SECOND AMENDMENT TO REVOLVING LOAN AND SECURITY AGREEMENT
THIS REVOLVING LOAN AND SECURITY AGREEMENT is dated as of
December 31, 2000, and is by and among BALTEK CORPORATION, a Delaware
corporation having its principal executive offices at 00 Xxxxxxx Xxxxx,
Xxxxxxxxx, Xxx Xxxxxx 00000 ("Baltek") and CRUSTACEA CORPORATION, a Delaware
corporation having its principal executive offices at 000 Xxxxxxxxxx Xxxxx,
Xxxxxxxxx, Xxx Xxxxxx 00000 ("Crustacea") (each a "Borrower" and collectively
the "Borrowers") and SUMMIT BANK, a banking institution of the State of New
Jersey having an office located at 000 Xxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx
00000 (the "Bank").
W I T N E S S E T H
WHEREAS, the Borrowers and the Bank entered into a Revolving Loan and
Security Agreement dated as of December 21, 1999, as amended by virtue of a
certain First Amendment to Revolving Loan and Security Agreement dated as of
September 30, 2000 (the "Loan Agreement") which Loan Agreement relates to a
certain Revolving Credit Note of even date with the Loan Agreement, which note
was amended by virtue of a certain Substitute Revolving Credit Note dated as of
September 30, 2000 (the "Note"); and
WHEREAS, the Borrowers have requested that the Bank: (a) increase the
amount due on the Note to $16,500,000 Dollars and extend the maturity date of
the Note and Loan Agreement through and including December 31, 2003; and (b)
make available to the Borrowers an Equipment Line of Credit Note in the amount
of $1,000,000 Dollars (the "Line of Credit Note"), evidenced by an Equipment
Line of Credit Note of even date herewith; and
WHEREAS, the Bank is willing to grant the Borrowers such extension and
Line of Credit Note upon the condition that, among other things, the Borrowers
duly execute this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
WITH RESPECT TO THE NOTE:
1. Definitions. Except as otherwise defined herein, terms defined in
the Loan Agreement shall have the same meaning when used herein.
2. Amendment of Loan Agreement. The Loan Agreement is hereby amended as
follows:
(a). Section 1.1 is hereby amended so that the definition of
"Maturity Date" with respect to the Note is hereby amended to mean December 31,
2003.
(b). Section 1.1 of the Loan Agreement is hereby further amended to
include the following:
"Borrowing Base" shall mean at any time, an amount (in any event not
less than zero) equal to: (i) the sum of: (A) eighty five (85%) percent of
Eligible Accounts Receivable; and (B) in the case of Baltek, fifty (50%) percent
of Eligible Inventory; and in the case of Crustacea, sixty (60%) percent of
Eligible Inventory.
"Borrowing Base Certificate" shall mean a full and complete certificate
in the form approved by the Bank, certified as true and correct by the
Borrower's President or Chief Financial Officer.
"Eligible Account Receivable" shall mean an Account Receivable
that meets all of the following requirements as of its date of invoice or other
origination date and continues to meet the following requirements for all
periods of time thereafter until collected:
(i) such Account Receivable represents a complete bona fide
transaction which requires no further act under any circumstances on the part of
the Borrower to make such Account Receivable payable by the Account Debtor;
(ii) such domestic Account Receivable of Baltek shall not be unpaid
more than ninety one (91) days from its date of invoice or other origination
date, and in the case of Crustacea, all domestic accounts receivable less than
30 days past due with usual reserves;
(iii) if applicable, the goods, the sale of which gave rise to such
Account Receivable, were shipped or delivered to the Account Debtor on an
absolute sale basis and not on a xxxx and hold sale basis, a consignment sale
basis, a progress basis, a guaranteed sale basis, a sale or return basis, or on
the basis of any other similar understanding, and no part of such goods has been
returned or rejected; provided, however, that in the event any credit is granted
by the Borrower, in the ordinary course of business, with respect to a portion
of an Account Receivable, the amount of such Account Receivable which is not
subject to such credit shall constitute an Eligible Account Receivable if the
Account Receivable is otherwise an Eligible Account Receivable;
(iv) such Account Receivable is not evidenced by chattel paper or an
instrument of any kind;
(v) the Account Debtor, with respect to such Account Receivable, is
not, to the best of the Borrower's knowledge, insolvent or the subject of any
bankruptcy or insolvency proceedings of any kind or of any other proceeding or
action, which might foreseeably have a materially adverse effect on the business
of such Account Debtor or is not, in the reasonable discretion of Bank, deemed
ineligible for credit for any other reason;
(vi) if such Account Receivable arises from the performance of
services, such services have been fully rendered and approved by the Account
Debtor with respect thereto;
(vii) to the best of the Borrower's knowledge, such Account
