Exhibit 10.2

 

AMENDMENT NO. 5 TO

LOAN AND SECURITY AGREEMENT

 

AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT (“Amendment No. 5”), dated as of
January 6, 2004, by and among PEMSTAR Inc., a Minnesota corporation (as
surviving corporation of the merger with Pemstar Pacific Consultants, Inc.,
“Parent”), Turtle Mountain Corporation, a North Dakota Corporation (“Turtle
Mountain”, and together with Parent, each individually a “Borrower” and
collectively, “Borrowers”), Gentlelife, Inc., a California corporation, formerly
known as Kinderlife Instruments Inc. (“Guarantor”) and Congress Financial
Corporation (Central), an Illinois corporation, in its capacity as
administrative and collateral agent pursuant to the Loan Agreement (as
hereinafter defined) acting for and on behalf of the parties thereto as lenders
(in such capacity “Agent”).

 

W I T N E S S E T H :

 

WHEREAS, Agent, Borrowers, Guarantor, Fleet Capital Corporation, a Rhode Island
corporation, in its capacity as Documentation Agent for Lenders (in such
capacity, “Documentation Agent”), and the parties to the Loan Agreement as
lenders, whether by execution of the Loan Agreement or an Assignment and
Acceptance (individually, each a “Lender” and collectively, “Lenders”), have
entered into financing arrangements pursuant to which Lenders (or Agent on
behalf of Lenders) have made, and may make, loans and advances and provide other
financial accommodations to Borrowers as set forth in the Loan and Security
Agreement, dated April 25, 2003, by and among Agent, Borrowers, Guarantor,
Documentation Agent and Lenders, as amended by Amendment No. 1 to Loan and
Security Agreement, dated April 25, 2003, Amendment No. 2 to Loan and Security
Agreement, dated as of June 30, 2003, Amendment No. 3 to Loan and Security
Agreement, dated as of July 10, 2003 and Amendment No. 4 to Loan and Security
Agreement, dated as of January 5, 2004 (as amended hereby and as the same may
hereafter be further amended, modified, supplemented, extended, renewed,
restated or replaced, the “Loan Agreement”, and together with all agreements,
documents and instruments at any time executed and/or delivered in connection
therewith or related thereto, as from time to time amended and supplemented,
collectively, the “Financing Agreements”);

 

WHEREAS, Borrowers and Guarantor have requested that Agent and Lenders make
certain amendments to the Loan Agreement and the other Financing Agreements;

 

WHEREAS, Agent and Lenders are willing to agree to such amendments, subject to
the terms and conditions herein; and

 

WHEREAS, by this Amendment No. 5, Agent, Lenders, Borrowers and Guarantor desire
and intend to evidence such consent and amendments.

 

NOW THEREFORE, in consideration of the foregoing and the mutual agreements and
covenants contained herein, the parties hereto agree as follows:

 

1.    Definitions.

 

(a)  Additional Definitions. As used herein, the following terms shall have the
respective meanings given to them below and the Loan Agreement shall be deemed
and is hereby amended to include, in addition and not in limitation of, each of
the following definitions:

 

i.    “Amendment No. 5” shall mean this Amendment No. 5 to Loan and Security
Agreement by and among Agent, Lenders, Borrowers and Guarantor, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.

 

ii. “Merger” shall mean the merger of Parent and PPC, with Parent as the
surviving corporation;

 

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iii.    “Merger Agreements” shall mean, collectively, the following (as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated, or replaced): (A) the Plan of Merger, dated December 29,
2003, by and between Parent and PPC, (B) the Articles of Merger, dated December
29, 2003, by and between Parent and PPC, and (B) all other agreements, documents
or instruments executed or delivered in connection therewith.

(b) Amendments to Definitions.

 

i.    All references to the term “Parent” in the Loan Agreement and in the other
Financing Agreements (or other term that refers to such person) shall be deemed
and each such reference is hereby amended to mean PEMSTAR, Inc., a Minnesota
corporation, as the surviving corporation pursuant to the Merger, and its
successors and assigns.

 

ii.    All references to the term “Applicable Margin” in the Loan Agreement and
in the other Financing Agreements shall be deemed and each such reference is
hereby amended to mean one and one-half (1 ½%) percent as to the interest rate
for Prime Rate Loans and three and one-half (3 ½%) percent as to the interest
rate for Eurodollar Rate Loans; provided, that, such amendment to the definition
of such term shall only be effective for the period commencing on the date
hereof and ending on (and including) June 30, 2004. After June 30, 2004, the
term “Applicable Margin” shall have the meaning set forth in the Loan Agreement
as in effect prior to the effectiveness of this Amendment No. 5.

 

(c)  Interpretation. For purposes of this Amendment No. 5, unless otherwise
defined herein, all terms used herein, including, but not limited to, those
terms used and/or defined in the recitals above, shall have the respective
meanings assigned to such terms in the Loan Agreement.

 

2. Assumption and Acknowledgment.

 

(a) As of the effectiveness of the Merger, Parent (as the surviving corporation
of the Merger) expressly assumes, ratifies, restates and confirms the
Obligations and the Financing Agreements and confirms and ratifies its
assumption of, and it continuing liability for, under and pursuant to, the
Obligations and the Financing Agreements pursuant to the Merger and by operation
of law. As of the result of the Merger, Parent is acquiring the assets of PPC
subject to the existing security interests and lien therein of Agent pursuant to
the Financing Agreements.

 

(b) Borrowers and Guarantor acknowledge, confirm and agree that after giving
effect to the Merger,

 

i.    each Borrower is indebted to Agent and Lenders for the Obligations in the
amount of $43,983,997 as of the close of business on January 5, 2004, which
amount is unconditionally owing by Borrowers to Agent and Lenders, together with
interest accrued and accruing, all without offset, defense of counterclaim of
any kind, nature or description whatsoever;

 

ii.    their respective guarantees of the Obligations of the other Borrower or,
in the case of Guarantor of Borrowers, to the Agent and Lenders are in full
force and effect and their respective Obligations thereunder are unconditionally
owing to Agent and Lenders, without offset, defense or counterclaim of any kind,
nature or description whatsoever; and

 

iii.    without limiting the generality of the foregoing (A) the Merger shall
not in any way limit, impair or adversely affect the Obligations now or
hereafter owed to Agent and Lenders, the Obligations arising pursuant to the
guarantees by Borrowers and Guarantor in favor of Agent and Lenders or any
security interests or liens of Agent in the assets and properties of Borrowers
and Guarantor securing the same and (B) the security interests, liens and rights
of Agent and Lenders in and to all of the assets and properties of Borrowers
(including Parent as the surviving corporation of the Merger) and Guarantor
shall continue to secure all Obligations of Borrowers and Guarantor in favor of
Agent and Lenders arising prior to the effective time of the Merger, in addition
to all other existing and future Obligations.

 

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3.     Minimum EBITDA. Sections 9.17(a) and 9.17(b) of the Loan Agreement are
hereby deleted in their entirety and replaced with the following:

 

(a) “(a) In the event that at any time on or after September 30, 2003, the
aggregate amount of the Excess Availability of Borrowers is less than
$13,000,000, the EBITDA of Parent and its Subsidiaries (on a consolidated basis)
for the fiscal quarter ending December 31, 2003 and the fiscal quarter ending
March 31, 2004 shall for each such quarter be not less than $6,000,000 and for
each fiscal quarter thereafter shall be not less than $7,000,000.

 

(b) In the event that at any time on or after September 30, 2003, the aggregate
amount of the Excess Availability of Borrowers is less than $13,000,000, the
EBITDA of Parent and its Subsidiaries other than the Foreign Subsidiaries (on a
consolidated basis) for the fiscal quarter ending December 31, 2003 and the
fiscal quarter ending March 31, 2004 shall for each such quarter be not less
than $2,000,000 and for each fiscal quarter thereafter shall be not less than
$2,550,000.”

 

4.     Additional Reserves.

 

(a) Without limiting any other rights of Agent with respect to the establishment
of Reserves or otherwise, subject to Section 4(b) below, the Special
Availability Reserve in the amount of $3,000,000 established as set forth in
Section 7 of Amendment No. 2 shall be reduced to $1,500,000 upon the
satisfaction of each of the following conditions: (i) Agent shall have received
the financial statements of Parent and its Subsidiaries in accordance with
Section 9.6 of the Loan Agreement for each fiscal quarter of Parent and its
Subsidiaries through and including the fiscal quarter ending June 30, 2004, (ii)
no Default or Event of Default shall exist or have occurred and be continuing,
(iii) the EBITDA of Parent and its Subsidiaries (on a consolidated basis) for
the fiscal quarter ending December 31, 2003 and the fiscal quarter ending March
31, 2004 shall for each such quarter have been not less than $6,000,000 and for
the fiscal quarter ending June 30, 2004 shall have been not less than
$7,000,000, and (iv) the EBITDA of Parent and its Subsidiaries other than the
Foreign Subsidiaries (on a consolidated basis) for the fiscal quarter ending
December 31, 2003 and the fiscal quarter ending March 31, 2004 shall for each
such quarter have been not less than $2,000,000 and for the fiscal quarter
ending June 30, 2004 shall have been not less than $2,550,000.

