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Exhibit 10.1
CONSTRUCTION FUNDING AGREEMENT
(FIRST AMENDMENT TO LEASE)
This CONSTRUCTION FUNDING AGREEMENT (FIRST AMENDMENT TO LEASE) (this
"AMENDMENT") is made as of July 1, 1998, by and between BNP LEASING CORPORATION,
a Delaware corporation ("BNPLC"), and ELECTROGLAS, INC., a Delaware corporation
("ELECTROGLAS").
R E C I T A L S
A. BNPLC and Electroglas executed a Lease Agreement dated as of March
31, 1997 (the "LEASE"), evidenced by a Short Form of Lease recorded on March 31,
1997, as Document No. 13654987 of the Official Records of Santa ▇▇▇▇▇ County,
California. Capitalized terms used in this Amendment and not otherwise defined
herein shall have the meanings given to them in the Lease, unless amended
herein.
B. The Lease contemplates that, following the execution by BNPLC and
Electroglas of a Construction Funding Agreement, BNPLC shall provide
Construction Advances as reimbursement to Electroglas for the cost of
Improvements, subject to the conditions set forth in Paragraph 6 of the Lease
(the "CONDITIONS TO ADVANCES"). This Amendment is intended by the parties to
constitute the Construction Funding Agreement contemplated by the Lease.
C. During the term of the Lease, Electroglas intends to construct or
arrange for the construction of certain improvements (constituting the "INITIAL
CONSTRUCTION PROJECT" under and as defined in the Lease), which are described in
Exhibit A attached hereto. The plans and renderings for the initial Construction
Project described in the attached Exhibit A, and the site plan attached to and
made a part of the attached Exhibit A, (collectively, the "PROJECT RELATED
CONSTRUCTION DOCUMENTS") have already been submitted to BNPLC by Electroglas for
BNPLC's approval as provided by subparagraph 6(b)(i) of the Lease.
D. To obtain funds for the Initial Construction Project, Electroglas
asked BNPLC to increase the Maximum Construction Allowance available under the
Lease from $0 to $43,000,000. Responding to such request, BNPLC delivered a
letter agreement (the "CONSTRUCTION COMMITMENT LETTER") to Electroglas, which
both BNPLC and Electroglas executed on or before dated May 21, 1998. The
Construction Commitment Letter sets forth and establishes the commitment of both
BNPLC and Electroglas to enter into an amendment of the Lease in order to
increase the Maximum Construction Allowance to $43,000,000 and to otherwise
modify the Lease as therein set forth. It is the intent of the undersigned
parties that this Amendment confirm and formalize the commitments and agreements
set forth in the Construction Commitment Letter.
E. In connection with the Lease, BNPLC executed a Participation
Agreement (herein so called), dated as of March 31, 1997 with BNPLC's Parent
(together with any other parties that may from time to time become parties to
the Participation Agreement as contemplated therein, the "PARTICIPANTS").
Section 6.1.1 of the Participation Agreement requires the Participants' consents
to this Amendment, and BNPLC's Parent, as the only Participant at this time, is
executing a separate agreement (the "PARTICIPATION AGREEMENT AMENDMENT")
evidencing such consent contemporaneously with the execution of this Amendment.
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NOW, THEREFORE, in consideration of the mutual covenants provided
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, BNPLC and Electroglas agree as follows:
1. Amendments. As of the date of this Amendment, the Lease and, as indicated
below, the Purchase Agreement and Pledge Agreement, are amended as follows:
A. Extension of the Term and the Scheduled Designated Sale Date. The
references to "FIRST BUSINESS DAY OF APRIL, 2002" in Paragraph 1 of the Lease
and in the definition of "Designated Sale Date" set forth in the List of Defined
Terms attached to the Lease are changed to "FIRST BUSINESS DAY OF JULY, 2003".
(Also, the reference to "FIRST BUSINESS DAY OF APRIL, 2002" in the definition of
"Designated Sale Date" set forth in the List of Defined Terms attached to the
Purchase Agreement is changed to "FIRST BUSINESS DAY OF JULY, 2003".)
B. Increase in the Maximum Construction Allowance; Approval of initial
Construction Project. The Maximum Construction Allowance under (and as defined
in) the Lease is hereby increased from $0 to $43,000,000. BNPLC acknowledges
approval of the Project-Related Construction Documents as contemplated in
subparagraph 6(b)(i) of the Lease, with the understanding that - as expressly
provided in subparagraph 6(b)(i) - such approval shall not constitute a waiver
by BNPLC of subparagraph 6(b)(v) or any other provision of the Lease.
C. Conditions to Funding the Construction Allowance. Without limiting
other Conditions to Advances already set forth in the Lease, it is agreed that:
(1) Funding by Participants. Subparagraph 6(c)(x) of the Lease
is deleted and in lieu thereof is substituted the following:
(IX) FUNDING BY PARTICIPANTS. NONE OF THE
PARTICIPANTS OR THEIR SUCCESSORS UNDER THE PARTICIPATION
AGREEMENT SHALL HAVE FAILED TO ADVANCE TO BNPLC THEIR PRO RATA
SHARES OF THE CONSTRUCTION ADVANCE BEING REQUESTED. HOWEVER,
ANY SUCH FAILURE SHALL EXCUSE BNPLC'S OBLIGATION TO PROVIDE
THE CONSTRUCTION ADVANCE REQUESTED ONLY TO THE EXTENT OF THE
FUNDS THAT THE APPLICABLE PARTICIPANT OR PARTICIPANTS SHOULD
HAVE ADVANCED (BUT DID NOT ADVANCE) TO BNPLC, AND IN THE EVENT
OF ANY SUCH FAILURE:
a) BNPLC WILL IMMEDIATELY NOTIFY ELECTROGLAS
IF ANY PARTICIPANT REFUSES OR FAILS TO ADVANCE ITS
PRO RATA SHARE OF ANY CONSTRUCTION ADVANCE, BUT BNPLC
WILL NOT IN ANY EVENT BE LIABLE TO ELECTROGLAS FOR
BNPLC'S FAILURE TO DO SO.
b) BNPLC WILL, TO THE EXTENT POSSIBLE,
POSTPONE REDUCTIONS OF CONSTRUCTION ADVANCES BECAUSE
OF THE FAILURE BY ANY ONE OR MORE PARTICIPANTS
("NONFUNDING PARTICIPANTS") TO MAKE REQUIRED ADVANCES
UNDER THE PARTICIPATION AGREEMENT (A "PARTICIPANT
DEFAULT") BY ADJUSTING (AND READJUSTING FROM TIME TO
TIME, AS REQUIRED) THE FUNDING "PERCENTAGES" OF OTHER
PARTICIPANTS, AND BY REQUESTING THE OTHER
PARTICIPANTS TO MAKE ADVANCES TO BNPLC ON THE BASIS
OF SUCH ADJUSTED PERCENTAGES, IN EACH CASE AS
PROVIDED IN THE PARTICIPATION AGREEMENT; HOWEVER, SO
LONG AS A PARTICIPANT DEFAULT CONTINUES, NO
CONSTRUCTION ADVANCE SHALL BE REQUIRED THAT WOULD
CAUSE THE OUTSTANDING CONSTRUCTION ALLOWANCE TO
EXCEED (1) THE MAXIMUM CONSTRUCTION ALLOWANCE
AVAILABLE UNDER THIS LEASE, LESS (2) ALL AMOUNTS THAT
SHOULD HAVE BEEN, BUT BECAUSE OF A CONTINUING
PARTICIPANT DEFAULT HAVE NOT BEEN, ADVANCED BY ANY
ONE OR MORE OF THE PARTICIPANTS TO BNPLC UNDER THE
PARTICIPATION AGREEMENT WITH RESPECT TO CONSTRUCTION
ADVANCES.
c) FURTHER, AFTER A PARTICIPANT DEFAULT, AND
SO LONG AS NO EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING, BNPLC SHALL DO THE FOLLOWING AS
REASONABLY REQUESTED BY
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ELECTROGLAS, PROVIDED THAT NOTHING IN THIS PROVISION
SHALL REQUIRE BNPLC TO TAKE ANY ACTION THAT WOULD
VIOLATE APPLICABLE LAWS, THAT WOULD CONSTITUTE A
BREACH OF BNPLC'S OBLIGATIONS UNDER THE PARTICIPATION
AGREEMENT, OR THAT WOULD REQUIRE BNPLC TO WAIVE ANY
RIGHTS OR REMEDIES IT HAS UNDER THIS LEASE, THE
PURCHASE AGREEMENT, THE PLEDGE AGREEMENT OR BNPLC'S
OTHER AGREEMENTS WITH ELECTROGLAS CONCERNING THE
PROPERTY:
(1) BNPLC SHALL PROMPTLY MAKE A
WRITTEN DEMAND UPON THE NONFUNDING
PARTICIPANTS FOR THE CURE OF THE PARTICIPANT
DEFAULT.