Receivable (or portion thereof determined under subdivision (iii) above is a
valid, legally enforceable obligation of the Account Debtor with respect thereto
and is not subject to any (a) present, (b) contingent, and/or (c) no facts exist
which are the basis for any future, offset or counterclaim or other defense on
the part of such Account Debtor, including, without limitation, any account
payable owing by the Borrower to such Account Debtor;
(viii) such Account Receivable shall be subject to a valid and
perfected first priority security interest in favor of the Bank;
(ix) such Account Receivable is evidenced by an invoice or other
documentation in form and substance acceptable to the Bank;
(x) such Account Receivable is not subject to any provision
prohibiting its assignment or requiring notice of, or consent to, such
assignment;
(xi) if applicable, the goods giving rise to such Account Receivable
were not, at the time of the sale thereof, subject to any Lien, except Permitted
Liens;
(xii) if the Account Debtor with respect thereto is the United
States or any department, agency or instrumentality thereof, such Account
Receivable shall have been assigned to the Bank in full compliance with all
applicable laws and regulations, including the Assignment in Claims Act of 1940,
as amended;
(xiii) the Account Debtor with respect thereto is domiciled within
the United States of America or, if the Account Debtor with respect thereto is
not domiciled within the United States of America, such Account Receivable is
secured by credit insurance in form and substance satisfactory to the Bank in
its sole and absolute discretion;
(xiv) such Account Receivable does not arise out of any transaction
with any affiliate of the Borrower or any Person under common control with the
Borrower;
(xv) such Account Receivable is not due from an Account Debtor where
more than fifty (50%) percent of the total Accounts Receivable from such Account
Debtor are not Eligible Accounts Receivable; and
(xvi) such Account Receivable that does not exceed thirty (30%)
percent of the aggregate total Accounts Receivable from all Account Debtors.
"Eligible Inventory" shall mean Inventory, as reported monthly on a
"first-in-first-out" basis, which is:
(i) owned by a Borrower and not purchased or acquired on a
consignment, approval or sale or return basis;
(ii) subject to a valid and perfected first priority security
interest in favor of the Bank;
(iii) fully and adequately insured, with the Bank named as an
additional insured and loss payee as provided herein;
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(iv) not unsalable, damaged or obsolete as the Bank shall reasonably
determine;
(v) located within or in transit to the continental United States at
a location with respect to which the Bank shall have obtained a duly executed
landlord's waiver or other such similar documentation, all in form and substance
satisfactory to the Bank; and (vi) not aged more than one hundred eighty (180)
days from its purchase date.
"EBITDA" shall mean consolidated operating income, plus consolidated
depreciation and amortization.
"Intangible Assets" shall mean goodwill, patents, trademarks,
tradenames, copyrights, franchises, experimental expenses, organization
expenses, amortized debt discount and expense, deferred assets (other than
prepaid insurance and prepaid taxes as well as deferred cultivation costs), the
excess cost of shares over book value of related assets, and such other assets
as are properly defined as "intangible assets" in accordance with generally
accepted accounting principles.
"Minimum Tangible Net Worth" shall mean net worth less intangible
assets.
"Net Worth" shall mean the excess of assets over liabilities.
3. Substitute Note. Concurrently herewith, the Borrower shall execute
and deliver to the Bank a Second Substitute Revolving Credit Note (the "Second
Substitute Note") which shall supersede, and be in substitution for, the
original Revolving Credit Note dated as of December 21, 1999 as well as the
Substitute Note dated as of September 30, 2000 (the "Original Note") executed
and delivered pursuant to the provisions of paragraph 2 of the Loan Agreement
and shall be the "Note" as defined and described in the Loan Agreement for all
purposes. It is expressly agreed that the execution and delivery of such Second
Substitute Note shall not evidence or represent a refinancing, repayment, accord
or satisfaction or novation of the indebtedness evidenced by the Original Note.
4. Representations and Warranties. In order to induce the Bank to enter
into this Agreement and amend the Loan Agreement as provided herein, the
Borrowers hereby represent and warrant to the Bank that:
(a) Except as otherwise disclosed in writing to the Bank, all of the
representations and warranties of the Borrowers set forth in the Loan Agreement
are true, complete and correct in all material respects on and as of the date
hereof with the same force and effect as if set at length herein.
(b) No Default or Event of Default presently exists and is
continuing on and as of the date hereof.
