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ELEVENTH AMENDMENT TO LOANS AND SECURITY AGREEMENT,
MODIFICATION OF NOTES AND REAFFIRMATION OF GUARANTIES
This ELEVENTH AMENDMENT TO LOANS AND SECURITY AGREEMENT AND REAFFIRMATION
OF GUARANTIES, dated as of June 30, 1998 (this "AMENDMENT") is by and among
FLEET NATIONAL BANK F/K/A FLEET NATIONAL BANK OF CONNECTICUT F/K/A SHAWMUT BANK
CONNECTICUT, N.A., a national banking association with a place of business at
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("LENDER"), EDAC TECHNOLOGIES
CORPORATION, a Wisconsin corporation with a principal place of business at ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("BORROWER") and GROS-ITE
INDUSTRIES, INC., a Connecticut corporation with a mailing address c/o Borrower
at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("GUARANTOR").
On October 3, 1985, Lender and Borrower entered into a certain Revolving
Loan and Security Agreement which has been amended and restated in its entirety
by a certain Fifth Amended and Restated Revolving Loan, Term Loan, Equipment
Loan and Security Agreement dated February 28, 1995, as amended by a certain
Sixth Amendment to Revolving Loan, Term Loan, Equipment Loan and Security
Agreement dated July 31, 1995, as further amended by a certain Seventh
Amendment to Revolving Loan, Term Loan, Equipment Loan and Security Agreement
and Reaffirmation of Guaranties dated as of January 26, 1996, as further
amended by a certain Eighth Amendment to Revolving Loan, Term Loan, Equipment
Loan and Security Agreement and Reaffirmation of Guaranties dated as of April
10, 1996, as further amended by a certain Ninth Amendment to Revolving Loan,
Term Loan, Equipment Loan, Security Agreement, Modification of Notes and
Reaffirmation of Guaranties dated May 27, 1997 between Borrower and Lender and
as further amended by a certain Tenth Amendment to Revolving Loan, Term Loan,
Equipment Loan and Security Agreement and Reaffirmation of Guaranties dated May
22, 1998 (as amended and in effect from time to time, the "LOAN AGREEMENT").
Capitalized terms used herein and not defined herein shall have the meanings
given to them in the Loan Agreement.
Pursuant to the Loan Agreement, the Lender has made: (i) a $9,000,000.00
revolving loan (the "REVOLVING LOAN") as evidenced by a certain Amended and
Restated Revolving Promissory Note dated as of ▇▇▇▇▇ ▇▇, ▇▇▇▇ (▇▇▇ "▇▇▇▇▇▇▇▇▇
▇▇▇▇"), (▇▇) a $541,153.34 term loan (the "CONSOLIDATED EQUIPMENT LOAN") as
evidenced by a certain Amended and Restated Promissory Note dated March 27,
1997 (the "CONSOLIDATED EQUIPMENT NOTE"), (iii) a $4,000,000.00 term loan (the
"TERM LOAN") as evidenced by a certain Term Promissory Note dated March 22,
1993 (the "TERM NOTE"), (iv) a $1,000,000.00 construction to permanent loan
(the "CONSTRUCTION LOAN") as evidenced by a certain Construction to Permanent
Loan Promissory Note dated July 31, 1995 (the "CONSTRUCTION NOTE"), (v) a
$3,000,000.00 equipment loan (the "THIRD EQUIPMENT LOAN") as evidenced by a
certain Equipment Promissory Note III dated as of March 27, 1997 (the "THIRD
EQUIPMENT NOTE") and (vi) a $3,000,000 equipment loan (the "FOURTH EQUIPMENT
LOAN") as evidenced by a certain Equipment Promissory Note IV dated as of May
22, 1998 (the "FOURTH EQUIPMENT NOTE").
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Borrower has requested that Lender amend the Loan Agreement and the Loan
Documents in order to, among other things, (i) extend the termination date and
increase the maximum principal amount of the Revolving Loan, (ii) amend the
Borrowing Base, (iii) modify the interest rates of the Revolving Loan, the
Consolidated Equipment Loan, the Third Equipment Loan, the Fourth Equipment
Loan and the Construction Loan (collectively, the "LOANS"), (iv) make a new
$14,000,000 term loan to the Borrower, and (v) make other amendments as set
forth herein. Lender has advised Borrower that Lender is prepared to make the
loan and amendments requested on the condition that Borrower join with Lender
in this Amendment upon the terms and conditions set forth herein.
In consideration of this Amendment and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Lender, Borrower and Guarantor hereby agree as follows.