(2) BNPLC SHALL, TO THE EXTENT
BNPLC HAS THE RIGHT TO DO SO UNDER THE
PARTICIPATION AGREEMENT, DECLINE TO ALLOW
THE NONFUNDING PARTICIPANTS TO EXERCISE
VOTING, CONSENT OR NOTIFICATION RIGHTS UNDER
THE PARTICIPATION AGREEMENT.
(3) BNPLC SHALL NOT UNREASONABLY
WITHHOLD ITS APPROVAL FOR THE SUBSTITUTION
OF ANY NEW PARTICIPANT PROPOSED BY
ELECTROGLAS FOR NONFUNDING PARTICIPANTS (AND
TO ACCOMPLISH THE SUBSTITUTION, BNPLC SHALL
TERMINATE THE RIGHTS OF THE NONFUNDING
PARTICIPANTS TO RECEIVE FURTHER PAYMENTS
UNDER THE PARTICIPATION AGREEMENT PURSUANT
TO SECTION 6.4 THEREOF), IF (A) THE PROPOSED
SUBSTITUTION DOES NOT REQUIRE BNPLC TO WAIVE
RIGHTS AGAINST THE NONFUNDING PARTICIPANTS,
(B) THE NEW PARTICIPANT WILL AGREE (BY
EXECUTING SUPPLEMENT TO THE PARTICIPATION
AGREEMENT AS PROVIDED IN THE PARTICIPATION
AGREEMENT) TO PROVIDE FUNDS TO REPLACE THE
PAYMENTS THAT WOULD OTHERWISE BE REQUIRED OF
THE NONFUNDING PARTICIPANTS WITH RESPECT TO
FUTURE CONSTRUCTION ADVANCES, (C) THE NEW
PARTICIPANT (OR ELECTROGLAS) PROVIDES THE
FUNDS (IF ANY) NEEDED TO TERMINATE THE
NONFUNDING PARTICIPANTS' RIGHTS TO RECEIVE
PAYMENTS OF "NET CASH FLOW" (AS DEFINED IN
THE PARTICIPATION AGREEMENT) THAT BNPLC WILL
BE REQUIRED TO PAY THE NEW PARTICIPANT UNDER
THE TERMS OF THE SUBSTITUTION REASONABLY
PROPOSED BY ELECTROGLAS, (D) THE NEW
PARTICIPANT (OR ELECTROGLAS) PROVIDES AND
AGREES IN WRITING TO PROVIDE FUNDS NEEDED TO
REIMBURSE BNPLC FOR ANY AND ALL LOSSES
INCURRED BY BNPLC IN CONNECTION WITH OR
BECAUSE OF THE SUBSTITUTION OF THE NEW
PARTICIPANT FOR THE NONFUNDING PARTICIPANTS,
INCLUDING ANY COST OF DEFENDING AND PAYING
ANY CLAIM ASSERTED BY NONFUNDING
PARTICIPANTS BECAUSE OF THE SUBSTITUTION
(BUT NOT INCLUDING ANY LIABILITY OF BNPLC TO
THE NONFUNDING PARTICIPANTS FOR DAMAGES
CAUSED BY BNPLC'S BAD FAITH OR GROSS
NEGLIGENCE IN THE PERFORMANCE OF BNPLC'S
OBLIGATIONS TO THE NONFUNDING PARTICIPANTS),
(E) THE OBLIGATIONS OF BNPLC TO THE NEW
PARTICIPANT PER DOLLAR OF THE NEW
PARTICIPANT'S "INVESTMENT" (IT BEING
UNDERSTOOD THAT SUCH INVESTMENT WILL BE
COMPUTED IN A MANNER CONSISTENT WITH THE
EXAMPLES SET FORTH IN EXHIBIT A OF THE
PARTICIPATION AGREEMENT, BUT NET OF
REIMBURSEMENTS TO BNPLC UNDER CLAUSE (D)
PRECEDING) SHALL NOT EXCEED THE OBLIGATIONS
PER DOLLAR OF INVESTMENT BY THE NONFUNDING
PARTICIPANTS THAT BNPLC WOULD HAVE HAD TO
THE NONFUNDING PARTICIPANTS IF THERE HAD
BEEN NO PARTICIPANT DEFAULT, AND (F) THE NEW
PARTICIPANT SHALL BE A REPUTABLE FINANCIAL
INSTITUTION HAVING A NET WORTH OF NO LESS
THAN SEVEN AND ONE HALF PERCENT (7.5%) OF
TOTAL ASSETS AND TOTAL ASSETS OF NO LESS
THAN $10,000,000,000.00 (ALL ACCORDING TO
THEN RECENT AUDITED FINANCIAL STATEMENTS).
Further, recognizing that BNPLC will seek additional Participants to
participate in the funding of the Construction Allowance, Electroglas
agrees not to unreasonably withhold or delay its approval of any party
that BNPLC proposes as a Participant, provided the party proposed as a
Participant is a reputable financial institution having a net worth of
no less than seven and one half percent (7.5%) of total assets and
total assets of no less than $10,000,000,000.00 (all according to then
recent audited financial statements). (As indicated in the definition
of "Participant" in the List of Defined Terms attached to the Lease,
such approval of Electroglas
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will be required for any party [other than BNPLC's Parent] to become a
Participant for purposes of the Lease.)
(2) Limit Dependent Upon the Collateral Percentage and the
Value of Collateral Provided. Electroglas shall not be entitled to
require any Construction Advance that, if paid to Electroglas, would
cause the product of Stipulated Loss Value calculated immediately after
such payment times the Collateral Percentage then in effect to exceed
the Value (as defined in the Pledge Agreement) of all Collateral then
the subject of a Qualified Pledge pursuant to (and as defined in) the
Pledge Agreement.
D. Administrative Fees. On the date hereof, and on each anniversary of
the date hereof, Electroglas shall pay BNPLC an Administrative Fee under (and as
defined in) the Lease. The amount of the Administrative Fees shall be as set
forth under the heading "Administrative Agency Fees" in the Construction
Commitment Letter. As contemplated in subparagraph 6(a)(ii) of the Lease, and
subject to the other terms and conditions set forth in the Lease, Electroglas
may receive reimbursement for Administrative Fees from Construction Advances.
E. Modification and Extension Fee. Contemporaneous with the
effectiveness of this Amendment, Electroglas is paying to BNPLC (or authorizing
BNPLC to pay itself from a Construction Advance) a one time fee (the
"MODIFICATION AND EXTENSION FEE") as provided under the heading "Upfront Fee" in
the Construction Commitment Letter. BNPLC's receipt of the Modification and
Extension Fee will not reduce the Stipulated Loss Value, and any income taxes
payable on the Modification and Extension Fee by BNPLC shall constitute
"Excluded Taxes" under the Lease, as amended hereby.
F. Commitment Fees. From and after the date of this Amendment,
Commitment Fees will accrue and be payable by Electroglas to BNPLC under the
Lease, calculated as described in Subparagraph 4(g) of the Lease. The percentage
to be used to calculate such fees, referenced in clause (i) of Subparagraph 4(g)
of the Lease, will be .3% (30 basis points) per annum. Accrued, unpaid
Commitment Fees will be due in arrears on the first Business Day of each
October, January, April and July of each calendar year, beginning on the first
Business Day of October, 1998. As contemplated in subparagraph 6(a)(ii) of the
Lease, and subject to the other terms and conditions set forth in the Lease,
Electroglas may receive reimbursement for Commitment Fees from Construction
Advances.
G. Amendment and Restatement of Schedule 2. Schedule 2 attached to the
Lease is replaced in its entirety by Schedule 2 attached to this Amendment.
