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EXHIBIT 4.3
FIRST AMENDMENT TO LOAN AGREEMENT
This First Amendment to Loan Agreement is made as of the 21st day of
August, 1998 by and among
Galileo Corporation, a Delaware corporation, with its principal place
of business at Galileo Park, Sturbridge, Worcester County,
Massachusetts (the "Borrower"); and
BankBoston, N.A., a national banking association having its principal
offices at 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx (the "Bank")
In consideration of the mutual covenants herein contained and benefits to be
derived herefrom.
WITNESSETH
WHEREAS, the Borrower and the Bank have entered into a Loan Agreement
dated as of January 27, 1998 (the "Loan Agreement"); and
WHEREAS, certain Events of Default have arisen under the Loan Agreement
and the Borrower has requested the Bank to amend the Loan Agreement and to
forbear from exercising its rights and remedies as a result of the existence of
such Events of Default; and
WHEREAS, the Bank is willing to forbear from exercising its rights and
remedies as a result of the existence of the Events of Default and to amend the
Loan Agreement on the terms set forth herein.
NOW THEREFORE, it is hereby agreed as follows:
1. Definitions: All capitalized terms used herein and not otherwise
defined shall have the same meaning herein as the Loan Agreement.
2. Amendment to Section 1. The provisions of section 1.1 of the Loan
Agreement are hereby amended
(a) By deleting the definitions of "Adjusted LIBOR Rate",
"Conversion Date", "LIBOR Loan", "Interest Period" and "Notice of Borrowing
and/or Selection of Interest", in their entirety.
(b) By amending the definition of "Guarantor" by adding the
words "and Optical Filter Corporation" at the end thereof.
(c) By amending the definition of "Guaranty" by adding the
words "and the Guaranty of Optical Filter Corporation dated January 30, 1998" at
the end thereof.
(d) By amending the definition of "landlord's Waiver" by
deleting the words "at any location in which the value of the Borrower's assets
or any of its Subsidiaries exceed ONE MILLION and 00/100 ($1,000,000.00)
DOLLARS" and substituting in its stead the words "at any location at which
assets of the Borrower or any of its Subsidiaries are maintained".
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(e) By amending the definition of "Maximum Commitment" to read
"FOURTEEN MILLION and 00/100 DOLLARS ($14,000,000.00), subject to reduction as
provided in Section 2.1(b) hereof.
(f) By amending the definition of "Revolving Credit Period" by
deleting the words "or the Conversion Date" and substituting in its stead the
words "or the Maturity Date".
(g) By deleting the definition of "Security Agreements" in its
entirety and substituting the following in its stead:
Security Agreements. A certain Security Agreement of
even date herewith by and between the BORROWER and
the BANK encumbering the assets of the BORROWER, the
Security Agreements now or hereafter executed and
delivered by the BORROWER'S Subsidiaries to the BANK,
and all other instruments, documents and agreements
heretofore or hereafter executed and delivered by the
BORROWER or any of its Subsidiaries to the BANK
granting a Lien on any of their assets as security
for the Obligations.
(h) By adding the following new definitions:
Adjusted Interest Coverage Ratio. At any time of
determination, the ratio of (x) Consolidated
Operating Cash Flow plus or minus Consolidated
Working Capital Changes, as applicable, to (y)
Consolidated Interest Expense.
Asset Sale. Any one or series of related transactions
in which the Borrower or any of its Subsidiaries
conveys, sells, transfers or otherwise disposes of,
directly or indirectly, any of its properties,
business or assets (including the sale or issuance of
any capital stock of its respective Subsidiaries) or
merges or consolidates with or into, or enters into
any joint venture or other business combination with,
any other person or entity.
Consolidated Current Assets. All assets of the
BORROWER and its Subsidiaries on a consolidated basis
that, in accordance with generally accepted
accounting principles, are properly classified as
current assets.
