EXHIBIT 4.6(b)
AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT TO LOAN AGREEMENT (this "AMENDMENT") is made and entered
into as of March 21, 1999 by and among INNOVATIVE VALVE TECHNOLOGIES, INC., a
Delaware corporation (the "BORROWER"); each of the Lenders which is or may from
time to time become a party to the Loan Agreement (as defined below)
(individually, a "LENDER" and, collectively, the "LENDERS") and CHASE BANK OF
TEXAS, N. A., a national banking association (previously known as Texas Commerce
Bank National Association), acting as agent for the Lenders (in such capacity,
together with its successors in such capacity, the "AGENT").
RECITALS
A. The Borrower, the Lenders and the Agent executed and delivered that
certain Loan Agreement dated as of July 7, 1998. Said Loan Agreement, as
amended, supplemented and restated, is herein called the "LOAN AGREEMENT". Any
capitalized term used in this Amendment and not otherwise defined shall have the
meaning ascribed to it in the Loan Agreement.
B. The Borrower, the Lenders and the Agent desire to amend the Loan
Agreement in certain respects.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and warranties herein set forth, and further good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Lenders and the Agent do hereby agree as
follows:
SECTION 1. AMENDMENTS TO LOAN AGREEMENT.
(a) New definitions of "Additional Collateral", "Additional Collateral
Event", "Borrowing Base", "Borrowing Base Certificate", "Eligible Accounts",
"Eligible Inventory", "Free Cash Flow", "Maximum Revolving Loan Available
Amount", "Minimum Monthly EBITDA", "Monthly Financial Statements, "Over Advance
Amount" and "Stationary Term Loan Balance" are hereby added to SECTION 1.1 of
the Loan Agreement, such new definitions to read in their entireties as follows:
ADDITIONAL COLLATERAL shall have the meaning ascribed to such
term in SECTION 7.8 hereof.
ADDITIONAL COLLATERAL EVENT shall have the meaning ascribed to
such term in SECTION 7.8 hereof.
BORROWING BASE means, for any month, an amount determined as
follows:
(i) 80% of the aggregate amount of all Eligible Accounts
of Borrower and its Subsidiaries (other than Foreign
Subsidiaries) shown on the most recent Borrowing Base
Certificate
delivered pursuant to SECTION 7.2 hereof, PLUS
(ii) 50% of the aggregate amount of all Eligible Inventory
(determined at the lower of cost or market on a
consistent basis) of Borrower or any of its
Subsidiaries (other than Foreign Subsidiaries) shown
on the most recent Borrowing Base Certificate
delivered pursuant to SECTION 7.2 hereof; PROVIDED
that the amount calculated pursuant to this CLAUSE
(II) shall not exceed 50% of the Borrowing Base, PLUS
(iii) the then current Stationary Term Loan Balance, PLUS
or MINUS, as the case may be,
(iv) the then current Over/Under Advance Amount.
In the absence of the applicable Borrowing Base Certificate, Agent
shall determine the Borrowing Base from time to time in its reasonable
discretion, taking into account all information reasonably available to
it, and the Borrowing Base from time to time so determined shall be the
Borrowing Base for all purposes of this Agreement until the applicable
Borrowing Base Certificate, in Proper Form, is furnished to and
accepted by Agent. Notwithstanding anything herein to the contrary, in
calculating the Borrowing Base, the aggregate of the amounts calculated
under CLAUSES (I) AND (II) above shall not exceed $45,000,000.
BORROWING BASE CERTIFICATE shall mean a certificate, duly
executed by the chief executive officer, chief financial officer,
treasurer or controller of Borrower, appropriately completed and in
substantially the form of EXHIBIT J hereto. Each Borrowing Base
Certificate shall be effective only as accepted by Agent (and with such
revisions, if any, as Agent may reasonably require as a condition to
such acceptance).
ELIGIBLE ACCOUNTS shall mean, as at any date of determination
thereof, each Account (both those already billed and unbilled
receivables, i.e. work-in-process) of Borrower or any of its
Subsidiaries (other than Foreign Subsidiaries) which is subject to a
Lien created by any Security Document and on which Agent shall have a
first-priority perfected Lien (subject only to Permitted Liens) which
is at said date payable to Borrower or any such Subsidiary and which
complies with the following requirements: (a) (i) the subject goods
have been sold to an account debtor on an absolute sale basis on open
account and not on consignment, on approval or on a "sale or return"
basis or subject to any other repurchase or return agreement and no
material part of the subject goods has been returned, rejected, lost or
damaged, (ii) the Account is stated to be payable in Dollars and is not
evidenced by chattel paper or an instrument of any kind (unless Agent
has a perfected first priority Lien (subject only to Permitted Liens)
on such chattel paper or instrument) and said account debtor is not
insolvent or the subject of any bankruptcy or insolvency proceedings of
any kind; (b) the account debtor must be located in the United States;
(c) it is a valid obligation of the account debtor thereunder and is
not subject to any offset or other defense on the part of such account
debtor or to any claim on the part of such account debtor denying
liability thereunder; (d) it is subject to no Lien whatsoever, except
for the Liens created or permitted pursuant to the
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Loan Documents; (e) to the extent applicable, it is evidenced by an
invoice submitted to the account debtor in timely fashion and in the
normal course of business; (f) it has not remained unpaid beyond 90
days after the date of the invoice; (g) it does not arise out of
transactions with an employee, officer, agent, director or stockholder
of Borrower or any of its Subsidiaries or any Affiliate of Borrower or
any of its Subsidiaries, and (h) each of the representations and
warranties set forth in the Security Documents executed by Borrower and
its Subsidiaries with respect thereto is true and correct in all
material respects on such date. In the event of any dispute under the
foregoing criteria, about whether an Account is or has ceased to be an
Eligible Account, the decision of Agent, made in good faith, shall be
conclusive and binding, absent manifest error.
ELIGIBLE INVENTORY shall mean, as at any date of determination
thereof, Inventory of Borrower or any of its Subsidiaries (other than
Foreign Subsidiaries) which is subject to a Lien created by any
Security Documents and on which Agent shall have a first-priority
perfected Lien (subject only to Permitted Liens) and which complies
with the following requirements: (a) such Inventory shall be valued in
accordance with GAAP and consist of (i) raw materials and (ii) finished
goods (but shall not include any work-in-process), PROVIDED that all
such Inventory shall be within the United States of America; (b) it is
in good condition, meets all standards imposed by any Governmental
Authority having regulatory authority over it, its use and/or sale and
is either currently usable or currently salable in the normal course of
business of the Borrower or its applicable Subsidiary, as the case may
be; (c) it is not in the possession or control of any warehouseman,
bailee, or any agent or processor for or customer of Borrower or any of
its Subsidiaries or, if it is, (i) Borrower or its applicable
Subsidiary, as the case may be, shall have notified, in a manner that
effectively under applicable law creates a valid and first priority
Lien in favor of Agent in such Inventory, such warehouseman, bailee,
agent, processor or customer of Agent's Lien and (ii) such
warehouseman, bailee, agent, processor or customer has subordinated any
Lien it may claim therein and agreed to hold all such Inventory during
the continuance of an Event of Default for Agent's account subject to
the Agent's instructions, and (d) each of the representations and
warranties set forth in the Security Documents executed by Borrower and
its Subsidiaries with respect thereto is true and correct in all
material respects on such date. In the event of any dispute under the
foregoing criteria, about whether a portion of Inventory is or has
ceased to be Eligible Inventory, the decision of Agent, made in good
faith, shall be conclusive and binding, absent manifest error.
FREE CASH FLOW means, for any period for which the amount
thereof is to be determined, the Consolidated Net Income of Borrower
PLUS, to the extent deducted in calculating Consolidated Net Income,
depreciation, amortization and accrued fees paid or payable to the
Lenders under SECTION 3 of that certain Amendment to Loan Agreement
dated as of March 21, 1999 executed by and between Borrower and the
Lenders MINUS Capital Expenditures.
MAXIMUM REVOLVING LOAN AVAILABLE AMOUNT means, at any date, an
amount equal to the least of (i) the aggregate of the Revolving Loan
Commitments or (ii) the then effective Borrowing Base or (iii) for any
period, the amount set forth in the table below opposite such
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period (as such amounts set forth in the table below may be adjusted
from time to time by the Majority Lenders):
PERIOD AMOUNT
------ ------
Through 3/20/99 $73,800,000
3/21/99 through 4/20/99 $76,500,000
4/21/99 through 5/20/99 $77,000,000
5/21/99 through 6/20/99 $76,000,000
6/21/99 through 7/20/99 $75,500,000
7/21/99 through 8/20/99 $73,500,000
8/21/99 through 9/20/99 $73,500,000
9/21/99 through 10/20/99 $75,000,000
10/21/99 through 11/20/99 $76,300,000
11/21/99 through 12/20/99 $74,000,000
12/21/99 through 1/20/2000 $73,000,000
1/21/2000 through 2/20/2000 $71,000,000
2/21/2000 through 3/20/2000 $71,000,000
3/21/2000 through the Revolving Loan
Maturity Date $70,500,000
MINIMUM MONTHLY EBITDA means, for any applicable period, the
sum of the amounts set forth opposite the applicable fiscal months
included in such period on EXHIBIT K hereto.
