AMENDMENT TO COMMERCIAL LOAN AGREEMENT
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(AB/MOS)
This Amendment to Commercial Loan Agreement ("Amendment") is
entered into as of June 11, 1998 (but shall be deemed effective as of April 26,
1998) by and between The Sumitomo Bank of California, a California banking
corporation ("Sumitomo"), Manufacturers Bank, a California banking corporation
("Manufacturers"), AB Plastics Corporation, a California corporation ("AB
Plastics"), M.O.S. Plastics, Inc., a California corporation ("MOS Plastics"),
Compass Plastics & Technologies, Inc., a Delaware corporation ("Guarantor"), and
Sumitomo in its capacity as agent for Sumitomo and Manufacturers (the "Agent").
Manufacturers and Sumitomo are sometimes collectively referred to herein as the
"Banks." AB Plastics and MOS Plastics are sometimes referred to herein
collectively as the "Borrowers." This Amendment is entered into with reference
to the following:
RECITALS
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A. The Agent, the Banks, the Borrowers and the Guarantor previously
entered into that certain Commercial Loan Agreement dated as of February 27,
1998 (the "Agreement").
B. The Agent, the Banks, the Borrowers and the Guarantor desire to
amend the Agreement on the terms and conditions set forth herein.
AMENDMENT
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NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Agent, the Banks, the Borrowers and the Guarantor
hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings given such terms in the
Agreement.
2. Amendments. The Agreement is hereby amended as follows:
A. 1.5 Repayment Terms of Term Loan. Section 1.5(c)(i) is hereby
amended by adding the following sentence at the end thereof:
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"Notwithstanding anything to the contrary
contained in this subparagraph 1.5(c)(i),
Borrowers will be required to apply only 60%
of the net proceeds (i.e., gross proceeds
less repayment of the indebtedness secured
by a deed of trust against the property and
reasonable closing costs) from the sale of
real estate owned by Borrowers to the
outstanding principal amount of the Term
Loan."
B. 1.6 Interest Rates. Subsection 1.6(c)(ix) is hereby amended and
restated in its entirety to provide as follows:
"(ix) As used herein, "Applicable Spread" means the additional
component of interest, expressed as a percentage per annum, to be
added to the Prime Rate or the Offshore Rate, as applicable, in
determining the applicable interest rate for amounts outstanding
under the Loans. The Applicable Spread shall be based on the
ratio of the Senior Funded Debt (on a consolidated basis) to
EBITDA (on a consolidated basis) in accordance with the following
Pricing Grid:
================================ ========================== ==========================
Ratio of Funded Debt to EBITDA Applicable Spread for Applicable Spread for
Offshore Rate Borrowings Prime Rate Borrowings
================================ ========================== ==========================
Greater than or equal to 4.00 4.50% 2.25%
to 1
-------------------------------- -------------------------- --------------------------
Greater than or equal to 3.50 3.75% 1.50%
to 1 but less than 4.00 to 1
-------------------------------- -------------------------- --------------------------
Greater than or equal to 3.00 3.00% .75%
to 1 but less than 3.50 to 1
-------------------------------- -------------------------- --------------------------
Greater than or equal to 2.50 2.75% .50%
to 1 but less than 3.00 to 1
-------------------------------- -------------------------- --------------------------
Less than 2.50 to 1 2.50% .25%
-------------------------------- -------------------------- --------------------------
The ratio of Senior Funded Debt to EBITDA (as those terms are
defined in Section 1.5(c) above) shall be determined by Agent
as of the last day of each fiscal month based on financial
information supplied by the Borrowers and Guarantor hereunder
(with such adjustments thereto as Agent shall reasonably
determine). EBITDA will be computed for the twelve fiscal
months ending with the measuring date. The Applicable Spread
shall be per the Pricing Grid and shall take effect (a)
immediately for new Offshore Rate Advances, and for existing
Offshore Rate Advances on the maturity of the applicable
interest period for such existing Offshore Rate Advances, and
(b) immediately for Prime Rate
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Advances. Concurrently with the execution of this Amendment
the applicable borrowing rates shall be Offshore Rate plus
3.75% and Prime Rate plus 1.5%."
