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EX-10.16
SECOND AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN
AGREEMENT (the "Second Amendment") dated as of the 24th day of June, 1998, by
and among MAXCO, INC., a Michigan Corporation ("Borrower") and COMERICA BANK, a
Michigan banking corporation ("Bank").
W I T N E S S E T H
WHEREAS, Borrower and Bank entered into a certain Amended and Restated
Loan Agreement dated September 30, 1996, as amended by First Amendment thereto
dated as of August 1, 1997 (the "Agreement");
WHEREAS, Borrower, in addition to other credit facilities provided for
in the Agreement, desires to borrow up to $5,000,000 (subject to restrictions
provided herein) from the Bank from time to time for the acquisition financing
needs of the Borrower's wholly owned subsidiary Ersco Corporation, a Michigan
corporation ("Ersco") ("Phase I Ersco Acquisition");
WHEREAS, Borrower, in addition to other credit facilities provided for
in the Agreement and the Phase I Ersco Acquisition Facility, desires to borrow
up to additional $5,000,000 (subject to restrictions provided herein) from the
Bank from time to time, after the Phase I Ersco Acquisition Facility is fully
drawn down, for additional acquisition financing needs of Ersco ("Phase II Ersco
Acquisition"); and
WHEREAS, the Borrower and the Bank now desire to amend certain of the
covenants and restrictions set forth in the Agreement;
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Borrower and the Bank hereby agree as follows:
1. In Sub-Section 1.1 of Section 1 of the Agreement, the following
definitions are hereby deleted in their entirety and replaced by the following
or added entirely:
"Accounts," "Chattel Paper," "Documents," "Equipment,"
"Fixtures," "General Intangibles," "Goods," "Instruments," and
"Inventory" shall have the meanings assigned to them in the UCC on the
date of this Agreement.
"Approved Ersco Acquisition(s)" shall mean business
acquisitions for Ersco prepared by the Borrower, which are approved in
writing by the Bank, which approval shall not be unreasonably withheld.
"Atmosphere Annealing" shall mean Atmosphere Annealing, Inc.,
a Michigan corporation.
"Consolidated Funded Debt" shall mean, as of any applicable
date of determination, that portion of consolidated Debt which consists
of (a) indebtedness for borrowed money, including indebtedness for
borrowed money which is evidenced by notes, bonds, debentures or other
similar instruments or (b) obligations under installment sales
contracts or capital leases, less Liquid Assets of Borrower and/or the
Guarantors as of the applicable date.
"Ersco" shall mean Ersco Corporation, a Michigan corporation.
"Ersco Collateral" shall mean the any property of Ersco,
including but not limited to, any property in the possession of the
Bank, any amount in any deposit account of the Ersco with the Bank, any
real property, any securities owned by Ersco in any acquired
subsidiaries, all of Ersco's Accounts, Chattel Paper, Documents,
Equipment, Fixtures, General Intangibles, Goods, Instruments and
Inventory, wherever located and whether or not owned or hereafter
acquired, together with all replacements thereof, substitutions
therefor and all proceeds hereof.
"Financing Statements" shall mean UCC financing statements
describing the Bank as secured party and the Borrower, Ersco or a
Guarantor as debtor covering the Collateral or the Ersco Collateral, as
provided in this Agreement, and otherwise in such form, for filing in
such jurisdictions and with such filing offices as the Bank shall
reasonably deem necessary or advisable.
"Guarantors" shall mean Akemi, Ersco, Pak-Sak, Wisconsin and
Atmosphere Annealing.
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"Mortgages" shall mean one or more continuing collateral
mortgages in such form as shall be required by the Bank to perfect a
security interest in the Akemi Real Estate.
"Note" shall mean the Revolving Credit Note, the Revolving
Ersco Acquisition Note or the Term Note and "Notes" shall mean each of
the Revolving Credit Note, the Revolving Ersco Acquisition Note and the
Term Note.
"Phase I Ersco Acquisition Commitment Amount" shall mean
$5,000,000 (or such lesser amount to which the Phase I Ersco
Acquisition Commitment Amount may be reduced by the Borrower from time
to time under Section 2.8.1 of this Agreement), which commitment shall
be only for use in Phase I Ersco Acquisitions.