MONTHLY FINANCIAL STATEMENTS means the monthly financial
statements of a Person, which statements shall include a balance sheet
as of the end of such fiscal month, an income statement for the period
ended on such fiscal month and for the fiscal year to date and a
statement of cash flows for the fiscal year to date, subject to normal
year-end adjustments, prepared in accordance with GAAP in all material
respects except that such statements are condensed and exclude detailed
footnote disclosures and certified by the chief financial officer or
other authorized officer of such Person as fairly presenting, in all
material respects, the financial position of such person as of such
date. Monthly Financial Statements shall set forth in comparative form
the corresponding budgeted income statement amounts consolidated and by
Subsidiary, and balance sheet and statement of cash flow amounts on a
consolidated basis. To the extent required by Agent or the Majority
Lenders, Monthly Financial Statements shall also include an unaudited
consolidating balance sheet and income statement for the applicable
Person, in Proper Form, certified by the chief financial officer or
other authorized officer of such Person as true, correct and complete
in all material respects.
OVER/UNDER ADVANCE AMOUNT means, for any period, the amount
set forth in the table below opposite such period:
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PERIOD OVER/UNDER ADVANCE AMOUNT
Through 3/20/99 $2,500,000
3/21/99 through 4/20/99 $1,700,000
4/21/99 through 5/20/99 ($700,000)
5/21/99 through 6/20/99 ($3,000,000)
6/21/99 through 7/20/99 ($2,900,000)
7/21/99 through 8/20/99 ($2,000,000)
8/21/99 through 9/20/99 ($400,000)
9/21/99 through 10/20/99 $1,000,000
10/21/99 through 11/20/99 $0
11/21/99 through 12/20/99 ($3,200,000)
12/21/99 through 1/20/2000 ($2,500,000)
1/21/2000 through 2/20/2000 ($900,000)
2/21/2000 through 3/20/2000 $0
3/21/2000 through the Revolving Loan
Maturity Date ($200,000)
PRIMARY BORROWING BASE means, on any day, the aggregate of the
amounts calculated on such day under CLAUSES (I) AND (II) of the
definition of "Borrowing Base".
STATIONARY TERM LOAN BALANCE means (i) through July 30, 1999,
$35,000,000, (ii) for the period from July 31, 1999 through January 30,
2000, $34,000,000 and (iii) thereafter, $33,000,000, as such amount may
be reduced in accordance with the provisions of SECTIONS 2.1, 2.3,
3.2(B)(1) AND 8.5 hereof.
(b) The definitions of "Base Rate", "Consolidated EBITDA", "Interest
Payment Dates", "Loan Documents", "Revolving Loan Commitment Percentage",
"Revolving Loan Maturity Date" and "Security Agreements" set forth in SECTION
1.1 of the Loan Agreement are hereby amended to read in their entireties as
follows:
BASE RATE means for any day a rate per annum equal to the
lesser of (a) two percent (2%) per annum plus the Prime Rate for that
day or (b) the Ceiling Rate.
CONSOLIDATED EBITDA means, without duplication, for any period
the Consolidated Net Income of Borrower PLUS, to the extent deducted in
calculating Consolidated Net Income, depreciation, amortization, other
non-cash items, Interest Expense, fees payable under SECTION 3 of that
certain Amendment to Loan Agreement dated as of March 21, 1999 executed
by and among Borrower, Agent and certain Lenders, and provisions for
income taxes.
INTEREST PAYMENT DATES means April 1, 1999 and the first day
of each calendar month thereafter prior to the Maturity Date and the
Revolving Loan Maturity Date.
LOAN DOCUMENTS means, collectively, this Agreement, the Notes,
the Guaranties, all Applications, the Security Documents, the Notice of
Entire Agreement, all instruments,
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certificates and agreements now or hereafter executed or delivered by
any Obligor to Agent or any Lender pursuant to any of the foregoing or
in connection with the Obligations or any commitment regarding the
Obligations, and all amendments, modifications, renewals, extensions,
increases and rearrangements of, and substitutions for, any of the
foregoing.
REVOLVING LOAN COMMITMENT means, as to any Lender, the
obligation, if any, of such Lender to make Loans and incur or
participate in Letter of Credit Liabilities in an aggregate principal
amount at any one time outstanding up to (but not exceeding) the
amount, if any, set forth opposite such Lender's name on the following
table, or otherwise provided for in an Assignment and Acceptance
Agreement (as the same may be reduced from time to time pursuant to
SECTION 2.3 hereof):
LENDER REVOLVING COMMITMENT
------ --------------------
CHASE BANK OF TEXAS, N. A. $24,444,444.44
XXXXX FARGO BANK (TEXAS), $8,888,888.89
NATIONAL ASSOCIATION
BANK OF AMERICA TEXAS, N.A. $15,555,555.56
COMERICA BANK-TEXAS $13,333,333.33
NATIONAL CITY BANK OF $17,777,777.78
KENTUCKY
REVOLVING LOAN COMMITMENT PERCENTAGE means, as to any
Revolving Loan Lender, the percentage equivalent of a fraction the
numerator of which is the amount of such Lender's Revolving Loan
Commitment (or if the Revolving Loan Commitments have terminated, such
Lender's outstanding Loans) and the denominator of which is the
aggregate amount of the Revolving Loan Commitments of all Lenders (or
if the Revolving Loan Commitments have terminated, the aggregate amount
of all Loans).
REVOLVING LOAN MATURITY DATE means the maturity of the Notes,
April 20, 2000.
SECURITY AGREEMENTS means (i) security agreements, each in
Proper Form, executed or to be executed in favor of Agent, securing the
Obligations, covering all of the issued and outstanding equity
interests in any Subsidiary of Borrower (other than non-voting
preferred stock of Puget Investments, Inc. outstanding as of the
Effective Date and other than Foreign Subsidiaries) and (ii) security
instruments, each in Proper Form, executed in favor of Agent, securing
the Obligations, covering all real and personal Property of Borrower
and its Subsidiaries (other than Foreign Subsidiaries) and (iii)
security agreements, each in Proper Form, executed or to be executed in
favor of Agent, securing the Obligations, covering 65% of the issued
and outstanding equity interests in any Foreign Subsidiary, as the same
may from time to time be amended, modified, restated or supplemented.
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(c) SECTION 2.1 of the Loan Agreement is hereby amended to read in its
entirety as follows:
2.1 LOANS. Each Lender severally agrees, subject to all of the
terms and conditions of this Agreement (including, without limitation,
SECTIONS 5.1 AND 5.2 hereof), to make Loans to Borrower, from time to
time on or after the Effective Date and during the Revolving Loan
Availability Period, in an aggregate principal amount at any one time
outstanding (including its Revolving Loan Commitment Percentage of all
Letter of Credit Liabilities at such time) up to but not exceeding such
Lender's Revolving Loan Commitment Percentage of the Maximum Revolving
Loan Available Amount. Subject to the conditions in this Agreement, any
such Loan repaid prior to the Revolving Loan Termination Date may be
reborrowed pursuant to the terms of this Agreement; PROVIDED, that any
and all such Loans shall be due and payable in full at the end of the
Revolving Loan Availability Period and PROVIDED, FURTHER that the
Stationary Term Loan Balance shall automatically be reduced by any
payments which reduce the aggregate unpaid principal balance of the
Revolving Notes below the then current Stationary Term Loan Balance
prior to giving effect to such reduction (with the result that the
revolving nature of the credit facility provided for herein shall only
apply to the Revolving Notes to the extent that the aggregate unpaid
principal balance of the Revolving Notes exceeds the then current
Stationary Term Loan Balance). Borrower, Agent and the Lenders agree
pursuant to Chapter 346 ("CHAPTER 346") of the Texas Finance Code, that
Chapter 346 (which relates to open-end line of credit revolving loan
accounts) shall not apply to this Agreement, the Revolving Notes or any
Revolving Loan Obligation and that neither the Revolving Notes nor any
revolving Loan Obligation shall be governed by Chapter 346 or subject
to its provisions in any manner whatsoever.