I. Acknowledgments, Affirmations and Representations and Warranties.
A. The Borrower and Guarantor acknowledge and affirm that:
1. All of the statements contained herein are true and correct and
that they understand that the Lender is relying on the truth and completeness of
such statements to enter into this Amendment.
2. As of June 30, 1998 and without regard to the financial
accommodations contemplated herein, the Borrower is legally and validly
indebted to the Lender in the principal amount of $4,425,116.84 with respect to
the Revolving Loan, $414,873.34 with respect to the Consolidated Equipment
Loan, $2,850,000 with respect to the Third Equipment Loan, $1,245,085.00 with
respect to the Fourth Equipment Loan, $3,072,053.69 with respect to the Term
Loan and $833,333.20 with respect to the Construction Loan, plus interest and
fees accrued and accruing thereon and costs and expenses of collection,
including without limitation, attorneys' fees, and there is no defense, offset
or counterclaim with respect to any of the foregoing or independent claim or
action against the Lender.
3. The Guarantor is legally and validly indebted to the Lender by
virtue of the Guaranty and there is no defense, offset or counterclaim with
respect thereto or claim or independent against the Lender.
B. The Borrower and the Guarantor represent and warrant to the Lender
that:
1. The resolutions previously adopted by the Board of Directors of the
Borrower and the Guarantor and provided to the Lender have not in any way been
rescinded or modified and have been in full force and effect since their
adoption to and including the date hereof and are now in full force and effect,
except to the extent that they have been modified or supplemented to authorize
this Amendment and the documents and transactions described herein.
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2. The Borrower and the Guarantor have the corporate power and
authority to enter into, and have taken all necessary corporate action to
authorize, this Amendment and the transactions contemplated hereby.
3. All representations, warranties and covenants contained in, and
schedules and exhibits attached to, the Loan Documents are true and correct on
and as of the date hereof, are incorporated herein by reference and are hereby
remade.
4. The Borrower and the Guarantor are not currently in default under
any of the Loan Documents, and no condition exists which would constitute an
event of default under any of the Loan Documents but for the giving of notice
or passage of time, or both.
5. The consummation of the transactions contemplated hereby is not
prevented or limited by, nor does it conflict with or result in a breach of
terms, conditions or provisions of the Borrower's or Guarantor's respective
Certificates of Incorporation or Bylaws or any evidence of indebtedness,
agreement or instrument of whatever nature to which the Borrower or any of the
Guarantor is a party or by which any of them is bound, does not constitute a
default under any of the foregoing and does not violate any federal, state or
local law, regulation or order or any order of any court or agency which is
binding upon the Borrower or the Guarantor.
II. Amendments to Loan Documents.
A. Amendments to the Loan Agreement.
1. Amendment to Section 1. Sections 1.22, 1.30 and 1.33 are hereby
deleted and replaced with the following:
1.22 "COST OF FUNDS LOANS" or "COST OF FUNDS LOAN" means any
Revolving Loan, Equipment Loan, Equipment Loan IV, Second
Term Loan, or Acquisition Term Loan or any portion thereof
which bears interest with reference to the Cost of Funds.
1.30 "LIBOR LOANS" or "LIBOR LOAN" means the Revolving Loan,
Equipment Loan, Equipment Loan IV, the Second Term Loan
or Acquisition Term Loan or any portion thereof which
bears interest with reference to LIBOR.
1.33 "PRIME RATE LOAN" or "PRIME RATE LOANS" means the
Revolving Loan, Equipment Loan, Equipment Loan IV, Second
Term Loan or Acquisition Term Loan or any portion thereof
which bears interest with reference to the Prime Rate.
a. The following are hereby inserted after Section 1.38 of
the Loan Agreement:
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1.39 "ACQUISITION TERM LOAN" means that term as defined in
Section 2.21 hereof.
1.40 "ACQUISITION TERM NOTE" means that term as defined in
Section 2.21.
2. Amendment to Section 2.1 of the Loan Agreement. The Loan
Agreement is hereby amended by deleting Section 2.1 in its entirety and
substituting the following in lieu thereof:
2.1 Revolving Loan. The Lender may loan to the Borrower, at its
discretion, and the Borrower may borrow from the Lender, from
time to time (each an "ADVANCE" and collectively, the "REVOLVING
LOAN"), up to that amount (hereinafter referred to as the
"BORROWING BASE") which is the lesser of:
a. The sum of:
(1) EIGHTY PERCENT (80%) of the Borrower's Eligible
Receivables;
(2) SIXTY PERCENT (60%) of the Borrower's Eligible
Inventory, but in any event not to exceed SEVEN MILLION
DOLLARS ($7,000,000.00);
which sum shall be reduced by the aggregate amount committed
under any letter or letters of credit issued by the Lender on
behalf of the Borrower; OR
b. THIRTEEN MILLION DOLLARS ($13,000,000.00), reduced by the
aggregate amount committed under any letter or letters of
credit issued by the Lender on behalf of the Borrower.
