Exhibit 10.5
AMENDMENT NO. 4 TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT ("Amendment") is made
and entered into as of September 6, 2006 by and between ELECTROGLAS, INC., a
Delaware corporation ("Borrower") and COMERICA BANK ("Bank").
RECITALS
A. Borrower and Bank have entered into that certain Loan and Security
Agreement dated as of July 16, 2004, as amended by Amendment No. 1 to Loan and
Security Agreement dated as of January 24, 2005, Amendment No. 2 to Loan and
Security Agreement dated as of July 13, 2005, and Amendment No. 3 to Loan and
Security Agreement dated as of April 25, 2006 (collectively, the "Loan
Agreement") pursuant to which Bank has agreed to extend and make available to
Borrower certain credit facilities.
B. Borrower desires that Bank amend the Loan Agreement upon the terms and
conditions more fully set forth herein.
C. Subject to the representations and warranties of Borrower herein and
upon the terms and conditions set forth in this Amendment, Bank is willing to so
amend the Loan Agreement.
D. This Amendment, the Loan Agreement and the other Loan Documents (as
defined in the Loan Agreement), together with all other documents entered into
or delivered pursuant to any of the foregoing, in each case as originally
executed or as the same may from time to time be modified, amended,
supplemented, restated or superseded, are hereinafter collectively referred to
as the "Loan Documents."
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants herein set forth and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound, Borrower and Bank hereby agree to amend the Loan Agreement as
follows:
1. Definitions. Unless otherwise defined herein, all terms defined in
the Loan Agreement have the same meaning when used herein.
2. Amendments to Loan Agreement.
a. Section 2.1(b)(i) of the Loan Agreement is hereby amended by
deleting "$2,000,000" in the sixth line thereof and substituting "$3,000,000"
therefor.
b. Section 2.5 of the Loan Agreement is hereby amended (i) by
deleting the period at the end of Section 2.5(b) and substituting a semi-colon
therefor and (ii) by adding the following new Section 2.5(c):
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"(c) Commitment Fee. On September 6, 2006, and on August 31,
2007, a commitment fee equal to $11,250, which shall be nonrefundable."
c. Section 3.1(h) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
"(h) if the initial Credit Extension shall include a Borrowing
Base Advance, an accounts receivable audit of the Collateral, at Borrower's
expense, the results of which shall be satisfactory to Bank;"
d. Section 6.2(a)(i) of the Loan Agreement is hereby amended by
deleting the words "fifty (50)" and substituting "forty-five (45)" therefor.
e. Section 6.2(a)(iv) of the Loan Agreement is hereby amended by
deleting the words "fifty (50)" and substituting "forty-five (45)" therefor.
f. Section 6.2(b) of the Loan Agreement is hereby amended by
deleting the words "thirty (30)" and substituting "twenty (20)" therefor.
g. Section 6.2(e) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
"(e) While any Borrowing Base Advances are outstanding, Bank
shall have a right from time to time hereafter to audit Borrower's Accounts and
appraise Collateral at Borrower's expense, provided that such audits will be
conducted no more often than every 6 months during usual business hours upon
reasonable prior notice to Borrower unless an Event of Default has occurred and
is continuing."
h. Section 6.7 of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
"6.7 Financial Covenants. Borrower shall as of the last day of
each fiscal quarter of Borrower maintain the financial ratio and covenant set
forth in subsection (a) below and shall at all times maintain the financial
covenant set forth in subsection (b) below:
(a) Adjusted Quick Ratio. A ratio of Cash plus net billed trade
accounts receivable (provided such accounts receivable are "Eligible Accounts")
to all Indebtedness to Bank of at least 2.50 to 1.00.