(d) SECTION 2.2(A) of the Loan Agreement is hereby amended to read in
its entirety as follows:
(a) LETTERS OF CREDIT. Subject to the terms and conditions of
this Agreement, and on the condition that aggregate Letter of Credit
Liabilities shall never exceed $502,317 (less the face amount of any
Letters of Credit issued and outstanding as of March 21, 1999 which are
terminated or which expire after the date hereof), (i) Borrower shall
have the right to, in addition to Loans provided for in SECTION 2.1
hereof, utilize the Revolving Loan Commitments from time to time during
the Revolving Loan Availability Period by obtaining the issuance of
standby letters of credit for the account of Borrower if Borrower shall
so request in the notice referred to in SECTION 2.2(B)(I) hereof (such
standby letters of credit as any of them may be amended, supplemented,
extended or confirmed from time to time, being herein collectively
called the "LETTERS OF CREDIT)" and (ii) Chase Texas agrees to issue
such Letters of Credit. Upon the date of the issuance of a Letter of
Credit, the applicable Issuer shall be deemed, without further action
by any party hereto, to have sold to each Revolving Loan Lender, and
each such Lender shall be deemed, without further action by any party
hereto, to have purchased from the applicable Issuer, a participation,
to the extent of such Lender's Revolving Loan Commitment Percentage, in
such Letter of Credit and the related Letter of Credit Liabilities,
which participation shall terminate on the earlier of the expiration
date of such Letter of Credit or the Revolving Loan Termination Date.
No Letter of Credit shall have an expiration date later than one year
from date of issuance. Any Letter of Credit
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that shall have an expiration date after the end of the Revolving Loan
Availability Period shall be subject to Cover or backed by a standby
letter of credit in form and substance, and issued by a Person,
acceptable to Agent in its sole discretion. Chase Texas or, with the
prior approval of Borrower, Agent and the applicable Lender, another
Lender shall be the Issuer of each Letter of Credit.
(e) SECTION 2.2(B)(II) of the Loan Agreement is hereby amended to read
in its entirety as follows:
(ii) No Letter of Credit may be issued if after
giving effect thereto the sum of (A) the aggregate outstanding
principal amount of Loans plus (B) the aggregate Letter of
Credit Liabilities would exceed the aggregate of the Maximum
Revolving Loan Available Amount. On each day during the period
commencing with the issuance of any Letter of Credit and until
such Letter of Credit shall have expired or been terminated,
the Revolving Loan Commitment of each Revolving Loan Lender
shall be deemed to be utilized for all purposes hereof in an
amount equal to such Lender's Revolving Loan Commitment
Percentage of the amount then available for drawings under
such Letter of Credit (or any unreimbursed drawings under such
Letter of Credit).
(f) SECTION 2.2(B)(IV) of the Loan Agreement is hereby amended to read
in its entirety as follows:
(iv) Borrower shall be irrevocably and
unconditionally obligated forthwith to reimburse Agent, on the
date on which the Agent notifies Borrower of the date and
amount of any payment by the Issuer of any drawing under a
Letter of Credit, for the amount paid by any Issuer upon such
drawing, without presentment, demand, protest or other
formalities of any kind, all of which are hereby waived. Such
reimbursement may, subject to satisfaction of the conditions
in SECTIONS 5.1 and 5.2 hereof and to the Maximum Revolving
Loan Available Amount (after adjustment in the same to reflect
the elimination of the corresponding Letter of Credit
Liability), be made by the borrowing of Loans. Agent will pay
to each Revolving Loan Lender such Lender's Revolving Loan
Commitment Percentage of all amounts received from Borrower
for application in payment, in whole or in part, of the
Reimbursement Obligation in respect of any Letter of Credit,
but only to the extent such Lender has made payment to Agent
in respect of such Letter of Credit pursuant to CLAUSE (III)
above.
(g) SECTION 2.2(B)(V) of the Loan Agreement is hereby amended to read
in its entirety as follows:
(v) Borrower will pay to Agent at the Principal
Office for the account of each Revolving Loan Lender a letter
of credit fee with respect to each Letter of Credit equal to
the greater of (x) $500 or (y) 2.0% multiplied by the face
amount of such Letter of Credit (and computed on the basis of
the actual number of days elapsed in a year composed of 360
days), in each case for the period from and including the date
of issuance of such Letter of Credit to and including the date
of expiration or
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termination thereof, such fee to be due and payable in
advance. Agent will pay to each Revolving Loan Lender,
promptly after receiving any payment in respect of letter of
credit fees referred to in this CLAUSE (V), an amount equal to
the product of such Lender's Revolving Loan Commitment
Percentage TIMES the amount of such fees. In addition to and
cumulative of the above described fees, Borrower shall pay to
Agent, for the account of the applicable Issuer, in advance on
the date of the issuance of the applicable Letter of Credit, a
fronting fee in an amount equal to 1/8% of the face amount of
the applicable Letter of Credit (such fronting fee to be
retained by the applicable Issuer for its own account).
(h) SECTION 2.3 of the Loan Agreement is hereby amended to read in its
entirety as follows:
2.3 TERMINATIONS OR REDUCTIONS OF COMMITMENTS.
(a) MANDATORY. On the Revolving Loan Termination Date, all
Revolving Loan Commitments shall be terminated in their entirety. The
Revolving Loan Commitments are also subject to reduction as provided in
SECTION 8.5 hereof.
(b) OPTIONAL. Borrower shall have the right to terminate or
reduce the unused portion of the Revolving Loan Commitments at any time
or from time to time, PROVIDED that Borrower shall give notice of each
such termination or reduction to Agent as provided in SECTION 4.3
hereof. Borrower may elect to apply all or any part of such voluntary
reduction to the Stationary Term Loan Balance by so stating in its
written notice of reduction.
(c) NO REINSTATEMENT. No termination or reduction of the
Revolving Loan Commitments may be reinstated without the written
approval of Agent and the Lenders.
(i) SECTION 2.4 of the Loan Agreement is hereby amended to read in its
entirety as follows:
2.4 [INTENTIONALLY DELETED]
(j) SECTION 2.5 of the Loan Agreement is hereby amended to read in its
entirety as follows:
2.5 SEVERAL OBLIGATIONS. The failure of any Lender to make any
Loan to be made by it on the date specified therefor shall not relieve
any other Lender of its obligation to make its Loan on such date, but
neither Agent nor any Lender shall be responsible or liable for the
failure of any other Lender to make a Loan to be made by such other
Lender or to participate in, or co-issue, any Letter of Credit.
Notwithstanding anything contained herein to the contrary, (a) no
Lender shall be required to make or maintain Loans at any time
outstanding if as a result the total Revolving Loan Obligations held by
such Lender shall exceed the lesser of (1) such Lender's Revolving Loan
Commitment Percentage of all Revolving Loan Obligations and (2) such
Lender's Revolving Loan Commitment Percentage of the Maximum Revolving
Loan Available Amount and (b) if a Revolving Loan Lender fails to
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make a Loan as and when required hereunder, then upon each subsequent
event which would otherwise result in funds being paid to the
defaulting Lender, the amount which would have been paid to the
defaulting Lender shall be divided among the non-defaulting Lenders
ratably according to their respective shares of the outstanding
Revolving Loan Commitment Percentages until the Revolving Loan
Obligations of each Revolving Loan Lender (including the defaulting
Lender) are equal to such Lender's Revolving Loan Commitment Percentage
of the total Revolving Loan Obligations.
(k) SECTION 2.7 of the Loan Agreement is hereby amended to read in its
entirety as follows:
2.7 USE OF PROCEEDS. The proceeds of the Loans shall be used
to refinance existing Borrowed Money Indebtedness of Borrower, to pay
Reimbursement Obligations and for other working capital and general
corporate purposes. Neither Agent nor any Lender shall have any
responsibility as to the use of any proceeds of the Loans.
(l) SECTION 3.2 of the Loan Agreement is hereby amended to read in its
entirety as follows:
3.2 PREPAYMENTS.
(a) OPTIONAL PREPAYMENTS. Except as provided in SECTION 3.3
hereof, Borrower shall have the right to prepay, on any Business Day,
in whole or in part, without the payment of any penalty or fee, any
Loans at any time or from time to time, PROVIDED that Borrower shall
give Agent notice of each such prepayment as provided in SECTION 4.3
hereof.
(b) MANDATORY PREPAYMENTS AND COVER. Except, in each case, as
provided in SECTION 3.3 hereof,
(1) INSURANCE PROCEEDS AND CONDEMNATION AWARDS.
