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EXHIBIT 10.2
FIRST AMENDMENT
TO
FOURTH AMENDED AND RESTATED LOAN AGREEMENT
This FIRST AMENDMENT TO FOURTH AMENDED AND RESTATED LOAN
AGREEMENT ("First Amendment"), dated as of June ___, 1996, is made by Ducommun
Incorporated, a Delaware corporation (the "Borrower"), and Bank of America
National Trust and Savings Association (the "Bank"), with reference to the
following facts:
RECITALS
A. This First Amendment amends that certain Fourth Amended and
Restated Loan Agreement dated as of May 16, 1996, by and between the Borrower
and the Bank (the "Loan Agreement"). Capitalized terms used herein and not
otherwise defined shall have the meanings set forth for such terms in the Loan
Agreement.
B. Borrower is acquiring substantially all of the assets of
MechTronics of Arizona, Inc., and transferring such assets to DUC Acquisition
Corp., a newly formed subsidiary of Borrower. Borrower and Bank desire to amend
the Loan Agreement as set forth herein to reflect such asset acquisition.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants and
benefits contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, Borrower and Bank hereby
agree as follows:
1. AMENDMENTS TO LOAN AGREEMENT
1.1 Section 1.1. Section 1.1 of the Loan Agreement is
amended as follows:
a. The definition of the term "Fixed Charge Coverage
Ratio" is amended as follows:
(i) clauses (iv) and (v) o subsection (a)
thereof are revised in their entirety to read as follows:
"(iv) taxes paid in cash in that fiscal period; minus
(v) non-financed capital expenditures made during
that fiscal period (which, for any fiscal period
ending on or before December 31, 1996, shall be all
capital expenditures for that fiscal year in excess
of $3,000,000); plus"
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(ii) clause (x) is revised to insert the
phrase ", the MechTronics Acquisition" immediately following
the phrase "the acquisition of Brice" therein;
(iii) subsection (b) thereof is amended and
restated in its entirety to read as follows:
"(b) to:
(i) interest charges payable in cash for
that fiscal period; plus (ii) scheduled principal payments
with respect to indebtedness for that fiscal period; plus
(iii) scheduled payments for that fiscal period in respect of
capital leases; plus (iv) scheduled non-compete payments for
that fiscal period due under the Brice Agreement; plus (v)
without duplication of the amounts in clause (ii), $750,000
for each fiscal quarter in Fiscal Year 1996, $1,125,000 for
each fiscal quarter in Fiscal Years 1997 and 1998, and
$1,100,000 for each fiscal quarter in Fiscal Year 1999."
and (iv) to delete that portion thereof following
subsection (b).
b. The definition of "IBOR Rate Spread" is amended to
delete the reference to the rate "2.25%" in the second line thereof
immediately after the clause "with respect to any Line B Loan" and
insert in lieu thereof the rate "1.75%".
c. The definition of the term "Line A Commitment" is
amended to delete the amount "$14,000,000" in the first line thereof
and to insert in lieu thereof the amount of "$16,000,000".
d. The definition of the term "Line B Commitment" is
amended to delete the amount "$10,000,000" in the first line thereof
and to insert in lieu thereof the amount of "$8,000,000".
e. The definition of the term "Line B Termination
Date" is amended to delete the date "August 31, 1996" and to insert in
lieu thereof "July 31, 1996".
f. The definition of the term "Reference Rate Spread"
is amended to delete the rate "0.75%" in the second line thereof and
insert in lieu thereof the rate "0.25%".
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g. The definition of the terms "Cash Flow", "Excess
Cash Flow", "Teledyne", "Teledyne Acquisition", "Teledyne Acquisition
Agreement", "Teledyne Acquisition Price" and "Working Capital" are
deleted in their entirety.
h. The following defined terms are added to Section
1.1 of the Loan Agreement in the appropriate alphabetical order:
"'DUC Acquisition Corp.' means DUC Acquisition Corp.,
an Arizona corporation, to be known as MechTronics of Arizona
Corp.
'MechTronics' means MechTronics of Arizona, Inc.
'MechTronics Acquisition' means the purchase by
Borrower of substantially all of the assets and assumption of
certain liabilities of MechTronics.