Consolidated Current Liabilities. All liabilities and
other Indebtedness of the BORROWER and its
Subsidiaries on a consolidated basis maturing on
demand or within one (1) year from the date
Consolidated Current Liabilities are to be
determined, and such other liabilities that, in
accordance with generally accepted accounting
principles, are properly classified as current
liabilities.
Consolidated EBITDA. For any period, an amount equal
to Consolidated Net Income for such period, plus, to
the extent deducted in the calculation of
Consolidated Net Income for such period (a)
depreciation, amortization
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and other noncash expenses, (b) income tax expense,
and (c) Consolidated Interest Expense, all as
determined in accordance with generally accepted
accounting principles.
Consolidated Interest Expense. For any period, the
aggregate amount of interest required to be paid or
accrued by the BORROWER and its Subsidiaries during
such period on all Indebtedness, including all
facility and other fees incurred in connection
therewith.
Consolidated Operating Cash Flow. For any period, an
amount equal to (a) Consolidated EBITDA for such
period, less (b) the sum of (I) cash payments for all
taxes made during such period, and (ii) to the extent
not already deducted in the determination of
Consolidated EBITDA, capital expenditures made during
such period to the extent permitted under Section
5.11 hereof.
Consolidated Working Capital Changes. For any period,
the net change from the immediately preceding period
to (a) accounts receivable of the BORROWER and its
Subsidiaries, (b) accounts payable of the BORROWER
and its Subsidiaries, (c) current accruals of the
BORROWER and its Subsidiaries, and (d) inventory of
the BORROWER and its Subsidiaries, all as determined
in accordance in generally accepted accounting
principles.
Current Ratio. At any time of determination, the
ratio of Consolidated Current assets to Consolidated
Current Liabilities.
Interest Coverage Ratio. At any time of
determination, the ratio of (x) Consolidated
Operating Cash Flow to (y) Consolidated Interest
Expense.
Maturity Date. December 31, 1999.
Net Cash Proceeds. The net cash proceeds received by
the Borrower or any of its Subsidiaries in respect of
any Asset Sale, less the sum of (a) all reasonable
out-of-pocket fees, commissions and other expenses
incurred in connection with such Asset Sale (but
excluding any applicable taxes required to be paid as
a result of any such Asset sale), and (b) the
aggregate amount of cash which is used to retire (in
whole or in part) any Indebtedness secured by a Lien
permitted hereunder having priority over the Liens of
the Bank with respect to the assets which are the
subject of the Asset sale and which is required to be
repaid in whole or in part in connection with such
Asset Sale.
3. Amendments to Section 2. The provisions of section 2 of the Loan
Agreement are hereby amended
(a) By deleting the provisions of section 2.1 in its entirety
and substituting the following in its stead:
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2.1 The Loan. (a) Subject to the terms and conditions
hereof, the BANK will make available to the BORROWER
Loans in the aggregate amount outstanding of up to
the Maximum Commitment evidenced by a FOURTEEN
MILLION and 00/100 DOLLAR note ("Note") with interest
payable monthly at the aggregate of the Base Rate
plus one percent (1%) per annum. During the revolving
Credit Period, the BORROWER may borrow, prepay, and
reborrow pursuant to this Agreement. The entire
outstanding balance of the Loan shall be paid in full
on the Maturity date.
(b) The Borrower shall make a prepayment of the
Obligations in an amount equal to 100% of the Net
Cash Proceeds received by the Borrower or any of its
Subsidiaries from any Asset Sale. Upon any such Asset
Sale, the Maximum Commitment will be reduced by a n
amount equal to such Net Cash Proceeds. Any reduction
of the Maximum Commitment may not be reinstated.
b. by deleting the provisions of Section 2.2(a) and substituting the following
in its stead:
a) Whenever the BORROWER desires to obtain a Loan
hereunder, the BORROWER shall notify the BANK (which
notice shall be irrevocable) by telex, telegraph or
telephone received no later than 10:00 a.m. (Boston,
MA time) on the date one (1) business day before the
day on which the requested Loan is to be made. Such
notice shall specify the effective date and amount of
each Loan. Each such notification shall be
immediately followed by a written confirmation
thereof by the BORROWER in substantially the form of
Exhibit "B" hereto, provided that if such written
confirmation differs in any material respect from the
action taken by the BANK, the records of the BANK
shall control, absent manifest error.
