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EXHIBIT 10.1
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment"),
dated as of May 14, 1999, is entered into among XXXXXXXX MANUFACTURING COMPANY,
a Texas corporation (the "Borrower"), the lenders listed on the signature pages
hereof (collectively, the "Lenders"), and NATIONSBANK, N.A. (successor by
merger to NationsBank of Texas, N.A.), as the Administrative Agent (in said
capacity, the "Administrative Agent").
A. The Borrower, the Lenders and the Administrative Agent are parties
to that certain Credit Agreement, dated as of September 19, 1997, as amended by
that certain First Amendment to Credit Agreement, dated as of February 10, 1999
(the "Credit Agreement;" the terms defined in the Credit Agreement and not
otherwise defined herein shall be used herein as defined in the Credit
Agreement).
B. The Borrower, the Lenders and the Administrative Agent desire to
(i) amend the Credit Agreement and (ii) waive certain Events of Default under
the Credit Agreement.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the Borrower,
the Lenders and the Administrative Agent covenant and agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 7.12 of the Credit Agreement is hereby amended to read as
follows:
"Section 7.12 Minimum Fixed Charge Coverage Ratio. The Borrower
shall not permit the Fixed Charge Coverage Ratio to be less than (a)
1.00 to 1 for the fiscal quarters ending June 30, 1999 and September
30, 1999 and (b) 1.25 to 1 at the end of any fiscal quarter
thereafter."
(b) Section 7.13 of the Credit Agreement is hereby amended to read as
follows:
"Section 7.13 Interest Coverage Ratio. At the end of each fiscal
quarter occurring below or at the end of each fiscal quarter occurring
during the periods indicated below, the Borrower shall not permit the
Interest Coverage Ratio to be less than the ratio set forth below
opposite such fiscal quarter or the period in which such fiscal
quarter occurs:
Fiscal Quarter or Period Ratio
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At June 30, 1999 and September 30, 1999 1.20 to 1
From and including December 31, 1999 and thereafter 1.75 to 1"
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(c) Article 7 of the Credit Agreement is hereby amended by adding a
new Section 7.19 thereto to read as follows:
"Section 7.19 Minimum EBITDA. The Borrower shall not permit EBITDA
to be less than (a) $5,000,000 for the fiscal quarter ending June 30,
1999, (b) $9,500,000 for the fiscal quarter ending September 30, 1999
and (c) $12,000,000 for the fiscal quarter ending December 31, 1999."
(d) Section 8.1 of the Credit Agreement is hereby amended by (i)
deleting "or" after the end of clause (m) thereof, (ii) deleting "." at the end
of clause (n) thereof and inserting "; or" in lieu thereof, and (iii) adding a
new clause (o) thereto to read as follows:
"(o) The Borrower shall fail to deliver to the Lenders by August
15, 1999 a certificate signed by the chief financial officer of the
Borrower certifying that (i) the Borrower will be able to perform
computer accounting functions necessary to successfully close the
month of July, 1999 for accounting purposes in order to meet the
requirements of Section 6.1 of the Credit Agreement for the month of
July, 1999 and (ii) the chief financial officer is not aware of any
matters related to the Borrower's computer accounting systems
conversion that could reasonably be expected to delay the production
of accounting information of the Borrower and its Subsidiaries in
order to comply with the requirements of the Credit Agreement or
otherwise have a Material Adverse Effect."
(e) Exhibit F to the Credit Agreement is hereby amended to be in the
form of Exhibit F to this Second Amendment.
2. WAIVER. The Lenders hereby waive the Event of Default that
occurred under the Credit Agreement as a result of the failure of the Borrower
to comply with Sections 7.12, 7.13 and 7.19 of the Credit Agreement at the
fiscal quarter ending March 31, 1999. The waiver provided herein does not (a)
affect any other covenants or provisions of the Credit Agreement and (b) relate
to any fiscal quarter-end other than March 31, 1999.