Also, from and after the date of this Amendment, all references in the Pledge
Agreement to "Schedule 2" (regardless of whether such references are followed by
"attached to the Lease") shall constitute references to Schedule 2 attached to
this Amendment.
H. Carrying Costs. To provide for the accrual of Carrying Costs as
contemplated in Subparagraph 6(a)(ii) of the Lease, the parties agree that:
(1) New Definitions. For purposes of the Lease and this
Amendment:
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"BASE RENT RESUMPTION DATE" shall mean the latest
Base Rent Date that occurs on or before the earlier of the
following dates: (a) any Failed Collateral Test Date; (b) the
second anniversary of the date of this Amendment; (c) the date
upon which the Outstanding Construction Allowance, plus any
Qualified Payments deducted in computing the Outstanding
Construction Allowance, equals or exceeds the Maximum
Construction Allowance; or (d) the date upon which any notice
is given by Electroglas or BNPLC to accelerate the Designated
Sale Date as described in the definition of "Designated Sale
Date" set forth in the List of Defined Terms attached to the
Lease.
"BASIC CARRYING COSTS" means Carrying Costs that
accrue and are added to the Outstanding Construction Allowance
pursuant to subsection 1.H.(2) below.
"CONSTRUCTION PERIOD BASE RENT" shall mean any Base
Rent that, if paid as provided in the Lease without abatement
or reduction because of subsection 1.H.(2) below, would become
due after the date of this Amendment and on or prior to the
Base Rent Resumption Date.
"SUPPLEMENTAL CARRYING COSTS" means Carrying Costs
that are in addition to Basic Carrying Costs and that accrue
and are added to the Outstanding Construction Allowance
pursuant to subsection 1.H.(3)(B)(i) below.
(2) Accrual of Carrying Costs in lieu of Base Rent.
Notwithstanding subparagraph 4(a) of the Lease, except as provided in
subsection 1.I below, on each Base Rent Date occurring after the date
of this Amendment and on or prior to the Base Rent Resumption Date,
Basic Carrying Costs will accrue and be added to the Outstanding
Construction Allowance in lieu of and in an amount equal to the
Construction Period Base Rent that would otherwise become due on such
Base Rent Date. Consistent with the foregoing, the first sentence of
the definition of "BASE RENT DATE" in the List of Defined Terms
attached to the Lease is modified by inserting "or upon which Carrying
Costs are to be added to the Outstanding Construction Allowance" after
"means a date upon which Base Rent must be paid under the Lease". Also,
the definition of "ADVANCE DATE" in the List of Defined Terms attached
to the Lease is modified to mean each Base Rent Date, upon which
commences a Base Rent Period, falling on or after the date of this
Amendment and on or prior to the Base Rent Resumption Date.
(3) Effective Rate Components of Base Rent and Carrying Costs.
(A) Explanation of Base Rent Formula. To ease the
administrative burden of the Lease and the Pledge Agreement,
the formula set forth in subparagraph 4(b)(iv) of the Lease
for calculating Base Rent reflects a reduction equal to the
interest that would accrue on any Collateral required by the
Pledge Agreement from time to time if the Accounts (as defined
in the Pledge Agreement) bore interest at the Effective Rate.
BNPLC has agreed to such reduction to provide Electroglas with
the economic equivalent of periodic payments of interest on
such Collateral, and in return Electroglas has agreed to the
provisions of the Pledge Agreement that excuse the actual
payment of interest on the Accounts. By incorporating such
reduction into the formula in subparagraphs 4(b)(iv) of the
Lease, and by providing for noninterest bearing Accounts in
the Pledge Agreement, the parties avoid an unnecessary and
cumbersome periodic exchange of equal periodic payments.
However, it has never been the intent of BNPLC or Electroglas
to understate Base Rent or the interest income of Electroglas
for financial reporting purposes. Accordingly, for purposes of
determining Electroglas's compliance
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with the affirmative financial covenants set forth in Schedule
2 attached to this Amendment, and for purposes of any
financial reports that the Lease requires of Electroglas from
time to time, it is expected that after the Base Rent
Resumption Date Electroglas will report Base Rent as if there
had been no such reduction and as if the Collateral from time
to time required by the Pledge Agreement had been maintained
in Accounts bearing interest at the Effective Rate.
(B) Adjustments to Formulas For Purposes of Carrying
Cost Calculations. If total Carrying Costs for any Base Rent
Period during which the Collateral Percentage is greater than
zero were limited only to the Basic Carrying Costs that will
accrue pursuant to subsection 1.H.(2) above (calculated based
upon the Base Rent formulas in the original Lease), then such
total Carrying Costs would reflect the same reduction as the
reduction of Base Rent described in the preceding subsection.
However, unlike Base Rent, Carrying Costs will not be paid
directly from Electroglas to BNPLC in periodic payments as
they accrue, so a reduction of Carrying Costs cannot provide
Electroglas with the economic equivalent of periodic payments
of interest accruing at the Effective Rate on the Collateral.
Thus, rather than agree to so limit total Carrying Costs,
BNPLC and Electroglas agree as follows:
(i) Basic Carrying Costs added to the
Outstanding Construction Allowance as described in
subsection 1.H.(2) above will constitute only one of
two components of total Carrying Costs accruing for
any Base Rent Period prior to the Base Rent
Resumption Date during which the Collateral
Percentage is greater than zero. In addition to Basic
Carrying Costs, a second component of Carrying Costs
(i.e., Supplemental Carrying Costs) will accrue for
any such Base Rent Period and be added to the
Outstanding Construction Allowance on the same Base
Rent Date or Dates when the Basic Carrying Costs for
such period are added. Subject to subsection 1.I
below, the amount of Supplemental Carrying Costs
added will equal:
- Stipulated Loss Value on the first day of
such Base Rent Period, times
- the Collateral Percentage for such Base Rent
Period, times
- the Effective Rate with respect to such Base
Rent Period, times
- the number of days in the period from and
including the preceding Base Rent Date to
but not including the Base Rent Date upon
which the Supplemental Carrying costs are to
be added, divided by
- three hundred sixty.
(ii) Each time BNPLC adds Supplemental
Carrying Costs to the Outstanding Construction
Allowance pursuant to the preceding subsection
1.H.(3)(B)(i), BNPLC will also make a deposit into
one or more Accounts (as defined in the Pledge
Agreement) for Electroglas in an amount equal the
Supplemental Carrying Costs so added. Such
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deposit will be added to and constitute Collateral
pledged on and subject to the terms and conditions
set forth in the Pledge Agreement as if it had been
deposited by Electroglas itself. Accordingly, any
withdrawal from the Accounts of any such deposits by
BNPLC for Electroglas will be subject to the same
terms and conditions of the Pledge Agreement that
apply to other Collateral. By providing for such
deposits on behalf of Electroglas equal to
Supplemental Carrying Costs, Electroglas will get the
economic equivalent of periodic payments of interest
on the Collateral as if the interest accrued from
time to time at the Effective Rate. In no event,
however, shall any such deposit (or any advance by a
Participant to fund any such deposit) constitute a
"Construction Advance" under and as defined in the
Lease, it being understood that, although the
Supplemental Carrying Costs used to compute the
amount of such a deposit will be added to the
Outstanding Construction Allowance, the deposit
itself will not be added to the Outstanding
Construction Allowance.
I. Limits on Accrual of Carrying Costs.
(1) Limits Related to the Maximum Construction Allowance. In no event
will the total Carrying Costs accrued and added to the Outstanding Construction
Allowance on any Base Rent Date exceed the amount that can be added without
causing the Outstanding Construction Allowance, plus any Qualified Payments
deducted in calculating such Outstanding Construction Allowance, to exceed the
Maximum Construction Allowance. If on any Base Rent Date the Basic Carrying
Costs that would have accrued and been added to the Outstanding Construction
Allowance, but for the preceding sentence, exceed the actual Basic Carrying
Costs accrued and added to the Outstanding Construction Allowance in accordance
with the preceding sentence, then such excess shall be payable as Base Rent on
such Base Rent Date.
