Exhibit 10-U
September 28, 2001
Parlex Corporation
145 Milk Street
Methuen, MA 01844
Attn: Peter J. Murphy, President
Re: First Amendment of Loan Agreement dated March 1, 2000
Gentlemen:
Reference is made to that certain Loan Agreement dated March 1, 2000
(the "Agreement") by and between Parlex Corporation (the "Borrower") and
Fleet National Bank (the "Bank"). Notwithstanding any provisions of the
Agreement to the contrary, the Agreement is hereby amended, effective
immediately, as follows:
1. All capitalized terms used herein, unless otherwise defined,
shall have the meanings ascribed to them in the Agreement.
2. Section 1.2 of the Agreement is hereby deleted in its entity
and the following new Subsection 1.2 substituted therefor as follows:
"1.2 The Revolving Loan shall be evidenced by a Revolving
Line of Credit Note executed by the Borrower made payable to the Bank
dated September ____, 2001, as the same may be amended, supplemented
or superceded, in the maximum principal amount of $15,000,000.00 (the
"Revolving Note")."
3. Section 1.5 of Agreement is hereby deleted in its entity and
the following new Subsection 1.5 substituted therefor as follows:
"1.5 Prior to the Expiration Date (as defined below), the
Borrower shall pay to the Bank quarterly in arrears, commencing on
January 1, 2002 and continuing on the first day of each April, July,
October and January thereafter, an unused line fee in an amount equal
to one-half of one (2%) percent per annum (calculated on the basis of
the actual number of days elapsed and a 360-day year) of the average
daily unused principal amount of the Revolving Loan for the preceding
calendar quarter. This unused line fee shall revert to one quarter
of one (1/4%) percent if the ratio of the Borrower's Senior Funded
Indebtedness to EBITDA (as defined in Section 4.13 of the Agreement)
is less than or equal to 2.0 to 1 on the last day of the immediately
preceding fiscal quarter of the Borrower (commencing with the fiscal
quarter ending June 30, 2002 and provided that no Event of Default,
including, without limitation failure to adhere to any of the other
financial covenants contained in Section 4 of the Agreement has
occurred and has not been waived or cured as of the applicable
testing date);"
4. Section 1.8 of the Agreement is hereby deleted in its entity
and the following new Subsection 1.8 substituted therefor as follows:
"1.8 No advance under the Revolving Loan will be made after
December 31, 2003 (the "Expiration Date")."
5. Section 3.4 of Agreement is hereby deleted in its entity and
the following new Subsection 3.4 substituted therefor as follows:
"3.4 The Borrower will, at reasonable times, furnish the
Bank with such information and statements as the Bank may reasonably
request, including without limitation, quarterly (within 45 days of
the end of each fiscal quarter) accounts receivable agings and other
internally generated financial reports and copies of all financial
statements and reports that it shall send or make available its
stockholders."
6. Section 3.6 of the Agreement is hereby amended to indicate that
at the time Borrower submits its annual financial statements to Bank,
Borrower shall also submit its financial projections for the next fiscal
year to Bank in form and content satisfactory to Bank.
7. Section 4.7 of the Agreement is hereby deleted in its entity
and the following new Subsection 4.7 substituted therefor as follows:
"4.7 Except as set forth on Exhibit A, the Borrower will not
grant or suffer to exist any mortgage, pledge, title retention
agreement, security interest, lien, charge or encumbrance with
respect to any of its assets, tangible or intangible, whether now
owned or hereafter acquired, or subject any of such assets to the
prior payment of any indebtedness, or transfer in any manner any of
such assets with the intent or purpose, directly or indirectly, of
subjecting such assets to the payment of indebtedness, except for
purchase money security interests in the Borrower's equipment. In
addition, the Borrower will not agree with or confirm to any entity,
including any lender, supplier or affiliate of Borrower, other than
the Bank, that it will not grant or suffer to exist any mortgage,
pledge, title retention agreement, security interest, lien, charge or
encumbrance with respect to its assets, tangible or intangible,
whether now owned or hereafter acquired, or subject any of such
assets to the prior payment of any indebtedness, or transfer in any
manner any of such assets with the intent or purpose, directly or
indirectly, of subjecting such assets to the payment of indebtedness,
except for purchase money security interests in the Borrower's
equipment."
8. Sections 4.9, 4.10, 4.11, 4.12, 4.13 and 4.14 of the Agreement
are hereby deleted in their entity and the following new Sections 4.9 thru
and including 4.17 substituted therefor as follows:
"4.9 (Minimum Current Ratio). The Borrower will not permit
the ratio of its current assets to its current liabilities,
determined on a consolidated basis, to be less than 2.0 to 1 as at
the last day of each fiscal quarter of the Borrower, commencing with
the fiscal quarter ending September 30, 2001.