c. by deleting the provisions of Section 2.4 in their entirety.
d. by deleting the words "one-quarter (.25%)" in Section 2.5(d) and substituting
in its stead the words "one-half percent (.50%)".
e. by adding the following new subsection at the end of Section 2.5:
e) An amendment fee in connection with the First
Amendment to this Agreement in the sum of
$150,000.00. Such amendment fee shall be paid in two
installments, the first of which shall be in the sum
of $50,000.00 and shall be paid upon execution of the
First Amendment to this Agreement and the second of
which shall be in the sum of $100,000.00 and shall be
paid on January 2, 1999. The full amount of the
amendment fee shall be fully earned upon the
execution of the First Amendment to this Agreement
and, except as set forth in the following sentence,
shall not be subject to refund or rebate under any
circumstances. Notwithstanding the foregoing, if (x)
all Obligations have been irrevocably paid in full on
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or before December 31, 1998, and (y) all obligations
of the BANK to make Loans terminated on or before
December 31, 1998, and (z) no Event of Default has
arisen after the date of the First Amendment to this
Agreement as a result of which the BANK has
accelerated the time for payment of the Obligations
and commenced the exercise of its remedies upon
default, the BANK shall waive payment of the second
installment of the amendment fee due on January 2,
1999.
f. by deleting the provisions of Section 2.6 in their entirety and substituting
the following in its stead:
2.6 Interest Rate and Payments of Interest: Each Base
Rate Loan shall bear interest on the outstanding
principal amount thereof at a rate per annum equal to
the aggregate of the Base Rate plus one percent (1%),
which rate shall change contemporaneously with any
change in the Base Rate. Interest shall be payable
monthly in arrears on the first day of each month.
g. by deleting the provisions of Section 2.7(a) in their entirety.
h. by deleting the words "(other than such requirements as are already included
in the determination of Adjusted LIBOR Rate)" in clause (2) of Section 2.7(b).
i. by deleting the provisions of Section 2.8 in their entirely and substituting
the following in its stead:
2.8 Payments and Prepayments of the Loan. All Base
Rate Loans may be prepaid in increments of a minimum
of $100,000.00 at any time without premium or penalty
on one (1) business day's notice and the interest
accrued on the amount so paid to the date of such
payment must be paid at the time of any such payment.
j. by deleting the provisions of Section 2.1(a) and substituting the following
in its stead:
a) Upon the occurrence of any Event of Default,
interest shall accrue on the outstanding principal of
the Obligations and, to the extent permitted by
applicable law, overdue interest and fees or other
amounts payable hereunder or under the other Loan
Documents at a rate per annum equal to the aggregate
of the Base Rate plus four percent (4%).
k. by deleting the provisions of Section 2.11 in their entirety.
l. by deleting the words "Except as provided in Paragraph (a ) of the definition
of Interest Period" from the second sentence of Section 2.12.
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4. Amendments to Section 5. The provisions of Section 5 of the Loan Agreement
are hereby amended
a. by deleting the words "five (5) days" appearing in Section 5.1(g) and
substituting the words "two (2) days" in their stead.
b. by adding the following new subsection to Section 5.1:
j) promptly, and in any event no less frequently than
weekly, written notice of the status of any
negotiations, offers and/or agreements for any Asset
Sales, together with copies of all offers, agreements
and other documents in connection therewith.
