Exhibit 10.18
FIRST AMENDMENT TO
LOAN AGREEMENT
First Amendment to the Loan Agreement originally dated as of May 30,
1996 by and between BRUNSWICK TECHNOLOGIES, INC., a Maine corporation with a
place of business in Brunswick, Maine (the "Borrower" or the "Debtor"), and
FLEET BANK OF MAINE, a Maine banking corporation with a place of business in
Portland, Maine (the "Lender" or the "Bank").
1. Reference to Loan Agreement; Background. Reference is made to the
Loan Agreement originally dated as of May 30, 1996 (the "Loan Agreement").
Capitalized terms used herein without definition shall have the meanings
ascribed to them in the Loan Agreement, except to the extent that such meanings
may be amended hereby.
The Borrower desires to increase its existing working capital line of
credit with Lender from $1,500,000 to $2,500,000 and to provide its wholly-owned
subsidiary, Advanced Textiles, Inc. ("ATI" or "Guarantor"), with access to that
credit line. Fleet desires to accommodate the needs of the Borrower and ATI and
has therefore agreed to increase the credit line upon certain terms and
conditions, including the agreement of ATI to guarantee the obligations of
Borrower under the credit line. The parties
therefore desire to amend the Loan Agreement to (i) increase the working capital
line of credit loan from $1,500,000 to $2,500,000 and (ii) modify certain other
provisions of the Loan Agreement as set forth herein. To effectuate the
foregoing, the parties, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, hereby agree to amend the Loan
Agreement, effective as of the date hereof, in the following respects:
2. Amendments to Loan Agreement.
(a) Section 1 of the Loan Agreement is amended by adding thereto the
following definition: "Guarantor" means Advanced Textiles, Inc.
(b) Section 1 of the Loan Agreement is further amended such that for
each of the definitions identified below all references to "Borrower" or any
variation thereof set forth therein is replaced in each case by the words
"Borrower or Guarantor," and "Borrower and Guarantor" and the like, as
applicable. The definitions so modified are as follows: "Eligible Accounts
Receivable;" "Qualified Accounts;" "Eligible Finished Goods Inventory;"
"Eligible Parts Inventory;" "Eligible Raw Materials Inventory;" "Indebtedness;"
"Tangible Net Worth" or "Net Worth;" "Total Debt;" and "Total Debt Service."
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(c) Section 1 of the Loan Agreement is further amended by deleting the
definition of "Term Loan Period" and substituting therefor the following:
"Term Loan Period" shall mean the period beginning on April 1, 1997
and continuing through November 1, 2004.
(d) All references to the words, numbers and symbols indicating a
dollar amount of "One Million Five Hundred Thousand Dollars ($1,500,000)" in
Section 2 of the Loan Agreement are hereby deleted and the words, numbers and
symbols indicating a dollar amount of "Two Million Five Hundred Thousand Dollars
($2,500,000)" substituted therefor. The foregoing is intended to reflect an
increase of One Million Dollars ($1,000,000) in the amount available to
Borrowers under the Demand Note and other applicable Loan Documents, subject, in
all cases to the terms and conditions thereof.
(e) Section 2.4 of the Loan Agreement is hereby amended by deleting the
same in its entirety and substituting therefor the following:
2.4 Revolving Credit Note. The Loans made by Bank pursuant to
this Section 2 shall be evidenced by a certain $1,500,000 Demand Note
originally dated May 30, 1996 and amended by a First Amendment to
Demand Note of even or near even date pursuant to which the principal
amount described in the Demand Note is increased by an additional
$1,000,000 to a total principal amount of $2,500,000 (the "Revolving
Credit Note"). The Loans shall be repaid in accordance with
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the terms hereof and the terms and provisions of the Revolving Credit
Note, as so amended.
(f) Section 2.5 of the Loan Agreement is hereby amended by deleting the
last sentence of said section as follows: "Appropriate adjustments shall be made
for partial prepayments."
