses and
costs (including reasonable attorneys' fees and expenses) under the Loan
Documents, as amended hereby, and that it has no defenses, counterclaims or
setoffs with respect to full, complete and timely payment and performance of all
Obligations.
7. Confirmation of Liens.
Each Borrower acknowledges, confirms and agrees that the Loan Documents,
as amended hereby, are effective to grant to Bank duly perfected, valid and
enforceable first priority security interests and liens in the Collateral
described therein, except for Permitted Liens, and that the locations for such
Collateral specified in the Loan Documents have not changed except
Fleet Capital Corporation
January 30, 1996
Page 7
as provided herein. Borrower further acknowledges and agrees that all
Obligations of Borrower are and shall be secured by the Collateral.
8. Miscellaneous.
--------------
Except as set forth herein, the undersigned confirms and agrees that the Loan
Documents remain in full force and effect without amendment or modification of
any kind. The execution and delivery of this Second Amendment by Bank shall not
be construed as a waiver by Bank of any Default or Event of Default under the
Loan Documents. This Second Amendment, together with the Loan Agreement and
other Loan Documents, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior dealings,
correspondence, conversations or communications between the parties with respect
to the subject matter hereof. This Second Amendment and the transactions
hereunder shall be deemed to be consummated in the Commonwealth of Massachusetts
and shall be governed by and interpreted in accordance with the laws of that
state. This Second Amendment and the agreements, instruments and documents
entered into pursuant hereto or in connection herewith shall be "Loan Documents"
under and as defined in the Loan Agreement. Lender consents to the use of the
proceeds of the $200,000 Equipment Facility Loan to Specialty to repay
indebtedness owing to Wakefield and up to $1,000,000 in a one-time repayment of
subordinated debt to Alpha.
Executed under seal on the date set forth above.
ATTEST: WAKEFIELD ENGINEERING, INC.
By: /s/ Xxxxx X. Xxxxxxxxxxx
---------------------------------- -------------------------------------
Name: Xxxxx X. Xxxxxxxxxxx
------------------------------
Title: Vice President--Finance
------------------------------
ATTEST: SPECIALTY EXTRUSION CORP.
/s/ Xxxxxxx Xxxx By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------- -------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
------------------------------
Title: Treasurer
------------------------------
Fleet Capital Corporation
January 30, 1996
Page 8
Accepted in ________, _______________________
on _________________ ____, 000__
XXXXX XXXXXXXX XXXX XX
XXXXXXXXXXXXX
f/k/a Shawmut Bank, N.A.
By: _________________________________________
Name: __________________________________
Title: __________________________________
EXHIBIT A
PERFECTION CERTIFICATE
The undersigned, the chief executive or financial officer of Specialty
Extrusion Corp., a California corporation (the "Borrower"), hereby certifies
with reference to the Second Amendment to Loan Agreement dated as of January 30,
1996, between the Borrower, Wakefield Engineering, Inc. and Fleet National Bank
of Massachusetts f/k/a Shawmut Bank, N.A., as Lender (terms defined therein
being used herein as therein defined), to the Lender and each Lender as follows:
1. Names. (a) The exact corporate name of the Borrower as it appears in its
articles of organization is as follows:
Specialty Extrusion Corp.
(b) Set forth below is each other corporate name the Borrower has had since
its organization, together with the date of the relevant change:
Specialty Acquisition Corp.
(c) Except as set forth in Schedule 1, the Borrower has not changed its
identity or corporate structure in any way within the past five years. [Changes
in identity or corporate structure would include mergers, consolidations and
acquisitions, as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include in Schedule 1
the information required by paragraphs 1, 2 and 3 of this certificate as to each
acquire or constituent party to a merger or consolidation.]
Specialty Acquisition Corp. acquired Specialty Extrusion Ltd.