3. COOPERATION BY BORROWER. The Borrower (a) acknowledges that the
Administrative Agent shall engage a management consultant firm or group
("Management Consultant Firm") to conduct a review of management, sales and
marketing, systems, financial projections and liquidity of the Borrower and its
Subsidiaries and (b) agrees to fully cooperate at all times with the Management
Consultant Firm, the Administrative Agent and each Lender in connection with
such review. Notwithstanding anything in Section 5.7 of the Credit Agreement to
the contrary and the waiver of the Events of Default provided herein, the
Borrower agrees to pay all reasonable out-of-pocket expenses of the
Administrative Agent (including the fees and expenses of the Management
Consultant Firm) and each Lender in connection with such review or any other
visits and inspections related thereto conducted by the Administrative Agent
and each Lender. The
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Borrower acknowledges that the breach by the Borrower of its covenants and
agreements set forth in this Section 3 shall constitute an Event of Default
under the Credit Agreement.
4. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, the Borrower represents and warrants that, as of
the date hereof and after giving effect to the amendments contemplated by the
foregoing Section 1 and the waiver contemplated by the foregoing Section 2:
(a) the representations and warranties contained in the Credit
Agreement are true and correct on and as of the date hereof as if made on and
as of such date;
(b) no event has occurred and is continuing which constitutes a
Default or an Event of Default;
(c) the Borrower has full power and authority to execute and deliver
this Second Amendment, and this Second Amendment and the Credit Agreement, as
amended hereby, constitute the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms, except as enforceability may be limited by applicable debtor relief laws
and by general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law) and except as rights to indemnity
may be limited by federal or state securities laws; and
(d) no authorization, approval, consent, or other action by, notice
to, or filing with, any governmental authority or other Person (including the
Board of Directors of the Borrower), is required that has not been obtained for
the execution, delivery or performance by the Borrower of this Second
Amendment.
5. CONDITIONS OF EFFECTIVENESS. This Second Amendment shall be
effective as of May 14, 1999, subject to the following:
(a) the Administrative Agent shall have received a counterpart of this
Second Amendment executed by Lenders comprising the Determining Lenders;
(b) the Administrative Agent shall have received counterparts of this
Second Amendment executed by the Borrower;
(c) the representations and warranties set forth in Section 4 of this
Second Amendment shall be true and correct; and
(d) the Administrative Agent and the Lenders shall have received in
form and substance satisfactory to the Administrative Agent and the Lenders,
such other documents and certificates as the Administrative Agent shall
require.
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6. AMENDMENT FEE. The Borrower covenants and agrees to pay an
amendment fee to the Lenders which execute and deliver this Second Amendment to
the Administrative Lender (or its counsel) not later than 5:00 p.m., Dallas
time, May 14, 1999 in an amount equal to the product of (a) 0.05% multiplied by
(b)(i) with respect to each Lender having a portion of the Revolving Credit
Commitment, an amount equal to such Lender's portion of the Revolving Credit
Commitment and (ii) with respect to each Lender which is owed Facility A Term
Loan Advances or Facility B Term Loan Advances, the aggregate principal amount
of Facility A Term Loan Advances and Facility B Term Loan Advances owed to such
Lender. Such amendment fee shall be paid in immediately available funds and
shall be due and payable to each Lender eligible for payment pursuant to the
preceding sentence no later than one Business Day after the date which this
Second Amendment becomes effective. The Borrower agrees that the failure to pay
the amendment fee provided in this Section 6 shall be an Event of Default under
Section 8.1(b)(ii) of the Credit Agreement.
7. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Second Amendment, each reference in
the Credit Agreement to "this Agreement," "hereunder," or words of like import
shall mean and be a reference to the Credit Agreement, as affected and amended
by this Second Amendment.
(b) The Credit Agreement, as amended by this Second Amendment, and all
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
8. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all
reasonable costs and expenses of the Administrative Agent in connection with
the preparation, reproduction, execution and delivery of this Second Amendment,
and the other instruments and documents to be delivered hereunder (including
the reasonable fees and out-of-pocket expenses of counsel for the
Administrative Agent with respect thereto and with respect to advising the
Administrative Agent as to its rights and responsibilities under the Credit
Agreement, as amended by this Second Amendment).
9. EXECUTION IN COUNTERPARTS. This Second Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which when taken together shall constitute but one
and the same instrument.
10. GOVERNING LAW; BINDING EFFECT. This Second Amendment shall be
governed by and construed in accordance with the laws of the State of Texas and
shall be binding upon the Borrower and each Lender and their respective
successors and assigns.
11. HEADINGS. Section headings in this Second Amendment are included
herein for convenience of reference only and shall not constitute a part of
this Second Amendment for any other purpose.
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12. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS SECOND
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AS TO THE SUBJECT MATTER THEREIN AND HEREIN AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES.
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REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
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IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as of the date first above written.
BORROWER: XXXXXXXX MANUFACTURING COMPANY
By:
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Name:
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Title:
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ADMINISTRATIVE AGENT: NATIONSBANK, N.A. as the Administrative Agent
By:
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Name:
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Title:
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LENDERS: NATIONSBANK, N.A., as a Lender, Swing Line
Bank and Issuing Bank
By:
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Name:
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Title:
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ARCHIMEDES FUNDING, LLC
By: ING Capital Advisors, LLC
As Collateral Manager
By:
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Name:
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Title:
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COMERICA BANK-TEXAS
By:
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Name:
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Title:
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MARINE MIDLAND BANK
By:
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Name:
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Title:
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IMPERIAL BANK, A CALIFORNIA BANKING
CORPORATION
By:
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Name:
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Title:
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CREDITANSTALT CORPORATE FINANCE, INC.
By:
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Name:
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Title:
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By:
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Name:
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Title:
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FLEET CAPITAL CORPORATION
By:
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Name:
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Title:
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PRIME INCOME TRUST
By:
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Name:
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Title:
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KZH-SOLEIL CORPORATION
By:
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Name:
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Title:
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XX XXX XXX XXXXXXX XXXXXXX (XXXXXX)
LTD.
By: Pilgrim Investments, Inc., as its
Investment Manager
By:
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Name:
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Title:
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ML CBO IV (CAYMAN) LTD.
By: Highland Capital Management, L.P., as
Collateral Manager
By:
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Name:
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Title:
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EXHIBIT F
COMPLIANCE CERTIFICATE
NationsBank, N.A., ________, _____
as Administrative Agent
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
This Compliance Certificate is made as of _______________, ______. The
undersigned certifies that the calculations set forth herein are true,
accurate, and complete, and are made in accordance with the provisions of the
Credit Agreement among Xxxxxxxx Manufacturing Company, Inc., NationsBank, N.A.,
as Administrative Agent, and Lenders, dated as of September 19, 1997 (as
amended, modified or supplemented, "Credit Agreement"). All defined terms used
herein but not specifically defined shall have the meanings set forth in the
Credit Agreement.
1. Borrowing Base. [to be completed monthly]
Borrower hereby represents and warrants that the following Borrowing
Base Report is true and correct in all respects as of ___________,
_____ (the "Reporting Date"). The Borrowing Base is determined as
follows:
A. ELIGIBLE ASSETS ($000s)
1. All Accounts $__________
2. Less ineligible Accounts (without duplication)
a. Accounts to which Borrower or a Subsidiary does not $_________
have lawful and absolute title
b. Accounts which are not the valid, legally enforceable $_________
obligation of the account debtor for goods or services
delivered or rendered to such Person
c. Accounts owed by a creditor of Borrower or a $_________
Subsidiary to the extent that such Account equals the
amount owed to such creditor
d. Portion of Accounts subject to any asserted dispute, $_________
offset, discount, counterclaim, or other claim or
defense of account debtor or to any asserted claim on
the part of the account debtor denying liability under
such Account
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e. Accounts which Borrower or any Subsidiary may not $_________
assign or grant a security interest to Administrative
Agent
f. Accounts not evidenced by an invoice rendered to the $_________
account debtor
g. Accounts evidenced by chattel paper, promissory $_________
notes, or other instruments or the result of a
conditional sales agreement
h. Accounts subject to a Lien in favor of any Person $_________
other than Administrative Agent other than Permitted
Collateral Liens
i. Accounts due and payable for more than 90 days from $_________
the invoice date
j. Accounts of account debtors primarily conducting $_________
business in and organized under a jurisdiction outside
the United States (other than Canada) and which are
not insured or supported by an irrevocable letter of
credit
k. Accounts where the account debtor is a Tribunal $_________
l. Accounts where the account debtor is the subject of a $_________
proceeding under a Debtor Relief Law
m. Accounts of account debtors (excluding Kmart $_________
Receivable) who have more than 15% of accounts due
and payable for more than 90 days and which are not
insured from the invoice date
n. Accounts not subject to a fully perfected first
priority $ security interest in favor of
Administrative Agent
o. Accounts where the account debtor is an Affiliate or $_________
employee
Ineligible Accounts $_________
3. Eligible Accounts [(1) - (2)] $_________
4. Eligible Accounts includible in Borrowing Base [80% x $_________
(3)]
B. ELIGIBLE INVENTORY
1. All Inventory $_________
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2. Less ineligible Inventory (without duplication)
a. 50% Work-in-Progress $_________
b. Obsolete Inventory $_________
c. Consignment Inventory $_________
d. Demonstration and display Inventory $_________
e. Inventory to which Borrower or any Subsidiary does $_________
not have lawful and absolute title
f. Inventory subject to a Lien in favor of any Person $_________
other than Administrative Agent, other than Permitted
Collateral Liens
g. Defective or unmerchantable Inventory $_________
h. Inventory located outside the United States $_________
i. Inventory located in leased facilities for which a $_________
Landlord's Waiver has not been delivered to
Administrative Agent
j. Inventory not subject to a fully perfected first priority $_________
security interest in favor of Administrative Agent
k. The sale of such Inventory, upon an Event of Default, $_________
is subject to a Necessary Authorization restriction or
limitation
Ineligible Inventory (sum of a. through k.) $_________
3. Eligible Inventory [(1) - (2)] $_________
4. Eligible Inventory includible in Borrowing Base [50% x (3)] $_________
C. BORROWING BASE
1. Eligible Accounts includible in Borrowing Base (A.4.) $_________
2. Eligible Inventory includible in Borrowing Base (B.4.) $_________
Borrowing Base [(1) + (2)] $_________
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2. Covenant Calculations.. [To be completed quarterly except M.]
A. Leverage Ratio.
1. Total Debt
a. Indebtedness for borrowed money $_________
b. Capitalized Lease Obligations $_________
c. Obligations evidenced by bonds, debentures, notes or $_________
other similar instruments
d. Obligations to pay the deferred purchase price of $_________
property or services other than trade payables incurred
in the ordinary course of business
e. Total Debt [(a) + (b) + (c) + (d)] $_________
2. EBITDA
a. Pretax Net Income (excluding therefrom, to the extent $_________
included in determining Pretax Net Income, any item
of extraordinary gain, including net gains on the sale
of assets other than asset sales in the ordinary course
of business, and adding thereto, to the extent included
in determining Pretax Net Income, any items of
extraordinary loss, including net losses on the sale of
assets other than asset sales in the ordinary course of
business)
b. Interest expense (including in respect of Capitalized $_________
Lease Obligations)
c. EBIT Special Adjustments
(1) Management fees in favor of Westar Capital $_________
not to exceed $450,000
(2) Relocation costs related to integration of $_________
Borrower and Dogloo not to exceed $825,000
(3) Transaction fees and expenses related to $_________
Dogloo and Xxxxxxxx Transaction
(4) Schedule 9 Items $_________
(5) Excess of Westar Capital management fees $_________
accrued over such fees paid
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(6) Excess of Westar Capital management fees $_________
paid over such fees accrued
(7) [(1) + (2) + (3) + (4) + (5) - (6)] $_________
d. Depreciation $_________
e. Amortization $_________
f. Other non-cash charges $_________
g. EBITDA [(a) + (b) + (c) + (d) + (e) + (f)] $_________
3 Leverage Ratio [(1) : (2)] _____ to 1
B. Section 7.1(c). Capitalized Lease Obligations and Indebtedness to
purchase property, plant and equipment
1. Maximum ($10,000,000 minus Indebtedness pursuant to $_________
Section 7.1(h) and 7.1(m))
2. Actual $_________
3. Difference [(1) - (2)] $_________
C. Section 7.1(h). Indebtedness incurred or assumed in respect of