(2) Limits Related to Funding by Participants. Notwithstanding anything
in subsection 1.H.(3) above, the addition of Supplemental Carrying Costs to the
Outstanding Construction Allowance on any Base Rent Date, and BNPLC's obligation
in connection therewith to make a deposit for Electroglas equal to such
Supplemental Carrying Costs, shall be subject to the condition that none of the
Participants shall have failed to advance its pro rata share of the funds needed
to make such deposits as contemplated by the Participation Agreement, as
modified by the Participation Agreement Amendment. In this regard, it is
understood that BNPLC will not be responsible for any Participant's breach of
its obligation to make advances required by the Participation Agreement and
that, without breaching the Participation Agreement, a Participant shall have
the right (pursuant to Section 3.2.1 of the Participation Agreement, as modified
by the Participation Agreement Amendment) to postpone any advance otherwise
required of it when the following conditions remain unsatisfied:
(A) the condition to BNPLC's obligation to make Construction
Advances set forth in subparagraph 6(c)(vi) of the Lease, to the extent
that such condition is unsatisfied because of the occurrence and
continuation of any Event of Default under the Lease;
(B) the condition to BNPLC's obligation to make Construction
Advances set forth in subparagraph 6(c)(vii) of the Lease, which
concerns a prior sale of the Property by BNPLC under the Purchase
Agreement; and
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(C) the condition to BNPLC's obligation to make Construction
Advances set forth in subparagraph 6(c)(viii) of the Lease, which
concerns whether BNPLC shall have been provided with a certificate from
an officer of Electroglas and whether a copy of such certificate shall
have been provided to the Participants.
J. Calculation of Unsecured Spread. As used in the Lease, "UNSECURED
SPREAD" shall continue to mean one hundred thirty-five basis points (135/100 of
1%); provided, however, that if Electroglas achieves the Net Income Target (as
defined in the next sentence), then the Unsecured Spread under (and as defined
in) the Lease shall thereafter be reduced during the remaining Term of the Lease
to one hundred basis points (100/100 of 1%) effective as of the first Base Rent
Date after Electroglas has (a) publicly released its financial statements
showing that it has achieved the Net Income Target and (b) delivered such
financial statements to BNPLC with a notice to BNPLC that the Net Income Target
has been achieved and that Electroglas is therefore entitled to a reduction of
the Unsecured Spread. As used in the preceding sentence, "NET INCOME TARGET"
shall mean that the net income of Electroglas and its Subsidiaries, computed on
a consolidated basis before any nonrecurring noncash charges related to
acquisitions, (1) is positive in each of three consecutive fiscal quarters
ending after the date of this Amendment, and (2) equals or exceeds $10,000,000
during the same three consecutive fiscal quarters.
K. Limited Representations by BNPLC Concerning Accounting Matters.
BNPLC is not expected or required to represent or warrant that this Lease or the
Purchase Documents will qualify for any particular accounting treatment under
GAAP. However, to permit Electroglas to determine for itself the appropriate
accounting for this Lease and the Purchase Documents, BNPLC does represent to
Electroglas the following as of the date of this Amendment:
1 Equity capital invested in BNPLC is greater than three
percent (3%) of the aggregate of all lease funding amounts (including
participations) of BNPLC. Such equity capital investments constitute
equity in legal form and are reflected as shareholders' equity in the
financial statements and accounting records of BNPLC.
2 BNPLC is one hundred percent (100%) owned by French American
Bank Corporation, which is one hundred percent (100%) owned by BNPLC's
Parent.
3 BNPLC leases properties of substantial value to more than
fifteen tenants.
4 All parties to whom BNPLC has any material obligations known
to BNPLC are (and are expected to be) Affiliates of BNPLC's Parent,
Participants, or participants with BNPLC in other leasing deals or
loans made by BNPLC, or other tenants or borrowers in such other
leasing deals or loans.
5 BNPLC has substantial assets in addition to the Property,
assets which BNPLC believes to have a value far in excess of the value
of the Property.
6 Other than any Funding Advances provided from time to time
by Participants under the Participation Agreement, BNPLC expects to
obtain all Funding Advances from Banque Nationale de Paris or other
Affiliates of BNPLC (including Funding Advances to cover Carrying Costs
and other amounts to be capitalized as part of the Outstanding
Construction Allowance, and assuming that Electroglas uses the Maximum
Construction Allowance under this Lease), and to the extent that Banque
Nationale de Paris or such other Affiliates themselves borrow or accept
bank deposits to obtain the funds needed to provide such Funding
Advances, the obligation to
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repay such funds shall not be limited, by agreement or corporate
structure, to payments collected from Electroglas or otherwise
recovered from the Property.
7 BNPLC has not obtained residual value insurance or a
residual value guarantee from any third party to ensure the recovery of
its investment in the Property.
8 BNPLC does not presently intend to take any action during
the term of this Lease that would change, or anticipate any change in,
any of the facts listed above in this subparagraph.
2. Authorization of Electroglas. In connection with the increase in the Maximum
Construction Allowance and other changes provided for in the preceding Part I,
Electroglas shall provide to BNPLC no later than thirty days after the effective
date hereof evidence (including one or more legal opinions and a certificate of
Electroglas's corporate secretary) in form and substance satisfactory to BNPLC
of the approval or ratification of this Amendment by Electroglas's board of
directors and of the enforceability of the Lease as modified hereby.
3. Ratification; Prior Calculations. The Lease, as amended by this Amendment, is
hereby ratified and confirmed in all respects. To the extent that Base Rent or
other amounts have accrued under the Lease on or prior to the effective date of
this Amendment, the calculation of such amounts shall not be affected by
anything above.
4. Entire Agreement. The Lease, as amended hereby, and the documents and
agreements referred to in the Lease set forth the entire agreement between the
parties concerning the subject matter of the Lease, and no further amendment of
the Lease or this Amendment shall be binding or valid unless expressed in a
writing executed by both parties hereto.
5. Successors and Assigns. All of the covenants, agreements, terms and
conditions to be observed and performed by the parties hereto shall be
applicable to and binding upon their respective heirs, personal representatives,
successors and, to the extent assignment is permitted under the Lease, their
respective assigns.
6. References and Definitions in Other Documents. From and after the date of
this Amendment, in all documents related to this transaction references to the
"Lease" or the "Purchase Agreement" or the "Pledge Agreement" or the
"Participation Agreement" are intended to mean the Lease, Purchase Agreement,
Pledge Agreement or Participation Agreement, as the case may be, as amended
hereby and by the Participation Agreement Amendment, unless the context of such
a reference shall otherwise require. In addition, all documents related to this
transaction using capitalized terms, the definitions of which terms are modified
hereby, shall be deemed amended hereby to incorporate the same modifications to
such capitalized terms.
7. Execution in Counterparts. To facilitate execution, this Amendment may be
executed in as many identical counterparts as may be required. It shall not be
necessary that the signature of, or on behalf of, each party, or that the
signature of all persons required to bind any party, appear on each counterpart.
All counterparts, taken together, shall collectively constitute a single
instrument. It shall not be necessary in making proof of this Amendment to
produce or account for more than a single counterpart containing the respective
signatures of, or on behalf of, each of the parties hereto. Any signature page
to any counterpart may be detached from such counterpart without impairing the
legal effect of the signatures thereon and thereafter attached to another
counterpart identical thereto except having attached to it additional signature
pages.
9
10
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
BNP LEASING CORPORATION,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇, Vice President
11
[Continuation of signature pages to CONSTRUCTION FUNDING AGREEMENT (FIRST
AMENDMENT TO LEASE) dated as of July 1, 1998]
ELECTROGLAS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Financial
Officer and
Vice President of Finance
12
Exhibit A
DESCRIPTION OF INITIAL CONSTRUCTION PROJECT
Buildings to be used for offices and manufacturing facilities, together with
driveway, parking areas and other appurtenant facilities, all substantially as
shown on the site plan attached to and made a part of this Exhibit.
Such buildings and appurtenant facilities will also be substantially consistent
with the following:
1. Elevations of the buildings, copies of which are attached, which were
previously submitted by Electroglas to BNPLC (and/or to an appraiser
designated by BNPLC) to permit BNPLC to evaluate the initial
Construction Project.
2. The descriptions of "Phase I" of a development project set forth in the
attached excerpts taken from an appraisal prepared for BNPLC. As stated
in the appraisal, such descriptions are based in part on preliminary
plans and renderings dated March 26, 1997, submitted by or on behalf of
Electroglas, prepared by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Partners Incorporated
(architect), ▇▇▇▇ & ▇▇▇▇▇▇ (civil engineer) and ▇▇▇▇▇▇▇▇ & Associates
(landscape architect).