(i) Promptly following the receipt thereof
by Borrower or any of its Subsidiaries, subject to
the rights of any applicable lessor, Borrower shall
deposit or cause to be deposited with Agent in an
interest bearing account (but without any obligation
to maximize such interest) all of the net cash
proceeds of any payment or award in excess of $50,000
made to any such Person under any policy of Property
insurance with respect to any Property owned by such
Person or pursuant to any condemnation award with
respect to any such Property; provided such amounts
have not theretofore been reasonably expended for the
restoration or replacement of the asset in respect of
which such payment or award was made. Such amounts
shall be collaterally assigned to Agent as security
for the Obligations in a manner reasonably acceptable
to Agent. Upon delivery to Agent of written
certification by Borrower that the applicable Obligor
has reasonably expended amounts or committed in
writing to expend amounts for the restoration or
replacement of the asset in respect of which such
payment or
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award was made, specifying the amount expended or
committed, so long as no Default or Event of Default
shall have occurred and be continuing any such amount
deposited with Agent shall be released by Agent to
Borrower; PROVIDED, HOWEVER, that, in the event that
within 180 days of receipt of such payment or award
by Borrower, to the extent Borrower shall not have
actually spent or certified to Agent its intention to
expend a substantially equivalent amount for the
restoration or replacement of the asset in respect of
which such payment or award was made, Borrower shall
make a prepayment on the Loans (using any funds
deposited with Agent pursuant to this SECTION
3.2(B)(1) or other funds) in the amount of the excess
of the amount of such payment or award over the
amount of such expenditures and/or commitment on such
180th day. To the extent that such prepayment arises
out of an event occurring with respect to Property
which does not constitute "current assets", the
Stationary Term Loan Balance shall automatically be
reduced by the amount of such prepayment.
(ii) In cases where the amount of the net
cash proceeds of any payment or award is equal to or
less than $50,000 and no Default or Event of Default
has occurred and is continuing, such proceeds may be
paid to any Obligor, and if received by Agent shall
be paid by Agent to Borrower, for use in paying for
replacements or repairs of or substitutes for the
damaged, destroyed or taken assets or in a manner
otherwise consistent with this Agreement.
(2) BORROWING BASE.
(i) Borrower shall from time to time on
demand by Agent prepay the Loans (or provide Cover
for Letter of Credit Liabilities) in such amounts as
shall be necessary so that at all times the aggregate
outstanding amount of all Revolving Loan Obligations
shall be less than or equal to the Maximum Revolving
Loan Available Amount.
(ii) Borrower shall from time to time on
demand by Agent prepay the Loans (or provide Cover
for Letter of Credit Liabilities) in such amounts as
shall be necessary so that on each date set forth in
the table below the ratio of (x) the Primary
Borrowing Base shown on the most recent Borrowing
Base Certificate delivered pursuant to SECTION 7.2
hereof to (y) the unpaid principal balance of the
Obligations as of such date is equal to or greater
than the percentage specified opposite such date in
the table below:
11
DATE MINIMUM PERCENTAGE
---- ------------------
3/31/99 50.00%
4/30/99 54.62%
5/31/99 57.18%
6/30/99 56.74%
7/31/99 56.29%
8/31/99 54.06%
9/30/99 53.44%
10/31/99 55.01%
11/30/99 57.85%
12/31/99 56.70%
1/31/2000 54.79%
2/29/2000 52.24%
3/31/2000 53.19%
(3) DISPOSITION OF ASSETS. Reference is hereby made
to SECTION 8.5 hereof which requires certain principal
payments in connection with certain dispositions of assets.
(c) INTEREST PAYMENTS. Accrued and unpaid interest on the
unpaid principal balance of the Loans shall be due and payable on the
Interest Payment Dates.
(d) PAYMENTS AND INTEREST ON REIMBURSEMENT OBLIGATIONS.
Borrower will pay to Agent for the account of each Lender the amount of
each Reimbursement Obligation on the date on which the Agent notifies
Borrower of the date and amount of the applicable payment by the Issuer
of any drawing under a Letter of Credit. The amount of any
Reimbursement Obligation may, if the applicable conditions precedent
specified in SECTIONS 5.1 and 5.2 hereof have been satisfied, be paid
with the proceeds of Loans. Subject to SECTION 11.7 hereof, Borrower
will pay to Agent for the account of each Lender interest on any
Reimbursement Obligation (i) at the Base Rate from the date such
Reimbursement Obligation arises until the date five (5) Business Days
thereafter and (ii) at the Past Due Rate thereafter until the same is
paid in full.
(m) A new SECTION 6.18 is hereby added to the Loan Agreement, such new
Section to read in its entirety as follows:
6.18 COLLATERAL COVERED. As of the Effective Date, the
Collateral covered by the Security Documents constitutes all real and
personal Property owned by the Borrower and its Subsidiaries (other
than (a) Foreign Subsidiaries, (b) 35% of the equity interests in and
to Foreign Subsidiaries, (c) vehicles covered by certificates of title
and (d) a tract of real property in Muskogee, Oklahoma which Plant
Maintenance, Inc. is contractually obligated to convey to the former
shareholders of Plant Maintenance, Inc.).
(n) A new SECTION 6.19 is hereby added to the Loan Agreement, such new
Section reading in its entirety as follows:
12
6.19 YEAR 2000. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (i) the
Borrower's and any of its Subsidiaries' computer systems and (ii)
equipment containing embedded microchips (including systems and
equipment supplied by others or with which the Borrower's and any of
its Subsidiaries' systems interface) and the testing of all such
systems and equipment will be completed by September 30, 1999. The cost
to the Borrower and its Subsidiaries of such reprogramming and testing
and of reasonably foreseeable consequences of year 2000 to the Borrower
and its Subsidiaries (including, without limitation, reprogramming
errors and failure of others' systems or equipment) will not result in
an Event of Default or a Material Adverse Effect. Except for such of
the reprogramming referred to in the preceding sentence as may be
necessary, the computer and management systems of the Borrower and its
Subsidiaries are and, with ordinary course upgrading and maintenance,
will continue for the term of this Agreement to be, sufficient to
permit the Borrower and its Subsidiaries to conduct their business
without Material Adverse Effect.
(o) SECTION 7.2 of the Loan Agreement is hereby amended to read in its
entirety as follows:
7.2 FINANCIAL STATEMENTS AND INFORMATION. Furnish to Agent
(and, except where indicated, to each Lender) each of the following:
(a) as soon as available and in any event within 90 days after
the end of each applicable fiscal year, beginning with the fiscal year
ending on December 31, 1998, Annual Financial Statements of Borrower;
(b) as soon as available and in any event within 25 days after
the end of each fiscal month, preliminary drafts of Monthly Financial
Statements of Borrower and as soon as available and in any event within
30 days after the end of each fiscal month, final Monthly Financial
Statements of Borrower;
(c) as soon as available and in any event within 45 days after
the end of each fiscal quarter, Quarterly Financial Statements of
Borrower;
(d) concurrently with the financial statements provided for in
SUBSECTIONS 7.2(A), (B) and (C) hereof, (x) such schedules,
computations and other information, in reasonable detail, as may be
required by Agent to demonstrate compliance with the covenants set
forth herein or reflecting any non-compliance therewith as of the
applicable date, all certified and signed by the president, chief
financial officer or treasurer of Borrower (or other authorized officer
approved by Agent) as true and correct in all material respects to the
best knowledge of such officer and (y) a compliance certificate
("COMPLIANCE CERTIFICATE") in the form of EXHIBIT E hereto, duly
executed by such authorized officer;
(e) promptly upon their becoming publicly available, each
financial statement, report, notice or definitive proxy statements sent
by any Obligor to shareholders generally and each regular or periodic
report and each registration statement or prospectus filed by any
13
Obligor with any securities exchange or the Securities and Exchange
Commission or any successor agency;
(f) within 20 calendar days after the end of each calendar
month, a Borrowing Base Certificate as at the last day of such calendar
month, together with such supporting information as Agent may
reasonably request;
(g) within 20 days after the end of each calendar month (1) a
listing and aging of the Accounts of Borrower and its Subsidiaries as
of the end of the most recently ended calendar month, prepared in
reasonable detail and containing such other information as Agent may
reasonably request and (2) a summary of the Inventory of Borrower and
its Subsidiaries as of the end of the most recently ended calendar
month, prepared in reasonable detail and containing such other
information as Agent may reasonably request (information under this
clause to be delivered to Agent only);
(h) from time to time, at any time upon the request of Agent,
but at the cost of Borrower, a report of an independent collateral
field examiner approved by Agent in writing and reasonably acceptable
to Borrower (which may be, or be affiliated with, Agent or one of the
Banks) with respect to the Accounts and Inventory components included
in the Borrowing Base;
(i) on Tuesday of each week, the gross Accounts of Borrower
and its Subsidiaries and a true xxxxxxxx and collection report, all in
Proper Form, as of the last Business Day of the preceding week
(information under this clause to be delivered to Agent only);
