EXHIBIT 10.10(a)
WAKEFIELD ENGINEERING, INC.
00 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
As of December 31, 1997
FLEET NATIONAL BANK
Xxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Re: Sixth Amendment to Loan Agreement
Ladies and Gentlemen:
Reference is made to the Loan and Security Agreement dated June 22, 1994,
as amended by the First Amendment thereto dated May 5, 1995, a Second Amendment
thereto dated as of January 30, 1996, a Third Amendment thereto dated as of
March 29, 1996 and a Fourth Amendment thereto dated as of October 11, 1996 and a
Fifth Amendment thereto dated as of July 1, 1997 (together the "Loan Agreement")
and all promissory notes, agreements, documents and instruments entered into by
Wakefield Engineering, Inc. ("Wakefield"), Wakefield Extrusion Corp. ("WEC") and
Xxxxxxxx Industries, Inc. ("Xxxxxxxx") and any other person or obligor pursuant
thereto (collectively, the "Loan Documents") with or for the benefit of Fleet
National Bank ("Bank"). Except as otherwise defined herein, capitalized terms
used herein shall have the meanings given them in the Loan Agreement. This
Sixth Amendment to Loan Agreement is referred to as the "Sixth Amendment".
Background. Borrowers have requested that Bank agree to extend the
maturity date for the credit facilities provided under the Loan Agreement,
reinstitute an equipment acquisition loan facility, add Malco, Inc. ("Malco") as
a co-borrower and make certain other modifications to the Loan Agreement.
Lender has agreed to the request by the Borrowers subject to the terms and
conditions hereof.
1. Waiver of Covenant Non-Compliance. Subject to the terms and conditions
hereof, the Lender waives the Borrowers noncompliance with the financial
covenants in Sections 8(a) through (f) of the Loan Agreement at and prior to
December 31, 1997.
2. Malco Designated as Additional Borrower. Malco is, and hereby shall be, a
Borrower under the Loan Agreement and other Loan Documents, jointly and
severally with Wakefield, WEC and Xxxxxxxx with respect to all now existing and
hereafter existing or created Obligations and all references to Borrower or
Borrowers in the Loan Agreement shall mean Wakefield, WEC, Xxxxxxxx and Malco,
jointly and severally.
3. Subject to the satisfaction of the terms and conditions hereof, Bank and
Borrower have agreed that the Loan Agreement shall be amended as follows:
(a) Amendment to Definition of Termination Date. The definition of
Termination Date is amended to delete "January 1, 1998" and to replace it with
"December 31, 1999".
(b) Amendment to Net Earnings Definition. The definition of Net Earnings
is amended to add the phrase "and Alpha corporate allocation in excess of
$150,000" after the word "items" and before the comma following the word
"items".
(c) Amendments to Section 2(c). Section 2(c) is amended to delete the
Section in its entirety and to substitute the following in place thereof:
(d) Equipment Credit Facility.
Bank shall, from time to time, at Borrowers' request, make Equipment
Facility Loans to Borrowers, subject to the terms and conditions contained in
this Agreement. All or any portion of the Equipment Facility Loans, once
repaid, may not be reborrowed. The aggregate amount of Equipment Facility Loans
to be made hereunder shall not exceed Three Million Two Hundred Thousand Dollars
($3,200,000) and all borrowings hereunder that Borrowers elect to make must be
borrowed on or before December 31, 1998 (the "Conversion Date"). The proceeds
of Equipment Facility Loans may be used only for the purpose of funding up to
eighty percent (80%) of the Hard Cost of Capital Equipment purchased by
Borrowers, as determined by Bank in its discretion. Equipment Facility Loan
proceeds may not be used to acquire furniture, fixtures or leasehold
improvements or to fund software costs, shipping, installation, setup, testing
or other "soft" costs associated with the purchase of such new equipment.
Borrowers may request Equipment Facility Loans under this Equipment Credit
Facility of not less than $50,000 for purchasers of equipment, with each such
acquisition to be evidenced by purchase orders, invoices, shipping receipts and
such other documentation as Bank may require. Bank reserves the right to make
or decline to make any Equipment Facility Loan, in its discretion, if the
equipment to be acquired or the documentation relating thereto is not
satisfactory to the Bank, in its discretion, or if an Event of Default or any
event which, with notice or lapse of time or both, might become an Event of
Default has occurred and is continuing. Each Equipment Facility Loan
outstanding shall be interest only until the Conversion Date at which time each
such Equipment Facility Loan will be converted to a term loan and the Borrowers
shall commence repayment of the principal balance owed on
such Loans in equal monthly installments, each in an amount equal to one-eighty-
fourth (1/84th) of the aggregate unpaid principal balance of all Equipment Loans
made prior to the Conversion Date, together with all interest accrued thereon
payable on the first day of each month, commencing on the first day of the
calendar month following the Conversion Date with a final installment equal to
all unpaid principal, together with all interest accrued thereon (at the rate
specified below) on the first to occur of the Termination Date or December 31,
2003. The Equipment Facility Loans shall be evidenced by the Equipment Facility
Note, in the form of Exhibit B to the Sixth Amendment, or such other notes in
form satisfactory to Bank as Bank may require, and in the absence of such notes,
shall be conclusively evidenced by Bank's records of loans and repayments.
