Exhibit 10.1
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT ("Amendment") is dated as of
August 8, 2005 by and among All American Semiconductor, Inc., a Delaware
corporation (the "Company"), Harris N.A., successor by merger to Harris Trust
and Savings Bank, as Administrative Agent (the "Agent"), U.S. Bank National
Association, as Co-Agent (the "Co-Agent") and the lenders from time to time
party thereto (the "Lenders").
WHEREAS, the Company, the Agent, the Co-Agent and the Lenders are
parties to a certain Credit Agreement dated as of May 14, 2003, as amended by
that certain First Amendment to Credit Agreement dated June 11, 2004 (as such
agreement may have been or may hereafter be amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"); and
WHEREAS, the Company has requested that the Agent and the Lenders agree
to amend certain provisions of the Credit Agreement, as more particularly set
forth herein;
NOW THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Credit Agreement and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meanings ascribed to such terms in the
Credit Agreement.
2. Amendments. Subject to prior satisfaction of the conditions
set forth in Section 4 below and in reliance on the representations and
warranties set forth in Section 5 below, the Credit Agreement is hereby amended
as follows:
(a) Section 1.12(b) (Commitment Terminations) of the
Credit Agreement is hereby amended and restated in its entirety as follows:
"(b) On the effective date of any termination of all of
the Revolving Credit Commitments and prepayment of all the Obligations,
if such termination and prepayment occurs on or before August 31, 2007,
the Borrower shall pay a prepayment premium to the Administrative Agent
for the ratable benefit of the Lenders in proportion to their
respective Revolver Percentages of the Revolving Credit Commitments, as
liquidated damages for the loss of bargain and not as a penalty, in an
amount equal to the percentage set forth below of the amount of the
relevant Revolving Credit Commitments:
PREPAYMENT PREMIUM
SHALL BE THE FOLLOWING
PERCENTAGE OF THE
IF PREPAYMENT OCCURS DURING THE PERIOD REVOLVING CREDIT
COMMITMENTS
FROM AND INCLUDING TO AND INCLUDING
August 8, 2005 August 31, 2007 1.0%"
(b) The last sentence of Section 2.1(d) (Audit Fees) of
the Credit Agreement is hereby amended and restated in its entirety as follows:
"Notwithstanding the foregoing, in the absence of any Default
or Event of Default, the Borrower shall not be required to pay the
Administrative Agent or any Lender for the charges, costs or expenses
of more than 2 such audits per calendar year."
(c) The grid contained in the definition of "Applicable
Margin" set forth in Section 5.1 (Definitions) of the Credit Agreement is hereby
amended and restated in its entirety as follows:
APPLICABLE MARGIN APPLICABLE MARGIN
FOR BASE RATE LOANS FOR EURODOLLAR
UNDER REVOLVING LOANS UNDER APPLICABLE
CREDIT AND REVOLVING CREDIT MARGIN FOR
DEBT SERVICE COVERAGE REIMBURSEMENT AND LETTER OF CREDIT COMMITMENT FEES
"LEVEL RATIO FOR SUCH PRICING DATE OBLIGATIONS SHALL BE: FEES SHALL BE: SHALL BE:
I Greater than 2.75 to 1.0 -0.25% 1.75% 0.15%
II Less than or equal to 2.75 to 0.00% 2.00% 0.15%
1.0, but greater than 2.00 to 1.0
III Less than or equal to 2.00 to 0.25% 2.25% 0.15%
1.0, but greater than 1.25 to 1.0
IV Less than or equal to 1.25 to 0.50% 2.50% 0.15%
1.0, but greater than 1.05 to 1.0
V Less than or equal to 1.05 to 0.75% 2.75% 0.15%"
1.0
(d) Clause (a) of the definition of "Borrowing Base" set
forth in Section 5.1 (Definitions) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"(a) the sum of (i) up to 85% of the difference between the
then outstanding unpaid amount of Eligible Receivables (other than
foreign insured Eligible Receivables described in clause (g)(ii) of the
definition of Eligible Receivables) less any and all returns, rebates,
discounts, claims, credits, allowances and/or finance charges of any
nature at any time issued, owing,