(b) Minimum Cash. A balance of Cash in a Bank money market
account or a Bank deposit account of not less than $2,500,000."
i. Section 7.2 of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
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"7.2 Change in Name, Location, Executive Office, or Executive
Management; Change in Business; Change in Fiscal Year; Change in Control. Change
its name or the Borrower State or relocate its chief executive office without
giving Bank written notification within (5) Business Days thereafter; replace
its chief executive officer or chief financial officer without giving Bank
written notification within (5) Business Days thereafter; engage in any
business, or permit any of its Subsidiaries to engage in any business, other
than or reasonably related or incidental to the businesses currently engaged in
by Borrower; change its fiscal year end; or have a Change in Control."
j. Section 7.9 of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
"7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt and except (i) for
the conversion of Subordinated Debt into equity securities of Borrower, (ii)
Borrower may prepay or pay Borrower's 5.25% Convertible Subordinated Notes due
2007 issued pursuant to the Indenture in full out of the proceeds of a new
issuance of subordinated debt ("New Subordinated Debt") not to exceed
$15,000,000 in the aggregate so long as before and after giving effect thereto
no Event of Default exists and such indebtedness is subordinated in writing to
the debt owing by Borrower to Bank on terms reasonably acceptable to Bank (and
identified as being such by Borrower and Bank), and (iii) Borrower may prepay
the New Subordinated Debt in an aggregate amount not to exceed $2,500,000 per
year so long as before and after giving effect thereto no Event of Default
exists, or amend any provision affecting Bank's rights contained in any
documentation relating to the Subordinated Debt without Bank's prior written
consent."
k. Section 7 of the Loan Agreement is hereby amended by adding
the following new Section 7.12 to the end thereof:
"7.12 Capital Expenditures. Make or incur (or commit to make or
incur), or permit any of its Subsidiaries to make or incur (or commit to make or
incur), any Capital Expenditures in an aggregate amount in excess of $2,000,000
in any calendar year."
l. Section 10 of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
"10. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
If to Borrower: Electroglas, Inc.
0000 Xxxxxxxxx Xxx
Xxx Xxxx, XX 00000
Attn: Chief Financial Officer
FAX: (000) 000-0000
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If to Bank: Comerica Bank
00 Xxxx Xxxxxxx Xxxx
Mail Code 4770
Xxx Xxxx, XX 00000
FAX: (000) 000-0000
with a copy to: Comerica Bank
000 Xxxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxx, Senior Vice
President & Manager
FAX: (000) 000-0000
m. A new definition of "Capital Expenditures" is hereby added to
Exhibit A to the Loan Agreement in alphabetical order to read as follows:
"Capital Expenditures" shall mean for any period, the sum of (i)
expenditures (whether paid in cash or accrued as a liability) by the Borrower
and its Subsidiaries during such period that are included in "capital
expenditures," "additions to property, plant or equipment" or comparable items
in the financial statements of the Borrower and its Subsidiaries, and (ii) to
the extent not included in clause (i), the aggregate of all net non-current
assets of businesses acquired by the Borrower and its Subsidiaries during that
period, including all purchase price adjustments and all expenditures accounted
for by the Borrower and its Subsidiaries as purchases of intangibles and
licenses.
n. The definition of "Eligible Accounts" contained in Exhibit A
to the Loan Agreement is hereby amended (i) by deleting the words "(50% in the
case of National Semiconductor)" in clause (c) and substituting therefor "(40%
in the case of ST Microelectronics NV)" and (ii) by deleting the words "(30% in
the case of National Semiconductor)" in clause (d) and substituting therefor
"(40% in the case of ST Microelectronics NV)".
o. Clause (iv) of the definition of "Eligible Foreign Accounts"
contained in Exhibit A to the Loan Agreement is hereby amended by deleting the
words "Accounts with respect to which the account debtor is any of ST
Microelectronics, National Semiconductor, Philips, or Infineon" and substituting
"Accounts with respect to which the account debtor is any of ST Microelectronics
NV, Philips Semiconductor (subsidiary of Royal Philips electronics -
Netherlands), or DongbuAnam Semiconductor, Inc., or a foreign subsidiary of any
of the following: National Semiconductor, Seagate Technologies, International
Rectifier Corporation, Atmel Corporation, Intel Corporation, or Amkor
Technology" therefor.