'MechTronics Purchase Agreement' means the Asset
Purchase and Sale Agreement dated as of June 21, 1996 by and
among Borrower, MechTronics, Michael J. Demuro and The Michael
Demuro and Geraldine Demuro Family Trust u/a/d July 18, 1979,
as amended.
'MechTronics Acquisition Price' means the total value
of the consideration paid by Borrower and its Subsidiaries in
connection with the MechTronics Acquisition."
1.2 Section 2.7. Section 2.7 of the Loan Agreement is
amended to restate subsections (a) and (b) thereof in their entirety to read as
follows:
"(a) The Line A Commitment shall automatically and
permanently reduce on each December 31 in the amount set forth below
opposite the year in which such date occurs:
Annual Reduction To
Year Line A Commitment
---- -------------------
1996 $ 3,000,000
1997 $ 5,000,000
(b) [DELETED.]"
1.3 Section 3.2. Section 3.2 of the Loan
Agreement is amended and restated in its entirety to read as follows:
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"3.2 Facility Fee.
(a) Borrower shall pay to Bank a nonrefundable Line B facility
fee in an aggregate amount equal to $25,000 with respect to the Line B
Commitment. Bank acknowledges that it has received such fee. On or
before June 28, 1996, Borrower will pay to Bank an additional
non-refundable Line B facility fee in the amount of $25,000 with
respect to the change in the Line B Commitment attributable to the
MechTronics Acquisition.
(b) On or before June 28, 1996, Borrower shall pay to Bank a
nonrefundable Line A facility fee in an amount equal to 0.25% of the
Line A Commitment (which amount is equal to $40,555), less any portion
of such fee previously paid to Bank (which amount is equal to $35,485).
Thereafter, on each July 1, commencing July 1, 1997, Borrower shall pay
to Bank an annual Line A facility fee in an amount equal to 0.25% of
the Line A Commitment on such date. Such facility fee shall be fully
earned as of the date when due and shall be non-refundable under any
circumstances."
1.4 Section 4.5. Section 4.5 of the Loan Agreement is
amended by deleting the reference to the date "March 31, 1996" therein and
inserting in lieu thereof the date "May 27, 1996".
1.5 Section 4.23. Section 4.23 of the Loan Agreement
is amended by deleting the reference therein to "Section 7.1(g)" and inserting
in lieu thereof "Section 7.1(j)".
1.6 Section 4.24. Section 4.24 of the Loan Agreement
is deleted in its entirety.
1.7 Section 5.9. Subsection (b) of Section 5.9 of the
Loan Agreement is amended and restated in its entirety to read as follows:
"(b) Use the proceeds of Line B Loans for the following
purpose only: to consummate the MechTronics Acquisition."
1.8 Section 5.12. Section 5.12 of the Loan
Agreement is amended and restated in its entirety to read as follows:
"5.12 Bank Audit. Permit Bank, upon Bank's reasonable request,
either directly or through Persons retained by Bank, to conduct a
thorough annual bank audit of the accounts receivable and inventories
of Borrower and
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its Subsidiaries and to have access to all of the books, records and
employees of Borrower and its Subsidiaries reasonably incidental to
such bank audit and pay the reasonable expenses of Bank or such Persons
incurred in connection with such bank audit."
1.9 Section 5.13. Section 5.13 of the Loan
Agreement is amended and restated in its entirety to read as follows:
"5.13 Notice of Location Change/Defaults Under
Material Contracts.
(a) Promptly notify Bank in writing of the occurrence
of any change in the location of, or the addition of, any
branch office, any field office, any warehouse or any other
place of business of Borrower or any Subsidiary if such change
requires any action by Bank in order to maintain the validity
or to perfect any Lien in favor of Bank or results in or is
accompanied by the acquisition or ownership of any property
other than Property not subject to a Lien in favor of the Bank
pursuant to the Collateral Documents; provided, however, that
no such notification shall be required if the change, together
with any other change since the Restated Closing Date, would
not in the aggregate involve Property with a book value or
fair market value, whichever is higher, in excess of $200,000;
and
(b) Promptly notify Bank in writing of the occurrence
of any material default or event of default under any customer
contract of Borrower or any of its Subsidiaries with a value
of $5,000,000 or more."