c. by deleting the provisions of Section 5.8 in their entirety and substituting
the following in its stead:
5.8 Current Ratio. The BORROWER and its Subsidiaries
will maintain a Current Ratio of no less than the
following as of the end of each of the months
indicated:
Month Ending Maximum Ratio
------------ -------------
September 30, 1998 1.20:1.00
October 31, 1998 1.20:1.00
November 30, 1998 1.00:1.00
December 31, 1998 1.20:1.00
December 31, 1998 and each 1.10:1.00
month end thereafter
d. by deleting the provisions of Section 5.9 in their entirety and substituting
the following in its stead:
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5.9 Ratio of Indebtedness to Consolidated Tangible
Net Worth. The BORROWER and its Subsidiaries will
maintain a ratio of Indebtedness to Consolidated
Tangible Net Worth of no more than the following as
of the end of each of the months indicated:
Month Ending Minimum Ratio
------------ -------------
September 30, 1998 1.00:1.00
October 31, 1998 1.00:1.00
November 30, 1998 1.00:1.00
December 31, 1998 1.00:1.00
January 31, 1999 and each 1.20:1.00
month end thereafter
e, by deleting the provisions of Section 5.10 in their entirety and substituting
the following in its stead:
5.10 Interest Coverage Ratio. (a) The BORROWER and
its Subsidiaries shall achieve an Interest coverage
Ratio of no less than (I) 1.30:1.00 at December 31,
1998 (calculated for the three months beginning
October 1, 1998 and ending December 31, 1998), and
(ii) 1.50:1.00 for each month thereafter commencing
with the month ending January 31, 1999.
(b) The BORROWER and its Subsidiaries shall achieve
an Adjusted interest Coverage Ratio of no less than
(I) 1.30:1.00 at December 31, 1998 (calculated for
the three months beginning October 1, 1998 and ending
December 31, 1998), and (ii) 1.50:1.00 for each month
thereafter commencing with the month ending January
31, 1999.
f. by deleting the provisions of Section 5.11 in their entirety
and substituting the following in their stead:
5.11 Limitation on Capital Expenditures. The BORROWER
and its Subsidiaries shall not make or incur capital
expenditures in excess of $400,000.00 in the
aggregate in any fiscal quarter.
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g. by deleting the provisions of Section 5.13 in their entirety
and substituting the following in its stead:
5.13 Consolidated Net Income. (a) the BORROWER and
its Subsidiaries will not permit its consolidated net
loss (before taxes and excluding non-cash deductions
associated with the closure of the medical endoscope
business), determined in accordance with generally
accepted accounting principals, to be greater than
$2,000,000.00 for the quarter ending September 30,
1998.
(b) The BORROWER and its Subsidiaries shall achieve
Consolidated Net Income (before taxes and excluding
any extraordinary gains and extraordinary losses
which would otherwise be included in the calculation
of Consolidated Net Income), for the fiscal quarter
ending December 31, 1998 of at least $200,000.00
(c) The BORROWER and its Subsidiaries shall achieve
Consolidated Net Income (before taxes and excluding
any extraordinary gains which would otherwise be
included in the calculation of Consolidated Net
Income), for each fiscal quarter of at least
$200,000.00, commencing with the fiscal quarter
ending march 31, 1999.
h. by adding the following new sections to the Loan Agreement.
5.14 Disposition of Channeltron and Related Product
Lines. On or before October 1, 1998, the BORROWER
shall enter into an agreement, on terms and
conditions reasonably satisfactory to the BANK, for
the sale of Scientific Detector's channeltron
detector and assemblies product lines for a purchase
price of at least $4,500,000 (the assets of which
have a book value of less than $2,500,000); and the
BORROWER shall cause such sale to be consummated and
the net Cash Proceeds therefrom to have been paid to
the BANK on or before November 1, 1998.
5.15. Retention of Consultant. The BORROWER shall
engage The Recovery Group or another consultant
reasonably acceptable to the BANK to undertake such
activities and duties as the BANK may reasonably
require. The BORROWER and its Subsidiaries shall
cooperate with such consultant in the performance of
his duties and hereby agrees that the consultant may,
without any notice to, or further consent from, the
BORROWER or its Subsidiaries, disclose any and all
information regarding the BORROWER and its
Subsidiaries obtained by the consultant in the
performance of his duties to the BANK. All reasonable
fees, costs and expenses of the consultant shall be
borne by the BORROWER and its Subsidiaries.