p. The definition of "Revolving Maturity Date" contained in
Exhibit A to the Loan Agreement is hereby amended and restated to read as
follows:
"`Revolving Maturity Date' means August 31, 2008."
q. Section 2 of Exhibit D to the Loan Agreement (LIBOR Addendum)
is hereby amended and restated to read as follows:
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"2. Interest Rate Options. Borrower shall have the following
options regarding the interest rate to be paid by Borrower on Advances under the
Loan Agreement:
(a) A rate equal to two and a half percent (2.50%) above
Bank's LIBOR, which rate shall be in effect during the relevant LIBOR Period; or
(b) A rate equal to one quarter of one percent (0.25%) above
the "Prime Rate" as defined in the Loan Agreement and quoted from time to time
by Bank as such rate may change from time to time."
r. Exhibit E to the Loan Agreement (Borrowing Base
Certificate) is hereby deleted and replaced with Exhibit E in the form attached
to this Amendment.
s. Exhibit F to the Loan Agreement (Compliance Certificate)
is hereby deleted and replaced with Exhibit F in the form attached to this
Amendment.
3. Ratification and Reaffirmation of Liens. Borrower hereby
ratifies and reaffirms the validity and enforceability of all of the liens and
security interests heretofore granted pursuant to the Loan Documents, as
collateral security for the Obligations, and acknowledge that all of such liens
and security interests, and all Collateral heretofore pledged as security for
the Obligations, continues to be and remains Collateral for the Obligations from
and after the date hereof.
4. Representations And Warranties. Except as set forth on the
Amendment to Schedule attached hereto, Borrower represents and warrants that its
representations and warranties in the Loan Documents (as amended hereby)
continue to be true and complete in all material respects as of the date hereof
after giving effect to this Amendment (except to the extent such specifically
relate to another date) and that the execution, delivery and performance of this
Amendment are duly authorized, do not require the consent or approval of any
governmental body or regulatory authority and are not in contravention of or in
conflict with any law or regulation or any term or provision of any other
agreement entered into by Borrower. Borrower further represents and warrants
that, as of the date hereof after giving effect to this Amendment, no Event of
Default has occurred and is continuing.
5. Full Force And Effect; Entire Agreement. Except to the extent
expressly provided in this Amendment, the terms and conditions of the Loan
Agreement and the other Loan Documents shall remain in full force and effect.
This Amendment and the other Loan Documents constitute and contain the entire
agreement of the parties hereto and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications between the
parties, whether written or oral, respecting the subject matter hereof. The
parties hereto further agree that the Loan Documents comprise the entire
agreement of the parties thereto and supersede any and all prior agreements,
negotiations, correspondence, understandings and other communications between
the parties thereto, whether written or oral respecting the extension of credit
by Bank to Borrower and/or its affiliates. Except as expressly set forth herein,
the execution, delivery and performance of this Amendment shall not operate as a
waiver of, or as an amendment of, any right, power or remedy of Bank under the
Loan Agreement or any other Loan Document as in effect prior to the date hereof.
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6. Counterparts; Effectiveness. This Amendment may be executed in
any number of counterparts, each of which when so delivered shall be deemed an
original, but all such counterparts taken together shall constitute but one and
the same instrument. This Amendment is effective as of the date first above
written; provided that, as a condition precedent to the effectiveness of this
Amendment, (i) there shall have been no material adverse change in the business
operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole, no material impairment of the prospect of
repayment of any portion of the Obligations owing to Bank, and no material
impairment of the value or priority of the security interest in the Collateral
and (ii) Bank shall have received, in form and substance satisfactory to Bank,
the following:
(a) this Amendment, duly executed by Borrower;
(b) payment of the fees and Bank Expenses then due specified
in Section 2.5 of the Loan Agreement, as amended hereby; and
(c) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be executed and delivered by its duly authorized officer as of the date first
written above.
