SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
EXHIBIT 10.8
SECOND
AMENDMENT TO
THIS
AMENDMENT, dated as of May 2, 2008, is to the Loan and Security Agreement dated
January 2, 2008 between Xxxxxxx Bank (“Bank”), and Jefferson Electric, Inc.
(“Borrower”), as amended by Amendment to Loan and Security Agreement dated
January 29, 2008 (as amended, the “Loan Agreement”).
RECITAL
WHEREAS, Bank and Borrower desire to
amend the Loan Agreement as provided herein.
AGREEMENT
1. Definitions.
(a) Terms Defined in Loan
Agreement. All capitalized terms used but not defined herein
shall have the meanings set forth in the Loan Agreement.
(b) Additional Definitions and
Clarifications to Definitions. As used in the Loan Agreement
as amended hereby, the following terms shall have the following
meanings:
“Acquisition
Deliveries” means all of the following, fully executed as applicable, and
in form and substance satisfactory to Bank: (i) a Pledge Agreement
granting to Bank a first priority security interest in the Borrower’s 100%
membership interest in Nexus Custom Magnetics, LLC, a Texas LLC, together with
such certificates of membership interest, powers executed in blank and UCC
financing statements as are requested by Bank to perfect Bank’s interest in such
membership interest, (ii) a Debt Subordination Agreement fully subordinating all
rights of the seller of the Mexican Subsidiaries to the Obligations, (iii)
copies of the documents relating to the Mexican Acquisition, together with
articles of organization, operating agreement and certificate of good standing
for Nexus Custom Magnetics, LLC, (iv) original signatures for the Consent of
Lessor between Bank and the Borrower’s landlord in Franklin, Wisconsin, (v)
copies of the UCC’s the Borrower has filed against its customers, and (vi)
assignments of such UCC’s to Bank.
“Discounted Collateral
Amount” shall have the meaning provided in the Loan Agreement and,
without limitation, shall (i) include only equipment owned by Borrower directly
and not equipment owned by Borrower’s subsidiaries, and (ii) be calculated
without regard to any equipment located in Mexico.
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“Loan Amount”
means the sum of $4,000,000 plus the outstanding balance of the Term
Note.
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“Mexican
Acquisition” means the acquisition by Borrower of 100% of the
membership interest of Nexus Custom Magnetics, LLC, a Texas LLC, which is
in turn the 100% owner of Nexus Magneticos de Mexico, S. de X.X. de
C.V.
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“Mexican
Subsidiaries” shall mean Nexus Custom Magnetics, LLC, a Texas LLC
and Nexus Magneticos de Mexico, S. de X.X. de
C.V.
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“Qualified
Accounts” shall have the meaning provided in the Loan Agreement
and, without limitation, shall include only accounts owned by Borrower
directly and not accounts owned by Borrower’s
subsidiaries
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“Qualified
Inventory” shall have the meaning provided in the Loan Agreement,
and, without limitation, shall (i) include only Inventory owned by
Borrower directly and not Inventory owned by Borrower’s subsidiaries, and
(ii) include only Inventory located in the United States and not Inventory
located in Mexico.
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“Revolving Note”
means Borrower’s promissory note, substantially in form attached hereto as
Exhibit
A, as it may be amended, restated or replaced from time to
time.
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2. Consolidated Financial
Information and Determinations. The following amounts shall be
calculated for Borrower on a consolidated basis with the Mexican Subsidiaries
and on a combined basis with Company Guarantor: EBITDA, Excess Cash
Flow, Net Cash Flow, Net Income, Pre-Tax Net Income, Tangible Net Worth and
calculations for purposes of Sections 2.8, 5.21, 5.22 and 6.3 of the Loan
Agreement. The reports delivered under Sections 5.1.1, 5.1.2, 5.1.4,
5.1.5 and 5.1.7 of the Loan Agreement shall be prepared for Borrower on a
consolidated basis with the Mexican Subsidiaries and on a combined basis with
Company Guarantor.