13
EXCERPTS FROM BNPLC'S APPRAISAL
Proposed Building Improvements
At current status, the subject property represents ... vacant industrial land.
According to the available information, the entire subject site is proposed for
development with a 400,000 square foot campus headquarters R&D facility.... The
five-building, steel frame, two and three-story, proposed facility will include
approximately 77 percent office space and 23 percent highly improved
manufacturing area. It is anticipated to be of good-to-excellent overall
quality, and will be in new condition upon completion. Upon completion as
proposed, the subject site will provide 1,277 asphalt paved parking spaces, or
approximately 3.2 spaces per 1,000 square feet of building area. The floor area
ration (FAR) of the proposed facility will be 44.7 percent.
The proposed R&D facility will be constructed in two phases. As requested by the
client, this appraisal only values the first planned phase (Phase I) of ▇▇▇,▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, together with the remaining excess land with
approvals for the second phase (Phase II) of 136,176 square feet of building
area. Based on the overall project FAR of 44.7 percent, Phase I requires
approximately 590,210 square feet of site area, with the remaining [land]
considered to be vacant excess land.
The entire facility will be 100 percent HVAC served, with all interiors
projected to be of high quality. The entire facility will provide approximately
73 percent high quality office space and 27 percent high quality engineering and
manufacturing area.
Phase I is proposed for a four-building, steel frame, two and three-story, R&D
facility, containing approximately 73 percent office space and 27 percent highly
improved manufacturing area. The facility will be 100 percent HVAC served, with
all interiors projected to be of high quality. The high quality of the proposed
interiors is best reflected by [Electroglas's] projected interior improvements
cost of $40.42 per square foot of building area for this portion of the
facility....
The building foundations will reportedly be concrete slab, seismically
reinforced with 30-foot pilings. Exterior walls will be combination of precast
concrete panels with integral color and sandblasting; stone veneer; and tinted
windows set in aluminum frames. As can be seen from [exterior elevation
renderings provided by Electroglas], the facility will include extensive use of
exterior windows, which is generally typical of higher quality office/R&D space.
The roof will predominately comprise built-up composition material, supported by
a steel beam and girder system and metal decking. Portions of the roofs will
comprise either clay tile or copper shingles. The facility will be 100 percent
HVAC served, and fully sprinklered, with all buildings being elevator served.
Additional upper floor access will be provided by multiple stairways throughout
the structures. There will be two dock high loading doors and two grade level
loading doors, with additional man-doors along all building elevations.
The proposed facility is reportedly in the preliminary design phase and floor
plans had reportedly not been prepared as of the date of this appraisal. The
accompanying plans provide the best representation of the proposed configuration
and exterior elevations of each building. The interiors of the entire facility
will reportedly comprise approximately 77 percent high quality office space and
23 percent high quality engineering and manufacturing area. The Phase I portion
will reportedly provide approximately 73 percent high quality office space and
27 percent high quality engineering and manufacturing area. The facility will
reportedly be utilized for administrative, engineering and manufacturing
functions.
Typical of higher quality office space, the office portion of the proposed
subject property is anticipated to comprise high quality carpet and tile floor
coverings; acoustic tile ceilings with inset flourescent lighting; painted and
textured gypsum board interior walls; and multiple multi-fixture restrooms. The
engineering and manufacturing portions will reportedly include acoustic tile
ceilings with inset flourescent lighting.
Attachment to Exhibit A - Page 1
14
The proposed subject structures are outlined as follows:
Percentage
Building Size (Sq. Ft.) Percentage Office Warehouse
-------- -------------- ----------------- ---------
Phase I:
A: Consumer Pavilion 16,339 100% 0%
B: Prober Operations 143,812 50% 50%
C: Technology Center 88,473 100% 0%
D: Employee Pavilion 15,200 100% 0%
------- ------- -------
Total Phase I: 263,824 73% 27%
Phase II:
E: Corporate Administration 96,176 100% 0%
B: (Expansion) 40,000 50% 50%
------- ------- -------
Total Phase II: 136,176 85% 15%
Total Project 400,000 77% 23%
Proposed Building A (Phase I)
Proposed subject building A is a two-story, "customer pavilion", containing
16,339 square feet of building area. The locations of this and the other
proposed structures are delineated on the accompanying Site Plan. The reader is
referred to the elevation plans provided in the Addenda for the best
illustration of the proposed building exteriors. This building will supply
demonstration and conference rooms for customers. It will include an expansive
open lobby area and will be highly improved, with high quality carpeting, tile
and fixtures. Upper floor access will be available via internal staircases and
an elevator, in the lobby area. The upper floor will include two balconies.
Proposed Building B (Phase I)
Proposed subject building A is a two-story, "prober operations" facility,
containing 143,812 square feet of building area. This building will supply
ground floor manufacturing space and second floor office area, with an interior
buildout of 50 percent manufacturing and 50 percent office. This building will
include three internal staircases, and two freight elevators. Interior
improvements will be of high quality. There will be two, dock high, loading
doors and two, grade level, loading doors at the southwest corner of the
structure. A punch-out will at the southeast corner of this structure will allow
for a 40,000 square foot, two-story, expansion of this building as part of Phase
II of the larger project.
Attachment to Exhibit A - Page 2
15
Proposed Building C (Phase I)
Proposed subject building C is a three-story, "technology center" facility,
containing 88,742 square feet of building area. This building will supply 100
percent highly improved office space. this building will include one passenger
elevator, one freight elevator, and two internal staircases.
Proposed Building D (Phase I)
Proposed subject building D is a two-story, "employee pavilion" facility,
containing 15,200 square feet of building area. This building will also supply
highly improved interior improvements, with two internal staircases, an
elevator, and an open-air lobby. This structure will include office space; an
employee cafeteria; an employee fitness center, and employee day-care
facilities. This is considered to be typical of higher quality campus R&D
developments in the current market.
Proposed Building E and Building B Expansion (Phase II - Not Appraised Herein)
Proposed subject building E is a three-story, "corporate administration"
facility, containing 96,176 square feet of building area. This building will
provide 100 percent highly improved office space, with two internal staircases
and an elevator. The building B expansion area will consist of a two-story,
40,000 square foot, expansion to building B, at the southeast corner of the
structure. The ground floor of the expansion space will be manufacturing area,
while the upper floor will be office space.
Proposed Site Improvements
The orientation of the proposed building and site improvements is best
illustrated by the accompanying plans. The site ... will be attractively
landscaped. The western portion of the site will ultimately house asphalt paved
parking areas, after the construction of Phase II of the larger project. Until
that time, this portion of the site will be graded and regularly disked. The
footprint area for building E of Phase II will be hydroseeded and irrigated
until the building is constructed. Phase II building B expansion footprint site
area will be utilized for asphalt paved surface parking until construction of
the expansion building.
As can be seen from the accompanying Landscape Plan, the subject's proposed site
improvements constructed as part of Phase I will be extensive. A circular
walkway, with stone columns and a wood arbor, will surround waterscaping,
walkways, an employee plaza, and an open lawn amphitheater. Numerous trees and
shrubs will be located throughout the site. Extensive exterior lighting will
also be provided throughout the site.
Vehicular access will be available via three access driveways along Silver Creek
Valley Road, and three along ▇▇▇▇▇▇ Road. The proposed buildings will be
oriented toward the approximate center of the parcel, with vehicle circulation
and asphalt paved surface parking throughout all of the site perimeters, except
a small portion of the northern site perimeter. The entire site will provide
1,283 asphalt paved parking areas, or 3.2 spaces per 1,000 square feet of
building area (for the entire 400,000 square foot proposed campus). Regarding
the subject 262,824 square foot Phase I portion of the campus, a similar parking
ratio will reportedly be provided, with the remaining excess land site area (the
western portion of the site) graded and disked, but otherwise unimproved.
Overall, the layout of the site improvements and appearance of the landscaping
will be functional for the intended office/R&D use.
......
The proposed R&D facility will be constructed in two phases. As requested by the
client, this appraisal only values the first planned phase (Phase I) of ▇▇▇,▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, together with the remaining excess land with
approvals for the second phase (Phase II) of 136,176 square feet of building
area. Based on the overall project FAR of 44.7 percent, Phase I requires
approximately 590,210 square feet of site area, with the remaining 304,672
square feet of site area considered to be vacant excess land. As discussed
above, this vacant land area comprises the western portion of the larger subject
site.