(c) Except as otherwise disclosed in writing to the Bank, since the
date of the Borrowers' most recent financial statements delivered to the Bank,
no material adverse change has occurred in the business, assets, liabilities,
financial condition or results of operations of the Borrowers, and no event has
occurred or failed to occur which has had a material adverse effect on the
business, assets, liabilities, financial condition or results of operations of
the Borrowers.
(d) The Borrowers have full power and authority to execute, deliver
and perform any action or step which may be necessary to carry out the terms of
this Agreement and all other agreements, documents and instruments executed and
delivered by the Borrowers to the Bank concurrently herewith or in connection
herewith (collectively, the "Amendment Documents"); each Amendment Document to
which the Borrowers are a party has been duly executed and delivered by the
Borrowers and is the legal, valid and binding obligation of the Borrowers
enforceable in accordance with its terms, subject to any applicable bankruptcy,
insolvency, general equity principles or other similar laws affecting the
enforcement of creditor's rights generally.
(e) The execution, delivery and performance of the Agreement
Documents will not (i) violate any provision of any existing law, statute, rule
regulation or ordinance (ii) conflict with, result in a breach of or constitute
a default under (a) the certificate of incorporation or by-laws of the Borrowers
or (b) any order, judgment, award or decree of any court, governmental
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authority, bureau or agency, or (c) any mortgage, indenture, lease, contract or
other agreement or undertaking to which the Borrowers are a party or by which
the Borrowers or any of their properties or assets may be bound, or (iii) result
in the creation or imposition of any lien or other encumbrance upon or with
respect to any property or asset now owned or hereafter acquired by the
Borrowers.
(f) No consent, license, permit, approval or authorization of,
exemption by, notice to, report to, or registration, filing or declaration with
any person is required in connection with the execution, delivery, performance
or validity of the Amendment Documents or the transactions contemplated thereby.
(g) The Borrowers agree to pay to the Bank, in two (2) installments,
the first due June 1, 2001 and the second due December 31, 2001, each in the the
sum of $41,250.00 in reimbursement for all costs and expenses incurred by the
Bank in connection with the Amendment Documents and the transactions
contemplated therein, as well as an amount not exceeding Five Thousand ($5,000)
Dollars for legal fees and costs associated with the Amendment Documents and an
amount not to exceed five thousand ($5,000) Dollars for costs associated with
any audit done by the Bank in connection with this loan.
WITH RESPECT TO THE LINE OF CREDIT NOTE
1. All of the terms and conditions of the Loan Agreement are hereby
specifically incorporated into, and made part of, the Line of Credit Note, and
all of the terms and conditions of the Line of Credit Note are hereby
specifically incorporated into, and made part of, the Loan Agreement. In the
event of an inconsistency between the terms of the Loan Agreement and the Line
of Credit Note, the terms of the Line of Credit Note shall control.
2. Definitions. Except as otherwise defined herein, terms defined in
the Loan Agreement shall have the same meaning when used herein.
3. Section 2.3 of the Loan Agreement is amended to provide:
"The indebtedness of the Borrowers to the Bank with respect to the
Advances made from time to time hereunder shall be evidence by: (a) a revolving
credit note (the "Note"), made payable to the Bank, dated the date hereof,
signed by the Borrowers and delivered to the Bank; and (b) an Equipment Line of
Credit Note dated December 31, 2000 in the principal amount of $1,000,000 (the
"Line of Credit Note"). All Advances made by the Bank to the Borrowers shall be
noted by the Bank on the reverse side or last page of the Note and/or Line of
Credit Note as indicated thereon, and the Bank is authorized to make such
notations which shall be prima facia evidence of the principal amount
outstanding thereunder at any time, provided, however, that any failure to make
such a notation (or any errors in notation) shall not limit or otherwise affect
the obligation of the Borrowers hereunder or under the Note or Line of Credit
Note, which is and shall remain absolute and unconditional.
4. Section 2.17 of the Loan Agreement shall not be applicable to the
Line of Credit Note.
5. Section 1.1 is hereby amended so that the definition of "Maturity
Date" with respect to the Line of Credit Note is the one year anniversary
thereof.
6. Proceeds borrowed pursuant to the Line of Credit Note will be used
for expenditures made within the continental United States Only.
WITH RESPECT TO BOTH THE NOTE AND LINE OF CREDIT NOTE:
1. The definition of "Guarantor" in section 1.1 of the Loan Agreement
is amended to include Baltek International Corporation and Baltek Mercosur,
L.L.C.