(j) within 20 days after the end of each calendar month, to
the extent available, a listing and aging of the accounts payable of
Borrower and its Subsidiaries as of the end of the most recently ended
calendar month, prepared in reasonable detail and containing such other
information as Agent may reasonably request;
(k) within 20 days after the end of each calendar month, a
summary of all capital expenditures of Borrower and its Subsidiaries
during the preceding calendar month in excess of $5,000, prepared in
reasonable detail and containing such other information as Agent may
reasonably request;
(l) on every other Friday (or if the applicable Friday is not
a Business Day, on the immediately following Business Day), a report to
Agent and the Lenders, by telephone conference call, of the status of
the strategic plan of the Borrower and its Subsidiaries, and any
revisions to the projections of the operating results of Borrower and
its Subsidiaries and any such other matters as Agent or the Majority
Lenders may require;
(m) on the Wednesday preceding the telephone conference
described the preceding clause (or if the applicable Wednesday is not a
Business Day, on the immediately following Business Day), a report to
Agent and the Lenders on the matters to be discussed during the
following telephone conference, any other material developments with
respect to
14
Borrower and its Subsidiaries and such other matters as Agent or the
Majority Lenders may require;
(n) on the first day of each month, a calculation of the ratio
described in SECTION 3.2(B)(2)(II) hereof as of the last day of the
preceding month;
(o) within 30 days after request therefor from any Lender
(which request may only be made during the continuation of an Event of
Default), real estate evaluations and machinery and equipment
appraisals representing 71% of total net book value of Borrower (on a
consolidated basis) (machinery and equipment items with a net book
value in excess of $250,000 are to be appraised on FSV basis and the
remaining machinery and equipment items are to be valued on a desk top
approach);
(p) on or before June 30, 1999, the Lenders shall coordinate
among themselves, schedule with the Borrower, and perform a collateral
audit (including detailed reports on billing procedures, collection
procedures [including verifications] and inventory systems and costing)
on the Borrower and its Subsidiaries, with the results of same to be
distributed among the Lenders; all costs of the Lenders in connection
with the audits and reports under this CLAUSE (P) are to be paid by the
Borrower;
(q) on or before March 31, 1999, and every two weeks
thereafter, the Borrower shall deliver a strategic plan substantially
in the format heretofore delivered to the Lenders, in such detail as
the Agent may reasonably request;
(r) by the end of each calendar month, an update on progress
with respect to "Year 2000" issues, including projected completion
dates by location, estimated related costs, verification of final
testing and such other related matters as the Majority Lenders may
require;
(s) on or before May 31, 1999, (1) an enterprise valuation of
each Subsidiary of the Borrower; (2) a valuation of each business line
of the Borrower, with the Subsidiaries of the Borrower to be grouped in
accordance with such business lines, and (3) an enterprise valuation of
the Borrower and its Subsidiaries taken as a whole; each such valuation
shall be performed by a Person nominated by the Borrower and acceptable
to the Majority Lenders; and
(t) such other financial projections and other information
relating to the condition (financial or otherwise), operations or
business of any Obligor as from time to time may be reasonably
requested by Agent. Each delivery of a financial statement pursuant to
this SECTION 7.2 shall constitute a restatement of the representations
contained in the last two sentences of SECTION 6.2 with respect to the
period of time from the date of such most recently delivered financial
statements.
(p) SECTION 7.3 of the Loan Agreement is hereby amended to read in its
entirety as follows:
15
7.3 FINANCIAL TESTS. Borrower will have and maintain (in each
case, on a consolidated basis for Borrower and its Subsidiaries):
(a) CONSOLIDATED EBITDA -- Consolidated EBITDA (i)
for the period from January 1, 1999 through June 30, 1999 of
at least $7,000,000, (ii) for the period from January 1, 1999
through December 31, 1999 of at least $14,000,000, (iii) for
each fiscal month of at least 70% of the Minimum Monthly
EBITDA for such fiscal month and (iv) beginning April 30,
1999, for each three-month period ending on the last day of a
fiscal month, of at least 85% of the Minimum Monthly EBITDA
for such period.
(b) FREE CASH FLOW -- Free Cash Flow (i) for any
fiscal quarter of at least $100,000 and (ii) for the period
from January 1, 1999 through December 31, 1999 of at least
$2,000,000; PROVIDED, HOWEVER, that in the event of a
divestiture of a Subsidiary of Borrower, the foregoing amounts
shall be reduced commensurate with such Subsidiary's pro rata
share of projected Consolidated EBITDA for the fiscal year
1999.
The use of historical financial results for acquired Subsidiaries in
connection with "pooling of interests" accounting shall not serve to
cure any default under the covenants set forth in this Section that
would otherwise arise.
(q) SECTION 7.8 of the Loan Agreement is hereby amended to read in its
entirety as follows:
7.8 NOTICE OF CERTAIN MATTERS. Give Agent written notice of
the following promptly (and in any event within five Business Days)
after any executive officer of Borrower shall become aware of the same:
(a) the issuance by any court or governmental agency or
authority of any injunction, order or other restraint prohibiting, or
having the effect of prohibiting, the performance of this Agreement,
any other Loan Document, or the making of the Loans or the initiation
of any litigation, or any claim or controversy which would reasonably
be expected to result in the initiation of any litigation, seeking any
such injunction, order or other restraint;
(b) the filing or commencement of any action, suit or
proceeding, whether at law or in equity or by or before any court or
any Governmental Authority involving claims in excess of $1,000,000
(exclusive of claims covered by insurance) or which may reasonably be
expected to result in a Default hereunder;
(c) any Event of Default or Default, specifying the nature and
extent thereof and the action (if any) which is proposed to be taken
with respect thereto;
(d) the incurrence of material burdensome restrictions under
contracts or applicable law which could reasonably be expected to have
a Material Adverse Effect and
16
any other event (including strikes, labor disputes or loss of use of
material patents or trademarks) which could reasonably be expected to
have a Material Adverse Effect; and
Borrower will also notify Agent in writing at least 30 days prior to
the date that any Obligor changes its name or the location of its chief
executive office or principal place of business or the place where it
keeps its books and records. After the Effective Date, Borrower will
notify Agent in writing at least 45 days prior to any Obligor's
acquisition of any real or personal Property, wherever located, other
than the Collateral covered by the Security Documents (such acquisition
or ownership being herein called an "ADDITIONAL COLLATERAL EVENT" and
the Property so acquired or owned being herein called "ADDITIONAL
COLLATERAL").
(r) New SECTIONS 7.11, 7.12 AND 7.13 are hereby added to the Loan
Agreement, such new Sections to read in their entireties as follows:
7.11 ADDITIONAL SECURITY DOCUMENTS. As soon as practicable and
in any event within ten (10) Business Days after an Additional
Collateral Event, Borrower shall (a) execute and deliver or cause to be
executed and delivered applicable Security Documents, in Proper Form
and in an amount reasonably satisfactory to the Majority Lenders, in
favor of Agent and duly executed by the applicable Obligor, granting a
first-priority Lien (subject only to Permitted Liens) upon the
applicable Additional Collateral securing all of the Obligations, and
such other documents (including, without limitation, all items required
in connection with the applicable Security Documents previously
executed hereunder, such as surveys, environmental assessments,
certificates, legal opinions, all in Proper Form) as may be reasonably
required by Agent or the Majority Lenders in connection with the
execution and delivery of such Security Documents; (b) deliver or cause
to be delivered such other documents or certificates consistent with
the terms of this Agreement and relating to the transactions
contemplated hereby as Agent or the Majority Lenders may reasonably
request, and (c) pay in full all documentary stamps, filing and
recording fees, taxes and other fees and charges payable in connection
with the filing and recording of any Security Document.
7.12 DOMINION OF FUNDS PROCEDURES. All revenues and receipts
received by Borrower or any of its Subsidiaries will be immediately
deposited into an account or accounts (collectively, the "LOCKBOX
ACCOUNTS") in the name of Borrower or one or more of its Subsidiaries
maintained with Agent. No disbursements or withdrawals may be made from
any of the Lockbox Accounts by Borrower or any of its Subsidiaries
without the prior written approval of Agent, in its sole and absolute
discretion. On a daily basis, sums shall be withdrawn from the Lockbox
Accounts by Agent and applied as a prepayment on the unpaid principal
balance of the Loans outstanding on such date.
7.13 TURNAROUND CONSULTANT. Borrower shall at all times retain
a turnaround consultant satisfactory to the Majority Lenders, under an
acceptable scope of work. The Agent and the Lenders will be provided
access to all consultant generated information and reports and the
applicable consultant shall report on a semi-monthly basis to Borrower,
with a copy to the Agent and each Lender.
