Exhibit 10

 

THIRD AMENDMENT TO

LOAN AND SECURITY AGREEMENT

 

as of March 31, 2005

 

WELLS FARGO FOOTHILL, INC., as Agent and Lender

2450 Colorado Avenue

Suite 3000 West

Santa Monica, California 90404

 

Ladies and Gentlemen:

 

Wells Fargo Foothill, Inc., as Arranger and Administrative Agent (“Agent”) and
Lender (together with all other lenders party thereto from time to time, the
“Lenders”) and BGF Industries, Inc., a Delaware corporation, (“Borrower”) have
entered into certain financing arrangements pursuant to the Loan and Security
Agreement dated as of June 6, 2003 among Agent, Lenders and Borrower (as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, the “Loan Agreement”) and all other Loan
Documents at any time executed and/or delivered in connection therewith or
related thereto. All capitalized terms used herein shall have the meaning
assigned thereto in the Loan Agreement, unless otherwise defined herein.

 

Borrower, Agent and Lenders have agreed to certain amendments to the Loan
Agreement and the other Loan Documents, on and subject to the terms and
conditions contained in this Third Amendment to Loan and Security Agreement
(this “Amendment”).

 

In consideration of the foregoing and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the parties
hereto, the parties hereto hereby agree as follows:

 

1. Amendments to Loan Agreement and Loan Documents. In order to effectuate
certain amendments of the Loan Agreement agreed to among Agent, Lenders and
Borrower, the Loan Agreement is hereby amended as follows:

 

(a) The definition of the term “Applicable Prepayment Premium” as set forth in
Section 1.1 of the Loan Agreement, is hereby amended and restated in its
entirety as follows:

 

““Applicable Prepayment Premium” means, as of any date of determination, an
amount equal to (a) during the period of time from and after the date of the
execution and delivery of this Agreement up to June 7, 2005, 4% times the
Maximum Revolver Amount, (b) during the period of time from and including June
8, 2005 up to June 7, 2006, 3% times the Maximum Revolver Amount, (c) during the
period of time from and including June 8,

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2006 up to June 7, 2007, 2% times the Maximum Revolver Amount, (d) during the
period of time from and including June 8, 2007, up to June 7, 2008, 1% times the
Maximum Revolver Amount and (e) during the period of time from and including
June 8, 2008, up to the Maturity Date, 1/2% times the Maximum Revolver Amount,
provided that, in the event that Borrower funds the final payment in full of all
Obligations with the proceeds of (i) loans made by a commercial banking unit of
Wells Fargo and so long as Agent has received not less than 45 days advance
written notice of Borrower’s intention to prepay the Obligations, and so long as
no Default or Event of Default exists at the time of such prepayment, the
Applicable Prepayment Premium shall be zero, and (ii) a private placement of
subordinated debt or an equity offering, or a sale of substantially all assets
or all capital stock of Borrower and so long as Agent has received not less than
60 days advance written notice of Borrower’s intention to prepay the
Obligations, and so long as no Default or Event of Default exists at the time of
such prepayment, the otherwise Applicable Prepayment Premium shall be reduced by
50%.”

 

(b) Subsection (j) of the definition of “Eligible Account” as set forth in
Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety
as follows:

 

“(j) Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, has gone out of business, or as to which
Borrower has received notice of an imminent Insolvency Proceeding or a material
impairment of the financial condition of such Account Debtor; provided, however,
that Accounts of Owens Corning will be eligible (if otherwise eligible pursuant
to the other requirements herein) up to a maximum amount of $750,000;”

 

(c) The definition of “Liquidity Reserve” as set forth in Section 1.1 of the
Loan Agreement is hereby amended and restated in its entirety as follows:

 

““Liquidity Reserve” shall mean a reserve established by Agent in its sole and
absolute discretion from time to time, in the amount of $4,000,000 (or such
other amount as Agent determines) as of the Closing Date, and automatically
increasing by $200,000 on the first Business Day of each week thereafter,
provided that, such Liquidity Reserve shall not exceed $5,200,000. Agent will
release part or all of such Liquidity Reserve on a semi-annual basis, so long as
no Default or Event of Default then exists and so long as Borrower has Excess
Availability of not less than $1,000,000 after giving effect to any release of
the Liquidity Reserve by Agent in its sole discretion.”

 

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(d) The definition of the term “Maximum Revolver Amount” as set forth in Section
1.1 of the Loan Agreement is hereby amended and restated in its entirety as
follows:

 

““Maximum Revolver Amount” means $19,000,000.”

 

(e) The definition of the term “Required Availability” as set forth in Section
1.1 of the Loan Agreement is hereby amended and restated in its entirety as
follows:

 

““Required Availability” means Excess Availability and unrestricted cash and
Cash Equivalents subject to Cash Management Agreements in an aggregate amount of
not less than $12,000,000 as of the Closing Date, and $1,000,000 at all times
thereafter.”

 

(f) Subsection (b) of the definition of “Subordinated Note Interest Conditions”
as set forth in Section 1.1 of the Loan Agreement is hereby amended and restated
in its entirety as follows:

 

“(b) Borrower has Excess Availability of not less than $1,000,000 (on a pro
forma basis, with trade payables being paid when due, and expenses and
liabilities being paid in the ordinary course of business and without
acceleration of sales, and after giving effect to the then contemplated payment
of interest under the Subordinated Notes) for the immediately following 30
days.”

 

(g) Subsection (b) of the definition of “Subordinated Note Repurchase
Conditions” as set forth in Section 1.1 of the Loan Agreement is hereby amended
and restated in its entirety as follows:

 

“(b) Borrower has Excess Availability of not less than $1,000,000 (on a pro
forma basis, with trade payables being paid when due, and expenses and
liabilities being paid in the ordinary course of business and without
acceleration of sales and after giving effect to the then contemplated
repurchase of Subordinated Notes) for the immediately following 30 days;”

 

(h) The definition of “Term Loan Amount” as set forth in Section 1.1 of the Loan
Agreement is hereby amended and restated in its entirety as follows:

 

““Term Loan Amount” means the lesser of (a) $6,000,000, and (b) 70% of the net
Orderly Liquidation Value of eligible equipment of Borrower as set forth in the
Appraisal Report by Daley Hodkin, LLC, dated March, 2003 (together with any
additional or replacement equipment as described in appraisals satisfactory in
form and substance to Agent performed after the Closing Date), plus 70% of the
quick sale value of the following parcels of real property owned by Borrower:
800 Goodes Ferry Boulevard, South Hill, Virginia 23970, and 179 Butts Street,
South Hill, Virginia 23970, net of environmental reserves, all as determined by
Agent.”

 

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(i) Subsection 2.1(a) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

 

“(a) Subject to the terms and conditions of this Agreement, and during the term
of this Agreement, each Lender with a Revolver Commitment agrees (severally, not
jointly or jointly and severally) to make advances (“Advances”) to Borrower in
an amount at any one time outstanding not to exceed such Lender’s Pro Rata Share
of an amount equal to the lesser of (i) the Maximum Revolver Amount less the
Letter of Credit Usage and less the then-outstanding balance of the Term Loan,
or (ii) the Borrowing Base less the Letter of Credit Usage and the aggregate
amount of the Inventory Reserves. For purposes of this Agreement, “Borrowing
Base,” as of any date of determination, shall mean the result of:

 

(x) the lesser of

 

(i) 85% of the amount of Eligible Accounts, less the amount, if any, of the
Dilution Reserve, and

 

(ii) an amount equal to Borrower’s Collections with respect to Accounts for the
immediately preceding 120 day period, plus

 

(y) the lowest of

 

(i) $10,000,000,

 

(ii) 35% of the value of Eligible Inventory consisting of raw materials plus 55%
of the value of Eligible Inventory consisting of finished goods,

 

(iii) 80% times the then extant Net Liquidation Percentage times the book value
of Borrower’s Inventory, and

 

(iv) the amount of credit availability created by clause (x) above, minus

 

(z) the sum of (i) the Bank Product Reserve, and (ii) the aggregate amount of
reserves, if any, established by Agent under Section 2.1(b).”

 

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(j) Section 3.4 of the Loan Agreement is hereby amended and restated in its
entirety as follows:

 

“3.4 Term. This Agreement shall become effective upon the execution and delivery
hereof by Borrower, Agent, and the Lenders and shall continue in full force and
effect for a term ending on the earlier of (i) February 28, 2010 and (ii) the
date which is 180 days prior to the maturation date of the Subordinated Notes
(the “Maturity Date”). The foregoing notwithstanding, the Lender Group, upon the
election of the Required Lenders, shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.”

 

(k) Amended and Restated Term Loan. Contemporaneously herewith, and as a
one-time financial accommodation to Borrower, Agent and Lenders are making an
additional advance to Borrower in the original principal amount of $2,396,001
(the “Additional Term Loan”). The Additional Term Loan shall be consolidated
with the outstanding principal balance of the existing Term Loan (such principal
balance together with the Additional Term Loan, collectively, (“Term Loan”),
which Term Loan, as of the date hereof shall be in the original principal amount
of $6,000,000, and which shall amortize as set forth in the Loan Agreement.

 

(l) Environmental Reserves. Upon receipt by Agent of a satisfactory written
status report from Borrower regarding environmental matters on the Borrower’s
real property, Agent will release the $550,000 environmental reserve currently
in place; provided, however, that the release of such reserve is without
prejudice to Agent’s right to institute any and all other Reserves, including,
but not limited to, the imposition of an environmental reserve in the future.

 

2. Acknowledgment.

 

(a) Acknowledgment of Obligations. Borrower hereby acknowledges, confirms and
agrees that as of the close of business on March 29, 2005, Borrower is indebted
to Agent and Lenders in respect of the Advances in the principal amount of
$11,500,000, in respect of the Term Loan in the principal amount of $3,239,999
and in respect of Letter of Credit Usage (including undrawn Letters of Credit
with an aggregate face amount of $179,400.35) in the amount of $179,400.35. All
such Obligations, together with interest accrued and accruing thereon, and fees,
costs, expenses and other charges payable by Borrower to Agent and Lenders, are
unconditionally owing by Borrower to Agent and Lenders in accordance with the
terms of the Loan Documents, without offset, defense or counterclaim of any
kind, nature or description whatsoever.