"Phase II Ersco Acquisition Commitment Amount" shall mean
$5,000,000 (or such lesser amount to which the Phase II Ersco
Acquisition Commitment Amount may be reduced by the Borrower from time
to time under Section 2.8.1 of this Agreement), which commitment shall
be only for use in Phase II Ersco Acquisitions.
"Revolving Ersco Acquisition Note" shall mean a promissory
note conforming to Section 2.3(c) of this Agreement and in the form of
Exhibit A-3 to this Agreement.
"Revolving Ersco Acquisition Loan" shall mean an advance made
by the Bank to the Borrower under Section 2.1(d) of this Agreement on a
Disbursement Date for a Phase I Ersco Acquisition or a Phase II Ersco
Acquisition.
"Security Agreements" shall mean security agreements in such
form as shall be required by the Bank pursuant to this Agreement, which
the Borrower, Ersco and the Guarantors have previously or in the future
will grant, to the Bank, security interests in the Collateral and/or
the Ersco Collateral, as applicable, now owned or hereafter acquired,
together with all replacements thereof, substitutions therefor and all
proceeds thereof, for the purpose of securing Term Loans and/or the
Revolving Ersco Acquisition Loans.
"Series Four Preferred Stock" shall mean 46,414 issued shares
of 10% Maxco, Inc. preferred stock.
"Series Five Preferred Stock" shall mean 6,680 issued shares
of 10% Maxco, Inc. preferred stock.
"Termination Date" shall mean, as to the Revolving Credit Loan
and the Revolving Ersco Acquisition Loan, August 1, 1999 (or such
earlier date on which the Borrower shall permanently terminate the
Bank's commitment under Section 2.8.1 of this Agreement).
2. There shall be added a new Sub-Sub-Section 2.1(d) to Sub-Section 2.1
of Section 2 which shall read as follows:
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2.1 Commitment. (d) Subject to the terms and conditions of
this Agreement, the Bank agrees to make loans to the Borrower for
Approved Ersco Acquisitions on a revolving basis of such amount as the
Borrower shall request pursuant to Section 2.2 of this Agreement at any
time from the date of this Agreement until the Termination Date, up to
an aggregate principal amount outstanding at any time not to exceed the
sum of the Phase I Ersco Acquisition Commitment Amount and the Phase II
Ersco Acquisition Commitment Amount, provided that each Disbursement
Date under this Agreement must be a Business Day, and the principal
amount of each Revolving Ersco Acquisition Loan made under this
Agreement shall be in the aggregate amount of $10,000 or an integral
multiple thereof, and provided further, that the principal amount of
each Revolving Ersco Acquisition Loan made under this Agreement, for
which Borrower elects to pay interest at the Eurodollar-based Rate,
shall be in the aggregate amount of $1,000,000 or greater in $500,000
increments thereafter.
3. Sub-Sub-Section 2.2.1 of Sub-Section 2.2 of Section 2 is hereby
deleted in its entirety and replaced by the following:
2.2.1 Notice of Request for Loan and Letters of Credit. The
Borrower may with the consent of the Bank request a Revolving Loan, a
Revolving Ersco Acquisition Loan, a Term Loan or a Letter of Credit and
make payments thereon by written, telephonic or other approved form of
electronic authorization to the Bank in accordance with such terms and
procedures as the Bank shall from time to time establish.
4. A new Sub-Sub-Section 2.2.2(e) of Sub-Section 2.2 of Section 2 are
replaced and added by the following:
2.2.2 Bank Obligation to Make Loans or to Issue Letters of
Credit. The Bank agrees to make the Revolving Loan, the Revolving Ersco
Acquisition Loan or the Term Loan, or to issue the Letter of Credit, on
the Disbursement Date as set forth in a notice to the Bank from the
Borrower conforming to the requirements of Section 2.2.1 by crediting
the Borrower's general deposit account with the Bank in the amount of
such Revolving Loan, Revolving Ersco Acquisition Loan or Term Loan, or
by delivering the Letter of Credit to the Borrower, provided, however,
that the Bank shall not be so obligated if:
. . .