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5.16 Loan to Value. The BORROWER shall not permit the
ratio of the outstanding Obligations to the orderly
liquidation value (as reasonably determined by the
BANK) of the Collateral to be greater than 0.70:1.00.
5.17 Proceeds of Collateral. The BORROWER and its
Subsidiaries have previously established a lock box
with the BANK. All proceeds of the Collateral shall
continue to be directed to the lockbox, and shall be
deposited into the BORROWER'S operating account
maintained with the BANK until the earlier of
December 1, 1998 or the occurrence of an Event of
Default, at which time the BANK may apply the
proceeds in the lockbox to the Obligations.
5.18 Additional Information. The BORROWER and its
Subsidiaries shall cooperate with the BANK, the
consultant and their respective representatives in
order that the BANK shall receive a commercial
finance examination, a real estate appraisal, an
inventory valuation, and a final report of The
Recovery Group, each in form and substance
satisfactory to the BANK by September 13, 1998.
5. Amendments to Section 6. The provisions of Section 6 of the Loan
Agreement are hereby amended
a. by adding the words "and its Subsidiaries" in Sections 6.2,
6.2, 6.4, and 6.5 after the words "the BORROWER" in the first
line of each of such sections.
b. by deleting the provisions of Section 6.1(e) and 6.1(f) in
their entirety.
c. by deleting the provisions of Section 6.2(f) in its entirety.
d. by deleting the words "FIVE HUNDRED THOUSAND AND 00/100
DOLLARS ($500,000.00)" in clause (ii) of Section 6.4 and
substituting the words "TWO HUNDRED THOUSAND AND 00/100
DOLLARS ($200,000.00) in its stead.
e. by deleting the provisions of Section 6.4(iii) in their
entirety.
f. by adding the following new clauses at the end of Section 6.4:
and (vi) the sale or other disposition of Scientific
Detector's channeltron detector and assemblies
product lines in accordance with the provisions of
Section 5.14 hereof.
6. Amendments to Section 7. The provisions of Section 7 of the Loan
Agreement are hereby amended
a. by deleting clause m) in its entirety.
b. by adding the following new clause thereto:
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n) the occurrence of any default or event of default
under any other instrument, document, or agreement between the BORROWER or any
of its Subsidiaries and the BANK or any affiliate of the BANK.
c. by adding the following at the end thereof:
In addition, and without limiting any other remedies
of the BANK, upon the occurrence of any Event of Default, the BANK may institute
the lock box, clocked account or other procedures described in Section 5.17
hereof.
7. Amendments to Section 8. The provision of Section 8.1 of the Loan
Agreement are hereby amended by changing the notice address for the BANK as
follows:
BankBoston, N.A.
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxx
Mail Stop 01-06-01
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxxxxx
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esquire
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
8. Amendments. Exhibits B and C to the Loan Agreement are hereby
deleted in their entirety and Exhibits B and C annexed hereto are substituted in
their stead.
9. Conditions to Effectiveness. This First Amendment to Loan Agreement
shall not be effective until each of the following conditions precedent have
been fulfilled to the satisfaction of the BANK:
a. This First Amendment to the Loan Agreement shall have been
duly executed and delivered by the BORROWER, the Guarantors and the BANK, and
shall be in full force and effect. The BANK shall have received a fully executed
copy hereof and of each other document required hereunder.
b. All action on the part of the BORROWER and the Guarantors
necessary for the valid execution, delivery and performance by the BORROWER of
this First Amendment to Loan Agreement shall have been duly and effectively
taken. The BANK shall have received from each of the BORROWER and Guarantors,
true copies of their respective certificates of the
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resolutions adopted by their respective boards of directors authorizing the
transactions described herein, each certified by their respective secretaries as
of a recent date to be true and complete.
c. The BANK shall have received a list of all customers of the BORROWER
and its Subsidiaries (including, without limitation, all names, addresses,
contact persons and telephone numbers).
