CONSENT AND FOURTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
THIS CONSENT AND FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AND
SECURITY AGREEMENT (the "Amendment') is dated as of February 15, 1999 and is by
and between WSI INDUSTRIES, INC., formerly known as WASHINGTON SCIENTIFIC
INDUSTRIES, INC. (the "Borrower") and U.S. BANK NATIONAL ASSOCIATION as assignee
of 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, and a Third
Amendment to Amended and Restated Credit and Security Agreement dated as of
April 30, 1997 (as so amended, the "Credit Agreement") under which the Lender
has agreed to make Advances to the Borrower; and
WHEREAS, the Borrower desires to purchase all of the outstanding common
stock of Taurus Numeric Tool, Inc., a Minnesota corporation (the "Stock
Purchase") pursuant to the terms of a Stock Purchase Agreement dated as of
February 15, 1999 (the "Stock Purchase Agreement"), and has requested that
Lender consent to the Stock Purchase and increase availability under the Credit
Agreement; and
WHEREAS, the Lender has agreed to consent to the Stock Purchase on the
terms and conditions set forth herein; 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.
1.1(a) Each reference to the "Lender" in the Credit Agreement shall
be deemed a reference to U.S. Bank National Association.
1.1(b) 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. DEFINITIONS. The definition of "Eligible Account Receivable"
contained in Section 1.1 of the Credit Agreement is amended by adding
thereto, after the word "Borrower" each time it appears, the words "or
Taurus" and by adding thereto, after the word "Borrower's" each time it
appears, the words "or Taurus's". Notwithstanding any other provision of
this Amendment, the changes in the definition of Eligible Account
Receivable contained in the foregoing sentence shall be effective only
after this Amendment is otherwise effective and after completion of a
collateral audit of Taurus that is satisfactory to the Lender. The
definition of "Term Note B" is deleted from the Credit Agreement. The
definitions of "Term Notes" and "Term Note A" in Section 1.1 of the Credit
Agreement are amended to read as follows:
"TERM NOTE": Term Note A.
"TERM NOTE A": As defined in Section 2.1.2.
1.3 MORE DEFINITIONS. The following definitions are added to Section
1.1 of the Credit Agreement in appropriate alphabetical order:
"FOURTH AMENDMENT": The Consent and Fourth Amendment to this Credit
and Security Agreement dated as of February 15, 1999.
"TAURUS": Taurus Numeric Tool, Inc., a Minnesota corporation.
1.4 TERM LOAN. Section 2.1.2 of the Credit Agreement is amended in
its entirety to read as follows:
2.1.2 TERM LOAN.
(a) Subject to the terms and conditions of the Loan Documents and the
Fourth Amendment, and in reliance upon the warranties of the Borrower
set forth herein and in the other Loan Documents, the Lender agrees to
make a term loan (the "Term Loan") to the Borrower on
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the effective date of the Fourth Amendment in the principal amount of
$3,200,000. The Borrower shall execute and deliver to the Lender a
promissory note payable to the Lender in the amount of the Term Loan
("Term Note A").
(b) Unless otherwise required to be sooner paid pursuant to this
Agreement, the principal of the Term Loan shall mature and be payable
in consecutive equal monthly installments of $38,096 of principal
commencing August 31, 1999 and continuing on the last day of each
month until the Termination Date, at which time all unpaid principal
and all accrued and unpaid interest shall be due and payable. Any
principal of the Term Loan that is repaid may not be reborrowed except
as provided in SECTION 2.1.2(c). Interest on Term Note A shall be
paid in accordance with SUPPLEMENT A.
(c) So long as there are no Revolving Loans outstanding, the
Borrower may, upon one Business Day notice to the Lender, prepay the
principal of the Term Loan in whole or in part without premium except
as set forth in SUPPLEMENT A. Any partial prepayment of principal of
the Term Loan shall be in a minimum amount of the lesser of (i) the
outstanding principal balance of the Term Loan and (ii) $25,000 or an
integral multiple thereof, and shall be applied to the unpaid
installments of the Term Loan in the inverse order of their
maturities. Any principal of the Term Loan which is prepaid under
this Section 2.1.2(c) may be reborrowed so long as (x) no Event of
Default or Unmatured Event of Default has occurred and is continuing
and (y) a principal balance was outstanding under Term Note A prior to
the requested reborrowing and subject to a reduction in the
availability under Term Note A based upon its due amortization in
accordance with the provisions of this Agreement.