17
(s) SECTION 8.1 of the Loan Agreement is hereby amended to read in its
entirety as follows:
8.1 BORROWED MONEY INDEBTEDNESS. Create, incur, suffer or
permit to exist, or assume or guarantee, directly or indirectly, or
become or remain liable with respect to any Borrowed Money
Indebtedness, whether direct, indirect, absolute, contingent or
otherwise, except the following:
(i) Indebtedness under this Agreement and the other Loan
Documents and Indebtedness secured by Liens permitted
by SECTION 8.2 hereof;
(ii) the liabilities existing on the date of this
Agreement and disclosed in the financial statements
delivered on or prior to March 1, 1999 pursuant to
SECTIONS 6.2 OR 7.2 hereof and set forth on EXHIBIT G
hereto, and all renewals, extensions and replacements
(but not increases) of any of the foregoing;
(iii) the Interest Rate Risk Indebtedness;
(iv) current liabilities incurred in the ordinary course
of business.
(t) SECTION 8.2 of the Loan Agreement is hereby amended to read in its
entirety as follows:
8.2 LIENS. Create or suffer to exist any Lien upon any of its
Property now owned or hereafter acquired, or acquire any Property upon
any conditional sale or other title retention device or arrangement or
any purchase money security agreement; or in any manner directly or
indirectly sell, assign, pledge or otherwise transfer any of its
Accounts or General Intangibles; PROVIDED, HOWEVER, that any Obligor
may create or suffer to exist the following:
(i) artisans' or mechanics' Liens arising in the ordinary course
of business, and Liens for taxes, but only to the extent that
payment thereof shall not at the time be due or if due, the
payment thereof is being diligently contested in good faith
and adequate reserves computed in accordance with GAAP have
been set aside therefor;
(ii) normal encumbrances and restrictions on title which do not
secure Borrowed Money Indebtedness and which do not have a
Material Adverse Effect;
(iii) Liens in favor of Agent or any Lender under the Loan
Documents, including, without limitation, Liens securing
Interest Rate Risk Indebtedness owed to one or more of the
Lenders (but not to any Person which is not, at the time the
Interest Rate Risk Indebtedness is incurred, a Lender);
(iv) Liens incurred or deposits made in the ordinary course of
business (1) in connection with workmen's compensation,
unemployment insurance, social security and other like laws,
or (2) to secure insurance in the ordinary course of business,
the performance of bids, tenders, contracts, leases, licenses,
statutory obligations, surety,
18
appeal and performance bonds and other similar obligations
incurred in the ordinary course of business, not, in any of
the cases specified in this clause (2), incurred in connection
with the borrowing of money, the obtaining of advances or the
payment of the deferred purchase price of Property;
(v) attachments, judgments and other similar Liens arising in
connection with court proceedings, PROVIDED that the execution
and enforcement of such Liens are effectively stayed and the
claims secured thereby are being actively contested in good
faith with adequate reserves made therefor in accordance with
GAAP;
(vi) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens, incurred in good
faith in the ordinary course of business and securing
obligations which are not yet due or which are being contested
in good faith by appropriate proceedings if adequate reserves
with respect thereto are maintained in accordance with GAAP;
(vii) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, and restrictions
on the use of Property, and which do not in any case singly or
in the aggregate materially impair the present use or value of
the Property subject to any such restriction or materially
interfere with the ordinary conduct of the business of any
Obligor or any Subsidiary of Borrower to the extent that it
would cause a Material Adverse Effect;
(viii) capital leases permitted under the other provisions of this
Agreement;
(ix) existing Liens as of Effective Date as set forth on EXHIBIT H
hereto; and
(x) extensions, renewals and replacements of Liens referred to in
CLAUSES (I) through (IX) above; PROVIDED that any such
extension, renewal or replacement Lien shall be limited to the
Property or assets covered by the Lien extended, renewed or
replaced and that the Borrowed Money Indebtedness secured by
any such extension, renewal or replacement Lien shall be in an
amount not greater than the amount of the Indebtedness secured
by the Lien extended, renewed or replaced.
(u) SECTION 8.3 of the Loan Agreement is hereby amended to read in its
entirety as follows:
8.3 CONTINGENT LIABILITIES. Except for indemnification and
contribution arrangements with customers, sellers of businesses and
officers and directors of Borrower and its Subsidiaries in the ordinary
course of business, directly or indirectly guarantee the performance or
payment of, or purchase or agree to purchase, or assume or contingently
agree to become or be secondarily liable in respect of, any obligation
or liability of any other Person (other than Subsidiaries) except for
(a) the endorsement of checks or other negotiable instruments in the
ordinary course of business; (b) obligations disclosed to Agent in the
financial statements delivered on or prior to March 1, 1999 pursuant to
SECTIONS 6.2 OR 7.2 hereof (but not increases of such obligations after
the Effective Date), including stock price
19
guaranties described in such financial statements and (c) those
liabilities permitted under SECTION 8.1 hereof.
(v) SECTION 8.5 of the Loan Agreement is hereby amended to read in its
entirety as follows:
8.5 DISPOSITION OF ASSETS. Sell, convey or lease all or any
part of its assets, except for (x) sales of Inventory in the ordinary
course of business and (y) sales of other Property in the ordinary
course of business so long as the net proceeds realized from such sales
are used to prepay the Loans; PROVIDED that the Stationary Term Loan
Balance shall automatically be reduced by the net proceeds realized
from any such sales which consist of Property of Borrower or any of its
Subsidiaries other than items included in the Primary Borrowing Base.
For purposes of this Agreement, no sale/leaseback transaction or sale
of any equity interests will be deemed to be in the ordinary course of
business.
(w) SECTION 8.12 of the Loan Agreement is hereby amended to read in its
entirety as follows:
8.12 CAPITAL EXPENDITURES. Permit Capital Expenditures of
Borrower and its Subsidiaries to exceed $625,000 in the aggregate for
any calendar quarter.
(x) SECTION 8.13 of the Loan Agreement is hereby amended to read in its
entirety as follows:
8.13 ACQUISITIONS. Acquire any real Property or any material
personal Property (including any acquisition of equity interests in
another Person) after the Effective Date, except for acquisitions of
Property reasonably necessary to the continued operations of Borrower
or its Subsidiaries in the ordinary course of business.
(y) SECTION 8.15 of the Loan Agreement is hereby amended to read in its
entirety as follows:
8.15 SUBSIDIARIES. Form, create or acquire any Subsidiary,
except that Borrower (or any of its Subsidiaries) may form or create a
wholly-owned Subsidiary so long as (a) immediately thereafter and
giving effect thereto, no event will occur and be continuing which
constitutes a Default; (i) such Subsidiary shall execute and deliver to
Agent a Guaranty in substantially the same form as the Guaranties
executed prior to the date hereof; (ii) the applicable owner(s) of the
equity interests in such Subsidiary shall execute and deliver to Agent
such Security Documents as Agent may reasonably require in order to
create a valid, perfected, first priority Lien upon all of the issued
and outstanding equity interests in such Subsidiary, (iii) the new
Subsidiary shall execute and deliver to Agent such Security Documents
as Agent may reasonably require in order to create a valid, perfected,
first priority Lien (subject only to Permitted Liens) upon all of the
real and personal Property of such new Subsidiary and (iv) such new
Subsidiary is not a Foreign Subsidiary and (b) Agent is given at least
15 days' prior written notice of such formation or creation.
20
(z) SECTION 9.1(D) of the Loan Agreement is hereby amended to read in
its entirety as follows:
(d) AFFIRMATIVE COVENANTS - (i) default shall be made
in the due observance or performance of any of the covenants
or agreements contained in SECTIONS 7.3 or 7.8(C) hereof, (ii)
default is made in the due observance or performance of any of
the covenants or agreements contained in SECTION 7.2(F) hereof
and such default continues unremedied for a period of one day,
(iii) default is made in the due observance or performance of
any of the other covenants or agreements contained in SECTION
7.2 hereof and such default continues unremedied for a period
of five days, or (iv) default is made in the due observance or
performance of any of the other covenants and agreements
contained in SECTION 7 hereof or any other affirmative
covenant of any Obligor contained in this Agreement or any
other Loan Document and such default continues unremedied for
a period of 30 days after (x) notice thereof is given by the
Agent to the Borrower or (y) such default otherwise becomes
known to any executive officer of the Borrower, whichever is
earlier; or
(aa) SECTION 9.1(J) of the Loan Agreement is hereby amended to read in
its entirety as follows:
(j) SECURITY DOCUMENTS - any Security Document for
any reason ceases to create a valid and perfected Lien of the
first priority (subject to the Permitted Liens), required
thereby on any of the Collateral purported to be covered
thereby and securing that portion of the Obligations which is
therein designated as being secured, or any Obligor (or any
other Person who may have granted or purported to grant such
Lien) will so state in writing or the Security Documents shall
cease to evidence first-priority Liens upon all of the real
and personal Property of each Obligor other than 35% of the
equity interests in and to Foreign Subsidiaries and as
otherwise set forth in SECTION 6.18 hereof (except for the ten
(10) Business Day period provided for in SECTION 7.11 hereof)
; or
(bb) EXHIBIT A to the Loan Agreement (Request for Advance) is hereby
amended to read in its entirety as set forth on EXHIBIT A hereto.