(c) Any such proposed Revolving Ersco Acquisition Loan would
cause the aggregate unpaid principal amount of the Revolving Ersco
Acquisition Loans outstanding under this Agreement to exceed the sum of
the Phase I Ersco Acquisition Commitment Amount and the Phase II Ersco
Acquisition Commitment Amount.
5. There shall be added a new Sub-Sub-Section (c) to Sub-Section
2.3 to Section 2 which shall read as follows:
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(c) Revolving Ersco Acquisition Note. The Revolving Ersco
Acquisition Loans shall be evidenced by the Revolving Ersco Acquisition
Note, executed by the Borrower, dated the date of this Agreement,
payable to the Bank on the Termination Date (unless sooner accelerated
pursuant to the terms of this Agreement), and in the principal amount
of the sum of the Phase I Ersco Acquisition Commitment Amount and the
Phase II Ersco Acquisition Commitment Amount. The date and amount of
each Revolving Ersco Acquisition Loan made by the Bank and of each
repayment of principal thereon received by the Bank shall be recorded
by the Bank in its records. The aggregate unpaid principal amount so
recorded by the Bank shall constitute the best evidence of the
principal amount owing and unpaid on the Note, provided, however, that
the failure by the Bank so to record any such amount or any error in so
recording any such amount (whether on the schedule attached to the
Revolving Ersco Acquisition Note or otherwise) shall not limit or
otherwise affect the obligations of the Borrower under this Agreement
or the Revolving Ersco Acquisition Note to repay the principal amount
of all the Revolving Ersco Acquisition Loans together with all interest
accrued or accruing thereon.
6. There shall be added a new Sub-Section 2.4(c) to Section 2
which shall read as follows:
(c) The Revolving Ersco Acquisition Note shall bear interest
on the outstanding principal balance from time to time outstanding at a
rate equal to the Prime Rate, less one-half of one percent (.5%), or
the Eurodollar-based Rate, as elected by the Borrower under the terms
of the Revolving Ersco Acquisition Note, until maturity, whether by
acceleration or otherwise, and thereafter at a rate equal to three
percent (3%) per annum plus the rate otherwise prevailing hereunder.
Interest shall be payable in accordance with the terms of the Revolving
Ersco Acquisition Note.
7. There shall be added a new Sub-Section 2.6.5 to Section 2
which shall read as follows:
2.6.5 Revolving Ersco Acquisition Commitment Fee. The Borrower
agrees to pay to the Bank a revolving credit commitment fee for the
period from and including the date of this Agreement to the Termination
Date equal to (a) one-quarter of one percent (1/4%) per annum (i) of
the Phase I Ersco Acquisition Commitment Amount until the date of the
first request for a draw against the Phase II Ersco Acquisition
Commitment Amount and then (ii) of the Phase II Ersco Acquisition
Commitment Amount plus (b) one-quarter of one percent (1/4%) per annum
on the average daily difference between (i) the Phase I Ersco
Acquisition Commitment Amount and the aggregate unpaid principal
balance of the Revolving Ersco Acquisition Loans until the Phase I
Ersco Acquisition Commitment Amount is fully drawn, and then upon the
first request for a draw against the Phase II Ersco Acquisition
Commitment Amount, (ii) the Phase II Ersco Acquisition Commitment
Amount and the aggregate unpaid principal balance of the Revolving
Ersco Acquisition Loans drawn against
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the Phase II Ersco Acquisition Commitment Amount. Such commitment fees
shall be payable on the last Business Day of each March, June,
September and December during the term of this Agreement, and on the
Termination Date, for the periods ending on such dates.