(d) The following is a list of all other names (including trade names or
similar appellations) used by the Borrower or any of its divisions or other
business units at any time during the past five years:
See 1(b)
2. Current Locations: (a) The chief executive office of the Borrower is
located at the following address:
Mailing Address County State
--------------- ------ -----
Orange California
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(b) The following are all the locations where the Borrower maintains any books
or records relating to any Accounts:
See 2(A)
(c) The following are all the places of business of the Borrower not
identified above:
None
(d) The following are all the locations where the Borrower maintains any
Inventory not identified above:
None
(e) The following are the names and addresses of all Persons other than the
Borrower which have possession of any of the Borrower's Inventory:
None
3. Prior Locations. (a) Set forth below is the information required by
subparagraphs (a), (b) and (c) of paragraph 2 with respect to each location or
place of business maintained by the Borrower at any time during the past five
years:
None
(b) Set forth below is the information required by subparagraphs (d) and (e)
of paragraph 2 with respect to each location or bailee where or with whom
Inventory has been lodged at any time during the past four months:
None
4. File Search Reports. Attached hereto as Schedule 4(a) is a true copy of a
file search report from the Uniform Commercial Code filing officer in each
jurisdiction identified in paragraph 2 or 3 above with respect to each name set
forth in paragraph 1 above. Attached
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hereto as Schedule 4(b) is a true copy of each financing statement or other
filing identified in such file search reports.
See attached report.
IN WITNESS WHEREOF, I have hereunto set my hands this 30th day of January,
1996.
SPECIALTY EXTRUSION CORP.
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Treasurer
3
AMENDMENT NO. 2
TO REVOLVING CREDIT NOTE
Reference is made to the Revolving Credit Note originally dated June 23, 1994
issued by the undersigned as amended by Amendment No. 1 thereto dated May 5,
1995 (the "Note").
FOR VALUE RECEIVED, the undersigned agrees that the Note is amended as
follows:
1. The heading of the Note is amended by deleting the number "$7,000,000.00"
and substituting in lieu thereof the number "$9,000,000.00".
2. The Note is amended by deleting the words and number "SEVEN MILLION DOLLARS
($7,000,000.00)" on the fourth line of the Note and substituting in lieu thereof
the words and number "NINE MILLION DOLLARS ($9,000,000.00)".
3. The Note is amended to provide that Specialty Extrusion Corp., a California
corporation, is a Maker of the Note jointly and severally with Wakefield
Engineering, Inc.
4. Except as set forth herein the undersigned jointly and severally
acknowledge and confirm that the Note remains in full force and effect without
amendment or modification of any kind.
Executed under seal on this 30th day of January, 1996.
WAKEFIELD ENGINEERING, INC.
By: /s/ Xxxxx X. Xxxxxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxxxxx
------------------------------
Title: Vice President--Finance
------------------------------
SPECIALTY EXTRUSION
CORP.
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
------------------------------
Title: Treasurer
------------------------------
EQUIPMENT FACILITY NOTE
$200,000.00 Boston, Massachusetts
January 30, 1996
FOR VALUE RECEIVED, the undersigned ("Maker"), hereby promises to pay to the
order of Fleet National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.) with a
place of business at Xxx Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 ("Bank"),
the sum of Two Hundred Thousand Dollars ($200,000.00) together with interest on
the unpaid principal amount from time to time outstanding prior to maturity at a
fluctuating rate per annum equal to the sum of the Corporate Base Rate plus
three quarters of one percent (3/4 of 1%). The principal amount hereof shall be
repaid in thirty-five (35) equal monthly installments of Five Thousand Five
Hundred Fifty-Five and 55/100 Dollars ($5,555.55), payable on the first day of
each month commencing March 1, 1996 through and a final, thirty-sixth (36th)
installment equal to all unpaid principal and accrued and unpaid interest on
February 1, 1999. Interest shall be paid monthly, in arrears, on the first day
of each month commencing February 1, 1996.
