Forbearance and Amendment Number Two to Amended and Restated Credit Agreement between Ultralife Corporation and JPMorgan Chase Bank, N.A.
This agreement is between Ultralife Corporation and JPMorgan Chase Bank, N.A., acting as agent for itself and other lenders. It addresses Ultralife's defaults under a prior credit agreement, including missed financial covenants and payments. The lenders agree to temporarily forbear from exercising their default rights until the earliest of February 18, 2010, a new default, breach of this agreement, or closing of a specified transaction. Ultralife must meet certain conditions, including payment of fees and delivery of documents, for the forbearance to take effect. The agreement also amends the original credit agreement and terminates the lenders' commitments.
AND AMENDMENT NUMBER TWO
TO
AMENDED AND RESTATED CREDIT AGREEMENT
Principal | $ | 15,834,720.00 | ||
Interest | $ | 38,078.47 | ||
Fees | $ | 57,604.48 | ||
TOTAL | $ | 15,930,402.95 |
A. | Borrower and each of the Guarantors duly execute and deliver this Agreement to the Agent, in form and substance acceptable to the Agent in its sole discretion by 5:00 P.M. on January 22, 2010, and the Agreement is agreed to and executed by the Agent and the Lenders; and |
B. | The representation and warranties contained in Section 7 of this Agreement and in the Credit Agreement shall be true, correct and complete as of the effective date of this Agreement as though made on such date; and |
C. | The Agent shall have received $62,500 from Borrower for the benefit of the Agent and the Lenders on a pro rata basis in consideration of the forbearance and modifications set forth herein; and |
D. | The Agent and each Lender shall have received all fees required to be paid under the Credit Agreement, and all expenses for which invoices have been presented to Borrower by the Agent and the Lenders (including the reasonable fees and expenses of legal counsel) to date; and |
E. | Execution and delivery to the Agent of a completed initial Collateral Status Certificate (as defined below) and such other and further documentation as the Agent and the Lenders may reasonably deem necessary or appropriate to accomplish the terms set forth herein, each in form and substance reasonably acceptable to the Agent and the Lenders; and |
F. | Borrower is current with respect to all amounts currently due and owing to the Agent and the Lenders under the Loan Documents as amended hereby. |
A. | Borrower and each of the Guarantors shall provide the Agent and the Lenders with any information, documents, or reports concerning or related to the Indebtedness under the Credit Agreement, the repayment thereof and their businesses, as the Agent and/or the Lenders may request in their sole discretion, and shall make their management, officers, employees, professionals, agents, and consultants, available to the Agent and the Lenders upon request to answer any reasonable questions regarding the matters set forth above; and |
B. | All information provided by Borrower and each of the Guarantors to the Agent and/or the Lenders in connection with this Agreement, whether or not during the Forbearance Period, including, without limitation, information on the exhibits attached hereto or concerning financial status, assets, liabilities, or business plans, whether communicated orally or in writing, shall be true and correct in all material respects. |
C. | Borrower shall provide evidence satisfactory to the Agent, as soon as available but in any event at the end of each calendar week, during the Forbearance Period that all payroll, sales and withholding taxes are currently paid and maintained. |
D. | Borrower agrees that the Obligations shall bear interest at the rate set forth in Section 2.13(c) of the Credit Agreement. |
E. | Borrower shall, at all time during the Forbearance Period, remain in pro forma compliance with the conditions precedent to closing of the $35,000,000 senior secured credit facility offered to Borrower by RBS Business Capital, as set forth in the term sheet dated November 2, 2009, as previously or hereafter amended (RBS Commitment). |
F. | Borrower shall provide to the Agent, as soon as available but in any event on each Friday during the Forbearance Period, a rolling thirteen (13) week cash flow forecast in form and substance reasonably acceptable to the Agent. |
G. | Borrower shall make payments on the outstanding principal amount of the Obligations to Agent for the benefit of the Lenders in the following manner: (i) on the date of execution and delivery of the Agreement, Borrower shall make a payment in the amount of $1,500,000; (ii) on or before January 29, 2010, Borrower shall make a payment in the amount of $3,500,000; and (iii) commencing February 5, 2010 and continuing on each Friday thereafter during the Forbearance Period, Borrower shall make a payment in the amount of $500,000. |