C. 2.1 Unused Commitment Fee. Section 2.1(b) is hereby
amended by deleting the existing table and adding the following table:
======================================== ======================
Ratio of Senior Funded Debt to EBITDA Applicable UCF Spread
======================================== ======================
Greater than or equal to 4.00 to 1 1.00%
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Greater than or equal to 3.50 to 1 but 0.75%
less than 4.00 to 1
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Greater than or equal to 3.00 to 1 but 0.50%
less than 3.50 to 1
---------------------------------------- ----------------------
Greater than or equal to 2.50 to 1 but 0.375%
less than 3.00 to 1
---------------------------------------- ----------------------
Less than 2.50 to 1 0.25%
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D. 6.2 Financial Information. Subsection 6.2(b) is hereby
amended and restated in its entirety to provide as follows:
"(b) Within 45 days after the period's end (including the
financial statements of the last month of the fiscal
year), consolidated and consolidating monthly financial
statements (including a balance sheet, income statement
and statement of cash flows) for Guarantor, Borrowers and
AB Plastics de Mexico S.A. de C.V. ("AB Mexico") and any
other subsidiaries. These financial statements may be
internally prepared. The statements shall be prepared on
a consolidated and consolidating basis, and shall reflect
the results for the month just ended as well as the
results from the beginning of the current fiscal year
through the month just ended, along with a comparison to
budget. Borrowers shall also provide to Agent monthly
compliance certificates (in the form of Exhibit E hereto)
within 45 days of each month end containing details as
reasonably required by the Banks including, but not
limited to, capital expenditure detail by location, item
and how financed."
E. 6.3 Quick Ratio. Section 6.3 is hereby modified by
substituting the word "month" for the word "quarter" contained therein.
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F. 6.4 Tangible Net Worth. Section 6.4 is hereby amended
and restated in its entirety to provide as follows:
"6.4 Tangible Net Worth. To maintain on a consolidated
basis as of the end of each fiscal month Tangible Net
Worth equal to at least the sum of the following:
(a) $3,200,000;
(b) 80% of the cumulative net income after income
taxes determined on a monthly basis (with no deduction
for losses determined on a monthly basis) earned after
April 26, 1998;
(c) the net proceeds from any equity securities
issued after the date of this Agreement; and
(d) any increase in stockholders' equity resulting
from the conversion of debt securities to equity
securities after the date of this Agreement.
'Tangible Net Worth' means the gross book value of
Guarantor's and Borrowers' assets (excluding goodwill,
patents, trademarks, trade names, organization expense,
treasury stock, officer/employee and stockholder
receivables, unamortized debt discount and expense,
deferred research and development costs, deferred
marketing expenses, and other like intangibles), plus
debt subordinated to Banks in a manner acceptable to
Banks, less total liabilities, including, without
limitation, accrued and deferred income taxes, and any
reserves against assets."
G. 6.5 Maximum Senior Funded Debt to EBITDA. Section 6.5 is
hereby amended and restated in its entirety to provide as follows:
"6.5 Maximum Senior Funded Debt to EBITDA. To maintain on
a consolidated basis a ratio of Senior Funded Debt to
EBITDA (as those terms are defined in Section 1.5 above)
of not to exceed (a) 4.00 to 1 at all times prior to the
fiscal year ending about October 26, 1998; (b) 3.75 to 1
effective with the fiscal year ending about October 26,
1998 through one day prior to fiscal quarter ending about
April 26, 1999, (c) 3.50 to 1 effective with the fiscal
quarter ending about April 26, 1999 through one day
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prior to fiscal year ending about October 26, 1999, and
(d) 3.00 to 1 effective with the fiscal year ending about
October 26, 1999 and thereafter. For purposes of this
covenant, EBITDA will be computed for the twelve months
ending on the measuring date, and this covenant shall be
tested as of the last day of each fiscal month. Senior
Funded Debt will be determined as the amount thereof as
of the date of measurement. The trailing twelve month
EBITDA for AB Plastics for the fiscal month ending
January 25, 1998, and for MOS Plastics for the fiscal
month ending January 31, 1998, is as computed on Schedule
6.5. This EBITDA shall be used for computing the covenant
at closing."
H. 6.6 Fixed Charge Coverage Ratio. The definitions of
"Cash Flow" and "Fixed Charges" set forth in Section 6.6 are hereby amended to
provide as follows:
" 'Cash Flow' means the sum of trailing twelve month
EBITDA for the Guarantor and its subsidiaries (on a
consolidated basis) (plus MOS Plastics prior to
acquisition).
'Fixed Charges' means, as of the date of determination,
the sum of (a) the annualized (from the beginning of
Guarantor's fiscal year through the date of measurement,
on a consolidated basis for Guarantor and its
subsidiaries) sum of gross interest expense (payable in
cash for the period), plus taxes payable for such period,
plus cash dividends/distributions, plus (b) current
portion of long term debt under all Indebtedness
including, but not limited to, payments due under any
seller notes or 'earn-out' agreements entered into in
connection with the acquisition of MOS Plastics or any
other arrangements."
I. 6.7 Profitability. Section 6.7 is hereby amended by
deleting the period at the end thereof and adding the following:
", effective with the fiscal quarter ending about July
26, 1998."
J. 6.10 Leases. Section 6.10 is hereby amended by
changing the words "two million dollars ($2,000,000)" appearing therein to "two
million five hundred dollars ($2,500,000)."