Attachment to Exhibit A - Page 3
16
Schedule 2
FINANCIAL COVENANTS
This Schedule 2 is attached to and made a part of (a) the Lease
Agreement (the "LEASE") dated effective March 31, 1997, between BNP Leasing
Corporation, a Delaware corporation ("BNPLC") and Electroglas, Inc., a Delaware
corporation ("ELECTROGLAS") and (b) the Pledge Agreement (the "PLEDGE
AGREEMENT") dated effective March 31, 1997, among BNPLC, Electroglas, and Banque
Nationale de Paris, as a Participant and as agent for any financial institutions
that become Participants thereunder from time to time.
PART I - DEFINED TERMS
In this Schedule 2, capitalized terms used but not defined herein shall
have the meaning assigned to them in the Lease or the List of Defined Terms
attached to the Lease; and the following capitalized terms shall have the
following meanings:
"ADJUSTED NET LOSSES" means, for any fiscal period of Electroglas, the
aggregate net losses (if any) incurred during such period by
Electroglas and its Subsidiaries (determined on a consolidated basis),
plus the amounts (if any) which, in the determination of net loss for
such fiscal period, have been deducted for non-cash charges related to
acquisitions that do not exceed an aggregate, cumulative amount of
fifteen percent of Electroglas' Consolidated Tangible Net Worth
(measured at the end of such fiscal period).
"ADJUSTED EBIT" means, for any accounting period, net income (or net
loss) determined in accordance with GAAP, plus the amounts (if any)
which, in the determination of net income (or net loss) for such
period, have been deducted for (a) gross interest expense, (b) tax
expense (c) rent expense under leases of property, (d) depreciation,
and (e) non-cash charges related to acquisitions that do not exceed an
aggregate, cumulative amount of fifteen percent of Electroglas'
Consolidated Tangible Net Worth (measured at the end of such accounting
period).
"COLLATERAL TEST DATES (QUARTERLY)" shall mean the earlier of the
following dates after each fiscal quarter of Electroglas ending on or
after June 30, 1998: (1) the seventh Business Day after the release by
Electroglas of its financial statements for the fiscal quarter; or (2)
the first Business Day of the third calendar month following the end of
the fiscal quarter. Thus, for example, the first Collateral Test Date
(Quarterly) shall be the earlier of the seventh Business Day after
Electroglas' release of its financial statements for its fiscal quarter
ending June 30, 1998 or the first Business Day of September, 1998.
"COLLATERAL TEST DATES (AFTER JUNE, 2000/SEMI-ANNUAL)" shall mean the
earlier of the following dates after the latest fiscal quarter of
Electroglas that ends prior to the first Business Day of every January
and July, commencing with the first Business Day of July, 2000: (1) the
seventh Business Day after the release by Electroglas of its financial
statements for the fiscal quarter; or (2) the first Business Day of the
third calendar month following the end of the fiscal quarter. Thus, for
example, the first Collateral Test Date (After June, 2000/Semi-annual)
shall be the earlier of the seventh Business Day after Electroglas'
release of its financial statements for its fiscal quarter ending June
30, 2000 or the first Business Day of September, 2000.
"COLLATERAL" shall have the meaning assigned to it in the body of the
Pledge Agreement.
Schedule 2 - Page 1
17
"CONSOLIDATED TANGIBLE NET WORTH" means, with respect to any Person,
the excess of the total assets of such Person and its Subsidiaries
(determined on a consolidated basis) over the total Liabilities of such
Person and its Subsidiaries (determined on a consolidated basis);
provided, however, that Intangible Assets on such date shall be
excluded from any determination of consolidated total assets on such
date.
"CURRENT LIABILITIES" means, with respect to any Person, all
liabilities of such Person treated as current liabilities in accordance
with GAAP, including without limitation (a) all obligations payable on
demand or within one year after the date in which the determination is
made and (b) installment and sinking fund payments required to be made
within one year after the date on which determination is made, but
excluding all such liabilities or obligations which are renewable or
extendable at the option of such Person to a date more than one year
from the date of determination.
"FISCAL YEAR 1998 COLLATERAL TEST DATES (QUARTERLY)" shall mean the
first, second and third Collateral Test Dates (Quarterly). Accordingly,
all Collateral Test Dates (Quarterly) prior to and including the
earliest Collateral Test Date (Quarterly) to follow the fiscal quarter
of Electroglas ending December 31, 1998 shall constitute Fiscal Year
1998 Collateral Test Dates (Quarterly).
"FISCAL YEAR 1999 COLLATERAL TEST DATES (QUARTERLY)" shall mean the
fourth, fifth, sixth, and seventh Collateral Test Dates (Quarterly).
Accordingly, all Collateral Test Dates (Quarterly) - after the Fiscal
Year 1998 Collateral Test Dates (Quarterly) - prior to and including
the earliest Collateral Test Date (Quarterly) to follow the fiscal
quarter of Electroglas ending December 31, 1999 shall constitute Fiscal
Year 1999 Collateral Test Dates (Quarterly).
"FIXED CHARGES" means, for any accounting period, the sum of (a) gross
interest expense, plus (b) amortization of principal or debt discount
in respect of all Debt during such period, plus (c) rent payable under
all leases of property during such period, plus (d) taxes payable
during such period.
"INTANGIBLE ASSETS" means, as of the date of any determination thereof,
the total amount of all assets of Electroglas and its consolidated
Subsidiaries that are properly classified as "INTANGIBLE ASSETS" in
accordance with GAAP and, in any event, shall include, without
limitation, goodwill, patents, trade names, trademarks, copyrights,
franchises, experimental expense, organization expense, unamortized
debt discount and expense, and deferred charges other than prepaid
insurance and prepaid taxes and current deferred taxes which are
classified on the balance sheet of Electroglas and its consolidated
Subsidiaries as a current asset in accordance with GAAP and in which
classification Electroglas' independent public accountants concur.
"LIABILITIES" means, with respect to any Person, the sum (without
duplication of any item) of (A) all liabilities of such Person and its
Subsidiaries (determined on a consolidated basis), determined in
accordance with GAAP, and (B) the obligations of such Person and its
Subsidiaries (determined on a consolidated basis), contingent or
otherwise, under any lease of real property or related documents
(including a separate purchase agreement) which provide that such
Person or its Subsidiaries must purchase or cause another to purchase
any interest in the leased property and thereby guarantee a minimum
residual value of the leased property to the lessor. For purposes of
this definition (and for purposes of determining the amount of "Debt"
relevant to any requirements established by this Schedule 2), the
amount of the obligations described in clause (B) of the preceding
sentence with respect to any lease classified according to GAAP as an
"operating lease," shall equal the sum of (1) the present value of
rentals and other
Schedule 2 - Page 2
18
minimum lease payments required in connection with such lease
[calculated in accordance with FASB Statement 13 and other GAAP
relevant to the determination of the whether such lease must be
accounted for as an operating lease or capital lease], plus (2) the
fair value of the property covered by the lease; provided, however,
that such amount shall not exceed the price for which the lessee can
purchase the leased property pursuant to any valid ongoing purchase
option if, upon such a purchase, the lessee shall be excused from
paying rentals or other minimum lease payments that would otherwise
accrue after the purchase.
"LONG-TERM INVESTMENTS" means those investments described below (to the
extent that they are not classified as short term investments in
accordance with GAAP), provided that such investments shall have
maturities of not longer than two years, and shall be rated not less
than A- by Standard & Poor's Corporation or less than A by ▇▇▇▇▇'▇
Investors Service, Inc.:
(1) Securities issued or fully guaranteed or fully insured by
the United States government or any agency thereof and backed by the
full faith and credit of the United States;
(2) Certificates of deposit, time deposits, eurodollar time
deposits, repurchase agreements, or banker's acceptances that are
issued by either one of the 50 largest (in assets) banks in the United
States or by one of the 100 largest (in assets) banks in the world; and
(3) Notes and municipal bonds.
"MANDATORY COLLATERAL PERIODS" means periods during which,
notwithstanding any contrary designation of a Collateral Percentage by
Electroglas under the Pledge Agreement, the Collateral Percentage for
purposes of the Pledge Agreement shall be one hundred percent (100%),
determined as set forth in Part III of this Schedule 2.