H. | Borrower shall immediately notify Agent of any change to the terms or status of the RBS Commitment. |
I. | The Margined Collateral Not Borrowed identified on line 33 of the Collateral Status Certificate (defined below) attached as Exhibit A, shall not drop below $9,000,000 during the Forbearance Period. |
J. | Borrower and Guarantors shall deposit the proceeds of all Accounts (as defined below) of the Borrower and Guarantors in bank accounts maintained with either of the Lenders. |
A. | For the purposes of defining Collateral Status, the following definitions shall be applicable: |
i). | Account has the meaning assigned to such term in the Security Agreement (as defined herein). |
ii). | Account Debtor means any Person obligated on any of the Accounts. |
iii). | Affiliate means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. |
iv). | Collateral Status means, at any time, the sum of (a) up to 80% of Eligible Accounts at such time, plus (b) 30% of Eligible Inventory, valued at the lower of cost or market value, determined on a first-in-first-out basis, at such time, minus (c) Reserves. The maximum amount of Inventory which may be included as part of the Collateral Status is $10,000,000. The Agent and Lenders may, in their discretion, reduce the advance rates set forth above, adjust Reserves or reduce one or more of the other elements used in computing the Collateral Status. |
v). | Collateral Status Certificate means a certificate, signed and certified as accurate and complete by the chief financial officer, principal accounting officer, treasurer or controller of the Borrower, in substantially the form of Exhibit A or another form which is acceptable to the Agent in its sole discretion. |
vi). | Collateral has the meaning assigned to such term in the Security Agreement. |
vii). | Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. Controlling and Controlled have meanings correlative thereto. |
viii). | Eligible Accounts means, at any time, the Accounts of the Borrower and Guarantors which the Agent determines in its discretion would be eligible. Without limiting the Agents discretion provided herein, Eligible Accounts shall not include any Account: |
a). | which is not subject to a first priority perfected security interest in favor of the Agent; |
b). | which is subject to any Lien other than (i) a Lien in favor of the Agent and (ii) a Permitted Encumbrance which does not have priority over the Lien in favor of the Agent; |
c). | with respect to which (i) is unpaid more than 90 days after the date of the original invoice therefor or more than 60 days after the original due date, or (ii) which has been written off the books of Borrower or any of the Guarantors or otherwise designated as uncollectible; |
d). | which is owing by an Account Debtor for which more than 50% of the Accounts owing from such Account Debtor and its Affiliates are ineligible hereunder; | ||
e). | which is owing by an Account Debtor to the extent the aggregate amount of Accounts owing from such Account Debtor and its Affiliates to all Borrower and Guarantors exceeds 10% of the aggregate amount of Eligible Accounts of Borrower and Guarantors; | ||
f). | with respect to which any covenant, representation, or warranty contained in this Agreement, the Credit Agreement or in the Security Agreement has been breached or is not true; | ||
g). | which (i) does not arise from the sale of goods or performance of services in the ordinary course of business, (ii) is not evidenced by an invoice or other documentation satisfactory to the Agent which has been sent to the Account Debtor, (iii) represents a progress billing, (iv) is contingent upon the Borrowers or Guarantors completion of any further performance, (v) represents a sale on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment, cash-on-delivery or any other repurchase or return basis or (vi) relates to payments of interest; | ||
h). | for which the goods giving rise to such Account have not been shipped to the Account Debtor or for which the services giving rise to such Account have not been performed by Borrower or any of the Guarantors or if such Account was invoiced more than once; | ||
i). | with respect to which any check or other instrument of payment has been returned uncollected for any reason; | ||
j). | which is owed by an Account Debtor which has (i) applied for, suffered, or consented to the appointment of any receiver, custodian, trustee, or liquidator of its assets, (ii) has had possession of all or a material part of its property taken by any receiver, custodian, trustee or liquidator, (iii) filed, or had filed against it, any request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as bankrupt, winding-up, or voluntary or involuntary case under any state or federal bankruptcy laws, (iv) has admitted in writing its inability, or is generally unable to, pay its debts as they become due, (v) become insolvent, or (vi) ceased operation of its business; | ||