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available to or claimed by Account Debtors, granted, outstanding or
payable in connection with such Eligible Receivables at such time and
(ii) up to 90% of the difference between the then outstanding unpaid
amount of foreign insured Eligible Receivables described in clause
(g)(ii) of the definition of Eligible Receivables less any and all
returns, rebates, discounts, claims, credits, allowances and/or finance
charges of any nature at any time issued, owing, available to or
claimed by Account Debtors, granted, outstanding or payable in
connection with such Eligible Receivables at such time; plus"
(e) Clause (b) of the definition of "Borrowing Base" set
forth in Section 5.1 (Definitions) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"(b) the least of (i) $53,000,000, (ii) the sum of (w) up to
50% of the value (computed at the lower of market or cost using the
first-in first-out method of Inventory valuation applied by the
Borrower in accordance with GAAP but excluding from any such value
inventoriable variances (defined herein to mean that portion of
capitalized overhead costs which represent the portion of such costs in
excess of standard overhead costs which are needed to state the
Borrower's Inventory at actual FIFO cost and intercompany profits
associated with intercompany sales)) of Eligible Inventory other than
in-transit Eligible Inventory plus (x) up to 40% of the Inventory Value
(as computed above) of Eligible Slow-Moving Inventory plus (y) the
lesser of (A) up to 20% of the value (as computed above) of Eligible
Non-Franchise Inventory other than in-transit Eligible Non-Franchise
Inventory and (B) $600,000 plus (z) the lesser of (A) up to 50% of the
value of in-transit Eligible Inventory and in-transit Eligible
Non-Franchise Inventory and (B) $1,500,000; and (iii) 100% of the
amount derived pursuant to clause (a) above;"
(f) Clause (j) of the definition of "Eligible Inventory"
set forth in Section 5.1 (Definitions) of the Credit Agreement is hereby amended
and restated in its entirety as follows:
"(j) [Intentionally omitted];"
(g) Clause (d) of the definition of "Eligible
Receivables" set forth in Section 5.1 (Definitions) of the Credit Agreement is
hereby amended and restated in its entirety as follows:
"(d) it has not remained unpaid in whole or in part more than
90 days from and after its invoice date; or, in the case of an
aggregate amount of up to $5,000,000 of Receivables subject to 30 to 60
day extended payment terms, it has not remained unpaid in whole or in
part more than 120 days after its invoice date;"
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(h) The definition of "Revolving Credit Commitment" set
forth in Section 5.1 (Definitions) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
" 'Revolving Credit Commitment' means, as to any Lender, the
obligation of such Lender to make Revolving Loans and to participate in
Letters of Credit issued for the account of the Borrower hereunder in
an aggregate principal or face amount at any one time outstanding not
to exceed the amount set forth opposite such Lender's name on Schedule
1 attached hereto and made a part hereof, as the same may be reduced or
modified at any time or from time to time pursuant to the terms hereof.
The Borrower and the Lenders acknowledge and agree that the Revolving
Credit Commitments of the Lenders aggregate $100,000,000 on the date
hereof."
(i) The definition of "Slow-Moving Inventory" set forth
in Section 5.1 (Definitions) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
" 'Slow-Moving Inventory' means Inventory that is aged more
than 12 months, from the date of last receipt."
(j) The definition of "Termination Date" set forth in
Section 5.1 (Definitions) of the Credit Agreement is hereby amended and restated
in its entirety as follows:
" 'Termination Date' means May 31, 2009, or such earlier date
on which the Revolving Credit Commitments are terminated in whole
pursuant to Sections 1.12, 9.2 or 9.3 hereof."
