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Exhibit 10.12
FIRST AMENDMENT
TO
THIRD AMENDED AND RESTATED CONSOLIDATED
REPLACEMENT CREDIT FACILITY AND SECURITY AGREEMENT
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THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CONSOLIDATED
REPLACEMENT CREDIT FACILITY AND SECURITY AGREEMENT (this "Agreement") dated as
of October 10, 1997, is entered into by and between INTERNATIONAL TOTAL
SERVICES, INC., an Ohio corporation ("Borrower"), and BANK ONE, NA, successor by
merger to BANK ONE, CLEVELAND, NA, a national bank (the "Bank").
WITNESSETH
WHEREAS, the Borrower and the Bank are parties to that certain Third
Amended and Restated Consolidated Replacement Credit Facility and Security
Agreement dated as of March 31, 1997 (the "Loan Agreement", all terms defined in
said Loan Agreement being used herein with the same meaning), pursuant to which
the Bank has made a $2,000,000 Term Loan to the Borrower evidenced by a Note
dated March 31, 1997 and payable to the Bank, the final installment of principal
thereunder being due on November 1, 1997; and also pursuant to which the Bank
has made a $900,000 Domestic Term Loan to the Borrower evidenced by a Note dated
February 1, 1996 and payable to the Bank, the final installment of principal
thereunder originally being due on June 30, 1996, but now due on December 31,
1997; and also pursuant to which the Bank has agreed to make a $10,5000,000
Revolving Loan to the Borrower until March 31, 1999 evidenced by a Note dated
March 31, 1997 and payable to the Bank, such Note being payable on demand; and
WHEREAS, the Borrower and the Bank have agreed to amend the Loan
Agreement (i) to extend the maturity date of the Revolving Loan to September 30,
1999; (ii) to modify certain definitions in Section 1 of the Loan Agreement, to
modify certain provisions of Section 2 of the Loan Agreement and to modify
certain convents in Section 8 of the Loan Agreement; and (iii) to increase the
Revolving Loan to an aggregate of $30,000,000;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Borrower and the Bank agree as follows:
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AGREEMENT
Section 1. AMENDMENT OF LOAN AGREEMENT.
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A. The definitions of "Commitment", "Contract Rate", and "Notes" set
forth in Section 1 of the Agreement are, effective the Effective Date, hereby
amended and restated to read in their entirety as follows:
COMMITMENT - Lender's letter to Borrower dated March 21, 1997,
as accepted by Borrower on March 25, 1997 and Lender's letter to Borrower dated
June 11, 1997, containing Option A and B as accepted by Borrower on June 11,
1997 as to Option B.
CONTRACT RATE - A fluctuating rate established as follows:
BORROWER'S TOTAL DEBT TO TANGIBLE NET WORTH CONTRACT RATE
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greater than 17.0 to 1.0 Default Rate
greater than 14.0 to 1.0 and less than or equal to 17.0 to 1.0 Base Rate plus 3.00% per annum
greater than 11.0 to 1.0 and less than or equal to 14.0 to 1.0 Base Rate plus 2.50% per annum
greater than 8.0 to 1.0 and less than or equal to 11.0 to 1.0 Base Rate plus 2.00% per annum
greater than 6.0 to 1.0 and less than or equal to 8.0 to 1.0 Base Rate plus 1.50% per annum
greater than 4.0 to 1.0 and less than or equal to 6.0 to 1.0 Base Rate plus 1.00% per annum
greater than 3.0 to 1.0 and less than or equal to 4.0 to 1.0 Base Rate plus 0.75% per annum
greater than 2.0 to 1.0 and less than or equal to 3.0 to 1.0 Base Rate
greater than 1.0 to 1.0 and less than or equal to 2.0 to 1.0 LIBOR Rate plus 2.50% per annum
greater than 0.5 to 1.0 and less than or equal to 1.0 to 1.0 LIBOR Rate plus 2.00% per annum
less than 0.50 to 1.0 LIBOR Rate plus 1.50% per annum
For the purposes of this definition, Borrower's Total Debt shall be defined as
all accruals and payables for payroll and payroll related liabilities, plus all
Lender financing and Borrower's Tangible Net Worth shall be defined as net worth
less all or any capitalized value of contracts acquired after the completion of
Borrower's Initial Public Offering, and any other intangible asset which may
arise after the completion of Borrower's Initial Public Offering.