(e) Interest Rates Adjustment. Subsection 2(d)(i) of the Loan Agreement is
hereby amended to add the following to the end of said Section:
"Upon receipt in compliance with Section 5(e) of the Loan Agreement by
Bank of Alpha's consolidated audited financial statements with consolidating
schedules for each of the Borrowers for their fiscal year ending October 25,
1998 demonstrating to the satisfaction of the Bank that the Borrowers have and
continue to comply with the financial covenants set forth in Section 8 of the
Loan Agreement, the interest rates applicable to Loans outstanding shall be
reduced effective on the first day of the month following receipt of such
financial statements, to (A) for each Prime Rate Advance, the Prime Rate plus
one quarter of one percent (.25%) and (B) for each LIBOR Rate Advance, the
relevant Adjusted LIBOR Rate for the applicable Interest Period selected by
Borrowers in conformity with the Loan Agreement plus 225 basis points (2.25%).
The foregoing interest rates will be subject to further reduction after October
25, 1998 effective on the first day of the month following the receipt by Bank
of a Compliance Certificate furnished to Bank under Section 5(d) together with
the accompanying financial statements demonstrating to the Bank's satisfaction
that Borrowers' Senior Debt to Tangible Capital Base Ratio under Section 8(c) of
the Loan Agreement is less than or equal to 2:25 to 1:00 and continuing for so
long as such minimum ratio is maintained, to (A) for each Prime Rate Advance,
the Prime Rate, and (B) for each LIBOR Rate Advance, the Adjusted LIBOR Rate for
the applicable Interest Period selected by Borrowers in conformity with the Loan
Agreement plus 200 basis points (2.00%)."
(f) Unused Line Fee Adjustment. Section 2(h) is amended to add the
following sentence at the end thereof:
"The foregoing unused line fee shall be reduced to one quarter of one
percent (1/4%) per annum, upon the effective date of the first permitted
adjustment to interest rates under the last two sentences of Section 2(d)(i) of
the Loan Agreement."
(f) Financial Covenants Amendments.
(1) Section 8(a) of the Loan Agreement is amended by deleting the
Section in its entirety and by substituting in place thereof the following:
"(a) Tangible Capital Base. Permit Borrowers' Tangible Capital Base
to be less than the following amounts at the end of the respective periods set
forth below:
Date Minimum Tangible
Capital Base
January 1 through January 25, 1998 $6,900,000
January 26 through April 26, 1998 $7,500,000
April 27 through July 26, 1998 $7,900,000
July 26, 1998 through October 26,
1998 and thereafter $8,800,000
For purposes of calculating Tangible Capital Base, all Subordinated
Indebtedness hereafter provided to the Borrowers by Alpha and subject to the
Subordination Agreement between Alpha and Bank shall be added to the Minimum
Tangible Capital Base amounts set forth above.
(2) Section 8(b) is amended by deleting the Section in its entirety
and inserting in place thereof the following:
"8(b) Debt Service and Unfinanced Capital Expenditures Coverage
Ratio. Permit the ratio of (A) the aggregate of (i) EBITDA minus (ii)
unfinanced capital expenditures, minus (iii) cash taxes, and minus (iv)
permitted payments on Subordinated Indebtedness and any permitted Dividends to
(B) the sum of (i) interest expense and (ii) CMLTD of the Borrowers to be less
than .25 to 1.00 for the fiscal year to date period ending January 25, 1998 and
1.25 to 1.00 for each fiscal quarter ending thereafter, for the remainder of
fiscal year 1998, the fiscal year to date period, and thereafter, at each fiscal
quarter end for the prior four fiscal quarters."
(3) Section 8(c) Senior Debt to Tangible Capital Base Ratio is
amended by inserting the following therein:
"(c) Senior Debt to Tangible Capital Base. Permit the ratio of
Borrowers' Senior Indebtedness to Tangible Capital Base to be more than 2:50 to
1:00 at Borrowers' 1998 fiscal year end and at the end of each fiscal quarter
thereafter."
(4) Section 8(d) of the Loan Agreement is deleted in its entirety.