d. The BANK shall have received (i) a duly executed Mortgage, Security
Agreement and Assignment of Leases and Rents (the "Mortgage) with respect to the
BORROWER'S real estate in Sturbridge, Massachusetts, evidence that such Mortgage
has been duly recorded and perfected and is subject to no Liens other than
Permitted Liens, and title insurance with respect to such Mortgage, (ii) duly
executed Collateral Assignments of Trademarks and Patents which shall have been
forwarded for filing with the United States Patent and Trademark Office, (iii) a
stock pledge with respect to the capital stock of each of the BORROWER'S
Subsidiaries (other than foreign Subsidiaries as to which the pledge will be
limited to 66% of such stock), (iv) duly executed guarantees of the Obligations
and Security Agreements from each of the BORROWER'S Subsidiaries (other than
foreign Subsidiaries) and (v) all Landlord's Waivers, all of the foregoing to be
in form and substance reasonably satisfactory to the BANK.
e. The BORROWER and its Subsidiaries shall have executed security
agreements, collateral assignments, mortgages and such other documentation as
the BANK may require in order that all other obligations of the BORROWER and its
Subsidiaries to the BANK and to any affiliate of the BANK are secured by the
same Collateral as the Obligations under the Loan Agreement.
f. The BANK shall have received opinions of counsel to each of the
BORROWER and Guarantors satisfactory to the BANK and the BANK's counsel.
g. The BANK shall have been paid the initial installment of the
amendment fee in the sum of $50,000.00.
h. The BORROWER shall have paid to the BANK all other fees and expenses
then due and owing pursuant to the Loan Agreement, as modified hereby, including
without limitation, reasonable attorneys' fees incurred by the BANK.
i. No Default or Event of Default shall have occurred and be
continuing.
j. The Borrowers and Guarantors shall have provided such additional
instruments and documents to the BANK as the BANK and its counsel may have
reasonably requested.
10. Miscellaneous.
a. Except as provided herein, all terms and conditions of the Loan
Agreement and the other Loan Documents remain in full force and effect. The
BORROWER and the Guarantors hereby ratify, confirm, and reaffirm all of the
representations, warranties and covenants therein contained (except to the
extent that such representations and warranties expressly relate to an earlier
date). The BORROWER and the Guarantors further acknowledge and agree that none
of them have any offsets, defenses, or counterclaims against the BANK under the
Loan agreement
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or the other Loan Documents and, to the extent that the BORROWER or the
Guarantors have, or ever had, any such offsets, defenses, or counterclaims, the
BORROWER and the Guarantors each hereby waive and release the same.
b. The BANK hereby agrees to forbear from exercising its rights and
remedies as a result of the existence of any Defaults or Events of Default
existing prior to the date hereof under Sections 5.8, 5.9, 5.10 and 5.13 of the
Loan Agreement until the earlier of the Maturity Date or the occurrence of any
additional Event of Default under the Loan Agreement. This agreement to forebear
is not a waiver of any Defaults or Events of Default which hereafter arise under
such Sections of the Loan Agreement, as amended hereby.
c. The BORROWER shall pay all costs and expenses incurred by the BANK
in connection with this First Amendment, including without limitation, all
reasonable attorneys' fees and expenses, commercial finance examination fees,
appraisal fees, consultant's fees, and all reasonable travel expenses incurred
by the BANK.
d. This First Amendment may be executed in several counterparts and by
each party on a separate counterpart, each of which when so executed and
delivered, each shall be original, and all of which together shall constitute
one instrument.
e. This First Amendment expresses the entire understanding of the
parties with respect to the matters set forth herein and supersedes all prior
discussions or negotiations hereon.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be executed and their seals to be hereto affixed as the date first above
written.
"BORROWER"
GALILEO CORPORATION
By:__________________________________________
Name:
Title:
"GUARANTORS"
LEISEGANG MEDICAL, INC.
By:__________________________________________
Name:
Title:
"OPTICAL FILTER CORPORATION"
By:__________________________________________
Name:
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Title:
"BANK"
BANKBOSTON, N.A.
By:__________________________________________
Name:
Title:
