BB&T FOURTH AMENDMENT TO FIRST AMENDED AND RESTATED LOAN AGREEMENT

This Fourth Amendment to First Amended and Restated Loan Agreement (this “Amendment”) is made as of November 21, 2014 by and among BRANCH BANKING AND TRUST COMPANY, a North Carolina banking corporation (“Bank”) and the following entities (collectively, the “Borrowers”):

Synalloy Fabrication, LLC, a South Carolina limited liability company (formerly named SFR, LLC) (“Synalloy Fabrication”);

for purposes of amending (without novation, accord nor satisfaction) certain aspects and provisions of the First Amended and Restated Loan Agreement dated as of August 21, 2012 (“Restated Loan Agreement”) and the following amendments thereto (collectively, the “Prior Amendments”): (a) First Amendment to Restated Loan Agreement dated as of October 22, 2012, (b) Second Amendment to Restated Loan Agreement dated as of August 9, 2013, and (c) Third Amendment to Restated Loan Agreement dated as of January 2, 2014 (this Amendment, the Restated Loan Agreement and all the Prior Amendments being cumulatively and collectively referred to herein as the “Loan Agreement”).

Capitalized terms used in this Amendment without definition retain (except, to the extent applicable, as amended hereby) the meanings respectfully assigned to such terms in the Restated Loan Agreement. Further, the term “Loan Documents” as used in the Loan Agreement shall include all documents executed by Borrowers, their officers, directors or members pursuant to or in connection with the Loan Agreement.

 

Each and all of opening paragraphs, statements, information and other provisions of this above constitute an integral part of this Amendment among the parties and are to be considered binding upon the parties. In addition, the statements, recitals, terms, conditions and agreements of and in the Loan Agreement are hereby incorporated herein by this reference thereto as if set forth herein in full.

Ram-Fab, LLC shall be deleted as a Borrower from all Loan Documents and shall have no liability to Bank for debt of any kind or nature arising under or in connection with the Loan Documents.

Line of Credit (“Line of Credit”) in the maximum principal amount not to exceed, at any one time, the lesser of the following subsections (i) and (ii) (such lesser amount, the “Line of Credit Availability”):

The Line of Credit is for the purpose of working capital and to facilitate Synalloy’s purchase of substantially all the outstanding shares of stock of Specialty Pipe & Tube, Inc. (“SPT”), a Delaware corporation, and related closing costs and expenses. The Line of Credit is evidenced by Borrowers’ Restated LOC Note and maturing as provided therein or any renewal thereof, when the entire unpaid principal balance then outstanding plus accrued interest thereon shall be paid in full. In the event that at any time the principal amount outstanding under the Line of Credit shall exceed the then applicable Line of Credit Availability, Borrowers shall promptly repay such excess principal amounts to the extent necessary to regain compliance with the Line of Credit Availability. Accrued interest only shall be repayable monthly. Prior to maturity or the occurrence of any Event of Default hereunder and subject to the Availability limitations, Borrowers may borrow, repay, and reborrow under the Line of Credit through maturity. The Line of Credit shall bear interest at the rate set forth in the Restated LOC Note or in any other note or other instrument evidencing all or any portion of the Line of Credit, the terms of which are incorporated herein by reference.

The Loan Documents shall be deemed to be amended as necessary, mutatis mutandis, consistent with the foregoing provisions of this Section 4(b).

“Availability” means the maximum principal available amount under the Line of Credit (within the $40,000,000 of principal availability under the Line of Credit) determined and conditionally limited as follows:

 

 

The Loan Documents shall be deemed to be amended as necessary, mutatis mutandis, consistent with the foregoing provisions of this Section 4(c).

(e)    Notwithstanding anything in the Loan Documents to the contrary:

Based on Borrowers’ quarter-end financial report and Compliance Certificate, beginning with the end of Borrowers’ 2014 fourth quarter, Bank agrees to adjust the interest rate on the Line of Credit as follows:

If, at quarter end, Total Funded Debt to EBITDA is:

Greater than 3.50------------------------------------------------------------ Default

Bank will use the One Month LIBOR Rate plus the spread, as noted above. All interest shall be computed and charged for the actual number of days elapsed on the basis of a year consisting of three hundred sixty (360) days. “Total Funded Debt” is defined as the aggregate sum of all interest-bearing indebtedness of Borrower, then outstanding to Lenders, including capital lease obligations.