After maturity (whether by acceleration or otherwise), interest shall be payable
on the unpaid principal balance from time to time outstanding at a rate per
annum equal to the interest rate otherwise applicable hereunder plus three
percent (3%), until fully paid. Any payment hereunder not paid within ten (10)
days after the date such payment is due shall be subject to a late charge equal
to five percent (5%) of the amount overdue.
Interest and fees shall be calculated on the basis of a 360-day year times the
actual number of days elapsed. At Bank's discretion, all payments will be
applied first to unpaid accrued interest, then to principal, and then any
balance to any charges, costs, expenses or late fees outstanding. "Corporate
Base Rate," as used herein, shall mean for any day the rate on such day as
designated by Bank as its corporate base rate. Any change in rate resulting from
a change in the Corporate Base Rate shall become effective as of the day on
which such change in the Corporate Base Rate becomes effective. In no event
shall interest payable hereunder exceed the highest rate permitted by applicable
law. To the extent any interest received by Bank exceeds the maximum amount
legally permitted, such payment shall be credited to principal, and any excess
remaining after full payment of principal shall be refunded to Maker. This Note
evidences an Equipment Facility Loan under that certain Loan and Security
Agreement, as amended, (the "Agreement") dated the date hereof between Maker and
Bank and is secured by and entitled to the benefits of the provisions of the
Agreement and any other instruments or documents executed in connection
therewith. The principal of this note is subject to prepayment in the manner and
to the extent provided in the Agreement. If an Event of Default (as defined in
the Agreement) occurs, the entire balance of principal, accrued interest, and
any and all other fees and charges payable hereunder may become immediately due
and payable in the manner and with the effect provided in the Agreement.
As security for the payment and performance of Maker's obligations or the
obligations of any guarantor or endorser hereof to the Bank or any holder hereof
("Holder") now existing or hereafter arising, Holder is hereby granted a lien
and security interest in and to any and all
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deposits or other sums at any time credited by or due from Holder to Maker or
any guarantor or endorser, whether in regular or special depository accounts or
otherwise, and all moneys, securities and other property and the proceeds
thereof, now or hereafter held or received by Holder, whether for safekeeping,
custody, pledge, collection or otherwise. Upon the failure of Maker, or any
guarantor or endorser hereof, to pay any amount hereunder when due, in
addition to and not in limitation of any and all rights and remedies of the
Holder hereunder or otherwise, all of such rights and remedies being cumulative,
Holder may set off any such deposits, other sums, moneys, securities and other
property and the proceeds thereof against any or all of the obligations of
Maker, guarantors or endorsers to Holder, without prior notice or demand, and
regardless of whether or not such obligations are secured by any other
collateral, and regardless of the adequacy of any such other collateral.
Maker agrees to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and expenses incurred, or which may be incurred, by
Holder in connection with the negotiation, documentation, administration (as
provided in the Loan Agreement), enforcement and collection of this note and any
other agreements, instruments and documents executed in connection herewith.
Maker and all guarantors and endorsers hereby waive presentment, demand, notice,
protest, and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this note, and assent to extensions
of the time of payment or forbearance or other indulgence without notice. No
delay or omission of Holder in exercising any right or remedy hereunder shall
constitute a waiver of any such right or remedy. Acceptance by Holder of any
payment after demand shall not be deemed a waiver of such demand. A waiver on
one occasion shall not operate as a bar to or waiver of any such right or remedy
on any future occasion.
All payments required to be made hereunder shall be made to the Bank at its
office at Xxx Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 or such other address
as the Bank or any Holder may designate.
This instrument shall be governed by Massachusetts law.
Executed as an instrument under seal as of the date first above written.
WITNESS: SPECIALTY EXTRUSION CORP.
/s/ Xxxxxxx Xxxx By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------- -------------------------------------
Xxxxxxx Xxxx Name: Xxxxxx X. Xxxxxxxxx
Title: Treasurer
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