(5) Section 8(e) of the Loan Agreement is deleted in its entirety
and the following is substituted in place thereof:
(e) Current Ratio. Permit Borrowers' current ratio at any fiscal
quarter end to be less than 1.00 to 1.00.
(6) Section 8(f), Capital Expenditures, is deleted in its entirety
and the following is inserted in place thereof:
"(f) Capital Expenditures. Borrowers shall not incur Capital
Expenditures in excess of $5,500,000 in any fiscal year of the Borrowers."
(h) Section 8 of the Loan Agreement is amended to delete Section (p) and
to substitute in place thereof the following:
"(p) Subordinated Indebtedness. Borrowers shall not make, directly
or indirectly, any payment of principal, interest or other amounts on the
Subordinated Indebtedness due to Alpha; provided, however, that commencing in
the second fiscal quarter of the Borrowers' 1998 fiscal year so long as
Borrowers remain in compliance with the terms and conditions of the Loan
Agreement including, without limitation, Section 8 and maintain and continue to
maintain borrowing availability (as defined herein) of not less than $500,000
before and after giving effect to any payment, Borrowers may pay to Alpha
interest and not more than $250,000 of principal per fiscal quarter on the
Subordinated Debt due to Alpha. For purposes hereof, borrowing availability
means the difference at any time between the amount available to be borrowed as
Revolving Loans under the Loan Agreement and Borrowers' outstanding Revolving
Loans and Letters of Credit less all Borrowers' trade payables that are past
due. Notwithstanding the foregoing, upon the effectiveness of the Sixth
Amendment, Wakefield may make a loan repayment to Alpha in the amount of
$750,000, which payment shall not be subject to the foregoing limitations.
(i) Section 8 of the Loan Agreements is amended to add a new Section 8(q)
as follows:
(q) Reserve Policy. Borrowers shall not directly or indirectly
modify their reserve policy from the policy in effect on the date of the Sixth
Amendment without the prior written consent of the Bank.
4. Grant of Security Interest. As security for the prompt performance,
observance and payment in full of all Obligations, Malco hereby grants to Bank a
continuing security interest in and lien on and assigns, transfers, sets over
and pledges to the Bank all property of Malco whether now owned by Malco or
hereafter acquired or existing, and wherever located (collectively, the
"Collateral"), including without limitation:
(a) all Accounts;
(b) all Inventory;
(c) all Equipment;
(d) all General Intangibles;
(e) all Instruments and Documents;
(f) all Related Collateral; and
(g) all accessions to and additions to, substitutions for, replacements,
products and Proceeds to any and all of the foregoing.
The term "Collateral" shall also refer to any other property in which Bank is
granted a Lien to secure any of the Obligations pursuant to an agreement
supplemental hereto or otherwise (whether or not such agreement makes reference
to the Loan agreement or the Obligations of Borrower thereunder).
5. Representations and Warranties.
To induce Bank to enter into this Sixth Amendment, each Borrower
jointly and severally warrants, represents and covenants to Bank that:
(a) Organization and Qualification. Each Borrower is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each Borrower is duly qualified or is
authorized to do business and is in good standing as a foreign corporation in
all states and jurisdictions in which the failure of such Borrower to be so
qualified would have a material adverse effect on the financial condition,
business or properties of such Borrower.
(b) Corporate Power and Authority. Each Borrower is duly authorized
and empowered to enter into, execute, deliver and perform this Sixth Amendment,
and each of the Loan Documents to which it is a party. The execution, delivery
and performance of this Sixth Amendment and each of the other Loan Documents
have been duly authorized by all necessary corporate action and do not and will
not (i) require any consent or approval of the shareholders of any Borrower;
(ii) contravene any Borrower's charter or by-laws; (iii) violate, or cause any
Borrower to be in default under, any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award in effect
having applicability to such Borrower; (iv) result in a breach of or constitute
a default under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which any Borrower is a party or by which such
Borrower's properties may be bound or affected; or (v) result in, or require,
the creation or imposition of any Lien (other than Permitted Liens) upon or with
respect to any of the properties now owned or hereafter acquired by any
Borrower.
(c) Legally Enforceable Agreement. This Sixth Amendment and each of
the other Loan Documents delivered under this Sixth Amendment will be, a legal,
valid and binding obligation of each Borrower, enforceable against each Borrower
in
accordance with its respective terms subject to bankruptcy, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally.
(d) No Material Adverse Change. Since December 28, 1997, the date of
the last financial statements provided by the Borrowers to the Bank, there has
been no material adverse change in the condition, financial or otherwise, of
Borrowers as shown on the consolidated balance sheet thereof as of such date and
no change in the aggregate value of property and assets owned by Borrowers,
except changes in the ordinary course of business, none of which individually or
in the aggregate has been materially adverse.