(d) Any payment of the Term Loan may be made with the proceeds of a
Revolving Loan only if, immediately before and after giving effect to
such payment, no Event of Default or Unmatured Event of Default then
exists or would result therefrom.
(e) On or before each Mandatory Prepayment Date the Borrower shall
pay to the Lender an aggregate amount equal to 30% of the Excess Net
Income for the applicable fiscal year, based on audited financial
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statements for such fiscal year, which payment shall be applied
against the unpaid installments of the Term Loan in the inverse order
of maturities, with all such payments made in accordance with the
provisions of Section 2.10(a). If Revolving Loan Availability on the
Mandatory Prepayment Date is $500,000 or less, the prepayment required
under this Section 2.1.2(e) shall be due and payable on the first
Business Day on which the Revolving Loan Availability next exceeds
$500,000. In no event shall the amount of the Term Loan required to
be prepaid under this Section 2.1.2(e) exceed $200,000 for any fiscal
year.
1.5 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
Except as otherwise provided in Section 1.2 of this Amendment, 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 AND SUPPLEMENT A. The Borrower and the Lender
shall have executed this Amendment and initialed Supplement A as amended
pursuant hereto and the Borrower has executed and delivered Term Note A.
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 and except as modified by the
Schedules attached hereto. The execution by the Borrower of this
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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.
(e) GUARANTY OF TAURUS. A guaranty of Taurus of all obligations of
Borrower, in form and in substance acceptable to Lender;
(f) SECURITY AGREEMENT. A third party Security Agreement from Taurus
in form and in substance acceptable to Lender.
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(g) SUBORDINATION AGREEMENT. A Subordination Agreement (the
"Subordination Agreement") in form and substance acceptable to Lender executed
by Xxxxxx Xxxxxx.
(h) LANDLORD'S WAIVER. A Landlord Waiver in form and substance
acceptable to Lender executed by Xxxxxx Xxxxxx and his spouse.
(i) STOCK PURCHASE AGREEMENT. A certified copy of the Stock
Purchase Agreement and all documents executed and delivered in connection
therewith.
ARTICLE V - CONSENT
Upon receipt by the Lender of the documents required in Section 4.4 above,
effective February 15, 1999, the Lender hereby consents (a) to the purchase by
the Borrower of all of the outstanding shares of common stock of Taurus owned by
Xxxxxx Xxxxxx. (the "Selling Shareholder"), pursuant to the terms of the Stock
Purchase Agreement, (b) to Taurus being a wholly owned subsidiary of Borrower,
and (c) to the payment of the purchase price of such shares to the Selling
Shareholder pursuant to the terms of the Subordination Agreement described in
Section 4.4(i) above. The acquisition of Taurus shall not be construed as a
violation of the provisions of Section 6.10 of the Credit Agreement, the
ownership of Taurus as a wholly owned subsidiary shall not be construed as a
violation of the provisions of Section 6.6 of the Credit Agreement, the
subordinated debt incurred by the Borrower under the Stock Purchase Agreement
shall not be construed as a violation of the provisions of Section 6.11 of the
Credit Agreement, and the execution of the Third Party Security Agreement and
the Guaranty by Taurus shall not be construed as a violation of the provisions
of Sections 6.12 and 6.13 of the Credit Agreement.
ARTICLE VI - GENERAL
6.1 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.
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6.2 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.
6.3 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.
6.4 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.
6.5 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.
WSI INDUSTRIES, INC. (formerly known as
Washington Scientific Industries, Inc.)
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Title: President
-----------------------------
U.S. BANK NATIONAL ASSOCIATION, as Assignee of
FBS BUSINESS FINANCE
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CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Title: Vice President
--------------------------------------
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EXHIBIT A
SUPPLEMENT A
(AMENDED FEBRUARY 15, 1999)
TO
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
DATED AS OF MARCH 31, 1995 BETWEEN
U.S. BANK NATIONAL ASSOCIATION AS ASSIGNEE OF
FBS BUSINESS FINANCE CORPORATION (THE "LENDER")
AND
WSI INDUSTRIES, INC. FORMERLY KNOWN AS
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 THREE MILLION AND
NO/100 DOLLARS ($3,000,000); 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 and Taurus'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 the sum of $300,000.