Nothing herein shall be construed to require the Lender to
lend up to the Borrowing Base, and nothing shall prohibit the
Lender from lending in excess of the Borrowing Base, all
loans to be at the discretion of the Lender.
The Revolving Loan shall be evidenced by the Amended and
Restated Revolving Promissory Note annexed hereto and made a
part hereof as EXHIBIT "B".
3. Amendment to Section 2.9 of the Loan Agreement. The Loan
Agreement is hereby amended by deleting the first sentence of Section 2.9 in
its entirety and substituting the following in lieu thereof:
The Revolving Loan shall terminate on June 30, 2001.
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4. Amendment to Section 2.13 of the Loan Agreement. Section 2.13
of the Loan Agreement is hereby deleted and replaced with the following:
2.13 Non-Default Interest. The Borrower shall pay interest to
Lender monthly in arrears on the first day of each month
commencing on the outstanding and unpaid principal balance
of the Revolving Loan, Second Term Loan, Equipment Loan,
Equipment Loan IV and Acquisition Term Loan (collectively,
the "LOANS") at a rate per annum equal to, at Borrower's
election pursuant to Sections 2.14 and 2.17 below, (i) the
Prime Rate, (ii) LIBOR plus one hundred fifty (150) basis
points, or (iii) the Cost of Funds plus one hundred fifty
(150) basis points. If the Borrower achieves an Operating
Leverage Ratio (as defined in Section 10 of Exhibit A
hereto) of less than or equal to 2.0 to 1.0 for the
quarter period tested, the Lender, in its sole and
absolute discretion, may lower the interest rate on the
portion of the Loans which bear interest with respect to
the LIBOR Rate by twenty-five (25) basis points for the
quarter following the quarter in which the Operating
Leverage Ratio was tested.
5. The following is hereby inserted after Section 2.20 of the Loan
Agreement:
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Section 2.21 Acquisition Term Loan. Subject to the terms and
conditions of this Agreement, Lender shall make a term loan
to the Borrower in an original principal amount of Fourteen
Million Dollars ($14,000,000.00) (the "ACQUISITION TERM
LOAN"). The Acquisition Term Loan shall be evidenced by, and
repaid in accordance with a single promissory note of
Borrower in the form attached hereto as Exhibit G duly
completed, executed and delivered to Lender, in the principal
amount of $14,000,000.00 (such promissory note is referred to
herein as the "ACQUISITION TERM NOTE") payable to Lender and
maturing on June 30, 2005. Borrower shall make monthly
payments of accrued interest commencing on August 1, 1998 and
on the first Business Day of each month thereafter until the
Acquisition Term Loan is repaid in full. Borrower shall make
mandatory scheduled principal payments under the Acquisition
Term Note monthly in the amount of (a) $83,333.33 per month,
commencing July 1, 1999 and continuing on the first day of
each succeeding month thereafter through and including June
1, 2002, (b) $250,000 commencing on July 1, 2002 and
continuing on the first day of each succeeding month
thereafter through and including June 1, 2003 and (c)
$333,333.33 per month commencing on July 1, 2003 and
continuing on the first day of each succeeding month
thereafter through and including June 1, 2005 except that if
not sooner paid, the principal amount, together with all
accrued but unpaid interest thereon, shall be due and payable
on June 30, 2005. Additionally, if at any time after June
30, 1999 the Borrower's Debt Service Ratio (as defined in
Section 10 of Exhibit A) exceeds 1.3 to 1.0 based on
Borrower's June 30 and December 31 financial statements, the
Borrower shall pay Lender an amount equal to fifty (50%)
percent of the amount of earnings which when deducted from
the Debt Service Ratio calculation would provide for a Debt
Service Ratio of 1.3 to 1.0. Such excess amount will be used
to first pay down the principal balance of the Acquisition
Term Loan in the inverse order of maturity and then to pay
down the principal balance of the Second Term Loan, Term
Loan, Equipment Loan or Equipment Loan IV ("OTHER TERM DEBT")
as determined by Lender in its sole discretion. Furthermore,
in the event of a public offering of capital stock or other
equity of Borrower, including without limitation a secondary
offering thereof, a minimum of $11,000,000 of the proceeds of
such offering, after allowance for ordinary and customary
underwriting expenses, shall be used to first pay down the
principal balance of the Acquisition Term Loan in the inverse
order of maturity and then to pay down Other Term Debt of
Borrower to Lender as determined by Lender in its sole
discretion.