1.10 Section 5.15. Section 5.15 of the Loan
Agreement is amended and restated in its entirety to read as follows:
"5.15 MechTronics Phase I. On or before August 1,
1996, Borrower shall deliver to Bank copies of the most current
existing written Phase I environmental audit, or any such audit
required by Bank, on the property commonly known as 1601 East Broadway
Road, Phoenix, Arizona, the contents of which shall be satisfactory to
the Bank."
1.11 Section 6.6. Section 6.6 of the Loan
Agreement is amended as follows:
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a. Subsection 6.6(n) is amended by deleting the word "and" at
the end thereof;
b. Subsection 6.6(o) is amended by adding the word "and" at
the end thereof;
c. A new subsection (p) is added thereafter to read as
follows:
"(p) Indebtedness evidenced by that certain
promissory note in the principal amount of $750,000 made by
Borrower in favor of MechTronics, Michael J. Demuro and The
Michael Demuro and Geraldine Demuro Family Trust u/a/d July
18, 1979, as amended."
1.12 Section 6.9. Section 6.9 of the Loan
Agreement is amended and restated in its entirety to read as follows:
"6.9 Payment or Prepayment of Subordinated
Obligations. Pay or prepay any principal (including sinking fund
payments), interest or any other amount with respect to any
Subordinated Obligation, or purchase or redeem any Subordinated
Obligation, except Borrower may (a) pay interest in accordance with the
terms of any Subordinated Obligation so long as there has not occurred
and is then continuing any Default or Event of Default, (b) purchase or
redeem its Subordinated Obligations so long as there has not occurred
and is then continuing any Default or Event of Default, provided, that,
taking into account the purchase or redemption to be made, (i) the
total of such purchase or redemption payments (exclusive of any Premium
Payments) after January 1, 1996 does not exceed $3,000,000; and (ii)
the Premium Payments made in connection with purchases, redemptions or
conversions of Borrower's Subordinated Obligations do not exceed
$2,000,000 in the aggregate for any rolling twelve month period or $.15
for each dollar of the Subordinated Obligations purchased, redeemed or
converted, and provided further that, prior to the payment of any
Premium Payments, Borrower has delivered to Bank a certificate of a
Responsible Official of Borrower certifying (A) as to the amount of the
Premium Payments being paid with respect to each dollar of the
Subordinated Obligations being purchased or redeemed, (B) as to the
aggregate amount of the Premium Payments being paid, and (C) that,
taking into account the Premium Payments being made, no Default or
Event of Default exists or will have occurred."
1.13 Section 6.11. Section 6.11 of the Loan
Agreement is amended and restated in its entirety to read as follows:
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"6.11 Leverage Ratio. Permit the Leverage Ratio as of
the last day of any fiscal quarter of Borrower and its Subsidiaries
ending during any period specified below to exceed the designated
ratios for the periods specified below:
Period Maximum Ratio Numerator(1)(2)
------ ------------- Denominator
-----------
Restated Closing Date 1.20 : 1.00 44 / 34.5
through September 29, 1996
September 30, 1996 1.15 : 1.00 43 / 35.5
through December 30, 1996
December 31, 1996 1.00 : 1.00 38 / 38.5
through December 30, 1997
December 31, 1997 and at all 1.00 : 1.00 36 / 45.5
times following thereafter
provided, however, to the extent that any Line B Loan is made hereunder
at any time on or after the Restated Closing Date, the "Maximum Ratio"
set forth above shall be (i) 1.80 to 1.00 for the fiscal quarter ending
June 30, 1996 and (ii) subject to a one-time adjustment, effective as
of the fiscal quarter ending September 30, 1996, as follows: the
numerator of the Maximum Ratio shall be increased by the sum of the
MechTronics Acquisition Price plus the consideration (not to exceed
$3,000,000) paid by Borrower to purchase or redeem its Subordinated
Obligations (up to a maximum aggregate increase of $11,000,000 for the
fiscal quarters as stated above), and the denominator shall be
decreased by the sum of that portion of the MechTronics Acquisition
Price allocated to goodwill plus the total consideration paid by
Borrower to purchase or redeem its Subordinated Obligations (up to a
maximum decrease of $5,500,000 for the fiscal quarters as stated
above); provided, further, that in no event shall the Maximum Ratio be
less than 1.00 to 1.00, nor shall the Maximum Ratio ever exceed the
following amounts for the following periods:
Period Maximum Ratio
------ -------------
- --------
(1) In each instance, in millions and rounded up to the
nearest one tenth of one percent.