(g) Section 2 of the Loan Agreement is hereby amended by adding the
following as new Section 2.12:
2.12 Prepayment. At any time that (i) the interest rate on the
Loans is a fixed rate and (ii) the Bank in its sole discretion
determines that current market conditions can accommodate a prepayment
request, the Borrower may prepay the Loans in whole (but not in part)
without premium or penalty, except that the parties acknowledge that
the Borrower is obligated to pay the Availability Fee set forth in
Section 2.9 of this Agreement and, for any loan or advance bearing
interest at the LIBOR Rate which shall be prepaid in full prior to the
end of the applicable LIBOR Interest Period, a Maintenance Fee which
shall be calculated in the manner set forth in Section 2.5 of this
Agreement.
(h) Section 3.1(b) of the Loan Agreement is hereby amended by deleting
the same in its entirety and substituting therefor the following:
3.1 (b) The Term Loan shall be payable until paid in
full in eighty-four (84) consecutive monthly installments of principal,
each monthly payment in an amount sufficient to fully amortize the then
outstanding principal balance of the Term Loan over the then remaining
balance of the Term Loan Period. Principal payments shall be payable on
the first day of each month commencing on April 1, 1997 and continuing
thereafter on the first day of each month until February 1, 2004, with
one final payment of all remaining principal on March 1, 2004, unless
earlier paid or
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required to be paid in accordance with the terms of this Agreement.
Interest due in respect of so much of the principal amount of the Term
Note evidencing Term Loans as shall have been advanced to the Borrower
shall be payable monthly in arrears on the first day of each month,
commencing on the first such date after the date hereof and continuing
thereafter on the first day of each month until maturity (whether by
acceleration or otherwise).
(i) Section 4 of the Loan Agreement is hereby amended by adding the
following as new Section 4.3:
4.3 Conditions Precedent to Revolving Credit Loans. The
obligation of the Bank to make the Revolving Credit Loans in the amount
of $2,500,000 is subject to Bank's receipt of a guarantee from ATI of
the obligations of Borrower under the Demand Note, such guarantee to be
in form satisfactory to Bank and its counsel.
(j) Section 5.2 of the Loan Agreement shall be deleted in its entirety.
(k) Section 6.1 (a) through (c) of the Loan Agreement is hereby amended
by deleting the same in its entirety and substituting therefor the following:
6.1 Financial Statements, Collateral Reports, etc. The
Borrower will furnish or cause to be furnished to the Bank:
(a) Within one hundred twenty (120) days after the
end of each fiscal year of the Borrower audited, consolidated balance
sheets of the Borrower and Guarantor as at the end of such year, and
the related statements of income and surplus for such year, setting
forth figures for the previous fiscal year, all in reasonable detail
certified by independent public accountants selected by the Borrower
and satisfactory to the Bank.
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(b) Within forty-five (45) days of the end of each
fiscal year quarter, (i) a covenant compliance certificate from
Borrower's President or Treasurer certifying as to compliance by
Borrower with all covenants of Borrower hereunder, including
demonstration of compliance with all financial covenants in such detail
and form as the Bank may require; and (ii) a certificate by the
Borrower's President or Treasurer to the effect that such balance
sheets and income statements presented in the previous quarter fairly
present the condition of the Borrower at the end of such period and the
results of its operations during such period in accordance with
accounting procedures that have been applied on a consistent basis with
prior interim financial information prepared by the Borrower.
(c) Statements signed and certified by a principal
officer of the Borrower (or an employee of the Borrower acceptable to
Bank) setting forth in reasonable detail, (i) a listing and aging of
accounts receivable and all accounts payable, as soon as reasonably
possible, and in any event within fifteen (15) days after the end of
each month, and (ii) unaudited, consolidated balance sheets, statements
of profit and loss and a statement of cash flows for the year to date
of Borrower and Guarantor, as soon as reasonably possible, and in any
event within thirty (30) days after the end of each month.
(l) Section 7.11 of the Loan Agreement is hereby amended by deleting
the same in its entirety and substituting therefor the following:
7.11 Issuance or Sale of Additional Shares, etc. The Borrower and
the Guarantor will not directly or indirectly:
(a) Sell, assign, pledge or otherwise encumber or
dispose of any shares of capital stock of any Subsidiary (or options to
acquire any such shares).