(k) The following definition of "Eligible Non-Franchise
Inventory" is hereby inserted into Section 5.1 (Definitions) of the Credit
Agreement in appropriate alphabetical order:
" 'Eligible Non-Franchise Inventory' means any Inventory other
than (i) Franchise Inventory and (ii) up to $2,500,000 of Inventory of
the AVED Memory division of AVED Industries, Inc. consisting of memory
components or memory modules, which Inventory satisfies all eligibility
requirements contained in the definition of Eligible Inventory other
than the requirement set forth in clause (a) of such definition."
(l) The following definition of "Eligible Slow Moving
Inventory" is hereby inserted into Section 5.1 (Definitions) of the Credit
Agreement in appropriate alphabetical order:
" 'Eligible Slow-Moving Inventory' means Inventory that
constitutes Eligible Inventory, except that it does not comply with
clause (d) of the definition thereof."
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(m) The following definition of "Inventory Value" is
hereby inserted into Section 5.1 (Definitions) of the Credit Agreement in
appropriate alphabetical order:
" 'Inventory Value' means that the sum of (a) 100% of the
value of Inventory aged more than 12 months from the date of last
receipt, but less than or equal to 18 months from the date of last
receipt, (b) 50% of the value of Inventory aged more than 18 months
from the date of last receipt, but less than or equal to 36 months from
the date of last receipt, and (c) 0% of the value of Inventory aged
more than 36 months."
(n) Clause (g) of Section 8.9 (Investments, Acquisitions,
Loans and Advances) of the Credit Agreement is hereby amended and restated in
its entirety as follows:
"(g) intercompany advances and capital contributions made from
time to time by the Borrower to AASI UK, at a time when no Event of
Default is in existence (unless otherwise agreed by the Required
Lenders), in an aggregate amount not to exceed $5,000,000 at any time
outstanding;"
(o) Clause (n) of Section 8.9 (Investments, Acquisitions,
Loans and Advances) of the Credit Agreement is hereby amended and restated in
its entirety as follows:
"(n) intercompany advances, capital contributions and other
investments made from time to time by the Borrower to AASI Korea, at a
time when no Event of Default is in existence (unless otherwise agreed
by the Required Lenders), in an aggregate amount not to exceed
$4,000,000 at any time outstanding; and;"
(p) Clause (c) of Section 8.22 (Financial Covenants) of
the Credit Agreement is hereby amended and restated in its entirety as follows:
"(c) Debt Service Coverage Ratio. The Debt Service Coverage
Ratio shall not, on the last day of any calendar quarter in any period
set forth below, for the 12 month period ending on such date, be less
than the ratio set forth below opposite such period:
Period Ratio
------ -----
September 30, 2005 and thereafter 1.10 to 1.0
(q) Schedule 1 (Revolving Credit Commitments) to the
Credit Agreement is hereby amended and restated in its entirety as set forth on
Exhibit A attached hereto.
3. Addition of New Lender. By its execution hereof, FB Commercial
Finance, Inc. ("FB") has agreed to become a Lender under the Credit Agreement
and to provide a Revolving Credit Commitment equal to $15,000,000.
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4. Conditions. The effectiveness of this Amendment is subject to
the following conditions precedent:
(a) The Company shall have executed and delivered this Amendment,
together with such other documents, agreements and instruments as Agent may
require, each in form and substance satisfactory to Agent, including, without
limitation, each Reaffirmation of Guaranty attached hereto, fully-executed
Second Amended and Restated Revolving Notes ("A/R Notes") or in the case of FB,
a Revolving Note (the "FB Revolving Note"), issued to each Lender in an
aggregate principal amount of $100,000,000, fully-executed certified board
resolutions of the Company authorizing the execution of this Amendment and the
A/R Notes and the FB Revolving Note, a good standing certificate of the Company
from the State of Delaware, the Company's Certificate of Incorporation certified
by the State of Delaware, and a legal opinion issued by the Company's counsel;
(b) no Default or Event of Default shall have occurred and be
continuing; and
(c) the Company shall have paid to the Agent, for the pro rata
benefit of the Lenders, an amendment fee equal to $85,000.