(2) Numbers used for calculating applicable ratio.
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Fiscal quarter ending
June 30, 1996 1.90:1.00"
Fiscal quarter ending
September 30, 1996 1.90:1.00
Fiscal quarter ending
December 31, 1996 1.60:1.00
Fiscal quarter ending
December 31, 1997 and
thereafter 1.20:1.00
For example, assuming that Bank makes a Line B Loan hereunder, and the
MechTronics Purchase Price is $8,000,000, with goodwill allocation of
$2,500,000, and Borrower pays $3,000,000 to redeem its Subordinated
Obligations, the Maximum Ratio for purposes of this Section 6.11 at
September 30, 1996 will be set as follows:
44 + $8 + $3 = 55 = 1.89:1.00
----------------- --
34.5 - $2.5 - $3 29
1.14 Section 6.12. Section 6.12 of the Loan
Agreement is amended by deleting the Minimum Ratio of "1.15:1.00" for the period
from June 30, 1996 through March 30, 1997 and inserting in lieu thereof the
Minimum Ratio of "1.20:1.00".
1.15 Section 6.14. Section 6.14 of the Loan
Agreement is amended and restated in its entirety to read as follows:
"6.14 Capital Expenditures. Spend or incur obligations
(including the total amount of any capital lease) to acquire fixed or
capital assets in the aggregate for more than $7,000,000 in the Fiscal
Year ending December 31, 1996, and for more than $6,000,000 in any
Fiscal Year ending thereafter."
1.16 Section 7.1. Subsections (l) and (m) of
Section 7.1 of the Loan Agreement are amended to delete subsection (m) in its
entirety and to amend and restate subsection (l) in its entirety to read as
follows:
"(l) Within 60 days after the consummation of the
MechTronics Acquisition, a consolidated and consolidating
post-closing balance sheet of Borrower and its Subsidiaries,
taking into effect the acquisition of the assets and the
assumption of the liabilities of MechTronics being acquired or
assumed
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pursuant to the MechTronics Acquisition Agreement. The
preceding financial statements shall be certified by the Chief
Financial Officer of Borrower as fairly presenting the
financial condition and results of changes in financial
position of Borrower and its Subsidiaries in accordance with
generally accepted accounting principles, consistently
applied, as at such date, subject only to normal year-end
audit adjustments."
1.17 Section 10.23. Section 10.23 of the Loan
Agreement is amended and restated in its entirety to read as follows:
"10.23 MechTronics Indemnity. To the extent permitted
by the MechTronics Acquisition Agreement, Borrower and DUC
Acquisition Corp., each hereby assign to Bank the indemnity
provisions and representations and warranties (and all rights
and benefits attendant thereto) granted or made to either of
them under the MechTronics Acquisition Agreement; provided,
however, that Borrower and DUC Acquisition Corp. shall be
entitled to enforce all of such rights and to collect any
proceeds in connection therewith so long as no Default has
occurred and is continuing under this Agreement. Borrower
agrees to use its best efforts, and to cause DUC Acquisition
Corp. to use its best efforts, to permit the foregoing
assignment to Bank."
1.18 Section 10.24. A new Section 10.24 is added to the Loan
Agreement which shall read as follows:
"10.24 Bulk Sales. The Borrower and DUC Acquisition
Corp. each hereby assign to the Bank the representations and
warranties and indemnities (and all rights and benefits
attendant thereto) granted to them under Article IV of the
MechTronics Purchase Agreement, provided, however, that the
Borrower and DUC Acquisition Corp. shall be entitled to
enforce all of their rights with respect to Article IV of the
MechTronics Purchase Agreement and to collect any proceeds in
connection therewith so long as no Default has occurred and is
continuing under the Loan Agreement. The Borrower further
agrees that it shall cause the Bank (and its successors and
assigns) to be indemnified for any loss or damage caused by
the failure of the parties to the MechTronics Purchase
Agreement to comply with the Bulk Transfer provisions of the
Arizona Commercial Code to the extent that the Bank (or its
successors or assigns) suffers such loss
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or damage as a result of its ownership of the assets
of the Borrower or any of its Subsidiaries."