2.4 TERMINATION DATE. The term "Termination Date" shall mean March
31, 2000.
2.5 ADDITIONAL DEFINITIONS. As used herein, the following terms
shall have the following respective meanings:
"ADJUSTED EURODOLLAR RATE": With respect to each Interest Period
applicable to a Eurodollar Rate Advance, the rate (rounded upward, if
necessary, to the next one hundredth of one percent) determined by
dividing the Eurodollar Rate for such Interest Period by 1.00 minus
the Eurodollar Reserve Percentage.
"ADVANCE": Any portion of the outstanding principal balance of
the Revolving Loan or the Term Loan under the Credit Agreement as to
which the Borrower elected one of the available interest rate options
and, if applicable, an Interest Period. An Advance may be a
Eurodollar Rate Advance or a Reference Rate Advance.
"APPLICABLE REVOLVING MARGIN": With respect to:
(a) Reference Rate Advances: 0.25%.
(b) Eurodollar Rate Advances: 2.75%.
"APPLICABLE TERM MARGIN": With respect to:
(a) Reference Rate Advances: 0.50%.
(b) Eurodollar Rate Advances: 3.00%.
"BOARD": The Board of Governors of the Federal Reserve System or
any successor thereto.
"EURODOLLAR BUSINESS DAY": A Business Day which is also a day
for trading by and between Lenders in United States dollar deposits in
the interbank Eurodollar market and a day on which banks are open for
business in New York City.
"EURODOLLAR RATE": With respect to each Interest Period
applicable to a Eurodollar Rate Advance, the interest rate per annum
(rounded upward, if necessary, to the next one-sixteenth of one
percent) at which United States dollar deposits are offered to the
Lender in the interbank Eurodollar market two Eurodollar Business Days
prior to the first day of such Interest Period for delivery in
Immediately Available Funds on the
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first day of such Interest Period and in an amount approximately equal
to the Advance to which such Interest Period is to apply as determined
by the Lender and for a maturity comparable to the Interest Period;
PROVIDED, that in lieu of determining the rate in the foregoing
manner, the Lender may substitute the per annum Eurodollar interest
rate (LIBOR) for United States dollars displayed on the Reuters Screen
LIBO Page two Eurodollar Business Days prior to the first day of the
Interest Period. "Reuters Screen LIBO Page" means the display
designated as page "LIBO" on the Reuter Monitor Money Rates Screen (or
such other page as may replace the LIBO page on that service) for the
purpose of displaying London Interbank offered rates of major Lenders
for United States dollar deposits.
"EURODOLLAR RATE ADVANCE": An Advance with respect to which the
interest rate is determined by reference to the Adjusted Eurodollar
Rate.
"EURODOLLAR RESERVE PERCENTAGE": As of any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed
by the Board for determining the maximum reserve requirement
(including any basic, supplemental or emergency reserves) for a member
Lender of the Federal Reserve System, with deposits comparable in
amount to those held by the Lender, in respect of "Eurocurrency
Liabilities" as such term is defined in Regulation D of the Board. The
rate of interest applicable to any outstanding Eurodollar Rate
Advances shall be adjusted automatically on and as of the effective
date of any change in the Eurodollar Reserve Percentage.
"INTEREST PERIOD": With respect to each Eurodollar Rate Advance,
the period commencing on the date of such Advance or on the last day
of the immediately preceding Interest Period, if any, applicable to an
outstanding Advance and ending one, two or three months thereafter, as
the Borrower may elect in the applicable notice of borrowing,
continuation or conversion; PROVIDED THAT:
(1) Any Interest Period that would otherwise end on a day
which is not a Eurodollar Business Day shall be extended to the
next succeeding Eurodollar Business Day unless such Eurodollar
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Eurodollar
Business Day;
(2) Any Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Eurodollar Business
Day of a calendar month; and
(3) Any Interest Period that would otherwise end after the
Termination Date shall end on the Termination Date.
"REFERENCE RATE": The rate of interest from time to time
publicly announced by the Lender as its "reference rate." The Lender
may lend to its customers at rates that are at, above or below the
Reference Rate. For purposes of determining any interest rate
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hereunder or under any Note or loan which is based on the Reference
Rate, such interest rate shall change as and when the Reference Rate
shall change.