5. Representations and Warranties. To induce the Agent and the
Lenders to enter into this Amendment, the Company represents and warrants to the
Agent and the Lenders that (a) the execution, delivery and performance of this
Amendment has been duly authorized by all requisite corporate action on the part
of the Company and that this Amendment has been duly executed and delivered by
the Company, (b) each of the representations and warranties set forth in Section
6 of the Credit Agreement (other than those which, by their terms, specifically
are made as of a certain date prior to the date hereof) are true and correct in
all material respects as of the date hereof and after giving effect to the terms
hereof, and (c) no Default or Event of Default shall have occurred and be
continuing before or immediately after giving effect to this Amendment.
6. References. Any reference to the Credit Agreement contained in
any document, instrument or agreement executed in connection with the Credit
Agreement shall be deemed to be a reference to the Credit Agreement as modified
by this Amendment.
7. Severability; Counterparts. Any provision of this Amendment
held by a court of competent jurisdiction to be invalid or unenforceable shall
not impair or invalidate the remainder of this Amendment and the effect thereof
shall be confined to the provision so held to be invalid or unenforceable. This
Amendment may be executed in one or more counterparts, each of which shall
constitute an original, but all of which taken together shall be one and the
same instrument.
8. Ratification. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions of
the Credit Agreement and shall not be deemed to be a consent to the modification
or waiver of any other term or condition of the
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Credit Agreement. Except as expressly modified and superseded by this Amendment,
the terms and provisions of the Credit Agreement are ratified and confirmed and
shall continue in full force and effect.
9. Return of Revolving Notes. Each Lender (other than FB) agrees
that promptly after the effectiveness of this Amendment and delivery to such
Lender of the applicable A/R Note, it shall deliver to Agent, and Agent shall
promptly deliver to the Company for cancellation, such Lender's existing
Revolving Note.
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed under seal and delivered by their respective duly
authorized officers on the date first written above.
ALL AMERICAN SEMICONDUCTOR, INC.,
a Delaware corporation
By: /s/ BRUCE M. GOLDBERG
----------------------------------------
Name: Bruce M. Goldberg
-----------------------------------
Title: President and CEO
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HARRIS N.A., SUCCESSOR BY MERGER TO HARRIS
TRUST AND SAVINGS BANK, as Administrative
Agent and as a Lender
By: /s/ JEAN R. ELIE
----------------------------------------
Name: Jean R. Elie
-----------------------------------
Title: Vice President
----------------------------------
U.S. BANK NATIONAL ASSOCIATION, as Co-Agent
and as a Lender
By: /s/ THOMAS VISCONTI
----------------------------------------
Name: Thomas Visconti
-----------------------------------
Title: Vice President
----------------------------------
GMAC COMMERCIAL FINANCE LLC, as a Lender
By: /s/ PAMELA D. PETRICK
----------------------------------------
Name: Pamela D. Petrick
-----------------------------------
Title: First Vice President
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PNC BANK, NATIONAL ASSOCIATION, as a Lender
By: /s/ BRUCE METTEL
----------------------------------------
Name: Bruce Mettel
-----------------------------------
Title: Vice President
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FB COMMERCIAL FINANCE, INC., as a Lender
By: /s/ WALTER CASTILLO
----------------------------------------
Name: Walter Castillo
-----------------------------------
Title: Vice President
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EXHIBIT A
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SCHEDULE 1 TO CREDIT AGREEMENT
Revolving Credit Commitments
NAME OF LENDER REVOLVING CREDIT COMMITMENT
Harris N.A., successor by merger to Harris Trust $ 25,000,000.00
and Savings Bank
U.S. Bank National Association $ 20,000,000.00
GMAC Commercial Finance LLC $ 20,000,000.00
PNC Bank, National Association $ 20,000,000.00
FB Commercial Finance, Inc. $ 15,000,000.00
----------------------------
TOTAL $100,000,000.00
REAFFIRMATION OF GUARANTY
In order to induce Harris N.A., successor by merger to Harris
Trust and Savings Bank, as Administrative Agent ("Agent") for various lenders
("Lenders"), and Lenders to execute and deliver that certain Second Amendment to
Credit Agreement of even date herewith (the "Amendment"), each of the
undersigned hereby reaffirms its obligations under that certain Master Corporate
Guaranty dated as of May 14, 2003 by it in favor of Agent (the "Guaranty").