1.19 Schedule 4.4. Schedule 4.4 to the Loan
Agreement is amended and restated in its entirety to read as set forth in the
new Schedule 4.4 attached hereto and incorporated by this reference.
1.20 Schedule 4.7. Schedule 4.7 to the Loan
Agreement is amended and restated in its entirety to read as set forth in the
new Schedule 4.7 attached hereto and incorporated by this reference.
2. REPRESENTATIONS AND WARRANTIES.
Borrower makes the following representations and warranties to
Bank as of the date hereof, which representations and warranties shall survive
the execution, termination or expiration of this First Amendment and shall
continue in full force and effect until the full and final satisfaction and
discharge of all Obligations of Borrower to Bank under the Loan Agreement and
the other Loan Documents:
2.1 Reaffirmation of Prior Representations and
Warranties. Borrower hereby reaffirms and restates as of the date hereof all of
the representations and warranties made by Borrower in the Loan Agreement and
the other Loan Documents, except to the extent such representations and
warranties specifically relate to an earlier date.
2.2 No Default. No Default or Event of
Default, breach or failure of condition has occurred and is continuing under any
of the Loan Documents.
2.3 Due Execution. The execution, delivery and
performance of this First Amendment and any instruments, documents or agreements
executed in connection herewith (collectively, the "First Amendment Documents")
are within the powers of Borrower and its Subsidiaries that are a party thereto,
have been duly authorized by all necessary action, and do not contravene any law
or the certificate of incorporation or bylaws of Borrower or any such
Subsidiary, result in a breach of, or constitute a default under, any
contractual restriction, indenture, trust agreement or other instrument or
agreement binding upon Borrower or any such Subsidiary.
2.4 No Further Consent. The execution,
delivery and performance of this First Amendment and each of the other First
Amendment Documents do not require any consent or approval not previously
obtained of any stockholder, beneficiary or creditor of Borrower or any of its
Subsidiaries.
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2.5 Binding Agreement. This First Amendment
and each of the other First Amendment Documents constitute the legal, valid and
binding obligation of Borrower or its Subsidiaries as are party thereto and are
enforceable against Borrower and any such Subsidiary in accordance with their
terms, except as such enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws or equitable principles relating to
or limiting creditors' rights generally.
2.6 MechTronics Acquisition. The MechTronics
Acquisition has been, or will be, consummated in accordance with all applicable
state and federal laws.
2.7 DUC Acquisition Corp. Without limiting the
foregoing, the representations and warranties set forth in Section 4.4 of the
Loan Agreement are true and correct as of the date hereof as each applies to DUC
Acquisition Corp. and the outstanding shares of capital stock of DUC Acquisition
Corp.
3. CONDITIONS PRECEDENT.
The effectiveness of this First Amendment is subject to the
satisfaction of each of the following conditions precedent:
3.1 Documentation. Borrower shall have
delivered or caused to be delivered to Bank, at Borrower's sole cost and
expense, the following, each of which shall be in form and substance
satisfactory to Bank:
a. two counterpart executed originals of this First Amendment;
b. an executed original Instrument of Joinder from DUC
Acquisition Corp. with respect to the Guaranty;
c. an executed original Second Amended and Restated Security
Agreement (Subsidiaries);
d. an executed original Second Amendment and Reaffirmation of
Security Agreement (Borrower) executed by Borrower, together with the
stock certificate(s) and a stock power signed in blank, covering all
the issued and outstanding shares of DUC Acquisition Corp.;
e. an Amended and Restated Borrower and Subsidiary Patent and
Trademark Security Agreement;
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f. two executed original UCC-1 Financing Statements for debtor
DUC Acquisition Corp. of Arizona, Inc. (for filing with the Arizona
Secretary of State and the County Recorder of Maricopa County,
Arizona);
g. two executed original UCC-1 Financing Statements for debtor
MechTronics of Arizona, Inc. (for filing with the Arizona Secretary of
State and the County Recorder of Maricopa County, Arizona);
h. an original executed Consent and Reaffirmation of
Guarantors;
i. an original Landlord's Consent and Waiver executed by the
Landlord of the Property;
j. evidence that the execution, delivery and performance by
the Borrower (and any guarantor) of this First Amendment and any
instrument or agreement required under this First Amendment have been
duly authorized;
k. a completed form of the Bank's Environmental Questionnaire
& Disclosure Statement (the "EQDS Form") for MechTronics; and
l. an executed original UCC-2 Financing Statement termination
of that certain UCC-1 Financing Statement #820806 filed by Bank One on
February 23, 1995 with the Arizona Secretary of State.