NOTES - The Amended and Restated Replacement Promissory Note
(Revolving Loan) and any other promissory note or other instrument evidencing
the Borrower's obligation to repay any Obligations.
B. The following definitions of "Initial Public Offering" and "LIBOR
Rate" are, effective the Effective Date, hereby added to Section 1 of the
Agreement to read in their entirety as follows:
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INITIAL PUBLIC OFFERING - Borrower's initial offering of stock
to the public pursuant to the prospectus dated September 19, 1997 and filed with
the SEC on September 19, 1997, the proceeds of which were, in part, used to
satisfy all indebtedness of Borrower to Xxxxxxx.
LIBOR RATE - The rate of interest determined on the basis of
the offered rate of deposits in U.S. dollars in the London interbank market,
commonly referred to as the London Interbank Offered Rate ("LIBOR"), for one and
three month periods, as elected by Borrower at the time of any advance under the
Revolving Loan as provided in Section 2.3 (A) of this Agreement; provided,
however, that Borrower shall not elect a period extending beyond the maturity
date of the Revolving Loan.
C. Subsections 2.3(A), (B) and (C) of the Agreement are, effective the
Effective Date, amended and restated to read in their entirety as follows:
2.3 Revolving Loan.
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(A) REVOLVING LOAN. Subject at all times to the terms hereof,
the Lender will, from and after October 10, 1997 until September 30, 1999 make
such loans to the Borrower as from time to time the Borrower requests (the
"Revolving Loan") consisting of advances made by Lender against the value of
Eligible Accounts-Domestic and Eligible Accounts-Foreign. Subject to the
provisions of Subsection (B) of this Section 2.3, the aggregate unpaid principal
of the Revolving Loan outstanding at any one time shall not exceed the lesser of
(a) the line of credit approved for Borrower, which is currently Thirty Million
Dollars ($30,000,000), less the face amount of all outstanding Letters of Credit
issued by Lender for the account of Borrower or (b) the sum of (i) eighty
percent (80%) of the unpaid face amount of Eligible Accounts-Domestic (or such
other percentages of Eligible Accounts-Domestic as may from time to time be
fixed by the Lender upon notice to the Borrower) and (ii) the lesser of fifty
percent (50%) of the unpaid face amount of Eligible Accounts-Foreign (or such
other percentages of Eligible Accounts- Foreign as may from time to time be
fixed by the Lender upon notice to the Borrower) or Three Hundred Fifteen
Thousand Dollars ($315,000) less fifty percent (50%) of the Borrower's accrued
payroll and related expenses account calculated at the most recent calendar
month-end (or such other dollar amount as may from time to time be fixed by the
Lender upon notice to the Borrower).
(B) MAXIMUM BORROWINGS AVAILABLE UNDER REVOLVING LOAN.
Notwithstanding anything to the contrary contained in this Section 2.3, at no
time shall the loans outstanding at any time under the Revolving Loan exceed the
sum of Thirty Million Dollars ($30,000,000), less the face amount of all
outstanding Letters of Credit issued by Lender for the account of Borrower.
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(C) PAYMENT. The Revolving Loan shall be payable on September
30, 1999 and bear interest as provided in Section 2.3(D) of this Agreement and
shall otherwise be evidenced by, and repayable in accordance with, the Revolving
Note, but in the absence of such revolving promissory note shall be evidenced by
the Lender's record of disbursements and repayments.