(e) Continuous Nature of Representations and Warranties. Each
representation and warranty contained in the Loan Agreement and the other Loan
Documents remains accurate, complete and not misleading in any material respect
on the date of this Sixth Amendment, except for representations and warranties
that explicitly relate to an earlier date and changes in the nature of
Borrowers' business or operations that would render the information in any
exhibit attached thereto either inaccurate, incomplete or misleading, so long as
Bank has consented to such changes or such changes are expressly permitted by
the Loan Agreement.
7. Conditions Precedent.
Notwithstanding any other provision of this Sixth Amendment or any of
the other Loan Documents, and without affecting in any manner the rights of Bank
under the other sections of this Sixth Amendment, this Sixth Amendment shall not
be effective as to Bank unless and until each of the following conditions has
been and continues to be satisfied:
(a) Documentation. Bank shall have received, in form and substance
satisfactory to Bank and its counsel, a duly executed copy of this Sixth
Amendment, the Fourth Amended and Restated Revolving Credit Note in the form
attached as Exhibit A hereto, the $3,200,000 Equipment Facility Note in the form
attached as Exhibit B hereto, the Amendment to Subordination Agreement with
Alpha in the form attached as Exhibit C hereto, the Perfection Certificate of
Malco in the form of Exhibit D hereto, the Guaranty Agreement by Malco in the
form of Exhibit E hereto, together with such additional documents, instruments
and certificates as Bank and its counsel shall require in connection therewith,
all in form and substance satisfactory to Bank and its counsel.
(b) No Default. No Event of Default shall exist.
(c) No Litigation. Except as previously disclosed to and consented
to by Bank, no action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of the Loan
Agreement or this Sixth Amendment or the consummation of the transactions
contemplated thereby or hereby.
6. Acknowledgment of Obligations.
Each Borrower hereby (1) reaffirms and ratifies all of the promises,
agreements, covenants and obligations to Bank under or in respect of the Loan
Agreement and other Loan Documents as amended hereby and (2) acknowledges that
it is unconditionally liable for the punctual and full payment of all
Obligations, including, without limitation, all charges, fees, expenses and
costs (including reasonable attorneys' fees and expenses) under the Loan
Documents, as amended hereby, and that it has no defenses, counterclaims or
setoffs with respect to full, complete and timely payment and performance of all
Obligations.
7. Confirmation of Liens.
Each Borrower acknowledges, confirms and agrees that the Loan
Documents, as amended hereby, are effective to grant to Bank duly perfected,
valid and enforceable first priority security interests and liens in the
Collateral described therein, except for Permitted Liens, and that the locations
for such Collateral specified in the Loan Documents have not changed except as
provided herein. Each Borrower further acknowledges and agrees that all
Obligations of Borrowers are and shall be secured by the Collateral.
8. Miscellaneous.
Except as set forth herein, the undersigned confirms and agrees that
the Loan Documents remain in full force and effect without amendment or
modification of any kind. The execution and delivery of this Sixth Amendment by
Bank shall not be construed as a waiver by Bank of any Default or Event of
Default under the Loan Documents. This Sixth Amendment, together with the Loan
Agreement and other Loan Documents, constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
dealings, correspondence, conversations or communications between the parties
with respect to the subject matter hereof. This Sixth Amendment and the
transactions hereunder shall be deemed to be consummated in the Commonwealth of
Massachusetts and shall be governed by and interpreted in accordance with the
laws of that state. Any reference in any of the Loan Documents to Lender shall
be deemed to be a reference to the Bank. This Sixth Amendment and the
agreements, instruments and documents entered into pursuant hereto or in
connection herewith shall be "Loan Documents" under and as defined in the Loan
Agreement.
Executed under seal on the date set forth above.
ATTEST: WAKEFIELD ENGINEERING, INC.
By: /s/ XXXXX X. XXXXXXXXXXX
Name:
Title: V. P. of Finance
ATTEST: WAKEFIELD EXTRUSION CORP.
By: /s/ XXXXX X. XXXXXXXXXXX
Name:
Title:
ATTEST: XXXXXXXX INDUSTRIES, INC.
By: /s/ XXXXX X. XXXXXXXXXXX
Name:
Title:
ATTEST: MALCO, INC.
By: /s/ XXXXX X. XXXXXXXXXXX
Name:
Title:
Accepted in Boston, Massachusetts
as of December 31, 1997
FLEET NATIONAL BANK
By:
Name:
Title:
List of Exhibits
Exhibit A Fourth Amended and Restated Revolving Credit Note
Exhibit B Equipment Facility Note
Exhibit C Subordination Agreement
Exhibit D Perfection Certificate
Exhibit E Guaranty Agreement of Malco, Inc.