k). | which is owed by any Account Debtor which has sold all or a substantially all of its assets; | ||
l). | which is owed by an Account Debtor which (i) does not maintain its chief executive office in the U.S. or Canada or (ii) is not organized under applicable law of the U.S., any state of the U.S., Canada, or any province of Canada unless, in either case, such Account is backed by a Letter of Credit acceptable to the Agent which is in the possession of, and is directly drawable by, the Agent; |
m). | which is owed in any currency other than U.S. dollars; | ||
n). | which is owed by (i) the government (or any department, agency, public corporation, or instrumentality thereof) of any country other than the U.S. unless such Account is backed by a Letter of Credit acceptable to the Agent which is in the possession of the Administrative Agent, or (ii) any Federal Account Debtor unless the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq. and 41 U.S.C. § 15 et seq.), and any other steps necessary to perfect the Lien of the Agent in such Account have been complied with to the Agents satisfaction; | ||
o). | which is owed by any Affiliate, employee, officer, director, agent or stockholder of Borrower or any of the Guarantors; | ||
p). | which, for any Account Debtor, exceeds a credit limit determined by the Agent, to the extent of such excess; | ||
q). | which is owed by an Account Debtor or any Affiliate of such Account Debtor to which Borrower or any of the Guarantors is indebted, but only to the extent of such indebtedness or is subject to any security, deposit, progress payment, retainage or other similar advance made by or for the benefit of an Account Debtor, in each case to the extent thereof; | ||
r). | which is subject to any counterclaim, deduction, defense, setoff or dispute but only to the extent of any such counterclaim, deduction, defense, setoff or dispute; | ||
s). | which is evidenced by any promissory note, chattel paper, or instrument; | ||
t). | which is owed by an Account Debtor located in any jurisdiction which requires filing of a Notice of Business Activities Report or other similar report in order to permit Borrower or any of the Guarantors to seek judicial enforcement in such jurisdiction of payment of such Account, unless Borrower or any of the Guarantors has filed such report or qualified to do business in such jurisdiction; | ||
u). | with respect to which such Borrower or any of the Guarantors has made any agreement with the Account Debtor for any reduction thereof, other than discounts and adjustments given in the ordinary course of business, or any Account which was partially paid and Borrower created a new receivable for the unpaid portion of such Account; | ||
v). | which does not comply in all material respects with the requirements of all applicable laws and regulations, whether Federal, state or local, including without limitation the Federal Consumer Credit Protection Act, the Federal Truth in Lending Act and Regulation Z of the Board; |
w). | which is for goods that have been sold under a purchase order or pursuant to the terms of a contract or other agreement or understanding (written or oral) that indicates or purports that any Person other than such Borrower or any of the Guarantors has or has had an ownership interest in such goods, or which indicates any party other than such Borrower or Guarantors as payee or remittance party; | ||
x). | which was created on cash on delivery terms; or | ||
y). | which the Agent determines may not be paid by reason of the Account Debtors inability to pay or which the Agent otherwise determines is unacceptable for any reason whatsoever. |
ix). | Eligible Inventory means, at any time, the Inventory of the Borrower and Guarantors which the Agent determines in its discretion would be eligible. Without limiting the Agents discretion provided herein, Eligible Inventory shall not include any Inventory: |
a). | which is not subject to a first priority perfected Lien in favor of the Agent; | ||
b). | which is subject to any Lien other than (i) a Lien in favor of the Administrative Agent and (ii) a Permitted Encumbrance which does not have priority over the Lien in favor of the Agent; | ||
c). | which is, in the Agents opinion, slow moving, obsolete, unmerchantable, defective, used, unfit for sale, not salable at prices approximating at least the cost of such Inventory in the ordinary course of business or unacceptable due to age, type, category and/or quantity; | ||
d). | with respect to which any covenant, representation, or warranty contained in the Credit Agreement or the Security Agreement has been breached or is not true and which does not conform to all standards imposed by any Governmental Authority; |
e). | in which any Person (as defined below) other than such Borrower or any of the Guarantors shall (i) have any direct or indirect ownership, interest or title to such Inventory or (ii) be indicated on any purchase order or invoice with respect to such Inventory as having or purporting to have an interest therein; | ||