Section 5 of the Restated Loan Agreement entitled “Tangible Net Worth” is hereby deleted and restated to read as follows:

Tangible Net Worth: A minimum tangible net worth at all times of not less than sixty million dollars ($60,000,000) (as such amount may increase pursuant to the following sentence, the “Minimum Tangible Net Worth”). The Minimum Tangible Net Worth shall increase by at least 50% of Consolidated Net Income over the prior fiscal year-end result, and then each fiscal year thereafter. Tangible Net Worth is defined as net worth, plus obligations contractually subordinated to debts owed to Bank, minus goodwill, general intangibles, contract rights, and assets representing claims on stockholders or affiliated entities. Consolidated Net Income is defined as Borrowers’ after tax net income as shown on the Annual Financial Statements referred to in Section 3.08 of this Agreement.

Any references to this Tangible Net Worth covenant set forth in the Loan Agreement, the other Loan Documents and any related agreement, instrument, filing, document or other papers shall henceforth be deemed amended, mutatis mutandis, to reflect the above revision.

Section 5 of the Restated Loan Agreement entitled “Total Funded Debt to EBITDA” is hereby deleted and restated to read as follows:

Total Funded Debt to EBITDA: A maximum Total Funded Debt to EBITDA ratio of 3.5:1.0 that will be measured on a rolling four quarter basis. Without limiting the preceding sentence, should the ratio exceed 3.0:1.0 at any time (a “Leverage Ratio Event”) then, from such time and at all times thereafter Borrowers shall increase their Loan Base reporting requirements to levels acceptable to Bank and consistent with a routinely monitored asset based lending credit facility. This may also include changes to the Borrowing Base formula. Further, in the case of a Leverage Ratio Event, Availability under the Line of Credit shall become the lesser of $40,000,000 or the Availability under such modified arrangements as applicable to any modified Borrowing Base formula. “Total Funded Debt” is defined as the aggregate sum of all interest-bearing indebtedness of Borrower, then outstanding to Lenders, including capital lease obligations.

EBITDA is defined as the sum of (a) net income for such period plus (b) an amount which, in the determination of net income for such period, has been deducted for (i) interest expense (including the interest component under capital lease obligations) (ii) total federal, state and other income taxes (iii) depreciation and amortization expense, all as determined with GAAP and (iv) non-recurring acquisition expenses, all as determined with GAAP.Total Funded Debt to EBITDA is defined as the ratio of (a) Total Funded Debt outstanding at quarter end to (b) the aggregate EBITDA at quarter end. The ratio will be calculated using the most recent four-quarter periods (four quarter trailing calculation). Provided

however, in determining Total Funded Debt to EBITDA for Borrowers’ 2015 year, Borrowers may annualize SPT’s results and include the same in Borrowers’ rolling four quarter calculations for 2015 (the foregoing treatment of SPT’s results shall be permissible for Borrowers’ 2015 year only and shall not be permissible for subsequent years).

Any references to this Total Funded Debt to EBITDA covenant set forth in the Loan Agreement, the other Loan Documents and any related agreement, instrument, filing, document or other papers shall henceforth be deemed amended, mutatis mutandis, to reflect the above revision.

Section 5 of the Restated Loan Agreement entitled “Total Liabilities to Tangible Net Worth” is hereby deleted and restated to read as follows:

Total Liabilities to Tangible Net Worth: A maximum Total Liabilities to Tangible Net Worth ratio at all times of no greater than 2.75:1.00. Total Liabilities is defined as shown on the Borrowers Annual and Quarterly Financial Statements referred to in Section 3.08 of this Agreement.

Any references to this Total Liabilities to Tangible Net Worth covenant set forth in the Loan Agreement, the other Loan Documents and any related agreement, instrument, filing, document or other papers shall henceforth be deemed amended, mutatis mutandis, to reflect the above revision.

    Section 6.03 of the Restated Loan Agreement entitled “Capital Expenditures” is hereby deleted and restated to read as follows:

Capital Expenditures. Expenditures for fixed assets in any fiscal year shall not exceed, in the aggregate as to all Borrowers, (a) for the 2014 fiscal year the sum of eleven million ($11,500,000) dollars; (b) for 2015 fiscal year and each fiscal year after during the term of the Loan(s) the sum of eight million ($8,000,000) dollars.

Any references to this Capital Expenditures covenant set forth in the Loan Agreement, the other Loan Documents and any related agreement, instrument, filing, document or other papers shall henceforth be deemed amended, mutatis mutandis, to reflect the above revision.

