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Exhibit 10.1
SECOND AMENDMENT TO CREDIT AND SECURITY
AGREEMENT
THIS SECOND AMENDMENT (the "Amendment"), is dated as of June 30,
2008, and is entered into by and between DELPHAX TECHNOLOGIES INC.,
a Minnesota corporation (the "Borrower"), and WELLS FARGO BANK,
NATIONAL ASSOCIATION (the "Lender"), acting through its Wells Fargo
Business Credit operating division.
RECITALS
The Borrower and the Lender are parties to a Credit and Security
Agreement dated September 10, 2007 (as amended from time to
time, the "Credit Agreement"). Capitalized terms used in these
recitals have the meanings given to them in the Credit Agreement
unless otherwise specified.
The Borrower has requested that certain amendments be made to
the Credit Agreement, which the Lender is willing to make pursuant
to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, it is agreed as
follows:
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"Borrowing Base" means at any time the lesser of:
(a) The
Maximum Line Amount; less The Daily Gross Wage Reserve; or
(b) Subject to change from time to time in the Lender's sole
discretion, the sum of:
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(i) The product of the Accounts Advance Rate times Eligible
Accounts, plus
(ii) During the Foreign Accounts Eligibility Period, the lesser
of (A) the product of the Accounts Advance Rate times Eligible
Foreign Accounts or (B) $500,000, plus
(iii) The lesser of:
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(A) $1,700,000, or
(B) The sum of
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(I) The lesser of (A) the product of the Inventory Advance
Rate times the cost of Eligible Inventory located at locations
owned or leased by the Borrower, or (B) or seventy-five
percent (75%) of the Net Orderly Liquidation Value of such Eligible
Inventory, plus
(II) The lesser of (A) the lesser of (i) the product
of the Inventory Advance Rate times the cost of Eligible Inventory
not located on a location owned and leased by the Borrower or
(ii) seventy-five percent (75%) of the Net Orderly Liquidation
Value of such Eligible Inventory or (B) $1,250,000,
In both Paragraph (I) and Paragraph (II) above, the 75% rate
shall decrease by 2% per month on the last business day of the
first week of each month, beginning July 3, 2008.
less
(iv) The Borrowing Base Reserve, less
(v) The Daily Gross Wage Reserve, less
(vi) Indebtedness that the Borrower owes to the Lender that has
not yet been advanced on the Revolving Note, and an amount that the
Lender in its reasonable discretion finds on the date of
determination to be equal to the Lender's net credit exposure with
respect to any swap, derivative, foreign exchange, hedge, deposit,
treasury management or other similar transaction or arrangement
extended to the Borrower by the Lender that is not described in
Article II of this Agreement .
"Daily Gross Wage Reserve" shall mean a reserve equal to the
amount each day sufficient to pay wages that day, both for the
employees of Delphax Technologies, Inc. and the employees of
Delphax Technologies Canada, Ltd., which amount shall accrue and be
cumulative through each wage period. This reserve shall be reduced
by the amount of wages paid at the end of the pay period, and after
those wages are paid, shall begin to build up again for the
following wage period, on a daily basis.
"Floating Rate" means, effective as of May 1, 2008, an annual
interest rate equal to the sum of the Prime Rate plus two and
one-half percent (2.50%), which interest rate shall change when and
as the Prime Rate changes.
"Inventory Days on Hand" means (a) (i) the Borrower's
three-month rolling average cost of Inventory, divided by (ii) the
Borrower's three-month rolling average cost of goods sold,
multiplied by (b) 30.
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- On or before September 1, 2008, the Borrower's projected
balance sheets, income statements, statements of cash flow and
projected Availability for each month of the succeeding fiscal
year, each in reasonable detail prepared as a consolidated basis
for the Borrower and the Subsidiaries. Such items will be certified
by the Officer who is the Borrower's chief financial officer as
being the most accurate projections available and identical to the
projections used by the Borrower for internal planning purposes and
be delivered with a statement of underlying assumptions and such
supporting schedules and information as the Lender may in its
discretion require. Based upon the projections received, Lender
shall reset the financial covenants contained in the Credit
Agreement by September 15, 2008.
- Minimum Net Income . The Borrower will
achieve, for each period from the first day of the Borrower's
fiscal year containing the following indicated months to the last
day of such month, Net Income of not less than the amount set forth
opposite such month set forth in the table below (numbers appearing
between "( )" are negative):
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Fiscal Year-to-Date Period Ending the Last Day
of
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Minimum Net Income
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May 2008
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($4,700,000)
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June, 2008
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($7,200,000)
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July, 2008
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($7,400,000)
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August, 2008
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($7,350,000)
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September, 2008
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($7,150,000)
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(b) Maximum Inventory Days on Hand . The Borrower will
achieve, from the first day of each of the following fiscal
quarters of the Borrower to the last day of such fiscal quarter,
Inventory Days on Hand of not m
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