f). | which is not finished goods or which constitutes work-in-process, spare or replacement parts, subassemblies, packaging and shipping material, manufacturing supplies, samples, prototypes, displays or display items, bill-and-hold goods, goods that are returned or marked for return, repossessed goods, defective or damaged goods, goods held on consignment, or goods which are not of a type held for sale in the ordinary course of business; | ||
g). | which is not located in the U.S.; | ||
h). | which is in transit; | ||
i). | which is located in any location leased by such Borrower or any of the Guarantors unless (i) the lessor has delivered to the Agent a Landlord Waiver Agreement (as defined in the Security Agreement) or (ii) a Reserve for rent, charges, and other amounts due or to become due with respect to such facility has been established by the Agent in its discretion; | ||
j). | which is located in any third party warehouse or is in the possession of a bailee (other than a third party processor), unless (i) such warehouseman or bailee has delivered to the Agent a Landlord Waiver Agreement and such other documentation as the Agent may require or (ii) an appropriate Reserve has been established by the Agent in its discretion; | ||
k). | which is being processed offsite at a third party location or outside processor, or is in-transit to or from said third party location or outside processor; | ||
l). | which is a discontinued product or component thereof; | ||
m). | which is the subject of a consignment by such Borrower or any of the Guarantors as consignor; | ||
n). | which is perishable; | ||
o). | which contains or bears any intellectual property rights licensed to such Borrower or any of the Guarantors unless the Agent is satisfied that it may sell or otherwise dispose of such Inventory without (i) infringing the rights of such licensor, (ii) violating any contract with such licensor, or (iii) incurring any liability with respect to payment of royalties other than royalties incurred pursuant to sale of such Inventory under the current licensing agreement; | ||
p). | which is not reflected in a current perpetual inventory report of such Borrower or Guarantors; | ||
q). | for which reclamation rights have been asserted by the seller; or |
r). | which the Agent otherwise determines is unacceptable for any reason whatsoever. |
x). | Inventory has the meaning assigned to such term in the Security Agreement. |
xi). | Net Orderly Liquidation Value means, with respect to Inventory of Borrower, the orderly liquidation value thereof as determined in a manner acceptable to the Agent by an appraiser acceptable to the Agent, net of all costs of liquidation thereof. |
xii). | Person means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. |
xiii). | Reserves means any and all reserves which the Agent deems necessary, in its discretion, to maintain with respect to the Collateral. |
xiv). | Security Agreement means collectively the General Security Agreement given by Borrower to the Agent dated as of June 30, 2004 and the General Security Agreements given by each of the Guarantors to the Agent as the same may be modified, amended or reaffirmed. |
B. | Borrower shall provide the Agent, as soon as available but in any event at the end of each calendar month, and at such other times as may be requested by the Agent, in form satisfactory to the Agent, a detailed aging of the Borrowers and Guarantors Accounts (1) including all invoices aged by invoice date and due date (with an explanation of the terms offered) and (2) reconciled to the Collateral Status Certificate delivered as of such date prepared in a manner reasonably acceptable to the Agent, together with a summary specifying the name, address, and balance due for each account debtor. |
C. | Borrower shall provide the Agent, as soon as available but in any event at the end of each calendar month, and at such other times as may be requested by the Agent, in form satisfactory to the Agent a schedule detailing the Borrowers and Guarantors Inventory, in form satisfactory to the Agent, (1) by location (showing Inventory in transit, any Inventory located with a third party under any consignment, bailee arrangement, or warehouse agreement), by class (raw material, work-in-process and finished goods), by product type, and by volume on hand, which Inventory shall be valued at the lower of cost (determined on a first-in, first-out basis) or market and adjusted for Reserves as the Agent has previously indicated to the Borrower are deemed by the Agent to be appropriate, (2) including a report of any variances or other results of Inventory counts performed by the Borrower or any Guarantors since the last Inventory schedule (including information regarding sales or other reductions, additions, returns, credits issued by Borrower or Guarantors and complaints and claims made against the Borrower or Guarantors), and (3) reconciled to the Collateral Status Certificate delivered as of such date. |