3.2 MechTronics Acquisition Agreement. Bank and Bank's counsel
shall have reviewed the MechTronics Purchase Agreement, and such document shall
have been deemed to be acceptable to the Bank and its counsel.
3.3 EQDS. Bank's Environmental Services Group ("ESG") shall
have received and reviewed the Bank's Environmental Questionnaire & Disclosure
Form for the MechTronics facility located at 1601 East Broadway Road, Phoenix,
Arizona (the "Arizona Property"), and deemed the information therein to be
acceptable to the Bank.
3.4 Phase I. ESG shall have received from a consultant
acceptable to Bank a verbal report of the results of the most current existing
Phase I Environmental Report on the Arizona Property or any such report required
by the Bank and deemed the information therein to be acceptable to the Bank.
3.5 Leases. Bank's counsel shall have reviewed the lease
between MechTronics and DUC Acquisition Corp. relating to the Arizona Property
and deemed such lease to be
acceptable to the Bank.
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3.6 Material Contracts. Bank shall have reviewed a
list of all of MechTronic's material contracts and deemed such contracts to be
acceptable to the Bank.
3.7 No Defaults. All of Borrower's representations
and warranties contained herein shall be true and correct on and as of the date
of execution hereof and no Default or Event of Default shall have occurred and
be continuing under any of the Loan Documents, as modified hereby.
3.8 Good Standing Certificate. Bank shall have
received a Certificate of Good Standing issued by the Arizona Secretary of State
confirming the good standing of MechTronics and DUC Acquisition Corp.
3.9 No Liens. Bank shall have received evidence that
the assets of MechTronics are free and clear of all Liens and Rights of Others.
3.10 No Adverse Change. There shall have occurred no
material adverse change in the condition of the Borrower or its Subsidiaries
(financial or otherwise).
3.11 Fees. Borrower shall have paid the facility fee
required pursuant to Section 4.2 of this First Amendment.
4. MISCELLANEOUS.
4.1 Costs and Expenses. Borrower agrees to pay
all costs, expenses, attorneys' fees, search fees, filing and recordation fees
and all other charges and expenses incurred by the Bank in connection with (1)
the negotiation, preparation, delivery and execution of this First Amendment and
the First Amendment Documents, including without limitation, the Bank's (i)
attorneys' fees and costs (including allocated costs of in-house counsel) and
(ii) out-of-pocket audit and appraisal costs (including allocated costs of
in-house auditors), and (2) carrying out the terms of this First Amendment and
the First Amendment Documents, whether incurred before or after the effective
date hereof.
4.2 Facility Fee. Borrower shall pay to Bank a
non-refundable Line B facility fee in the amount of $25,000.00, together with an
additional $5,070 Line A facility fee, all of which shall be earned in full upon
the execution of this First Amendment.
4.3 Effect of Amendment. Except as provided in
this First Amendment, all of the terms and conditions of the Loan Agreement
shall remain in full force and effect.
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4.4 Counterparts. This First Amendment may be
executed in counterparts and any party may execute any counterpart, each of
which shall be deemed to be an original and all of which, taken together, shall
be deemed to be one and the same document. The execution hereby by any party
shall not become effective until this First Amendment is executed by all parties
hereto.
4.5 Prior Agreements. This First Amendment contains
the entire agreement between Bank and Borrower with respect to the subject
matters hereof, and all prior negotiations, understandings and agreements with
respect thereto are superseded by this First Amendment.
This First Amendment is executed as of the date stated at the
beginning of this First Amendment.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ J. Thomas Fagan, Vice President
------------------------------------
J. Thomas Fagan, Vice President
-----------------------------------
[Printed Name and Title]
DUCOMMUN INCORPORATED
By /s/ Joseph C. Berenato, President
-----------------------------------
Joseph C. Berenato, President
-----------------------------------
[Printed Name and Title]
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