"REFERENCE RATE ADVANCE": An Advance with respect to which the
interest rate is determined by reference to the Reference Rate.
"REGULATORY CHANGE": Any change after the date of the Credit
Agreement in federal, state or foreign laws or regulations or the
adoption or making after such date of any interpretations, directives
or requests applying to a class of Lenders including the Lender under
any federal, state or foreign laws or regulations (whether or not
having the force of law) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
3. INTEREST; FEES.
3.1 PROCEDURE FOR ADVANCES. Any request for an Advance must be given
so as to be received by the Lender not later than 1:00 p.m. (Minneapolis
time) two Eurodollar Business Days prior to the date of the requested
Advance if the Advance is requested as a Eurodollar Rate Advance and not
later than 1:00 p.m. on the date of the requested Advance if the Advance is
requested as a Reference Rate Advance. Each request for an Advance shall
specify (i) the date of the Advance, (ii) the amount of the Advance to be
made on such date which shall be in a minimum amount of $5,000 for
Reference Rate Advances, or $500,000 for Eurodollar Rate Advances or, if
more in either case, an integral multiple thereof, (iii) whether such
Advance is to be funded as a Reference Rate Advance or a Eurodollar Rate
Advance, and (iv) in the case of a Eurodollar Rate Advance, the duration of
the initial Interest Period applicable thereto.
3.2 CONVERSIONS AND CONTINUATIONS. On the terms and subject to the
limitations hereof, the Borrower shall have the option at any time and from
time to time to convert all or any portion of the Advances into Reference
Rate Advances or Eurodollar Rate Advances, or to continue a Eurodollar Rate
Advance as such; provided, however that a Eurodollar Rate Advance may be
converted or continued only on the last day of the Interest Period
applicable thereto and no Advance may be converted or continued as a
Eurodollar Rate Advance if a Default or Event of Default has occurred and
is continuing on the proposed date of continuation or conversion. Advances
may be converted to, or continued as, Eurodollar Rate Advances only in
amounts of $500,000 or an integral multiple thereof. The Borrower shall
give the Lender written notice of any continuation or conversion of any
Advance and such notice must be given so as to be received by the Lender
not later than 3:00 p.m. (Minneapolis time) two Eurodollar Business Days
prior to requested date of conversion or continuation in the case of the
continuation of, or conversion to, a Eurodollar Rate Advance. Each such
notice shall specify (a) the amount to be continued or converted, (b) the
date for the continuation or conversion (which must be (i) the last day of
the preceding Interest Period for any continuation or conversion of
Eurodollar Rate Advances, and (ii) a Eurodollar Business Day), and (c) in
the case of conversions to or continuations as Eurodollar Rate Advances,
the Interest Period applicable thereto. Any notice given by the Borrower
under this Section shall be irrevocable. If the Borrower shall fail to
notify the Lender of the continuation of any Eurodollar Rate Advance within
the time required by this
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Section, such Advance shall, on the last day of the Interest Period
applicable thereto, automatically be converted into a Reference Rate
Advance of the same principal amount.
3.3 INTEREST RATES, INTEREST PAYMENTS AND DEFAULT INTEREST. Interest
shall accrue and be payable on the Advances as follows:
3.3 (a) Each Eurodollar Rate Advance on the Revolving Loan
shall bear interest on the unpaid principal amount thereof during the
Interest Period applicable thereto at a rate per annum equal to the
sum of (i) the Adjusted Eurodollar Rate for such Interest Period, plus
(ii) the Applicable Revolving Margin.
3.3(b) Each Reference Rate Advance on the Revolving Loan shall
bear interest on the unpaid principal amount thereof at a varying rate
per annum equal to the sum of (i) the Reference Rate, plus (ii) the
Applicable Revolving Margin.
3.3(c) Each Eurodollar Rate Advance on the Term Loan shall bear
interest on the unpaid principal amount thereof during the Interest
Period applicable thereto at a rate per annum equal to the sum of (i)
the Adjusted Eurodollar Rate for such Interest Period, plus (ii) the
Applicable Term Margin.
3.3(d) Each Reference Rate Advance on the Term Loan shall bear
interest on the unpaid principal amount thereof at a varying rate per
annum equal to the sum of (i) the Reference Rate, plus (ii) the
Applicable Term Margin.