8. Sub-Section 2.8 of Section 2 is hereby deleted in its
entirety and replaced by the following:
2.8 Changes in Commitment and Prepayments.
2.8.1 Termination or Reduction in Commitment. The Borrower
may, at any time and from time to time, upon at least five (5) Business
Days' prior written notice received by the Bank, permanently terminate
the Bank's commitments under this Agreement or permanently reduce the
Commitment Amount, the Phase I Ersco Acquisition Commitment Amount or
the Phase II Ersco Acquisition Commitment Amount by an integral
multiple of $500,000, provided, however, that the Borrower, on the
effective date of such termination or reduction, (a) shall pay to the
Bank, in the case of a termination, the aggregate unpaid principal
amount of all Revolving Loans, Revolving Ersco Acquisition Loans and
Term Loans (together with, in the case of Term Loans, any prepayment
penalty or premium provided by the Term Notes or otherwise required by
the Bank) and shall deposit with the Bank in cash an amount (adjusted,
as deemed necessary by the Bank, for any applicable reserve or other
requirements) equal to the Bank's maximum liability under all Letters
of Credit then outstanding, or (b) shall pay to the Bank, in the case
of a reduction, the amount, if any, by which the aggregate unpaid
principal amount of all Revolving Loans exceeds the then reduced
Commitment Amount, together in either case with all interest accrued
and unpaid on the principal amounts so prepaid, and/or (c) shall pay to
the Bank, in the case of a reduction, the amount, if any, by which the
aggregate unpaid principal amount of all Revolving Ersco Acquisition
Loan exceeds the then reduced sum of the Phase I Ersco Acquisition
Commitment Amount and the Phase II Ersco Acquisition Commitment Amount,
together in either case with all interest accrued and unpaid on the
principal amounts so prepaid. After any such reduction, the commitment
fee provided under Section 2.6.1 of this Agreement shall be calculated
on the Commitment Amount and the sum of the Phase I Ersco Acquisition
Commitment Amount and the Phase II Ersco Acquisition Commitment Amount,
as so reduced and the such commitment amounts may not be increased or
otherwise reinstated without the express written agreement of the Bank.
2.8.2 Mandatory Prepayments. In addition to the mandatory
prepayment required under Section 2.8.1 of this Agreement, the Borrower
shall pay to the Bank the amount, if any, by which the aggregate unpaid
principal amount of all Revolving Loans from time to time exceeds the
Commitment Amount, together with all interest accrued and unpaid on the
amount of such excess, but without other premium or penalty. Such
prepayment shall be immediately due and owing upon the occurrence of
any such excess, provided, however, that any mandatory prepayment made
under this Section 2.8.2 shall not reduce the Commitment Amount.
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2.8.3 Optional Prepayments.
(a) The Borrower may, at any time and from time to
time, upon at least one (1) Business Day's prior written
notice received by the Bank, prepay the unpaid principal
amount of the Revolving Loans in whole or in part without
premium or penalty, provided, however, that any such optional
prepayment shall be made in an integral multiple of $10,000
and provided, further, that any optional prepayment made under
this Section 2.8.3 shall not reduce the Commitment Amount.
(b) The Borrower may prepay the unpaid principal
amount of the Term Loans only if permitted by, and on the
terms of, the Term Notes.
2.8.4 Payments Under Revolving Ersco Acquisition Loans.
Principal payments required under a Revolving Ersco Acquisition Loan
will be predicated on the amounts outstanding and will be defined prior
to any Revolving Ersco Acquisition Loan and shall provide for an
amortization period of up to seven (7) years, as determined by the
Bank, with payments commencing within six (6) months following the date
of the Revolving Ersco Acquisition Loan.
9. Section 3 is hereby deleted in its entirety and replaced by the
following:
SECTION 3. SECURITY.
3.1 Term Loans. To secure full and timely performance of the
Borrower's covenants set out in this Agreement relating to the Term
Loans and to secure the repayment of the Term Notes the Borrower agrees
to grant and assign, and to cause the Guarantors to grant and assign,
Purchase Money Security Interests and other security interests in the
Collateral pursuant to the Security Agreements, the Financing
Statements, the Mortgages and other instruments and agreements
satisfactory to the Bank. Any security interest in Collateral securing
a Term Loan shall also be deemed as security for all other Term Loans
made pursuant to this Agreement.