"POST-FISCAL YEAR 1998 COLLATERAL TEST DATES (QUARTERLY)" shall mean
all Collateral Test Dates (Quarterly) after the Fiscal Year 1998
Collateral Test Dates (Quarterly).
"POST-FISCAL YEAR 1999 COLLATERAL TEST DATES (QUARTERLY)" shall mean
all Collateral Test Dates (Quarterly) after the Fiscal Year 1999
Collateral Test Dates (Quarterly).
"QUICK ASSETS" means the sum (without duplication of any item) of the
Collateral held subject to a Qualified Pledge under and as defined in
the Pledge Agreement, plus unencumbered cash, plus unencumbered short
term cash investments, plus other unencumbered marketable securities
which are classified as short term investments according to GAAP, plus
the fair market value of unencumbered Long-Term Investments, plus
unencumbered current net accounts receivable.
PART II - FINANCIAL COVENANTS FOR LEASE AGREEMENT
1. Quick Ratio. Electroglas shall maintain a ratio of (a) Quick Assets of
Electroglas and its Subsidiaries (determined on a consolidated basis)
to (b) Current Liabilities of Electroglas and its Subsidiaries
(determined on a consolidated basis), of not less than 2.50 to 1.00.
2. Maximum Ratio of Liabilities to Tangible Net Worth. Electroglas shall
maintain a ratio of (a) the Liabilities of Electroglas to (b) the
Consolidated Tangible Net Worth of Electroglas, of not less than 0.70
to 1.00.
Schedule 2 - Page 3
19
3. Minimum Tangible Net Worth. Electroglas shall not permit its
Consolidated Tangible Net Worth, at the end of any fiscal quarter of
Electroglas, to be less than the sum of: (a) eighty-five percent of the
Consolidated Tangible Net Worth of Electroglas as of March 31, 1998;
plus (b) seventy-five percent of Electroglas' net income (computed
without deduction for net losses in any fiscal quarter) earned in each
fiscal quarter of Electroglas after March 31, 1998; plus (c)
one-hundred percent of the net proceeds of sales of stock in
Electroglas after March 31, 1998; less (d) non-cash charges relating to
acquisitions after March 31, 1998 that do not exceed an aggregate,
cumulative amount of fifteen percent of Electroglas' Consolidated
Tangible Net Worth at the end of such fiscal quarter.
4. Minimum Unencumbered Cash, Cash Equivalents and Collateral. Electroglas
shall not permit the sum (without duplication of any item) of the
Collateral held subject to a Qualified Pledge under and as defined in
the Pledge Agreement, plus, to the extent unencumbered, the total of
all cash, short term cash investments and marketable securities
classified as short term investments according to GAAP of Electroglas
and its Subsidiaries (determined on a consolidated basis) to be less
than $40,000,000 prior to the first Business Day of July, 2000.
PART III - TESTS FOR MANDATORY COLLATERAL PERIODS
1 Minimum Ratio of Unencumbered Cash and Cash Equivalents to Debt. The
period commencing on any Collateral Test Date (After June,
2000/Semi-annual), and ending on the next Collateral Test Date (After
June, 2000/Semi-annual), shall constitute a Mandatory Collateral Period
if, at the end of the latest fiscal quarter of Electroglas ending
before such period, Electroglas shall have failed to maintain a ratio
of (a) the sum (without duplication of any item) of the Collateral held
subject to a Qualified Pledge under and as defined in the Pledge
Agreement, plus, to the extent unencumbered, the total of all cash,
short term cash investments and marketable securities classified as
short term investments according to GAAP of Electroglas and its
Subsidiaries (determined on a consolidated basis) to (b) Debt of
Electroglas and its Subsidiaries (determined on a consolidated basis),
of at least 2.00 to 1.00.
2 Maximum Ratio of Debt to Tangible Net Worth. The period commencing on
any Collateral Test Date (After June, 2000/Semi-annual), and ending on
the next Collateral Test Date (After June, 2000/Semi-annual), shall
constitute a Mandatory Collateral Period if, at the end of the latest
fiscal quarter of Electroglas ending before such period, Electroglas
shall have failed to maintain a ratio of (a) Debt of Electroglas and
its Subsidiaries (determined on a consolidated basis) to (b)
Consolidated Tangible Net Worth of Electroglas, of no more than 0.40 to
1.00.
3 Maximum Net Loss During the Four Fiscal Quarters in the 1998 Fiscal
Year. The period commencing on each Fiscal Year 1998 Collateral Test
Date (Quarterly) and ending on the next Collateral Test Date
(Quarterly) shall constitute a Mandatory Collateral Period if, in the
fiscal quarter or quarters of Electroglas ending after January 1, 1998
and before such period, Electroglas has incurred cumulative Adjusted
Net Losses in excess of $10,000,000.
4 Maximum Net Loss During Subsequent Fiscal Quarters. The period
commencing on any Post-Fiscal Year 1998 Collateral Test Date
(Quarterly), and ending on the next Collateral Test Date (Quarterly),
shall constitute a Mandatory Collateral Period if either (a) during
each of the two latest fiscal quarters of Electroglas ending before
such period, Electroglas shall have incurred Adjusted Net Losses of any
amount in each such quarter, or (b) during the latest fiscal quarter of
Electroglas ending before such period, Electroglas shall have incurred
an Adjusted Net Loss
Schedule 2 - Page 4
20
greater than five percent of Electroglas' Consolidated Tangible Net
Worth as of the beginning of such period.
5 Maximum Fixed Charge Coverage Ratio During the Four Fiscal Quarters in
the 1999 Fiscal Year. The period commencing on each Fiscal Year 1999
Collateral Test Date (Quarterly), and ending on the next Collateral
Test Date (Quarterly), shall constitute a Mandatory Collateral Period
if Electroglas shall have failed to maintain a ratio of (a) cumulative
Adjusted EBIT of Electroglas and its Subsidiaries (determined on a
consolidated basis), in the fiscal quarter or quarters of Electroglas
ending after January 1, 1999 and before such period, to (b) cumulative
Fixed Charges of Electroglas and its Subsidiaries (determined on a
consolidated basis) for the same fiscal quarter or quarters, of at
least 2.00 to 1.00.
6 Minimum Fixed Charge Coverage Ratio in Subsequent Fiscal Quarters. The
period commencing on each Post-Fiscal Year 1999 Collateral Test Date
(Quarterly) and ending on the next following Collateral Test Date
(Quarterly), shall constitute a Mandatory Collateral Period if
Electroglas shall have failed to maintain a ratio of (a) cumulative
Adjusted EBIT of Electroglas and its Subsidiaries (determined on a
consolidated basis) for the four latest fiscal quarters ending before
such period, to (b) cumulative Fixed Charges of Electroglas and its
Subsidiaries (determined on a consolidated basis) for the same four
fiscal quarters, of at least 2.00 to 1.00.
Schedule 2 - Page 5
21
[BNP/Electroglas]
MODIFICATION AGREEMENT
(FIRST AMENDMENT TO PARTICIPATION AGREEMENT)
This MODIFICATION AGREEMENT (FIRST AMENDMENT TO PARTICIPATION
AGREEMENT) (this "AMENDMENT") is made as of July 1, 1998, by and between BNP
LEASING CORPORATION, a Delaware corporation ("BNPLC"), and BANQUE NATIONALE DE
PARIS, SAN ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("PARTICIPANT").
R E C I T A L S
A. BNPLC and Electroglas, Inc., a Delaware corporation ("ELECTROGLAS")
executed a Lease Agreement dated as of March 31, 1997 (the " LEASE"). Pursuant
to the Lease, BNPLC has leased to Electroglas the property described therein
(all real and personal property covered from time to time by the Lease is
hereinafter collectively called the "LEASED PROPERTY"). The Lease provides for a
"CONSTRUCTION ALLOWANCE" (as defined in the Lease) to be funded by BNPLC for the
construction of improvements, all as more particularly provided therein.
B. BNPLC and Electroglas have also entered into a Purchase Agreement
dated as of March 31, 1997 (the "PURCHASE AGREEMENT"), pursuant to which
Electroglas has agreed to purchase or arrange for the purchase of the Leased
Property as more particularly provided therein. BNPLC, Electroglas and Banque
Nationale de Paris, San ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ have also entered into a Pledge
Agreement dated as of March 31, 1997 (the "PLEDGE AGREEMENT"), pursuant to which
Electroglas has agreed to provide cash collateral for its obligations under the
Purchase Agreement as more particularly provided therein. (The Lease Agreement,
the Purchase Agreement and the Pledge Agreement are herein collectively called
the " UNDERLYING DOCUMENTS").