2. Section 2.1 of the Loan Agreement is replaced with the following:
"Advances. From time to time, during the period from January 1, 2001 until the
Maturity Date, provided no Default and/or Event of Default shall have occurred
and be continuing (in which event the Bank shall have no obligation to make
loans in accordance with the terms and provisions of the Loan Agreement), in the
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manner hereinafter set forth, the Borrowers may borrow, repay and reborrow from
the Bank and, upon request of the Borrowers and upon the terms and conditions
contained herein as well in the Second Substitute Revolving Credit Note and Line
of Credit Note, respectively, the Bank agrees to make loans to the Borrowers (a)
under the Second Substitute Revolving Credit Note in such amounts which, when
added to the outstanding principal amount of the Second Substitute Revolving
Credit Note and Line of Credit Note theretofore made pursuant to this Agreement,
will not exceed the Borrowing Base and (b) under the Line of Credit Note in such
amounts which, when added to the outstanding principal amount of the Line of
Credit Note, theretofore made pursuant to this Agreement, will not exceed One
Million ($1,000,000) Dollars"
3. Section 5.2 of the Loan Agreement is amended to provide that the
proceeds made available to them pursuant to the terms of the Line of Credit Note
shall be used to finance the purchase of equipment.
4. Section 5.8 of the Loan Agreement is amended to add 5.8(iii) which
provides: "A quarterly covenant compliance report."
5. Section 5.10 of the Loan Agreement is amended to provide that
Crustacea shall maintain, for the term of the Note, its credit insurance on all
accounts receivable.
6. Section 5.13 of the Loan Agreement is amended to provide:
The Borrowers shall not (a) sell, transfer, assign, lease or otherwise
dispose of (whether in one transaction or a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) or (b)
consolidate with or merge into any other corporation or permit any corporation
to merge into it where the combined purchase value of such merger or acquisition
is greater than $6,000,000 without the prior written consent of the Bank; (c)
consolidate with or merge into any other corporation or permit any corporation
to merge into it where the combined purchase value of such merger or acquisition
is less than $6,000,000 unless (i) such Borrower is the surviving entity of such
merger or consolidation, (ii) the Bank receives pro forma financial statements
from an independent certified public accountant satisfactory to the Bank to
reflect such merger or consolidation, and such pro forma statements set forth a
Tangible Net Worth of the Borrowers which equals or exceeds the Tangible Net
Worth of the Borrowers prior to such event, (iii) no Default or Event of Default
shall occur as a result of and after giving effect to such event and (iv) the
security interest of the Bank in the Collateral (and the priority position of
the Bank with respect thereto) shall not be affected, diminished or impaired in
any way.
7. A new section (Section 5.23) of the Loan Agreement is added to
provide:
During the term of the Note, neither Borrower shall issue any dividends
which, in the aggregate, exceed such Borrower's current year net income.
8. A new section (Section 5.24) of the Loan Agreement is added to
provide:
Commencing January 1, 2001 and during the term of the Note, Baltek and
its subsidiaries shall maintain a combined Minimum Tangible Net Worth of Thirty
Three Million Five Hundred Thousand ($33,500,000) Dollars with annual step ups
of One Million Two Hundred and Fifty Thousand ($1,250,000) Dollars.
9. A new section (Section 5.25) of the Loan Agreement is added to
provide:
Debt Service Coverage Ratio. Commencing January 1, 2001 and during the
term of the Note, the Borrowers, on a consolidated basis, shall not cause,
suffer or permit its Debt Service Coverage Ratio (as hereinafter defined) to be
less than 1.25 to 1 measured quarterly, on a rolling four quarter basis. "Debt
Service Coverage Ratio" shall mean the ratio of (i) EBITDA, less cash taxes,
dividends and cash capital expenditures, to (ii) the sum of: (a) Current Portion
of Long Term Indebtedness (as hereinafter defined) and (b) interest expense for
the last twelve (12) months. "Current Portion of Long Term Indebtedness" shall
mean that portion of the Obligor's Long Term Indebtedness due and payable within
the last twelve (12) months, determined in accordance with generally accepted
accounting principles.
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10. Baltek shall be entitled to guarantee loans made to Baltek SA and
Baltek Limited which, in the aggregate, do not exceed $1,000,000 and to assist
Baltek SA and Baltek Limited in obtaining such loans.
11. No Change. Except as expressly set forth herein, all of the terms
and provisions of the Loan Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
ATTEST: BALTEK CORPORATION
By: By:
--------------------------------- ---------------------------------
Xxxxxx Xxxxxxxx, Treasurer Name: Xxxxxxx Xxxx
Title:President
ATTEST: CRUSTACEA CORPORATION
By: By:
--------------------------------- ---------------------------------
Xxxxxx Xxxxxxxx, Treasurer Name:Xxxxxxx Xxxx
Title: President