BORROWER:
ELECTROGLAS, INC.
By:_/s/ Xxxxxx X. Xxxxxxx
-------------------------
Title Chief Financial Officer
-----------------------
BANK:
COMERICA BANK
By: /s/ Xxxxxx X. Xxxxx
-------------------------
Title: Senior Vice President
----------------------
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EXHIBIT E
BORROWING BASE CERTIFICATE
Borrower: Electroglas, Inc. Lender: Comerica Bank
Commitment Amount: $7,500,000
ACCOUNTS RECEIVABLE*
1. Accounts Receivable Book Value as of ___ $___________
2. Additions (please explain on reverse) $___________
3. TOTAL ACCOUNTS RECEIVABLE $___________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)*
4. Amounts over 90 days of invoice date $___________
5. Balance of 25% (40% in the case of ST
Microelectronics NV) over 90 day accounts $___________
6. Concentration Limits $___________
7. Foreign Accounts $___________
8. Governmental Accounts $___________
9. Contra Accounts $___________
10. Demo Accounts $___________
11. Intercompany/Employee Accounts $___________
12. Other (please explain on reverse) $___________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $___________
14. Eligible Accounts (#3 minus #13) $___________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $___________
BALANCES
16. Revolving Line minus Non-Formula Amount $___________
17. Total Funds Available [Lesser of #16 or #15] $___________
18. Advances in excess of Non-Formula Amount $___________
19. Outstanding under Letter of Credit Sublimit $___________
20. RESERVE POSITION (#17 minus #18 and #19) $___________
* As determined in accordance with the Loan and Security Agreement dated as
of July 16, 2004 between Borrower and Lender, as amended.
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The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Comerica Bank.
ELECTROGLAS, INC.
By:
-------------------------------------------------
Authorized Signer
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EXHIBIT F
COMPLIANCE CERTIFICATE
TO: COMERICA BANK
FROM: Electroglas, Inc.
The undersigned authorized officer of Electroglas, Inc. hereby certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement between Borrower and Bank (as amended from time to time, the
"Agreement"), (i) Borrower is in complete compliance for the period ending
_______________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that this Certificate has been prepared in accordance with Generally
Accepted Accounting Principles (GAAP) consistently applied from one period to
the next except as explained in an accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies"
column.
Reporting Covenant Required Complies
Company prepared financial statements (Consolidated) Quarterly within 45 days Yes No
Annual (CPA Audited; Consolidated) FYE within 120 days Yes No
10K and 10Q Within 5 days after filing Yes No
with the Securities and
Exchange Commission unless
available on XXXXX
Borrowing Base Certificate Monthly within 20 days Yes No
when Borrowing Base
Advances are outstanding
Financial Covenant Required Actual Complies
Maintain on a Quarterly Basis:
Minimum Adjusted Quick Ratio 2.50:1.00 ____:1.00 Yes No
Maintain at all times:
Minimum Cash with Bank $2,500,000 $___________ Yes No
Comments Regarding Exceptions: See Attached. ---------------------------------------------------------
BANK USE ONLY
Received by:
Sincerely, ---------------------------------------------
AUTHORIZED SIGNER
Date:
---------------------------------------------------
Verified:
------------------------------------------------------------ -----------------------------------------------
SIGNATURE AUTHORIZED SIGNER
Date:
------------------------------------------------------------ ---------------------------------------------------
TITLE
ELECTROGLAS, INC. Compliance Status Yes No
------------------------------------------------------------ ---------------------------------------------------------
DATE
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AMENDMENT TO SCHEDULE
The Schedule attached to the Loan Agreement is hereby amended by deleting
the reference to Xxxxxx Xxxxxxx & Co. Incorporated in Section 5.3 thereof and
inserting the following in substitution therefor:
Deutsche Bank Xxxx Xxxxx Inc.
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
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