Section 3.09 of the Restated Loan Agreement is amended by adding the following paragraph as the final paragraph in said Section:

Reporting Requirements Whenever Borrowers are to furnish Bank with internally prepared information or statements pursuant to Section 3.09 of the Loan Agreement, such information and reports shall be signed and certified by the Vice President Finance of Borrowers or such other officer of Borrowers as shall be acceptable to Bank in its reasonable discretion. Further, whenever Borrowers are to furnish Bank with an audited financial statement or report, the Certified Public Accounting firm preparing such audited statement or report must be acceptable to Bank in its absolute discretion.

(b)    Immediately following Synalloy’s acquisition of substantially all the shares of stock of SPT, Synalloy shall cause SPT to:

(c) If Synalloy breaches any of the covenants in parts (a) or (b) of this Section 11, such breach shall constitute an Event of Default under Section 8 of the Restated Loan Agreement if such default is not cured within seven (7) days after Bank gives notice to Borrowers of the existence of such default and demand for cure (Nothing herein shall grant any cure rights to Borrowers with respect to an Event of Default which does not arise under Section 11 of this Amendment).

Section 12. Bringdown of Representations and Warranties.

Borrowers represent and warrant to Bank the continued accuracy and completeness, as of the date hereof, of all representations made in the Loan Documents, (including without limitation Section 2 of the Restated Loan Agreement.

Borrowers hereby jointly and severally agree to and do hereby indemnify and defend Bank, its affiliates, their successors and assigns and their respective directors, officer, employees and shareholders, and do hereby hold each of them harmless from and against, any loss, liability, lawsuit, proceeding, cost expense or damage (including reasonable in-house and outside counsel fees, whether suit is brought or not) arising from or otherwise relating to the closing, disbursement, administration, or repayment of the Loan(s) and the other Loans, including without limitation: (i) the failure to make any payment to Bank promptly when due, whether under the Loans or otherwise; (ii) the breach of any representations or warranties to Bank contained in this Amendment, the Loan Documents or in any other loan documents now or hereafter executed in connection with this Amendment and the Loans; (iii) the violation of any covenants or agreements made for the benefit of Bank and contained in any of the Loan Documents; provided, however, that the foregoing indemnification shall not be deemed to cover any loss which is finally determined by a court of competent jurisdiction to result solely from Bank’s gross negligence or willful misconduct; or (iv) any aspect of this Amendment or the transactions contemplated hereby.

For the avoidance of doubt, all of the obligations of Borrowers, whether of payment or performance, under the Line of Credit, the Term Loan, the SPT Acquisition Loan and any additional Loans shall be and continue following the effectiveness of this Amendment to be (along with the other obligations referenced therein), secured by and enjoying the benefits of the pledges, mortgages, deeds of trust, collateral and other matters and security set forth in the Loan Documents, including without limitation the Mortgages and the Security Agreement and the other agreements, instruments, filings and other papers set forth and/or referenced on Attachment 1 to this Amendment. Further, after Synalloy acquires substantially all the shares of stock of SPT, all documents executed by SPT, its officers and directors pursuant to or in connection with this Amendment (including without limitation those shown on Attachment I) shall be included in the definition of Loan Documents for all purposes of the Loan Agreement.

For the avoidance of doubt, Borrowers hereby confirm that SPT shall not be a party to any existing or future Swap Agreements by and between Bank and Borrowers, nor shall SPT have any liability to Bank arising under any such Swap Agreements, unless Bank, Borrowers and SPT hereafter enter into a written agreement providing for SPT’s participation in such Swap Agreements.

Section 16. Miscellaneous.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment under seal as of the date first written above.

Borrowers: Synalloy Corporation, a Delaware corporation; Metchem, Inc., a Delaware corporation;

Synalloy Fabrication, LLC, a South Carolina limited liability company (formerly named SFR, LLC);

Synalloy Metals, Inc., a Tennessee corporation; Bristol Metals, LLC, a Tennessee limited liability company;

Manufacturers Soap & Chemical Company, a Tennessee corporation; Manufacturers Chemicals, LLC, a

Tennessee limited liability company; Palmer of Texas Tanks, Inc., a Texas corporation; Syntrans, LLC, a Texas

limited liability company; and CRI Tolling, LLC, a South Carolina limited liability company, on a joint and several

basis

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The agreement or instrument to which this attachment is attached and all loans, notes, instruments and other liabilities and obligations referenced therein are all governed, secured, guarantied and/or otherwise related to by, as applicable, each of the following (each of which is - except as otherwise set forth below - originally dated on or about August 21, 2012, provided that references to the following are as the same may be amended, restated, increased, decreased or otherwise modified and in effect from time to time), among any other applicable pledge, security, collateral, agreements and instruments in effect from time to time.