3. Revolving
Loans. Section 2.1.1 of the Loan Agreement is amended to
delete “Three Million Five Hundred Thousand Dollars ($3,500,000.00)” and replace
it with “Four Million Dollars ($4,000,000.00).”
4. Collateral Obligation
Ratio. Section 2.6 of the Loan Agreement is amended to delete
“$3,500,000” and replace it with “$4,000,000.”
5. Subordination
Agreement. Any failure by Borrower to comply with the
subordination agreement between Bank and the seller of the Mexican Subsidiaries
shall be an Event of Default under the Loan Agreement as amended
hereby.
6. Affirmative
Covenants. The Mexican Subsidiaries and the Company Guarantor
shall comply with the covenants contained in Sections 5.5, 5.10, 5.12, 5.16,
5.17, 5.18 and 5.19 of the Loan Agreement as if each of them were “Borrower”
thereunder.
7. Negative
Covenants. The Mexican Subsidiaries and the Company Guarantor
shall comply with the covenants contained in Sections 6.1, 6.2, 6.4, 6.5, 6.6,
6.7 (other than distributions to Borrower which shall not be restricted), 6.8,
6.9, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18 and 6.19 of the Loan
Agreement as if each of them were “Borrower” thereunder, except that (a) the
Bank consents to the Mexican Acquisition, provided that Borrower delivers to
Bank the Acquisition Deliveries on or before May 15, 2008, (b) the Bank consents
to the Borrower having the Mexican Subsidiaries as subsidiaries, (c) the Bank
consents to transfers of cash, goods and other property to Borrower, and (d) the
Bank consents to the transfer by Borrower of (i) equipment with a value of
approximately $142,000 currently contemplated to be transferred to the Mexican
Subsidiaries, (ii) Inventory that may be transferred to the Mexican Subsidiaries
or the Company Guarantor in the ordinary course of business for full and
adequate consideration, and (iii) transfers of cash to the Mexican Subsidiaries
for their normal operating expenses or to the Company Guarantor for its normal
operating expenses in an aggregate amount for all such transfers of cash not to
exceed $2,000,000 in any fiscal year of Borrower.
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8. Defaults. Any
failure by either Mexican Subsidiary or the Company Guarantor to comply with
Section 5 or 6 hereof shall be an Event of Default under the Loan
Agreement. Any event or condition that would be an Event of Default
under Section 7.1.1 of the Loan Agreement with respect to Borrower or any
Guarantor or any property of Borrower or any Guaranty shall also be an Event of
Default if such event or condition occurs with respect to either Mexican
Subsidiary or the property of either Mexican Subsidiary.
9. Conditions
Precedent. This Amendment shall not be effective until Bank
has received a fully executed copy of this Amendment and each of the following
in form and substance satisfactory to the Bank, executed as
appropriate:
(a) Revolving
Note;
(b) Corporate
Borrowing Resolutions; and
(c) Officer’s
Certificate.
9.
Effect of
Amendment. Except as otherwise provided herein, the Loan
Agreement shall remain in full force and effect and Borrower shall be bound by
all of the covenants therein.
10. Law
Governing. This Amendment shall be governed by the laws of the
State of Wisconsin.
11. Binding
Effect. This Amendment shall be binding on and inure to the
benefit of Borrower, Bank and their respective successors and
assigns.
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BORROWER:
Jefferson
Electric, Inc.
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By:
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/s/ Xxxxxx Xxxxx | |
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Xxxxxx
Xxxxx, President
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BANK:
Xxxxxxx
Bank
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By:
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/s/ Xxxxxxx X. Xxxxxxxx | |
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Xxxxxxx
X. Xxxxxxxx, Vice President
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CONSENT
OF GUARANTORS
The undersigned hereby consent to the
foregoing amendment and ratify their Guaranties of the obligations of Jefferson
Electric, Inc. to Xxxxxxx Bank.
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Xxxxxx
Xxxxx
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JEFFERSON ELECTRIC LEASING,
LLC,
A
Wisconsin limited liability company
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By:
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/s/ Xxxxxx Xxxxx | |
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Xxxxxx
Xxxxx, Member
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