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Credit Agreement dated as of May 14, 2003, as
amended by that certain First Amendment to Credit Agreement dated as of June 11,
2004, by and among Agent, Lenders and All American Semiconductor, Inc. (as the
same has been, and may be from time to time, amended, supplemented or otherwise
modified, the "Credit Agreement").
Each of the undersigned further agrees that the Guaranty shall
remain in full force and effect following the execution and delivery of the
Amendment and that all references to the "Credit Agreement" in the Guaranty
executed by it shall be deemed to refer to the Credit Agreement as amended by
the Amendment. Except as set forth in the immediately preceding sentence, the
Guaranty shall remain unmodified and in full force and effect.
This Reaffirmation of Guaranty is dated as of August 8, 2005.
Access Micro Products, Inc.
All American A.V.E.D., Inc.
All American Added Value, Inc.
All American Semiconductor of Atlanta, Inc.
All American Semiconductor of Chicago, Inc.
All American Semiconductor of Florida, Inc.
All American Semiconductor of Huntsville, Inc.
All American Semiconductor of Massachusetts, Inc.
All American Semiconductor of Michigan, Inc.
All American Semiconductor of Minnesota, Inc.
All American Semiconductor of New York, Inc.
All American Semiconductor of Philadelphia, Inc.
All American Semiconductor of Phoenix, Inc.
All American Semiconductor of Portland, Inc.
All American Semiconductor of Rockville, Inc.
All American Semiconductor of Salt Lake, Inc.
All American Semiconductor of Texas, Inc.
All American Semiconductor-Northern California, Inc.
All American Semiconductor of Washington, Inc.
All American Technologies, Inc.
All American Transistor of California, Inc.
Aved Industries, Inc.
Palm Electronics Manufacturing Corp.
All American Semiconductor of Ohio, Inc.
All American Semiconductor of Wisconsin, Inc.
All American Semiconductor of Rhode Island, Inc.
All American IDT, Inc.
AGD China, Inc.
Each by: /s/ BRUCE M. GOLDBERG
-------------------------------------------
Its: President and CEO
AMERICAPITAL, LLC
By: All American Semiconductor, Inc.,
its sole member
By: /s/ BRUCE M. GOLDBERG
------------------------------------------------
Its: President & CEO
REAFFIRMATION OF GUARANTY
In order to induce Harris N.A., successor by merger to Harris
Trust and Savings Bank, as Administrative Agent ("Agent") for various lenders
("Lenders"), and Lenders to execute and deliver that certain Second Amendment to
Credit Agreement of even date herewith (the "Amendment"), the undersigned hereby
reaffirms its obligations under that certain Corporate Guaranty and Covenant
dated as of May 14, 2003 by it in favor of Agent (the "Guaranty"). Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in the Credit Agreement dated as of May 14, 2003, as amended by that
certain First Amendment to Credit Agreement dated as of June 11, 2004, by and
among Agent, Lenders and All American Semiconductor, Inc. (as the same has been,
and may be from time to time, amended, supplemented or otherwise modified, the
"Credit Agreement").
The undersigned further agrees that the Guaranty shall remain
in full force and effect following the execution and delivery of the Amendment
and that all references to the "Credit Agreement" in the Guaranty executed by it
shall be deemed to refer to the Credit Agreement as amended by the Amendment.
Except as set forth in the immediately preceding sentence, the Guaranty shall
remain unmodified and in full force and effect.
This Reaffirmation of Guaranty is dated as of August 8, 2005.
ALL AMERICAN SEMICONDUCTOR OF
CANADA, INC.
By: /s/ BRUCE M. GOLDBERG
-------------------------------
Its: President and CEO