3.3 (e) Any Advance not paid when due, whether at the date
scheduled therefor or earlier upon acceleration, shall bear interest
until paid in full at the Default Rate, which shall be (i) during the
balance of any Interest Period applicable to such Advance, at a rate
per annum equal to the sum of the rate applicable to such Advance
during such Interest Period plus 2.0%, and (ii) otherwise, at a rate
per annum equal to the sum of the rate otherwise applicable to such
Advance plus 2.0% per annum.
3.3 (f) Interest shall be payable (i) with respect to each
Eurodollar Rate Advance having an Interest Period of three months or
less, on the last day of the Interest Period applicable thereto; (ii)
with respect to any Reference Rate Advance, on the last day of each
month; (iii) with respect to all Advances, upon any permitted
prepayment (on the amount prepaid); and (v) with respect to all
Advances, on the Termination Date; provided that interest under
Section 3.3 (e) shall be payable on demand.
3.4 OPTIONAL PREPAYMENTS. The Borrower may prepay Reference Rate
Advances on the Revolving Loan, in whole or in part, at any time, without
premium or penalty. Any such prepayment must be accompanied by accrued and
unpaid interest on the amount prepaid. Each partial prepayment shall be in
a minimum amount of $10,000 or, if more, an integral multiple thereof.
Except upon an acceleration following an Event of Default or upon
termination of the Credit in whole or as otherwise required under the
Credit Agreement, the Borrower may pay Eurodollar Rate Advances only on the
last day of the Interest Period applicable thereto. Amounts paid (unless
following an acceleration or upon termination of the Credit in whole) or
prepaid on Advances under this Section 3.4 may be reborrowed upon the terms
and subject to the conditions
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and limitations of the Credit Agreement. Prepayment of the Term Loan is
also subject to the provisions of Section 3.13 below.
3.5 INTEREST RATE NOT ASCERTAINABLE, ETC. If, on or prior to the
date for determining the Adjusted Eurodollar Rate in respect of the
Interest Period for any Eurodollar Rate Advance, the Lender determines
(which determination shall be conclusive and binding, absent error) that:
(a) deposits in dollars (in the applicable amount) are not being
made available to the Lender in the relevant market for such Interest
Period, or
(b) the Adjusted Eurodollar Rate will not adequately and fairly
reflect the cost to the Lender of funding or maintaining Eurodollar
Rate Advances for such Interest Period,
the Lender shall forthwith give notice to the Borrower of such
determination, whereupon the obligation of the Lender to make or continue,
or to convert any Advances to, Eurodollar Rate Advances, as the case may
be, shall be suspended until the Lender notifies the Borrower that the
circumstances giving rise to such suspension no longer exist. While any
such suspension continues, all further Advances by the Lender shall be made
as Reference Rate Advances. No such suspension shall affect the interest
rate then in effect during the applicable Interest Period for any
Eurodollar Rate Advance outstanding at the time such suspension is imposed.
3.6 INCREASED COST. If any Regulatory Change:
(a) shall subject the Lender to any tax, duty or other charge
with respect to its Eurodollar Rate Advances, its obligation to make
Eurodollar Rate Advances or shall change the basis of taxation of
payment to the Lender of the principal of or interest on Eurodollar
Rate Advances or any other amounts due under this Agreement in respect
of Eurodollar Rate Advances or its obligation to make Eurodollar Rate
Advances (except for changes in the rate of tax on the overall net
income of the Lender imposed by the jurisdiction in which the Lender's
principal office is located); or
(b) shall impose, modify or deem applicable any reserve, special
deposit, capital requirement or similar requirement (including,
without limitation, any such requirement imposed by the Board, but
excluding with respect to any Eurodollar Rate Advance any such
requirement to the extent included in calculating the applicable
Adjusted Eurodollar Rate) against assets of, deposits with or for the
account of, or credit extended by, the Lender or shall impose on the
Lender or on the interbank Eurodollar market any other condition
affecting its Eurodollar Rate Advances or its obligation to make
Eurodollar Rate Advances;
and the result of any of the foregoing is to increase the cost to the
Lender of making or maintaining any Eurodollar Rate Advance, or to reduce
the amount of any sum received or receivable by the Lender under this
Agreement or under the Note, then, within 30 days after demand by the
Lender, the Borrower shall pay to the Lender such additional amount or
amounts as will compensate the Lender for such increased cost or reduction.