Section 2.22 Success Fee. The Borrower shall pay Lender a
"success fee" of $120,000.00 as follows: (i) in full upon
the closing of a secondary stock offering which occurs on or
before December 31, 1999; (ii) $60,000 on or before December
31, 1999 and $60,000 on the earlier of (a) June 30, 2000 or
(b) the closing of a secondary stock offering; or (iii) in
full if the Loans are refinanced either in whole or in part
with borrowed money.
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6. Section 5.1(i) of the Loan Agreement is hereby deleted and
replaced with the following:
(i) Default in the payment of any sum due under any
indebtedness for borrowed money owed by the Borrower or any
Guarantor, including without limitation, indebtedness owed to
▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇ (the "▇▇▇▇▇▇ DEBT"), which
results in such indebtedness being due prior to its stated
maturity, provided, however, if (x) the Borrower disputes a
claim of default under the ▇▇▇▇▇▇ Debt due to its right of
offset contained in a certain Asset Purchase Agreement by and
among Apex Acquisition Corp., Apex Machine Tool Company,
Inc., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
and (y) Borrower establishes adequate reserves for the ▇▇▇▇▇▇
Debt in an amount reasonably satisfactory to Lender, such
default shall not constitute a default hereunder unless and
until such dispute is resolved adversely to Borrower.
7. Amendment to Exhibit A of the Loan Agreement. Exhibit A of
the Loan Agreement is hereby amended by:
a. Deleting Section 10 of Exhibit "A" to the Loan
Agreement in its entirety and substituting the
following in lieu thereof:
Debt Service Ratio. The Borrower shall maintain as of
the end of each calendar quarter, for the year to date
period, a ratio of [(earnings before interest, taxes,
depreciation and amortization) minus (Unfunded Capital
Expenditures (pro rated based upon the percentage of
the calendar year elapsed at the time of the covenant
testing)) to [(Current Maturities of Long-Term Debt
paid or scheduled to be paid during the period to be
tested) plus (interest) plus (taxes) plus (dividends)]
of not less than (a) 1.4 to 1.0 as of September 30,
1998 and at all times through and including September
30, 1999, and (b) 1.2 to 1.0 as of December 31, 1999
and at all times thereafter. "CURRENT MATURITIES OF
LONG TERM DEBT" shall mean all indebtedness of Borrower
(excluding the Revolving Loan) which, in accordance
with GAAP may be properly classified as long term debt,
the portion of which is due within one (1) year from
the date of determination thereof. "UNFUNDED CAPITAL
EXPENDITURES" means all Capital Expenditures which are
not funded with the proceeds of the Equipment Loan IV,
the Acquisition Term Loan, or the ▇▇▇▇▇▇ Debt.
"CAPITAL EXPENDITURES" shall mean amounts paid by the
Borrower in connection with the purchase by the
Borrower of Capital Assets that would be required to be
capitalized and shown on the balance sheet of the
Borrower in accordance with GAAP. "CAPITAL ASSETS"
shall mean fixed assets, both tangible (such as land,
buildings, fixtures,
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machinery and equipment) and intangible (such as
patents, copyrights, trademarks, franchises and good
will); provided that Capital Assets shall not include
any item customarily charged directly to expense or
depreciated over a useful life of twelve (12) months or
less in accordance with GAAP.
b. Deleting Section 13 of Exhibit "A" to the Loan
Agreement in its entirety and substituting the
following in lieu thereof:
Operating Leverage Ratio. The Borrower shall maintain
on a rolling four quarter basis a ratio of [Funded
Senior Debt] to [earnings before interest, taxes,
depreciation and amortization] of not greater than (a)
5.6 to 1.0 as of September 30, 1998, (b) 4.9 to 1.0 as
of December 31, 1998 and at all times through September
30, 1999, (c) 3.0 to 1.0 as of December 31, 1999 and at
all times through September 30, 2000 and (d) 2.5 to 1.0
as of December 31, 2000 and at all times thereafter.
"FUNDED SENIOR DEBT" shall mean all outstanding
indebtedness of Borrower to Lender and to ▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇.
8. EXHIBIT B of the Loan Agreement is hereby deleted and
replaced with B attached hereto.