(cc) EXHIBIT E to the Loan Agreement (Compliance Certificate) is hereby
amended to read in its entirety as set forth on EXHIBIT E hereto.
(dd) A new EXHIBIT J (Borrowing Base Certificate) is hereby added to
the Loan Agreement, such new Exhibit to read in its entirety as set forth on
EXHIBIT J hereto.
(ee) A new EXHIBIT K (Minimum Monthly EBITDA) is hereby added to the
Loan Agreement, such new Exhibit to read in its entirety as set forth on EXHIBIT
K hereto.
SECTION 2. NO LIBOR OPTION. Borrower acknowledges and agrees that,
notwithstanding anything to the contrary set forth in the Loan Agreement, the
option to have any part of the Obligations bear interest at an interest rate
based upon a Eurodollar Rate has been terminated.
21
SECTION 3. CERTAIN FEES. In consideration of the execution and delivery
of this Amendment, but subject to the provisions of SECTION 11.7 of the Loan
Agreement, Borrower shall pay to the Lenders which have elected to execute this
Amendment as of March 21, 1999 (collectively, the "APPROVING LENDERS") a fee
which shall accrue quarterly, on March 31, 1999, June 30, 1999, September 30,
1999 and December 31, 1999, in an amount equal to (for each such quarterly
accrual date) one and one-half percent (1-1/2%) TIMES the unpaid principal
balance of the Obligations as of the applicable accrual date. Such fee shall be
paid to Agent for pro rata distribution to the Approving Lenders (i) in an
installment of $1,000,000 to be due and payable on July 31, 1999, (ii) in an
installment of $500,000 to be due and payable on August 31, 1999, (iii) in an
installment of $500,000 to be due and payable on November 30, 1999 and (iv) on
the Revolving Loan Maturity Date, when the balance of such fee shall be due and
payable; PROVIDED that if on June 1, 1999 (x) the Stationary Term Loan Balance
is reduced to zero; (y) the Revolving Loan Obligations are no greater than the
Primary Borrowing Base (as reflected in the most recent Borrowing Base
Certificate delivered to the Agent) and (z) no Event of Default shall have
occurred which is continuing, the aggregate fees payable under this Section
shall be reduced to $100,000 which shall be due and payable on July 1, 1999 and
PROVIDED FURTHER that if the Obligations are paid in full (and the Revolving
Loan Commitments terminated in their entirety) by June 30, 1999, no fees shall
be payable under this Section.
SECTION 4. RATIFICATION. Except as expressly amended by this Amendment,
the Loan Agreement and the other Loan Documents shall remain in full force and
effect. None of the rights, title and interests existing and to exist under the
Loan Agreement are hereby released, diminished or impaired, and the Borrower
hereby reaffirms all covenants, representations and warranties in the Loan
Agreement.
SECTION 5. EXPENSES. The Borrower shall pay to the Agent all reasonable
fees and expenses of Agent's legal counsel (pursuant to Section 11.3 of the Loan
Agreement) incurred in connection with the execution of this Amendment.
SECTION 6. CERTIFICATIONS. The Borrower hereby certifies that (a) no
material adverse change in the assets, liabilities, financial condition,
business or affairs of the Borrower has occurred since December 31, 1998 and (b)
except as previously disclosed to Agent and the Lenders in writing, no Default
or Event of Default has occurred and is continuing or will occur as a result of
this Amendment.
SECTION 7. EFFECTIVENESS. The effectiveness of this Amendment is
contingent upon (a) execution and delivery to each of the Approving Lenders of
certain warrants and registration rights agreements.
SECTION 8. OVERDRAFTS. Concurrently with the effectiveness of this
Agreement, the Obligors will eliminate the overdrafts in their accounts with
Chase Texas.
SECTION 9. MISCELLANEOUS. This Amendment (a) shall be binding upon and
inure to the benefit of the Borrower, the Lenders and the Agent and their
respective successors, assigns, receivers and trustees; (b) may be modified or
amended only by a writing signed by the required parties; (c) shall be governed
by and construed in accordance with the laws of the State of Texas and the
United
22
States of America; (d) may be executed in several counterparts by the parties
hereto on separate counterparts, and each counterpart, when so executed and
delivered, shall constitute an original agreement, and all such separate
counterparts shall constitute but one and the same agreement and (e) together
with the other Loan Documents, embodies the entire agreement and understanding
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, consents and understandings relating to such subject matter.
The headings herein shall be accorded no significance in interpreting this
Amendment.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THE LOAN AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND ALL OTHER LOAN
DOCUMENTS EXECUTED BY ANY OF THE PARTIES PRIOR HERETO OR SUBSTANTIALLY
CONCURRENTLY HEREWITH CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have caused
this Amendment to be signed by their respective duly authorized officers,
effective as of the date first above written.
INNOVATIVE VALVE TECHNOLOGIES, INC.,
a Delaware corporation
By:_________________________________
Xxxxxxx X. Xxxxxxxxxx, Xx.,
Vice President
24
CHASE BANK OF TEXAS, N. A.,
as Agent and as a Lender
By:_________________________________
Name:_______________________________
Title:______________________________
00
XXXXX XXXXX XXXX (XXXXX), NATIONAL
ASSOCIATION
By:_________________________________
Name:_______________________________
Title:______________________________
00
XXXX XX XXXXXXX XXXXX, N.A.
By:_________________________________
Name:_______________________________
Title:______________________________
27
COMERICA BANK-TEXAS
By:_________________________________
Name:_______________________________
Title:______________________________
00
XXXXXXXX XXXX XXXX XX XXXXXXXX
By:_________________________________
Name:_______________________________
Title:______________________________
29
The undersigned hereby join in this Amendment to evidence their consent
to execution by Borrower of this Amendment, to confirm that each Loan Document
now or previously executed by the undersigned applies and shall continue to
apply to the Loan Agreement, as amended hereby, to acknowledge that without such
consent and confirmation, Lender would not execute this Amendment and to join in
the notice pursuant to Tex. Bus. & Comm. Code ss.26.02 set forth above.
EACH OF THE SUBSIDIARIES OF
INNOVATIVE VALVE TECHNOLOGIES, INC.
By:________________________________
Xxxxxxx X. Xxxxxxxxxx, Xx.,
Vice President
30
[LETTERHEAD OF THE BORROWER]
REQUEST FOR EXTENSION OF CREDIT
________________, 199____
Chase Bank of Texas, National
Association, as Agent
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Manager, Diversified Corporate Group
Gentlemen:
The undersigned hereby certifies that he is the
_________________________________ of INNOVATIVE VALVE TECHNOLOGIES, INC., a
Delaware corporation (the "COMPANY"), and that as such he is authorized to
execute this Request for Extension of Credit (the "REQUEST") on behalf of the
Company pursuant to the Loan Agreement (as it may be amended, supplemented or
restated from time to time, the "AGREEMENT") dated as of July 7, 1998, by and
among the Company, Chase Bank of Texas, National Association, as Agent and the
Lenders therein named. The (check one) [ ] Loan [ ] Letter of Credit being
requested hereby is to be in the amount set forth in (b) below and is requested
to be made on __________________, which is a Business Day. The undersigned
further certifies, represents and warrants that to his knowledge, after due
inquiry (each capitalized term used herein having the same meaning given to it
in the Agreement unless otherwise specified herein):
(a) As of the date hereof:
(1) The Borrowing Base is: $
===========
(2) The aggregate Revolving Loan Commitments are: $
===========
(3) The Maximum Revolving Loan Available Amount
(Lesser of (a)(1) and (a)(2)) is: $___________
(4) The aggregate outstanding principal of the Revolving
Loan Obligations, before giving
effect to the Loan, if any, requested hereby, is: (_________)
(5) The amount of Letter of Credit Liabilities as of
EXHIBIT A
the date hereof, before giving effect to the Letter of
Credit, if any, requested hereby, is: (_________)
(6) The aggregate unused Revolving Loan Commitments of
all Lenders [(a)(3) minus sum of
(a)(4) and (a)(5)], if positive, is: $
===========
(b) If and only if the aggregate unused Revolving Loan Commitments
of all Lenders [(a)(6)] is positive, the Company hereby
requests under this Request a Loan or Letter of Credit (as
indicated above) in the amount of $____________ (which is no
more than the aggregate unused Revolving Loan Commitments of
all Lenders).