(b) Redeem, repurchase, retire, convert or otherwise
acquire for value any of its capital stock (or rights or options to
purchase such shares except pursuant to
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employee stock option plans described in Schedule 5.17 attached hereto)
or, whether now or hereafter outstanding, except for conversion of its
outstanding preferred stock to common stock upon the effectiveness of
an initial public offering as provided in the Articles of Incorporation
of the Borrower.
(m) Section 7.16 of the Loan Agreement is hereby amended by deleting
the same in its entirety and substituting therefor the following:
7.16 Limitation on Restricted Payments. Borrower and Guarantor
shall not declare, make or pay, directly or indirectly, any dividends
or other distributions in respect of its corporate stock or security,
whether in cash or in kind, or make any other Restricted Payments,
except for (i) distributions or dividends paid by Guarantor to
Borrower; (ii) payment of accrued distributions and dividends in
respect of the preferred stock of the Borrower in accordance with its
Articles of Incorporation; and (iii) subsequent to an initial public
offering of Borrower's common stock, payment of dividends on or in
respect of its common stock, in each case only if at the time of such
distribution or dividend, and after giving effect thereto, no Event of
Default or Default exists hereunder or under the other Loan Documents,
or any event which with notice, the passage of time, or both, would
constitute an Event of Default or Default hereunder or thereunder.
Borrower and Guarantor shall not pay any salaries, bonuses, or other
compensation, direct or indirect, to any officer or stockholder of
Borrower or Guarantor in excess of existing compensation levels other
than normal and reasonable periodic increases in base compensation and,
so long as no Default or Event of Default exists, or any event which
with notice, the passage of time, or both, would constitute a Default
or Event of Default hereunder, bonuses paid in accordance with
historical practices.
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(n) Section 8 of the Loan Agreement is hereby amended by deleting the
same in its entirety and substituting therefor the following:
SECTION 8.
So long as any of the Loans shall remain available to the
Borrower, and until the principal of and interest on the Notes and all
fees due hereunder shall have been paid in full, the Borrower and
Guarantor agree that:
8.1 Ratio of Senior Debt to Tangible Net Worth. The Borrower
and the Guarantor will not permit their ratio of Senior Debt to
Tangible Net Worth determined on a consolidated basis to exceed 1.0 to
1.0 throughout the term hereof. Compliance with this covenant shall be
measured quarterly beginning with the quarter ending December 31, 1996.
For purposes of determining compliance with this covenant, Borrower's
and Guarantor's Tangible Net Worth shall include all Subordinated Debt.
8.2 Debt Service Coverage. Borrower and Guarantor will not
permit their Debt Service Coverage to be less than 1.2 to 1.0
determined on a consolidated basis. For purposes of this Agreement,
"Debt Service Coverage" shall be determined by dividing (a) Borrower's
and Guarantor's net income on a consolidated basis after current taxes
but before any deferred income tax expense and after restoring thereto
depreciation expense and interest expense, all determined in accordance
with GAAP ("Net Cash Flow") by (b) their Annual Debt Service. For
purposes of determining compliance with this covenant, "Annual Debt
Service" shall mean the current portion of principal and interest paid
or payable by Borrower and Guarantor for the applicable period in
respect of Indebtedness, all determined in accordance with GAAP. For
determining compliance with this covenant, Net Cash Flow shall be
divided by Annual Debt Service. Compliance with this covenant will be
measured annually beginning on December 31, 1996.
8.3 Minimum Net Profits. Borrower and Guarantor shall realize
consolidated minimum after tax profits (determined
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in accordance with GAAP) of at least $75,000 on a consolidated basis
for each quarter. Compliance with this covenant shall be measured
quarterly throughout the term hereof, beginning on the quarter ending
June 30, 1996.