3.2 Revolving Ersco Acquisition Loans. To secure full and
timely performance of the Borrower's covenants set out in this
Agreement relating to the Revolving Ersco Acquisition Loans and to
secure the repayment of the Revolving Ersco Acquisition Note the
Borrower agrees to cause Ersco to grant and assign security interests
in the Ersco Collateral pursuant to the Security Agreements, the
Financing Statements, the Mortgages and other instruments and
agreements satisfactory to the Bank. Any security interest in Ersco
Collateral securing a Revolving Ersco Acquisition Loan shall also be
deemed as security for all other Revolving Ersco Acquisition Loans made
pursuant to this Agreement ("Ersco Security Interests"), including
loans for both Phase I Ersco Acquisitions and Phase Ii Ersco
Acquisitions. Notwithstanding anything contained herein to the
contrary, the Ersco Security
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Interests shall be granted to the Bank contemporaneously with the
first request by Borrower for a Revolving Ersco Acquisition Loan for
a Phase II Ersco Acquisition.
10. Section 5.5 of Section 5 is hereby deleted in its entirety and
is replaced by the following:
5.5 Subsidiaries. The Guarantors are wholly owned Subsidiaries
of the Borrower. The Borrower also owns approximately (i) 24% of the
capital stock of Medar, (ii) 100% of the capital stock of Atmosphere
Annealing, Inc., (iii) 45% of the capital stock of Strategic
Interactive, Inc., (iv) 50% of the membership interests Xxxxxxxx Oil
Co., L.L.C., (v) 33% of the capital stock of AMI Energy, Inc., (vi) 50%
of the membership interests in L/M Associates, L.L.C. and (vii) 33% of
the capital stock of Blasen Xxxxxx Asset Management Company.
11. Section 5.17 of Section 5 is hereby deleted in its entirety
and is replaced by the following:
5.17 Shares and Shareholders. The Borrower's entire authorized
capital stock consists of 10,000,000 shares of common stock, $1.00 par
value, and 100,000 shares of Preferred Stock, of which 14,988 shares of
Series Three Preferred Stock are issued and outstanding; of which
46,414 shares of Series Four Preferred Stock are issued and
outstanding; and of which 6,680 shares of Series Five Preferred Stock
are issued and outstanding. The Guarantors' entire outstanding capital
stock is owned both beneficially and of record by the Borrower, and the
Guarantors' authorized and outstanding capital stock consists of the
following:
Authorized Outstanding
Guarantor: Capital Stock: Par Value: Capital Stock
Akemi 50,000 $ 1.00 1,000
Atmosphere Annealing 60,000 N/A 1,000
Ersco Corp. 60,000 N/A 1,000
Pak-Sak 5,000 $10.00 3,768
Wisconsin Common 1,250 no par 290
Preferred 250 $100.00 250
The Borrower owns 2,130,605 shares of the outstanding capital stock of
Medar, which constitutes approximately 24% of the aggregate outstanding
capital stock of Medar and those interest disclosed in Section 5.5.
Except as disclosed on Schedule 5.17, there are no outstanding options,
warrants or rights to purchase, nor any agreement for the subscription,
purchase or acquisition of, any shares of the capital stock of the
Borrower or any Subsidiary.
12. Section 6.6 of Section 6 is hereby deleted in its entirety
and is replaced by the
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following:
6.6 Maintain Consolidated Funded Debt to EBITDA. On a
consolidated basis, maintain the ratio of Consolidated Funded Debt to
earnings before interest, taxes, depreciation and amortization
(determined on a rolling four quarters basis) ("EBITDA") of not more
than (a) 3.20 to 1.0 from the date of this Agreement and the date upon
which a Revolving Ersco Acquisition Loan is requested by Borrower for a
Phase II Ersco Acquisition, and (b) 3.80 to 1.0 thereafter until the
Termination Date.
13. There shall be added a new Sub-Section 6.12 to Section 6
which shall read as follows:
6.12 Maintain Debt to Tangible Net Worth. On a consolidated
and proforma (including acquisitions) basis, maintain the ratio of Debt
to Tangible Net Worth of not more than 1.75 to 1.0 from the date upon
which a Revolving Ersco Acquisition Loan is requested by Borrower for a
Phase II Ersco Acquisition to the Termination Date.