Acquisitions
1. Maximum ($10,000,000 minus Indebtedness pursuant to $_________
Section 7.1(c) and 7.1(m))
2. Actual $_________
3. Difference [(1) - (2)] $_________
D. Section 7.1(m). Other Indebtedness
1. Maximum ($10,000,000 minus Indebtedness pursuant to $_________
Section 7.1(c) and 7.1(h))
2. Actual $_________
3. Difference [(1) - (2)] $_________
E. Section 7.3(f). Investments and expenditures in respect of
Acquisitions of non-Domestic Subsidiaries
1. Maximum $10,000,000
2. Actual $_________
3. Difference [(1) - (2)] $_________
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F. Section 7.3(h). Investments of non-cash consideration in sales
1. Maximum 5,000,000
2. Actual $__________
3. Difference [(1) - (2)] $__________
G. Section 7.3(j). Other Investments
1. Maximum $2,500,000
2. Actual $__________
3. Difference [(1) - (2)] $__________
H. Section 7.7. Capital Expenditures (From September 19, 1997)
1. Maximum ($25,000,000 + Net cumulative revenues $__________
multiplied by .05)
2. Actual $__________
3. Difference [(1) - (2)] $__________
I. Section 7.8. Restricted Payments
1. Purchases and redemptions of officers, directors and
employees stock
a. Maximum $2,500,000
b. Actual $__________
2. Redemptions and repurchases required under Second
Securityholders Agreement
a. Maximum $250,000
b. Actual $__________
3. Dogloo Transaction Restricted Payments
a. Maximum (Base Amount, exclusive of accrued $36,882,000
dividends)
b. Actual $__________
4. Additional redemptions of capital stock
a. Maximum $2,400,000
b. Actual $__________
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5. Advisory Fees to Specified Investors
a. Maximum per fiscal year $600,000
b. Actual $__________
J. Section 7.11. Leverage Ratio
1. Maximum
a. At December 31, 1999 and March 31. 2000 5.50 to 1
b. At June 30, 2000 5.00 to 1
c. From and including September 30, 2000 and 4.50 to 1
thereafter
2. Actual (2.A.3. above) _____ to 1
K. Section 7.12. Fixed Charge Coverage Ratio
1. Minimum
a. At June 30, 1999 and September 30, 1999 1.00 to 1
b. For each fiscal quarter thereafter 1.25 to 1
2. Actual
a. Cash Flow
(1) EBITDA (2.A.2.g. above) $__________
(2) Lease expense $__________
(3) Cash income tax paid $__________
(4) Total Cash Flow [(1) + (2) - (3)] $__________
b. Fixed Charges
(1) Scheduled principal payments in respect of $__________
Indebtedness
(2) Interest expense (including interest expense $__________
pursuant to Capitalized Lease Obligations)
(3) Operating Lease Expense $__________
(4) Fixed Charges [(1) + (2) + (3)] $__________
c. Fixed Charge Coverage Ratio [K.2.a.(4) to k.2.b.(4)] _____ to 1
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L. Section 7.13. Interest Coverage Ratio
1. Minimum
a. At June 30, 1999 and September 30, 1999 1.20 to 1
b. From and including December 31, 1999 and thereafter 1.75 to 1
2. Actual
a. EBITDA (2.A.2.g. above) $__________
b. Interest expense (including interest expense pursuant $__________
to Capitalized Lease Obligations)
c. Interest Coverage Ratio [L.2.a to L.2.b.] _____ to 1
M. Section 7.19. Minimum EBITDA
1. Minimum
a. At June 30, 1999 $5,000,000
b. At September 30, 1999 $9,500,000
c. At December 31, 1999 $12,000,000
2. Actual EBITDA (2.A.2.g. above) $__________
N. Excess Cash Flow. [To be completed annually.]
1. Net Operating Cash Flow
a. Net Income $__________
b. Depreciation, amortization and other non-cash $__________
charges
c. Net losses on asset sales and non-cash asset write $__________
downs
d. Capital Expenditures $__________
e. Scheduled principal payments on Indebtedness $__________
f. Net gain on asset sales $__________
g. Net Operating Cash Flow [(a) + (b) + (c) - (d) - (e) - $__________
(f)]
2. Cash Acquisition Consideration $__________
3. Voluntary prepayments of Indebtedness which cannot be $__________
reborrowed
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4. Restricted Payments $__________
5. Excess Cash Flow [1. - 2. - 3. - 4.] $__________
The undersigned hereby further certifies to the following as of the
date of this Certificate:
The undersigned has reviewed the relevant terms of this Certificate
and has made, or caused to be made, under his/her supervision, a review of the
transactions and condition of the Borrower from the beginning of the accounting
period covered by the financial statements being delivered herewith to the date
of this Certificate and that such review has not disclosed the existence during
such period of any condition or event which constitutes a Default or Event of
Default.
The Borrower is in compliance in all material respects with all of the
terms and conditions of the Credit Agreement and other Loan Documents.
The financial statements delivered to Administrative Agent have been
prepared according to GAAP applied on a consistent basis in all material
respects with those previously delivered.
XXXXXXXX MANUFACTURING
COMPANY, INC.
By:
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Name:
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Title:
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