D. Section 2.12 of the Agreement is, effective the Effective Date,
hereby amended and restated to read in its entirety as follows:
2.12 COMMITMENT FEE. Borrower shall pay to Lender annually,
in advance, on the date of this Agreement and on October 10, 1998, and, if the
Revolving Loan is hereafter renewed, on the date of renewal and annually
thereafter if renewed for a period of more than one (1) year, a commitment fee
(the "Commitment Fee") of forty-five hundredths of one percentage point (0.45%)
of the maximum borrowings available under the Revolving Loan pursuant to Section
2.3(B) of this Agreement, whether the Borrower shall be entitled to request such
amount pursuant to Section 2.3(A) of this Agreement or not.
E. Subsection 8.1(H) of the Agreement is, effective the Effective Date,
hereby amended and restated to read in its entirety as follows:
(H) Keep adequate records and books of account with respect to
its business activities in which proper entries are made in accordance with GAAP
reflecting all its financial transactions and permit the Lender annually, in its
discretion, to conduct two (2) or three (3) field examinations and an audit as
set forth in the Commitment, at Borrower's expense.
F. Subparagraph (v) of Subsection 8.1(I) of the Agreement is, effective
the Effective Date, hereby amended and restated to read in its entirety as
follows:
8.1(I)(v) Concurrently with each request for an advance under
the Revolving Loan, and monthly, weekly or daily according to the schedule below
on the last day of each month, week or day according to the schedule below, a
certificate prepared by the chief financial officer or president of Borrower in
the form attached hereto as EXHIBIT A, which certificate may be delivered to
Lender by telecopy and on the first business day of each week Borrower shall
submit to Lender a certificate (certified by the President or Chief Financial
Officer of Borrower as of the last lay of the preceding week) that payroll taxes
for which Borrower is obligated through and as of the date of the certificate
have been paid in full or remitted when due. The Borrower shall also provide to
Lender on or before the 10th day of each month, a monthly reconciliation of
unbilled Accounts Receivable for the preceding month and, on or before the 30th
day of each month, a monthly reconciliation between Accounts Receivable as shown
on its
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CLEVELAND/0041673.03
General Ledger and Borrowing Certificates for the preceding month, each in form
acceptable to Lender and including such detail as the Lender shall require.
Borrowing Certificate Frequency Leverage Ratio
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Monthly less than or equal to 2.0 to 1.0
Weekly greater than 2.0 to 1.0 and less than or equal to 4.0 to 1.0
Daily greater than 4.0 to 1.0
G. Subsection 8.1(O) of the Agreement is, effective the Effective Date,
hereby amended and restated to read in its entirety as follows:
(O) Maintain at all times a Tangible Net Worth equal to or
greater than Five Hundred Thousand Dollars ($500,000) commencing September 30
1997 and thereafter, and maintain at all times Stockholder's Equity as set forth
below commencing September 30, 1997 and thereafter, such covenants to be
calculated monthly in accordance with GAAP based on Borrower's internally
prepared interim financial statements.
NET PROCEEDS OF INITIAL PUBLIC OFFERING STOCKHOLDER'S EQUITY
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greater than $18,000,000 and less than or equal to $19,000,000 $20,500,000
greater than $19,000,000 and less than or equal to $20,000,000 $21,500,000
greater than $20,000,000 and less than or equal to $21,000,000 $22,500,000
greater than $21,000,000 and less than or equal to $22,000,000 $23,500,000
greater than $22,000,000 $24,000,000
H. Subsection 8.1(P) of the Agreement is, effective the Effective Date,
hereby amended and restated to read in its entirety as follows:
(P) Maintain Debt Coverage (as defined herein) not less than
2.5 to 1.0 at September 30, 1997 and thereafter. "Debt Coverage" as used in this
Section 8.1(P) means the ratio of Borrower's net income, plus depreciation and
amortization and net interest paid to Lender, less dividends, purchases of
treasury stock and capital expenditures, to the amount of all principal and
interest payable to Lender calculated quarterly in accordance with GAAP based
upon Borrower's quarterly and fiscal year-end financial statements.