4.10 (Minimum Tangible Net Worth). The Borrower will not
permit its tangible net worth, determined on a consolidated basis, to
be less than $74,000,000.00 as at the last day of the fiscal quarter
ending September 30, 2001 or less than $74,000,000.00 plus fifty
(50%) percent of the prior quarter's net income for each subsequent
fiscal quarter thereafter (without reduction for any losses sustained
in any fiscal quarter). The term "tangible net worth" shall mean
stockholders' equity determined in accordance with generally accepted
accounting principles, consistently applied, subtracting therefrom:
(i) intangibles (as determined in accordance with such principles so
applied), including, without limitation, goodwill, purchased
technology and capitalized software development costs; and (ii)
accounts and indebtedness owing from any employee or parent,
subsidiary or other affiliate.
4.11 (Maximum Total Liabilities to Tangible Net Worth
Ratio). The Borrower will not permit the ratio of its total
liabilities (including, without limitation, all deferred taxes and
contingent liabilities such as guarantees) to its tangible net worth,
determined on a consolidated basis, to be more than 1.0 to 1 as at
the last day of each fiscal quarter of the Borrower, commencing with
the fiscal quarter ending September 30, 2001.
4.12 (Minimum Interest Coverage Ratio). The Borrower will
not permit the ratio of its: (a) net operating profit (earnings
before interest and taxes) to (b) interest expense to be less than
3.0 to 1 for the fiscal quarter ending March 31, 2002 or less than
3.0 to 1 for twelve-month period ending on the last day of any fiscal
quarter thereafter.
4.13 (Maximum Senior Funded Indebtedness to EBITDA). The
Borrower will not permit the ratio of its senior indebtedness to its
EBITDA, determined on a consolidated basis, to be more than 2.0 to 1
for the twelve-month period ending on the last day of any fiscal
quarter, commencing with the fiscal quarter ending June 30, 2002.
The term "EBITDA" as used herein, shall mean, for the applicable
period, income from operations before the payment of interest and
taxes, plus depreciation and amortization. Prior to the Expiration
Date, outstanding balances under the Revolving Loan shall not be
considered current maturities of long term indebtedness.
4.14 (Maximum Net Loss). The Borrower will not sustain a
net loss in excess of $1,200,000.00 for the fiscal quarter ending
September 30, 2001.
4.15 (Minimum Net Income). The Borrower's net income after
taxes will not be less than $1.00 for any fiscal quarter commencing
with the fiscal quarter ending December 31, 2001.
4.16 (Maximum Capital Expenditures). The Borrower will not
permit Borrower's Capital Expenditures to exceed $8,000,000.00 for
any fiscal year of Borrower, commencing with the fiscal year ending
June 30, 2002. The term "Capital Expenditures" as used herein means,
for any period, the aggregate amount of all expenditures for the
acquisition, construction, replacement or purchase of Capital Assets
and Intangible Assets, including, but not limited to, expenditures
under Capital Leases. The term "Capital Assets" as used herein means
assets that according to generally accepted accounting principles
consistently applied are required or permitted to be depreciated or
amortized on Borrower's balance sheet. The term "Intangible Assets"
as used herein means assets that according to generally accepted
accounting principles consistently applied are properly classified as
intangible assets, including, but not limited to, goodwill,
franchises, licenses, patents, trademarks, trade names and
copyrights. The term "Capital Leases" as used herein means capital
leases, conditional sales contracts and other title retention
agreements related to the purchase or acquisitions of Capital Assets.
In calculating Capital Expenditures, Borrower will be assessed the
value of Borrower's capital expenditures for Borrower's Chinese Joint
Venture (the Joint Venture") times Borrower's percentage interest in
such Joint Venture. Furthermore, capital equipment being transferred
(or sold) from Borrower's locations to China will be excluded in
calculating Borrower's Capital Expenditures for purposes of this
covenant.
4.17 All accounting terms not otherwise specifically defined
herein shall be construed and interpreted in accordance with
generally accepted accounting principles consistently applied."
9. Exhibit A and Exhibit B of Agreement are hereby deleted in
their entity and Exhibit A and Exhibit B attached hereto are substituted
therefor.
Except as specifically amended hereby, the Agreement shall remain in
full force and effect, and the Borrower hereby reaffirms all
representations and warranties contained therein, as of date hereof.
Please acknowledge your acceptance and agreement to the matters
contained herein by signing this letter in the space provided and returning
it to the undersigned, whereupon it shall take effect as an instrument
under seal.
Very truly yours,
FLEET NATIONAL BANK
By: /s/ Thomas F. Brennan
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Thomas F. Brennan, Senior Vice President
ACCEPTED AND AGREED TO:
PARLEX CORPORATION
By: /s/ Peter J. Murphy
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Peter J. Murphy, President