14. Section 7.1 of Section 7 is hereby deleted in its entirety
and is replaced by the following:
7.1 Dividends. Declare or pay any dividend (other than
dividends payable solely in shares of its capital stock) on, or make
any other distribution with respect to (whether by reduction of capital
or otherwise), any shares of its capital stock, except that (i)
dividends from any Subsidiary to the Borrower are permitted, (ii)
dividends of up to $110,000 annually on Borrower's Series Three
Preferred Stock are permitted, (iii) dividends of up to $300,000
annually on the Borrower's Series Four Preferred Stock are permitted,
and (iv) dividends of up to $81,000 annually on the Borrower's Series
Five Preferred Stock are permitted.
15. Section 7.2 of Section 7 is hereby deleted in its entirety
and is replaced by the following:
7.2 Stock Issuance. Issue any additional shares of its capital
stock, or any warrant, right or option relating thereto or any security
convertible into any of the foregoing, except (i) pursuant to the
Borrower's employee stock option plan, or (ii) Borrower's Series Five
Preferred Stock but only to the extent such stock was issued on or
prior to June 24, 1998.
16. Section 7.7 of Section 7 is hereby deleted in its
entirety and is replaced by the following:
7.7 Guarantee Obligations. Guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any
other Person, whether by agreement to purchase the indebtedness of any
other Person, agreement for the furnishing of funds to any other Person
through the furnishing of goods, supplies or services, by way of stock
purchase,
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capital contribution, advance or loan, for the purpose of
paying or discharging (or causing the payment or discharge of) the
indebtedness of any other Person, or otherwise, except for (i) the
endorsement of negotiable instruments by the Borrower or the
Subsidiaries in the ordinary course of business for deposit or
collection, (ii) the guaranty by the Borrower of any and all
obligations of any Subsidiary wholly-owned by Borrower, (iii) the
guaranties by the Borrower listed on Schedule 5.12 of this Agreement.
17. Section 7.10 of Section 7 is hereby deleted in its entirety
and is replaced by the following:
7.10 Acquire Securities. Purchase or hold beneficially any
stock or other securities of, or make any investment or acquire any
interest whatsoever in, any other Person except for the common stock of
or ownership interests in the Guarantors, Medar Subordinated Debt
Securities, Atmosphere Annealing, Strategic Interactive, Inc., Xxxxxxxx
Oil Co., L.L.C., AMI Energy, Inc., L/M Associates, L.L.C., and Blasen
Xxxxxx Asset Management Company, in each case limited to the interest
owned by the Borrower on the date of this Second Amendment to the
Agreement, and except for certificates of deposit with maturities of
one year or less of United States commercial banks with capital,
surplus and undivided profits in excess of $100,000,000, direct
obligations of the United States Government maturing within one year
from the date of acquisition thereof, and high grade commercial paper
and high grade fixed-income securities (e.g., corporate bonds).
18. Except as specifically modified hereby, the terms and
conditions of the Agreement and the Notes remain in full force and
effect and the undersigned hereby ratify and agrees to be bound by the terms of
the Agreement as hereby amended.
19. Neither the extension of this Second Amendment by the Bank,
nor any other act or omission by the Bank in connection herewith, shall
be deemed a waiver by the Bank of any default under the Agreement.
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IN WITNESS WHEREOF, the Borrower and the Bank have caused this Second
Amendment to be executed by their duly authorized officers as of the day and
year first written above.
MAXCO, INC.
By /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx
Its Vice President
COMERICA BANK
By /s/ Xxxxx X. Xxxxxxxx
-------------------------
Xxxxx X. Xxxxxxxx
Its Vice President
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The Undersigned Guarantors hereby acknowledge and consent to the above
Second Amendment.
Akemi Plastics, Inc.
By /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx
Its Treasurer
Ersco Corporation Pak-Sak Industries, Inc.
By /s/ Xxxxxxx Xxxxxxx By /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx Xxxxxxx Xxxxxxx
Its Treasurer Its Treasurer
Wisconsin Wire & Steel, Inc. Atmosphere Annealing, Inc.
By /s/ Xxxxxxx Xxxxxxx By /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx Xxxxxxx Xxxxxxx
Its Treasurer Its Treasurer
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