I. Subsection 8.1(Q) of the Agreement is, effective the Effective Date,
hereby amended and restated to read in its entirety as follows:
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(Q) Maintain at all times a ratio of total unsubordinated
liabilities (including deferred liabilities and/or deferred income), computed in
accordance with GAAP, to Tangible Net Worth equal to or less than 17.0 to 1.0
commencing September 30, 1997 and thereafter, and a ratio of funded bank debt to
EBITDA of not more than 3.0 to 1.0 commencing September 30, 1997 thereafter, to
be tested quarterly beginning September 30, 1997, such covenants to be
calculated in accordance with GAAP based on Borrower's fiscal year-end financial
statements.
J. Subsection 8.2(A) of the Agreement is, effective the Effective Date,
hereby amended and restated to read in its entirety as follows:
(A) Merge or consolidate with, or acquire all or any
substantial portion of the assets or capital stock of, any Person.
K. Subsection 8.2(K) of the Agreement is, effective the Effective Date,
hereby amended and restated to read in its entirety as follows:
(K) Make Capital Expenditures during any fiscal year of
Borrower which, in the aggregate, exceed Two Million Dollars ($2,000,000).
L. EXHIBIT I attached to the Agreement is, effective the Effective
Date, hereby amended to delete item number 3 contained therein.
M. EXHIBIT J attached to the Agreement is, effective the Effective
Date, hereby amended to delete item number 5 contained therein.
Section 2. EFFECTIVE DATE OF THE AGREEMENT.
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The effective date of this Agreement ("Effective Date") shall be the
date on which all conditions precedent and all conditions subsequent have been
satisfied, or waived by the Bank in writing.
Section 3. CONDITIONS PRECEDENT.
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Borrower hereby acknowledges and agrees that the effectiveness of this
Agreement is conditioned upon the receipt by the Bank, on or prior to the date
hereof, in form and substance satisfactory to the Bank and its counsel, of the
following:
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A. A certificate, dated as of the date hereof, signed by the President
of Borrower and to the effect that:
1) As of said date, no Event of Default has occurred and
is continuing, and no event has occurred and is
continuing that, with the giving of notice or passage
of time, or both, would be an Event of Default; and
2) The representations and warranties of Borrower set
forth in Section 7 of the Loan Agreement are true and
correct as of such date; and
3) Borrower is in compliance with all of the terms and
conditions set forth in the Loan Agreement on and as
of said date.
B. A certificate, dated as of the date hereof, signed by the Secretary
of Borrower certifying as follows:
1) Borrower's Articles of Incorporation and Code of
Regulations have not been modified or amended since
August 11, 1995 (or certifying that true, correct and
complete copies of all such modifications and
amendments are attached thereto); and
2) Copies of resolutions of Borrower's Board of
Directors are attached thereto with respect to the
approval of this Agreement and of the matters
contemplated hereby and authorizing the execution,
delivery and performance of this Agreement and each
other document, instrument, agreement or note to be
delivered pursuant hereto; and
3) As to the incumbency and signatures of the officers
of Borrower signing this Agreement and each other
document, instrument, agreement or note to be
delivered pursuant hereto.
C. The Amended and Restated Replacement Promissory Note (Revolving
Loan) in the form of EXHIBIT A attached hereto, with all blanks completed, duly
executed and delivered by Borrower to Bank.
D. An Acknowledgement, Consent and Agreement in the form of EXHIBIT B
attached hereto, with all blanks completed, duly executed and delivered by
Transport, NBC, and the Guarantors to Bank.
E. Evidence that Borrower has completed its Initial Public Offering,
including receipt by Borrower of at least Eighteen Million Dollars ($18,000,000)
as a result of the sale of
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stock of Borrower pursuant to the Initial Public Offering, net of all costs and
expenses whatsoever incurred by Borrower in connection with the Initial Public
Offering.