 

(b) Without limiting any other rights of Agent with respect to the establishment
of Reserves or otherwise, the Special Availability Reserve in the amount of
$3,000,000 established as set forth in Section 7 of Amendment No. 2 shall be
released and terminated in its entirety, instead of being reduced to $1,500,000
as provided in Section 4(a) above, upon the satisfaction of each of the
following conditions: (i) Agent shall have received the financial statements of
Parent and its Subsidiaries in accordance with Section 9.6 of the Loan Agreement
for each fiscal quarter of Parent and its Subsidiaries through and including the
fiscal quarter ending June 30, 2004, (ii) no Default or Event of Default shall
exist or have occurred and be continuing, (iii) the EBITDA of Parent and its
Subsidiaries (on a consolidated basis) for the fiscal quarter ending December
31, 2003 and the fiscal quarter ending March 31, 2004 shall for each such
quarter have been not less than $6,000,000 and for the fiscal quarter ending
June 30, 2004 shall have been not less than $8,175,000, and (iv) the EBITDA of
Parent and its Subsidiaries other than the Foreign Subsidiaries (on a
consolidated basis) for the fiscal quarter ending December 31, 2003 and the
fiscal quarter ending March 31, 2004 shall for each such quarter have been not
less than $2,000,000 and for the fiscal quarter ending June 30, 2004 shall have
been not less than $2,550,000.

 

5.     Amendment Fee. In addition to all other fees, charges, interest and
expenses payable by Borrowers to Agent and Lenders under the Loan Agreement and
the other Financing Agreements, Borrowers shall pay to Agent for the account of
Lenders, contemporaneously with the effectiveness of this Amendment, an
amendment fee in the amount of $100,000, which fee shall be fully earned and
nonrefundable as of the date hereof and may be charged to any loan account of
Borrowers.

 

6.     Additional Representations, Warranties and Covenants. Each Borrower and
Guarantor represents, warrants and covenants with and to Agent and Lenders as
follows, which representations, warranties and covenants are continuing and
shall survive the execution and delivery hereof:

 

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(a) This Amendment No. 5 has been duly executed and delivered by each Borrower
and Guarantor and is in full force and effect as of the date hereof and the
agreements and obligations of each Borrower and Guarantor contained herein
constitute legal, valid and binding obligations of each Borrower and Guarantor
enforceable against each of them in accordance with their respective terms.

 

(b) The Merger is valid and effective in accordance with the Merger Agreements
and the corporation statutes of the State of Minnesota and the State of
California and Parent is the surviving corporation pursuant to the Merger.

 

(c) All actions and proceedings required by the Merger Agreements, applicable
law and regulation (including but not limited to, compliance with
Hart-Scott-Rodino Anti-Trust Improvement Acts of 1976, as amended by all
applicable securities laws) have been taken and the transactions required
thereunder have been duly and validly taken and consummated.

 

(d) No court of competent jurisdiction has issued any injunction, restraining
order or other order which prohibits consummation of the transactions described
in the Merger Agreements and no government action or proceeding has been
threatened or commenced seeking any injunction, restraining order or other order
which seeks to void or otherwise modify the transactions described in the Merger
Agreements.

 

(e) The security interests in and liens upon the assets and properties of PPC in
favor of Agent shall continue upon such assets and properties to which Parent
shall succeed pursuant to the Merger and such security interests and liens and
their perfection and priority shall continue in all respects in full force and
effect. Without limiting the generality of the foregoing, the Merger shall in no
way limit, impair or adversely affect the Obligations, howsoever arising, or any
security interests or liens securing the same.

 

(f) The Merger and the other arrangements contemplated herein do not violate any
law or regulation or any order or decree of any court or governmental
instrumentality in any respect and do not and will not conflict with or result
in the breach of, or constitute a default in any respect under, any agreement,
document or instrument to which any Borrower or Guarantor is a party or by which
it or any of its assets may be bound, or result in the creation or imposition of
any lien, charge or encumbrance upon any of the property of any Borrower or
Guarantor or violate any provision of the Certificate of Incorporation or
By-Laws of any Borrower or Guarantor.

 

(g) Borrowers and Guarantors have delivered, or caused to be delivered, to Agent
a true, correct and complete copy of the Merger Agreements;

 

(h) No action of, or filing with, or consent or any governmental or public body
or authority, and no approval or consent of any other party, is or will be
required to authorize, or is or will be otherwise required in connection with,
the execution, delivery and performance of this Amendment No. 5 other than such
filings with the Securities and Exchange Commission as Borrowers may deem
advisable to comply with applicable law.