(c) If a Letter of Credit is requested hereby, it should be issued
for the benefit of ___________________________________ and
should have an expiration date of ____________________ (which
date is no later than one year from the proposed date of
issuance) and any special language to be incorporated into
such Letter of Credit is attached hereto. The sum of the face
amount of the requested Letter of Credit PLUS the Letter of
Credit Liabilities as the date hereof as specified in item
(a)(5) above does not exceed $______________.
(d) The representations and warranties made in each Loan Document
are true and correct in all material respects on and as of the
time of delivery hereof, with the same force and effect as if
made on and as of the time of delivery hereof.
(e) No change in the assets, liabilities, financial condition,
business or affairs of the Company or any of the other
Obligors has occurred which results in a Material Adverse
Effect.
(f) No Default or Event of Default has occurred and is continuing.
Thank you for your attention to this matter.
Very truly yours,
_________________________________
[SIGNATURE OF AUTHORIZED OFFICER]
EXHIBIT A
2
COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he is the
______________________________ of INNOVATIVE VALVE TECHNOLOGIES, INC., a
Delaware corporation (the "BORROWER"), and that as such he is authorized to
execute this certificate on behalf of the Borrower pursuant to the Loan
Agreement (as amended, the "AGREEMENT") dated as of July 7, 1998, by and among
the Borrower, CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as Agent, and the
lenders therein named; and that a review of the Borrower and the other Obligors
has been made under his supervision with a view to determining whether the
Borrower and the other Obligors have fulfilled all of their respective
obligations under the Agreement, the Notes and the other Loan Documents; and on
behalf of the Borrower further certifies, represents and warrants that to his
knowledge, after due inquiry (each capitalized term used herein having the same
meaning given to it in the Agreement unless otherwise specified):
(a) The Borrower and the other Obligors have fulfilled, in
all material respects, their respective obligations under the
Agreement, the Notes and the other Loan Documents.
(b) The representations and warranties made in each Loan
Document are true and correct in all material respects on and as of the
time of delivery hereof, with the same force and effect as if made on
and as of the time of delivery hereof.
(c) The financial statements delivered to the Agent
concurrently with this Compliance Certificate have been prepared in
accordance with GAAP consistently followed throughout the period
indicated and fairly present the financial condition and results of
operations of the applicable Persons as at the end of, and for, the
period indicated (subject, in the case of Monthly Financial Statements,
to normal changes resulting from year-end adjustments).
(d) No Default or Event of Default has occurred and is
continuing. In this regard, the compliance with the provisions of
SECTIONS 7.3 and 8.12 is as follows:
(i) SECTION 7.3(A) -- CONSOLIDATED EBITDA
[PROVIDE DETAIL FOR APPLICABLE PERIODS
REPORTED, ACTUAL CONSOLIDATED EBITDA AND
REQUIRED CONSOLIDATED EBITDA]
(ii) SECTION 7.3(B) -- FREE CASH FLOW
[PROVIDE DETAIL FOR APPLICABLE PERIODS
REPORTED, ACTUAL FREE CASH FLOW AND REQUIRED
FREE CASH FLOW]
EXHIBIT E
(iii) SECTION 8.12 -- CAPITAL EXPENDITURES
ACTUAL MAXIMUM
$------------ $------------
(e) No material adverse change in the assets, liabilities,
financial condition, business or affairs of the Borrower or any of the
other Obligors has occurred since the Effective Date.
DATED as of ____________________.
_________________________________
[SIGNATURE OF AUTHORIZED OFFICER]
EXHIBIT E
2
BORROWING BASE CERTIFICATE
The undersigned hereby certifies that he is the
__________________________________ of INNOVATIVE VALVE TECHNOLOGIES, INC., a
Delaware corporation (the "BORROWER"), and that as such he is authorized to
execute this Borrowing Base Certificate on behalf of the Borrower pursuant to
the Loan Agreement (as it may be amended, supplemented or restated from time to
time, the "AGREEMENT") dated as of July 7, 1998, by and among the Borrower,
Chase Bank of Texas, National Association, as Agent, and the Lenders therein
named. The undersigned further certifies, represents and warrants that to his
knowledge, after due inquiry, that SCHEDULE 1 attached hereto has been duly
completed and is true and correct in all material respects.
Dated ________________, 199____.
_________________________________
[SIGNATURE OF AUTHORIZED OFFICER]
EXHIBIT J
Borrowing Base Certificate
Dated ________________
Gross Accounts Receivable ______________
Plus:
Costs in excess of xxxxxxxx (WIP) ______________
Less:
Over 90 days Old (_____________)
Foreign (_____________)
Total Eligible A/R ______________
Advance Rate 80%
A/R Borrowing Amount _____________
Gross Inventory ______________
Less:
Foreign (______________)
Costs in excess of Xxxxxxxx (WIP) (______________)
Total Eligible Inventory _______________
Advance Rate 50%
Inventory Borrowing Amount ______________
Add or Subtract: Allowed Over/(under) Advance ______________
Add: Allowed Stationary Balance ______________
Total Borrowing Base ______________
Total Outstanding including L/C's (____________)
Availability/(required paydown) ______________
SCHEDULE 1
BORROWING BASE COLLATERAL COVERAGE MAXIMUM PERMITTED OUTSTANDINGS
ALLOWED OVER OR ALLOWED REQUIRED OUTSTANDING MAXIMUM
BORROWING (UNDER) ADVANCE STATIONARY LOANS TO BB COVERAGE OBLIGATION
BASE DATE AMOUNTS BALANCE % AND "AS OF" DATE PERIOD AMOUNT
--------- --------------- ----------- ----------------------- ------ ------
2/28/99 $1.7MM $35,000,000
3/31/99 ($.7MM) $35,000,000 50.00% on 3/31/99 3/21/99 - 4/20/99 $76,500,000
4/30/99 ($3MM) $35,000,000 54.62% on 4/30/99 4/21/99 - 5/20/99 $77,000,000
5/31/99 ($2.9MM) $35,000,000 57.18% on 5/31/99 5/21/99 - 6/20/99 $76,000,000
6/30/99 ($2MM) $35,000,000 56.74% on 6/30/99 6/21/99 - 7/20/99 $75,500,000
7/31/99 ($.4MM) $34,000,000 56.29% on 7/31/99 7/21/99 - 8/20/99 $73,500,000
8/31/99 $1.0MM $34,000,000 54.06% on 8/31/99 8/21/99 - 9/20/99 $73,500,000
9/30/99 $0MM $34,000,000 53.44% on 9/30/99 9/21/99 - 10/20/99 $75,000,000
10/31/99 ($3.2MM) $34,000,000 55.01% on 10/31/99 10/21/99 - 11/20/99 $76,300,000
11/30/99 ($2.5MM) $34,000,000 57.85% on 11/30/99 11/21/99 - 12/20/99 $74,000,000
12/31/99 ($.9MM) $34,000,000 56.70% on 12/31/99 12/21/99 - 1/20/00 $73,000,000
1/31/00 $0MM $33,000,000 54.79% on 1/31/00 1/21/00 - 2/20/00 $71,000,000
2/29/00 ($.2MM) $33,000,000 52.24% on 2/29/00 2/21/00 - 3/20/00 $71,000,000
3/31/00 $0MM $33,000,000 53.19% on 3/31/00 3/21/00 - 4/20/00 $70,500,000
* Calculated by using the current borrowing base as a percent of the total
outstanding credit facility at the end of the indicated month, (e.g., the March
31, 1999 number of 51.37% is calculated using the 2/28 borrowing base of $38,380
divided by the total outstandings including L/C's under the credit facility of
$74,706.)
SCHEDULE 1
2
MINIMUM MONTHLY EBITDA
CALENDAR MONTH MINIMUM MONTHLY EBITDA
-------------- ----------------------
February, 1999 $112,560
March 1999 $2,318,239
April 1999 $1,799,048
May 1999 $1,799,048
June 1999 $1,059,942
July 1999 $825,955
August 1999 $825,955
September 1999 $1,348,400
October 1999 $1,299,813
November 1999 $1,299,813
December 1999 $629,991
January 2000 $255,343
February 2000 $775,943
March 2000 $1,817,131
April 2000 $1,799,048
EXHIBIT K