F. Evidence of repayment in full of all indebtedness of Borrower to
Xxxxxxx, including receipt by Borrower from Xxxxxxx of fully executed UCC-3
Termination Statements for all outstanding UCC filings and the original
promissory note of Borrower and all guarantys of the indebtedness of Borrower to
Xxxxxxx marked "Paid in Full" or written acknowledgment from Xxxxxxx that
Borrower's indebtedness to Xxxxxxx has been fully satisfied and all security
interests and liens discharged or terminated.
G. Evidence of repayment in full of all indebtedness of Xxxxxx X.
Xxxxxxx to Borrower.
H. A fully executed Participation Agreement between the Bank and IBJ
Xxxxxxxx Business Credit Corporation ("IBJ Xxxxxxxx"), pursuant to which IBJ
Xxxxxxxx agrees to participate $10,000,000 of the Revolving Loan, together with
receipt by the Bank from IBJ Xxxxxxxx of all funds necessary to consummate such
participation.
I. The written opinion of counsel for Borrower as to the enforceability
of this Agreement, the Loan Agreement, the Note, and each of the other Credit
Documents and covering such other issues thereunder as requested by the Bank and
its counsel.
J. Such other documents, instruments, agreements and notes as the Bank
may reasonably request to implement this Agreement and the transactions
contemplated hereby and by the Loan Agreement.
SECTION 4. FEES AND EXPENSES.
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Borrower shall pay all out-of-pocket fees and expenses incurred by the
Bank in connection with the preparation, negotiation, execution and delivery of
this Agreement, the promissory notes, guaranty, participation agreement, and all
the other agreements, documents or certificates required or contemplated hereby,
including, without limitation, legal fees and expenses of the Bank. Borrower
shall pay a closing fee to IBJ Xxxxxxxx of $25,000 and shall also pay all
out-of-pocket fees and expenses incurred by IBJ Xxxxxxxx in connection with the
preparation, negotiation, execution and delivery of the Participation Agreement,
including, without limitation, legal fees and expenses of IBJ Xxxxxxxx.
SECTION 5. REFERENCES.
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On and after the effective date of this Agreement, each reference in
the Loan Agreement to "this Agreement", "hereunder", "hereof", or words of like
import referring to the Loan
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Agreement, and in the Note to the "Loan Agreement", "thereof", or words of like
import referring to the Loan Agreement shall mean and refer to the Loan
Agreement as previously amended and as amended hereby. References to Exhibit C-1
in the definition of "Revolving Note" in the Loan Agreement shall be deemed to
refer to the Promissory Note, a copy of which is attached hereto as EXHIBIT A.
References in the Loan Agreement, Note and other Credit Documents to Bank One,
Cleveland, NA shall mean and refer to Bank One, NA as successor to Bank One,
Cleveland, NA. The Loan Agreement, as previously amended and as amended by this
Agreement, and all Credit Documents are and shall continue to be in full force
and effect and are hereby and in all respects ratified and confirmed. References
to the Loan Agreement in the Note shall be deemed to include all amendments to
the Loan Agreement whether specified in the Note or not.
SECTION 6. Applicable Law.
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This Agreement shall be deemed to be a contract under the laws of the
State of Ohio, and for all purposes shall be construed in accordance with the
laws of the State of Ohio.
SECTION 7. Counterparts.
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This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and any one
of the parties hereto may execute this Agreement by signing any such
counterpart.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be executed by their duly authorized officers as of the date and
year first above written.
BANK ONE, NA INTERNATIONAL TOTAL SERVICES, INC.
By /s/ Xxxxx X. Xxxxxxxxx By /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxxxx Name: Xxxxxx X. Xxxxxxx
Title: Relationship Manager Title: Chief Executive Officer
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SCHEDULE 1
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List of Guarantors
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Domestic
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Crown Technical Systems, Inc. (Ohio)
T.I.S. Incorporated (Texas)
Certified Investigative Services, Inc. (Texas)
I.T.S. of New York, Inc. (New York)
Selective Detective Services, Inc. (New Jersey)
Foreign
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International Total Services, Ltd. (United Kingdom)
International Transport Security, s.r.o. (Czech Republic)
International Transport Services, Ltd. (Thailand)
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