K. 6.24 Additional Negative Covenants. Subsection
6.24(j) is hereby amended by changing the dollar figure "$6,500,000" set forth
therein to "$5,500,000."
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L. 6.30 Appraisals. A new Section 6.30 is hereby added to
the Agreement which shall provide as follows:
"6.30 Appraisals. Borrowers shall allow Agent's
appraisers from time to time to inspect and appraise all
of Borrowers' machinery and equipment (the first such
appraisal to take place by July 10, 1998), and Borrowers
shall, upon request of Agent, pay all reasonable
appraisal fees and costs incurred in connection
therewith."
M. Notice of Defaults. A new Section 6.31 is hereby added
to the Agreement which shall provide as follows:
"6.31 Notice of Defaults. Borrowers shall, within five
(5) days of becoming aware thereof, notify Agent in
writing of any Event of Default, and of any event that
with the giving of notice and/or the passage of time
could become an Event of Default. Without limiting the
foregoing, Borrowers shall also promptly notify the Agent
if they anticipate that any financial covenant contained
herein shall not be met as of the next date of
determination applicable to any such covenant (which
Borrowers are aware of prior to the time Agent or Banks
are so aware because the Borrowers have the financial
information prior to the time they are obligated to remit
it to the Agent or Banks, or for any other reason
whatsoever)."
N. Exhibit E. The existing Exhibit E to the Agreement is
hereby deleted and a new Exhibit E in the form of Exhibit "E" attached hereto
is substituted in its place.
3. Events of Default. The failure of the Borrowers (or either of them)
to perform or observe any of the additional terms and conditions set forth in
this Amendment (which failure is not cured within the grace period applicable
under Section 8.1(b) of the Agreement, if any) shall constitute an Event of
Default under the Agreement, and shall permit the Agent and the Banks to
exercise all of their rights and remedies set forth in the Agreement, other loan
documents and which they may otherwise have under law. Furthermore, the failure
of the Borrowers (or either of them) to raise an additional $2,000,000 in equity
or subordinated debt (which is subordinated to the indebtedness owing to the
Banks pursuant to documentation and terms satisfactory to the Banks in their
sole discretion) by no later than October 31, 1998 shall constitute an
additional Event of Default under the Agreement, and shall permit the Agent and
the Banks to exercise all of their rights and remedies set forth in the
Agreement, other loan documents, and which they may otherwise have under law.
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4. Amendment Fee. Concurrently with execution hereof, Borrowers shall
pay to Agent, for the ratable benefit of the Banks, an amendment fee in the
amount of $10,000.
5. Reaffirmation of Guaranty and Security Documents. Guarantor and
Borrowers hereby reaffirm and agree to perform and observe all of their
respective obligations and agreements under the continuing guaranty, security
agreements, pledge agreements, and any other loan documents and security
documents executed in connection with the Agreement, or otherwise pertaining to
the transactions described therein, in light of the foregoing amendments and
modifications.
6. Loan Documents in Full Force and Effect. Except as specifically
amended or modified by this Amendment, the Agreement and any and all other loan
documents executed in connection therewith or pertaining thereto shall remain
unmodified and in full force and effect.
7. Payment of Costs and Fees. Borrowers agree to pay, promptly upon
demand by Agent, all costs and expenses incurred by the Agent and the Banks in
connection with the preparation and negotiation of this Amendment, and which may
otherwise have been incurred by the Agent and the Banks in connection with the
Agreement, including without limitation reasonable attorneys' fees and costs
incurred by the Agent and Banks.
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This Amendment is executed as of the date stated at the top of
the first page.
"Borrowers"
AB PLASTICS CORPORATION, a California corporation
By: \s\ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
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[Printed Name and Title]
By: \s\ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇, CFO
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[Printed Name and Title]
M.O.S. PLASTICS, INC., a California corporation
By: \s\ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
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[Printed Name and Title]
By: \s\ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇, CFO
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[Printed Name and Title
Address where notices to Borrowers are to be sent:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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"Guarantor"
COMPASS PLASTICS & TECHNOLOGIES, INC.,
a Delaware corporation
By: \s\ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
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[Printed Name and Title]
By: \s\ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇, CFO
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[Printed Name and Title]
Address where notices to Guarantor are to be sent:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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"Banks"
THE SUMITOMO BANK OF CALIFORNIA, a California
banking corporation, in its individual capacity
By: \s\ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
Address where notices to Sumitomo are to be sent:
The Sumitomo Bank of California
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▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Manager
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
MANUFACTURERS BANK, a California banking
corporation
By: \s\ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇, V.P.
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[Printed Name and Title]
Address where notices to Manufacturers are to be
sent:
Manufacturers Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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"Agent"
THE SUMITOMO BANK OF CALIFORNIA, a California
banking corporation, as Agent for itself and
Manufacturers Bank
By: \s\ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
Address where notices to Agent are to be sent:
The Sumitomo Bank of California
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: Manager
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