(o) Section 15 of the Loan Agreement is hereby amended by adding the
following as new Section 15.20:
15.20 Execution as Co-Maker. If after the date hereof, the
Bank determines in its sole discretion that it is necessary to have the
Guarantor be a co-borrower in lieu of a guarantor, then Bank shall
promptly, after it's determination of such necessity, give notice to
the Borrower, and the Borrower shall vote (as sole shareholder of
Guarantor) to authorize the Guarantor to be a co-borrower and to
execute and deliver all documents and instruments necessary or
convenient to effectuate the same. Until such time ATI agrees that all
negative covenants set forth in this Agreement shall be applicable to
it as if it were the "Borrower" identified and a breach of any such
covenant shall constitute a default hereunder.
3. No Default. The Borrower hereby represents and warrants to the Bank
that it is in compliance with all of the conditions to lending specified in the
Loan Agreement as of the date hereof. Without limiting the generality of the
foregoing, the Borrower hereby confirms that except as set forth on Schedule 3
attached hereto the representations and warranties contained in the Loan
Agreement (and the information disclosed in the schedules thereto) are true as
of the date hereof as if made on such date; that Borrower is in compliance in
all respects with all of the terms and provisions of the Loan Agreement and the
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other Loan Documents and Security Documents referred to therein; and that after
giving effect to this Amendment, no event of default specified in the Loan
Agreement, or any event which with the giving of notice, the passage of time, or
both, would constitute an Event of Default, shall have occurred.
4. Miscellaneous.
(a) This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be an original, but all
counterparts shall together constitute one instrument. Except to the extent
specifically amended hereby, the terms and provisions of the Loan Agreement and
all other Loan Documents are hereby ratified and affirmed in all respects and
continue in full force and effect.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Maine and shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
(c) Borrower hereby represents and warrants that this Amendment has
been executed and delivered by duly authorized officers of the Borrower and
acknowledges and agrees that it will execute and deliver such additional
amendments, agreements and
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documents as the Bank may reasonably require to confirm the foregoing.
(d) Reference is made to the Security Agreement dated as of May 30,
1996 (the "Security Agreement") by and between the Bank as secured party and
Borrower as debtor; the Assignment of Lease (Tenant's Interest) dated as of May
30, 1996 by and between Borrower as Assignor and Bank as Assignee (the
"Collateral Assignment"); and the Environmental Compliance and Indemnification
Agreement dated as of May 30, 1996 from the Borrower to the Bank (the "Indemnity
Agreement"). Borrower acknowledges and agrees that the "Loans", the Revolving
Credit Note evidencing the same, as amended, and all other Loan Documents, as
amended, constitute "Secured Obligations" for purposes of such Security
Agreement and are fully secured by the Collateral described therein in
accordance with the terms thereof; and are debts and obligations of Borrower to
Bank for purposes of the Collateral Assignment. The Borrower further agrees that
the terms and conditions of the Loan Agreement, the Revolving Credit Note, the
Security Agreement, the Collateral Assignment and all other Loan Documents and
Security Documents, as the same may be amended, are hereby ratified, affirmed
and reaffirmed in all respects.
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(e) The Borrower agrees to execute and deliver such additional
agreements, documents and other instruments as the Bank may reasonably request
in order to effectuate this Agreement and to confirm the Bank's standing thereof
and rights thereunder.
(f) The Borrower hereby ratifies, affirms, reaffirms and restates as of
the date hereof all of the warranties and covenants of the Borrower set forth in
the Security Agreement.
(g) The Guarantor executes this Agreement to evidence its intent to be
bound by and comply with all applicable provisions hereof.
[The remainder of this page has intentionally been
left blank. The next page is the signature page.]
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IN WITNESS WHEREOF, the undersigned have caused this First Amendment to
Loan Agreement to be executed as of the ____ day of December, 1996 by duly
authorized officers intending the same to take effect as a sealed instrument.
WITNESS FLEET BANK OF MAINE
______________________________ By:___________________________
Its:__________________________
BRUNSWICK TECHNOLOGIES, INC.
______________________________ By:___________________________
Its:__________________________
ADVANCED TEXTILES, INC.
______________________________ By:___________________________
Its:__________________________
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