D. | Subject to the limitations set forth below, the Agent is authorized by Borrower and the Lenders, from time to time, at the direction of the Required Lenders, (but shall have absolutely no obligation to), to make Loans to the Borrower, on behalf of all Lenders, which the Required Lenders, in their discretion, deem necessary or desirable (i) to preserve or protect the Collateral, or any portion thereof, (ii) to enhance the likelihood of, or maximize the amount of, repayment of the Loans and other Obligations, or (iii) to pay any other amount chargeable to or required to be paid by the Borrowers pursuant to the terms of this Agreement, including payments of reimbursable expenses (including costs, fees, and expenses as described in Section 9.03) and other sums payable under the Loan Documents (any of such Loans are herein referred to as Protective Advances). Protective Advances may be made even if the conditions precedent set forth in Section 4.02 of the Credit Agreement have not been satisfied. The Protective Advances shall be secured by the Liens in favor of the Agent for the benefit of the Lenders in and to the Collateral and shall constitute Obligations hereunder. All Protective Advances shall be at the discretion of the Agent. The Agent may request the Lenders to make a Revolving Loan to repay a Protective Advance and Lenders shall make such Revolving Loan directly to the Agent. |
A. | Each of the Recitals set forth above is true and correct in all material respects; |
B. | Except for the Disclosed Defaults, to the best of their knowledge, Borrower and each of the Guarantors have complied with all of their respective obligations under the Loan Documents in all material respects. There is no Default or Event of Default which has occurred and is continuing under any of the Loan Documents other than the Disclosed Defaults; |
C. | Except for the Disclosed Defaults arising out of breaches of representations and warranties contained in the Loan Documents, the representations and warranties set forth in Loan Documents remain true and correct in all material respects as of the date of this Agreement; |
D. | The execution, delivery, and performance of this Agreement, and any other document required herein, is within the corporate powers of Borrower and the Guarantors, has been duly authorized by all necessary corporate action and does not and will not: (i) require any consent or approval of the board of directors of Borrower or the Guarantors; (ii) violate any provision of the articles of incorporation of Borrower or the Guarantors, its bylaws, any other document of corporate governance, or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Borrower or the Guarantors; (iii) require the consent or approval of, or filing or registration with, any governmental body, agency or authority; (iv) cause any breach of, or constitute a default under, any contract, indenture or other agreement or instrument under which Borrower or any Guarantor is a party or by which it or its properties may be bound or affected; or (v) result in the imposition of any lien, charge or encumbrance upon any property of Borrower or any Guarantor; |
E. | This Agreement constitutes, and any of the documents required herein will constitute upon execution and delivery, legal, valid, and binding obligations of the Borrower and each of the Guarantors, enforceable in accordance with its terms; |
F. | Borrower and each of the Guarantors do not, and hereby covenant that they will not, contest that the Agent and the Lender have and will continue to possess valid and perfected security interests in, and liens upon, all of the property as set forth in the Loan Documents; and |
G. | All information provided by Borrower and each of the Guarantors to the Agent and/or the Lenders, previously or in connection with this Agreement, including, without limitation, information on the exhibits attached hereto and concerning financial status, assets, liabilities, or business plans, whether communicated orally or in writing, is true and correct in all material respects. |
ULTRALIFE CORPORATION | ||||||||
By: | /s/ Philip A. Fain | |||||||
Name: | Philip A. Fain | |||||||
Title: | Chief Financial Officer and Treasurer | |||||||
ADMINISTRATIVE AGENT: | JPMORGAN CHASE BANK, N.A., as Agent | |||||||
By: | /s/ Thomas C. Strasenburgh | |||||||
Name: | Thomas C. Strasenburgh | |||||||
Title: | Vice President | |||||||
LENDERS: | JPMORGAN CHASE BANK, N.A. | |||||||
By: | /s/ Thomas C. Strasenburgh | |||||||
Name: | Thomas C. Strasenburgh | |||||||
Title: | Vice President | |||||||
MANUFACTURERS AND TRADERS TRUST COMPANY | ||||||||
By: | /s/ Jon Fogle | |||||||
Name: | Jon Fogle | |||||||
Title: | Vice President |