The Lender will promptly notify the Borrower of any event of which it has
knowledge, occurring after the date hereof,
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which will entitle the Lender to compensation pursuant to this Section.
A certificate of the Lender claiming compensation under this Section,
setting forth the additional amount or amounts to be paid to it hereunder
and stating in reasonable detail the basis for the charge and the method of
computation, shall be conclusive in the absence of error. In determining
such amount, the Lender may use any reasonable averaging and attribution
methods. Failure on the part of the Lender to demand compensation for any
increased costs or reduction in amounts received or receivable with respect
to any Interest Period shall not constitute a waiver of the Lender's rights
to demand compensation for any increased costs or reduction in amounts
received or receivable in any subsequent Interest Period.
3.7 ILLEGALITY. If any Regulatory Change shall make it unlawful or
impossible for the Lender to make, maintain or fund any Eurodollar Rate
Advances, the Lender shall notify the Borrower, whereupon the obligation of
the Lender to make or continue, or to convert any Advances to, Eurodollar
Rate Advances shall be suspended until the Lender notifies the Borrower
that the circumstances giving rise to such suspension no longer exist. If
the Lender determines that it may not lawfully continue to maintain any
Eurodollar Rate Advances to the end of the applicable Interest Periods, all
of the affected Advances shall be automatically converted to Reference Rate
Advances as of the date of the Lender's notice, and upon such conversion
the Borrower shall indemnify the Lender in accordance with Section 3.8.
3.8 FUNDING LOSSES; EURODOLLAR RATE ADVANCES. The Borrower shall
compensate the Lender, upon its written request, for all losses, expenses
and liabilities (including any interest paid by the Lender to lenders of
funds borrowed by it to make or carry Eurodollar Rate Advances to the
extent not recovered by the Lender in connection with the re-employment of
such funds and including loss of anticipated profits) which the Lender may
sustain: (i) if for any reason, other than a default by the Lender, a
funding of a Eurodollar Rate Advance does not occur on the date specified
therefor in the Borrower's request or notice as to such Advance under
Section 3.1 or 3.2, or (ii) if, for whatever reason (including, but not
limited to, acceleration of the maturity of Advances following an Event of
Default), any repayment of a Eurodollar Rate Advance, or a conversion
pursuant to Section 3.7, occurs on any day other than the last day of the
Interest Period applicable thereto. The Lender's request for compensation
shall set forth the basis for the amount requested and shall be final,
conclusive and binding, absent error.
3.9 DISCRETION OF LENDER AS TO MANNER OF FUNDING. The Lender shall
be entitled to fund and maintain its funding of Eurodollar Rate Advances in
any manner it may elect, it being understood, however, that for the
purposes of this Agreement all determinations hereunder (including, but not
limited to, determinations under Section 3.8, but excluding determinations
that the Lender may elect to make from the Telerate System, Inc. screen)
shall be made as if the Lender had actually funded and maintained each
Eurodollar Rate Advance during the Interest Period for such Advance through
the purchase of deposits having a maturity corresponding to the last day of
the Interest Period and bearing an interest rate equal to the Eurodollar
Rate for such Interest Period.
3.10 OVERDRAFT LOANS; OVER ADVANCES. Overdraft Loans and Over
Advances (including the Agreed Over Advance) shall bear interest at the
rate(s) determined pursuant to SECTION 2.7 or SECTION 2.8 of the Credit
Agreement, as applicable.
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3.11 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.
3.12 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.
3.13 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 $7,000,000.
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.
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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) 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.
6. MORE COVENANTS. No later than June 30, 1999, the Borrower shall:
(a) Submit to the Lender projected financial statements of
the Borrower and the Subsidiaries for the periods ending August 31,
2000 and August 31, 2001, prepared in the same manner as the audit
report referred to in Section 5.1.1(a) of the Credit Agreement, signed
by the Borrower's chief financial officer and presenting fairly the
Borrower's best good faith projections of the financial position and
results of operations of the Borrower and the Subsidiaries for each
such accounting period; and
(b) Allow the Lender to complete a collateral audit of the
properties of the Borrower and the Subsidiaries, in form and substance
satisfactory to the Lender, at the Borrower's expense.
Borrower's Initials /s/ MJP
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Lender's Initials /s/ LHR
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Dated as of February 15, 1999
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