C. BNPLC and Participant have executed a Participation Agreement dated
as of March 31, 1997 ( the "PARTICIPATION AGREEMENT") evidencing Participant's
agreement to participate with BNPLC in certain of the risks and rewards to BNPLC
of the Underlying Documents. Capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings given to them in the
Participation Agreement.
E. BNPLC and Electroglas wish to enter into a Construction Funding
Agreement (First Amendment to Lease) dated of even date herewith (the "FIRST
LEASE AMENDMENT"), amending the Lease in order to, among other things, increase
the Maximum Construction Allowance to $43,000,000.
NOW, THEREFORE, in consideration of the above recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, BNPLC and Participant, agree as follows:
I. Consent and Agreement of Participant. Participant hereby consents to the
execution and delivery of the First Lease Amendment, and in connection therewith
agrees to the following modifications to the Participation Agreement:
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A. Replacement of Schedule 1. The SCHEDULE 1 attached hereto
is substituted for and will replace SCHEDULE 1 attached to the
Participation Agreement. By such substitution (A) Participant's
"Percentage" under and as defined in the Participation Agreement is
being increased from 85% to 95%, and (B) the maximum amount of
Participant's participation under the Participation Agreement is being
increased from $10,200,000 to $53,250,000. Consistent with the increase
of Participant's Percentage from 85% to 95%, Participant is delivering
a payment to BNPLC contemporaneously with the execution of this
Amendment equal to 10% of Stipulated Loss Value as of the date of this
Amendment.
B. Funding of Collateral Deposits Required in connection with
Supplemental Carrying Costs. To provide for the funding of deposits for
Electroglas equal to Supplemental Carrying Costs as provided in the
First Lease Amendment, all references in the original Participation
Agreement to "Construction Advance" or "Construction Advances" are
changed to "Construction Related Advance" and "Construction Related
Advances", respectively, and the following new definition is inserted
as a new Section 1.1A into the Participation Agreement:
1.1A "CONSTRUCTION RELATED ADVANCE" MEANS (1) ANY
CONSTRUCTION ADVANCE UNDER AND AS DEFINED IN THE LEASE, AND
(2) ANY DEPOSIT OF FUNDS INTO THE ACCOUNTS (AS DEFINED IN THE
PLEDGE AGREEMENT) BY BNPLC FOR ELECTROGLAS AS PROVIDED IN
SECTION 1.H.(3) OF THE FIRST LEASE AMENDMENT.
B. Replacement of Section 14.1. Section 14.1 of the
Participation Agreement, which concerns assignments by Participants, is
amended and restated in its entirety to read as follows:
14.1 BY THE PARTICIPANTS GENERALLY. EXCEPT AS
EXPRESSLY PROVIDED BELOW, NO PARTICIPANT SHALL ASSIGN OR
ATTEMPT TO ASSIGN ANY INTEREST IN OR RIGHTS UNDER THIS
AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF BNPLC, WHICH
CONSENT SHALL NOT BE UNREASONABLY WITHHELD SO LONG AS THE
PARTICIPANT REQUESTING THE APPROVAL IS NOT IN DEFAULT
HEREUNDER; PROVIDED, THIS PROVISION SHALL NOT PREVENT A
PARTICIPANT FROM TRANSFERRING ITS RIGHTS HEREUNDER TO ITS
AFFILIATES OR TO ANY OTHER PARTICIPANTS WHO ARE ALREADY
PARTIES TO THIS AGREEMENT. NOTWITHSTANDING ANY PERMITTED
ASSIGNMENT BY A PARTICIPANT, IF THE ASSIGNMENT IS TO ANY
PERSON THAT DOES NOT QUALIFY AS A "PARTICIPANT" FOR PURPOSES
OF THE LEASE ITSELF (WHICH, AS MORE PARTICULARLY PROVIDED IN
THE DEFINITION OF PARTICIPANT IN THE LEASE, MAY REQUIRE THE
WRITTEN APPROVAL OF SUCH PERSON BY ELECTROGLAS), SUCH
PARTICIPANT'S OBLIGATIONS UNDER THIS AGREEMENT SHALL REMAIN
UNCHANGED, SUCH PARTICIPANT SHALL REMAIN PRIMARILY RESPONSIBLE
FOR THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER, AND BNPLC
MAY CONTINUE TO DEAL SOLELY AND DIRECTLY WITH SUCH PARTICIPANT
IN CONNECTION WITH ALL RIGHTS AND OBLIGATIONS UNDER THIS
AGREEMENT. IN THE EVENT, HOWEVER, OF A PERMITTED ASSIGNMENT BY
A PARTICIPANT TO A PERSON THAT DOES QUALIFY AS A "PARTICIPANT"
FOR PURPOSES OF THE LEASE ITSELF, ACCOMPLISHED BY THE
EXECUTION OF APPROPRIATE PARTICIPATION AGREEMENT SUPPLEMENTS
AS HEREIN PROVIDED, THE ASSIGNING PARTICIPANT SHALL NOT BE
LIABLE FOR ANY FAILURE BY THE ASSIGNEE TO FULFILL THE
OBLIGATIONS ASSUMED HEREUNDER BY THE ASSIGNEE BY REASON OF
SUCH ASSIGNMENT.
C. Change in Minimum Hold Percentage of BNPLC and its
Affiliates. The reference in the proviso at the end of the second
sentence of Section 14.2 of the Participation Agreement to "twenty-five
percent (25%)" is changed to "three percent (3%)", such that the
proviso will now read as follows:
; PROVIDED, THAT THE ASSIGNMENT OF PARTICIPATIONS BY BNPLC
SHALL NOT REDUCE THE SUM OF THE PERCENTAGES OF BNPLC AND ITS
AFFILIATES TO LESS THAN THREE PERCENT (3%).
II. Ratification. Participant hereby ratifies and confirms in all respects the
Participation Agreement as amended hereby, and agrees that its obligations and
covenants thereunder shall continue in full force and effect with respect to the
Underlying Documents as amended by the First Lease Amendment.
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III. Fees Excluded From Net Cash Flow. Neither the Administrative Fees nor the
Modification and Extension Fee (both as described in the First Lease Amendment)
will constitute Net Cash Flow for purposes of the Participation Agreement.
IV. Entire Agreement. The Participation Agreement, as amended hereby, and the
documents and agreements referred to therein, set forth the entire agreement
between the parties concerning the subject matter of the Participation
Agreement, and no further amendment of the Participation Agreement or this
Amendment shall be binding or valid unless expressed in a writing executed by
both parties hereto.
V. Successors and Assigns. All of the covenants, agreements, terms and
conditions to be observed and performed by the parties hereto shall be
applicable to and binding upon their respective heirs, personal representatives,
successors and, to the extent assignment is permitted under the Participation
Agreement, their respective assigns.
VI. References to the Participation Agreement. From and after the date of this
Amendment, all references to the "Participation Agreement" in other documents
related to this transaction are intended to mean the Participation Agreement as
amended hereby, unless the context shall otherwise require.
VII. Execution in Counterparts. To facilitate execution, this Amendment may be
executed in as many identical counterparts as may be required. It shall not be
necessary that the signature of, or on behalf of, each party, or that the
signature of all persons required to bind any party, appear on each counterpart.
All counterparts, taken together, shall collectively constitute a single
instrument. It shall not be necessary in making proof of this Amendment to
produce or account for more than a single counterpart containing the respective
signatures of, or on behalf of, each of the parties hereto. Any signature page
to any counterpart may be detached from such counterpart without impairing the
legal effect of the signatures thereon and thereafter attached to another
counterpart identical thereto except having attached to it additional signature
pages.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
BNPLC:
BNP LEASING CORPORATION,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇
------------------------------
▇▇▇▇▇ ▇. ▇▇▇, Vice President
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[Continuation of signature pages to MODIFICATION AGREEMENT (FIRST AMENDMENT TO
PARTICIPATION AGREEMENT) dated as of July 1, 1998]
PARTICIPANT:
BANQUE NATIONALE DE PARIS,
SAN ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇
------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇, Vice President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇▇,
Assistant Vice President