 

(i) After giving effect to the provisions of this Amendment No. 5, no Event of
Default exists or has occurred and is continuing as of the date of this
Amendment No. 5 as a result of or in connection with the Merger.

 

7.     Conditions Precedent. The effectiveness of the amendments contained
herein shall be subject to:

 

(a) the receipt by Agent of this Amendment No. 5 duly authorized, executed and
delivered by the parties hereto;

 

(b) the receipt by Agent of the approval of Required Lenders, in form and
substance satisfactory to Agent, to the terms and conditions of this Amendment
No. 5;

 

(c) each of the Merger Agreements and the transactions contemplated thereby
shall have been or shall be duly authorized, executed and delivered by the
respective parties thereto prior to or contemporaneously with the effectiveness
thereof;

 

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(d) all conditions precedent to the obligations of the parties to the Merger
Agreements shall have been fulfilled (and not merely waived, except if approved
in writing by Agent), at or before the consummation of the Merger;

 

(e) all actions and proceedings required by the Merger Agreements, applicable
law or regulation and the transactions contemplated thereby shall have been duly
and validly taken in accordance with the terms thereof, and all required
consents thereto under any agreement, document or instrument to which Parent,
PPC or any of their affiliates is a party or by which any of its or their
properties are bound, and all applicable consents or approvals of each
Governmental Authority, shall have been obtained and be in full force and
effect;

 

(f) Agent shall have received, in form and substance satisfactory to Agent,
true, correct and complete copies of the Merger Agreements, duly executed,
authorized and delivered by each of the parties thereto;

 

(g) receipt by Agent of evidence, in form and substance satisfactory to Agent,
that (i) the Articles of Merger with respect to the Merger have been filed with
the Secretary of State of Minnesota and such merger is valid and effective in
accordance with the terms and provisions of the applicable corporate statutes of
the State of Minnesota, and (ii) the Merger is valid and effective in accordance
with the terms and provisions of the applicable corporate statutes of the State
of Minnesota.

 

8.     Effect of this Amendment. Except as expressly set forth herein, no other
amendments, consents, changes or modifications to the Financing Agreements are
intended or implied, and in all other respects the Financing Agreements are
hereby specifically ratified, restated and confirmed by all parties hereto as of
the effective date hereof and Borrowers shall not be entitled to any other or
further amendment or consent by virtue of the provisions of this Amendment No. 5
or with respect to the subject matter of this Amendment No. 5. To the extent of
conflict between the terms of this Amendment No. 5 and the other Financing
Agreements, the terms of this Amendment No. 5 shall control. The Loan Agreement
and this Amendment No. 5 shall be read and construed as one agreement.

 

9.     Governing Law. The validity, interpretation and enforcement of this
Amendment No. 5 and the other Financing Agreements and any dispute arising out
of the relationship between the parties hereto whether in contract, tort, equity
or otherwise, shall be governed by the internal laws of the State of Illinois
but excluding any principles of conflicts of law or other rule of law that would
cause the application of the law of any jurisdiction other than the laws of the
State of Illinois.

 

10.     Binding Effect. This Amendment No. 5 shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors and
assigns.

 

11.     Headings. The headings listed herein are for convenience only and do not
constitute matters to be construed in interpreting this Amendment No. 5.

 

12.     Counterparts. This Amendment No. 5 may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment No. 5, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto. Delivery of an executed counterpart of this
Amendment No. 5 by telefacsimile shall have the same force and effect as
delivery of an original executed counterpart of this Amendment No. 5. Any party
delivering an executed counterpart of this Amendment No. 5 by telefacsimile also
shall deliver an original executed counterpart of this Amendment No. 5, but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Amendment No. 5 as to such
party or any other party.

 

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 5 to be
duly executed and delivered by their authorized officers as of the day and year
first above written.

 

AGENT

    

CONGRESS FINANCIAL CORPORATION

    (CENTRAL), as Agent

 

By: /s/ Brian Hynds                      

 

Title: Vice President                    

           

BORROWERS

           

 

PEMSTAR INC.

 

By: /s/ Greg S. Lea                          

 

Title: CFO                                       

  

TURTLE MOUNTAIN CORPORATION

 

By: /s/ Roy Bauer                          

 

Title: Treasurer                              

      

GUARANTOR

    

 

GENTLELIFE, INC.

 

By: /s/ William H. Rice II              

 

Title: Assistant Secretary