9. EXHIBIT G attached hereto is hereby attached to the Loan
Agreement as EXHIBIT G.
B. Amendments to Revolving Note. The Revolving Note is hereby amended
and restated as set forth in EXHIBIT B attached hereto.
III. Reaffirmation of Guaranty.
To induce the Lender to enter into this Amendment, the Guarantor hereby
(a) consents to this Amendment and (b) affirms and ratifies the Guaranty and
confirms that (i) the Guarantor does irrevocably and unconditionally guarantee
to the Lender the payment and performance from the Borrower of the Obligations
(as defined in the Guaranty) from the Borrower to the Lender, upon the terms
and conditions set forth in the Guaranty, (ii) the term Obligations includes,
without limitation, this Amendment (the "MODIFICATION"), the Term Loan, the
Construction Loan, the Consolidated Equipment Loan, the Third Equipment Loan,
the Fourth Equipment Loan, the increase in the Revolving Loan and the
Acquisition Term Loan, and (iii) the Guaranty remains in full force and effect.
IV. Miscellaneous.
A. Ratifications, Etc. Except as otherwise expressly set forth herein,
all terms and conditions of the Loan Agreement, the Guaranty and the Loan
Documents are ratified and shall
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remain in full force and effect. Nothing herein shall be construed to be a
waiver of any requirements of the Loan Agreement and the Loan Documents except
as expressly set forth herein.
B. Conditions Precedent. The effectiveness of this Amendment shall be
subject to the Lender's prior receipt of each of the following in form and
substance satisfactory to Lender and its counsel:
1. This Amendment, duly executed and delivered by the Borrower
and Guarantor and the Amended and Restated Revolving
Promissory Note and Acquisition Term Note, both duly executed
and delivered by the Borrower;
2. The execution by Apex Machine Tool Company, Inc. f/k/a Apex
Acquisition Corporation of a Guaranty of the obligations of
Borrower to Lender (the "APEX GUARANTY"), a security agreement
securing all obligations of Apex under the Apex Guaranty and a
UCC-1 Financing Statement in favor of Lender providing a first
priority perfected security interest in all personal property
of Apex to Lender, except for the security interest of the
State of Connecticut as previously disclosed to Lender.
3. The execution and delivery of an open-end mortgage in favor
of Lender on 1790, 1794 and ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ securing the Acquisition Term Loan.
4. Copies of all corporate action taken by the Borrower,
Guarantor and Apex, including resolutions of their Board of
Directors, authorizing the execution, delivery, and
performance of the Loan Documents to which each is a party and
each other document to be delivered pursuant to this
Amendment, certified as of the date of this Amendment by the
Secretary of the Borrower, Guarantor and Apex;
5. A certificate or certificates, dated as of the date of this
Amendment, of the Secretary of the Borrower, Guarantor and
Apex certifying the names and true signatures of the officers
of the Borrower, Guarantor and Apex authorized to sign the
Loan Documents to which the Borrower, Guarantor and Apex are a
party and the other documents to be delivered by the Borrower,
Guarantor and Apex under this Amendment;
6. Opinions of counsel for Borrower, Guarantor and Apex in form
and substance satisfactory to Lender.
7. All fees and expenses, including legal fees and related
disbursements incurred by Lender in connection with the
structuring, negotiation, preparation and closing of this
Amendment and the transactions related hereto;
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8. Execution and recording of a modification to the mortgage
securing the Construction Loan and the issuance of an
endorsement to the title policy insuring the original mortgage
modified by such modification;
9. Execution and recording of a certain Ninth Modification of
Open-End Mortgage of even date herewith and the issuance of
an endorsement to the title policy insuring the original
mortgage modified by said Modification of Open-End Mortgage
Deed; and
10. Payment of a $30,000 commitment fee to Lender.
C. Counterparts. This Amendment may be executed in any number of
counterparts, which together shall constitute one instrument.
D. Governing Law. This Amendment shall be construed and interpreted in
accordance with the laws of the State of Connecticut.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
an instrument under seal.
LENDER:
FLEET NATIONAL BANK f/k/a FLEET NATIONAL
BANK OF CONNECTICUT f/k/a SHAWMUT BANK
CONNECTICUT, N.A.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇
Its Vice President
Duly Authorized
BORROWER:
EDAC TECHNOLOGIES CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its Vice President
Duly Authorized
GUARANTOR:
GROS-ITE INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Its Secretary
APEX MACHINE TOOL COMPANY, INC. f/k/a
APEX ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Its Vice President
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