 

(b) Acknowledgment of Security Interests. Borrower and each Guarantor hereby
acknowledges, confirms and agrees that Agent and Lenders have and shall continue
to have valid, enforceable and perfected liens upon and security interests in
all collateral, including, without limitation, the Collateral, heretofore
granted to Agent and Lenders pursuant to the Loan Documents or otherwise granted
to or held by Agent or any Lender.

 

(c) Binding Effect of Documents. Borrower and each Guarantor hereby
acknowledges, confirms and agrees that: (i) each of the Loan Documents to which
it is a party has been duly executed and delivered to Agent and Lenders by
Borrower and Guarantors, as the

 

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case may be, and each is in full force and effect as of the date hereof, (ii)
the agreements and obligations of Borrower and each Guarantor contained in such
documents and in this Agreement constitute the legal, valid and binding
Obligations of Borrower and each Guarantor, respectively, enforceable against it
in accordance with their respective terms, and Borrower and each Guarantor has
no valid defense to the enforcement of such Obligations, and (iii) Agent and
Lenders are and shall be entitled to the rights, remedies and benefits provided
for in the Loan Documents and applicable law.

 

3. Representations, Warranties and Covenants. In addition to the continuing
representations, warranties and covenants heretofore or hereafter made by
Borrower and Guarantors to Agent and Lenders pursuant to the Loan Agreement and
the other Loan Documents, Borrower hereby 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 and
shall be incorporated into and made a part of the Loan Documents):

 

(a) No Event of Default exists on the date of this Amendment (after giving
effect to the amendments to the Loan Agreement set forth herein).

 

(b) This Amendment has been duly executed and delivered by Borrower and each
Guarantor and is in full force and effect as of the date hereof, and the
agreements and obligations of Borrower and each Guarantor contained herein
constitute its legal, valid and binding obligations, enforceable against it in
accordance with the terms hereof.

 

(c) This Amendment and each other agreement or instrument to be executed and
delivered by Borrower and Guarantors hereunder has been duly executed and
delivered by Borrower and Guarantors and is in full force and effect as of the
date hereof, and the agreements and obligations of Borrowers contained herein
and therein constitute legal, valid and binding obligations of Borrower and
Guarantors enforceable against Borrower and Guarantors in accordance with their
terms.

 

4. Conditions Precedent. The effectiveness of the consent contained in Section 2
of this Amendment shall be subject to the receipt by Agent of each of the
following, in form and substance satisfactory to Agent:

 

(a) a fully executed copy of this Amendment, duly authorized, executed and
delivered by Borrower and each Guarantor.

 

(b) Borrower’s written status report with respect to environmental matters.

 

(c) such additional documents and due diligence as determined by Agent.

 

5. Effect of this Amendment. Except as modified pursuant hereto, no other
changes or modifications to the Loan Agreement and the other Loan Documents are
intended or implied and in all other respects the Loan Agreement and the other
Loan Documents are hereby specifically ratified, restated and confirmed by all
parties hereto as of the effective date hereof. To the extent of any conflict
between the terms of this Amendment and any of the Loan Documents, the terms of
this Amendment shall control. The Loan Agreement, as amended hereby, the other
Loan Documents, and this Amendment shall be read and be construed as one
agreement.

 

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6. Amendment Fee. The Borrower shall pay to Agent an amendment fee in an amount
equal to $25,000, which amount shall be fully earned and payable simultaneously
with the execution of this Amendment and shall not be subject to refund, rebate
or proration for any reason whatsoever. Such fee shall be in addition to all
other amounts payable under the Loan Documents, shall constitute part of the
Obligations and may, at Agent’s option, be charged directly to any account of
the Borrower maintained with Agent.

 

7. Further Assurances. The parties hereto shall execute and deliver such
additional documents and take such additional actions as may be necessary or
desirable to effectuate the provisions and purposes of this Amendment.

 

8. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AMENDMENT
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 NEW YORK (WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW).

 

9. Binding Effect. This Amendment shall be binding upon and inure to the benefit
of each of the parties hereto and their respective successors and assigns.

 

10. Counterparts. This Amendment may be executed in any number of counterparts,
but all of such counterparts when executed shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto. This Amendment may be executed and delivered via telecopier
with the same force and effect as if it were a manually executed and delivered
counterpart.

 

[SIGNATURE PAGE FOLLOWS]

 

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Very truly yours, BORROWER: BGF INDUSTRIES, INC. By:  

 

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Title:  

 

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ACKNOWLEDGED AND AGREED TO

BY THE GUARANTORS:

 

NVH INC. By:  

 

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Title:  

 

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GLASS HOLDINGS LLC By:  

 

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Title:  

 

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BGF SERVICES, INC. By:  

 

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Title:  

 

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AGREED:

WELLS FARGO FOOTHILL, INC., as Agent and Lender By:  

 

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Title:  

 

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