EXHIBIT 4.1(d)
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "AMENDMENT") is made and
entered into as of October 22, 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, NATIONAL ASSOCIATION, 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) The following definitions set forth in SECTION 1.1 of the Loan
Agreement are hereby amended to read in their entireties as follows:
BORROWING BASE means, for any period, 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 financial statements of Borrower and its
Subsidiaries as of the Most Recent Financial
Statement Date; PROVIDED that the amount calculated
pursuant to this CLAUSE (II) shall not exceed 50% of
the Borrowing Base, PLUS
(iii) 80% of the WIP of Borrower and its Subsidiaries, PLUS
(iv) the Stationary Term Loan Balance, PLUS
(v) the 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.
ELIGIBLE ACCOUNTS shall mean, as at any date of determination
thereof, each Account 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, and (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
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.
MAXIMUM REVOLVING LOAN AVAILABLE AMOUNT means, at any date, an
amount equal to the least of (i) $72,750,000 until October 31, 1999 and
$76,000,000 thereafter (as such amounts may be adjusted from time to time
by the
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Majority Lenders), (ii) the aggregate of the Revolving Loan Commitments or
(iii) the then effective Borrowing Base.
OVER/UNDER ADVANCE AMOUNT means $5,650,000.
REVOLVING LOAN MATURITY DATE means the maturity of the Notes,
January 31, 2000.
STATIONARY TERM LOAN BALANCE means $35,000,000, as such amount may
be reduced in accordance with SECTIONS 2.1, 2.3, 3.2(B)(1) and 8.5 hereof.
(b) The following definitions are hereby added to the Loan Agreement:
AGGREGATE ESTIMATED INCREMENTAL WIP means, as of any date, the sum
of the Estimated Incremental WIP for each Week since the Most Recent
Financial Statement Date; Aggregate Estimated
Incremental WIP may be positive or negative.
BASE WIP means the work in process of Borrower and its Subsidiaries
as reflected in the most recent financial statements of Borrower delivered
to the Agent.
ESTIMATED INCREMENTAL WIP means, for each Week, the difference of
(a) the product of 4.17 times the direct labor costs incurred by Borrower
and its Subsidiaries during such Week minus (b) 70.5% of the Eligible
Accounts of Borrower and its Subsidiaries issued during such Week;
Estimated Incremental WIP may be positive or negative.
MOST RECENT FINANCIAL STATEMENT DATE means the date of the most
recent financial statements of Borrower and its Subsidiaries delivered to
the Agent.
WEEK means the week ending on any Friday (or, if such Friday is not
a Business Day, on the immediately preceding Thursday); but if a Week
would otherwise include the Most Recent Financial Statement Date, then
such Week shall include only the period from such Most Recent Financial
Statement Date to the end of such Week.
WIP means, on any date, the Base WIP plus the Aggregate Estimated
Incremental WIP.
(c) SECTION 3.2(B)(2)(II) of the Loan Agreement is hereby deleted, and no
prior breach thereof shall be a Default or an Event of Default or justify the
exercise of any remedy under the Loan Documents.
(d) SECTION 7.2(F) of the Loan Agreement is hereby amended to read in its
entirety as follows:
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(f) By 4:30 p.m., Houston time, of each Monday (or, if such Monday
is not a Business Day, of the immediately following Tuesday) during the
term hereof, a Borrowing Base Certificate as at the last day of
immediately preceding Week, together with such supporting information as
Agent may reasonably request;
(e) SECTION 9.1(L) of the Loan Agreement is hereby amended, and there is
hereby added to the Loan Agreement a new SECTION 9.1(M), to read in their
entirety as follows:
(l) CHANGE OF CONTROL - there should occur any Change of
Control; or
(m) SCHEDULE - any of the events scheduled to occur after November
12, 1999 in the "Transaction Timing" which was part of the "Discussion
Materials Prepared For The Invatec Bank Syndicate" dated October 18, 1999
fails to occur by the date specified therein for such event.
(f) EXHIBIT J to the Loan Agreement (Borrowing Base Certificate) is hereby
amended to read in its entirety as set forth on EXHIBIT J hereto.
SECTION 2. SUSPENSION OR WAIVER OF CERTAIN COVENANTS. The covenants of the
Borrower contained in Sections 6.19 ("Year 2000"); 7.2(o) (real estate
evaluations and machinery and equipment appraisals); 7.3(a)(i) and (iv)
("Consolidated EBITDA"), and 7.13 ("Turnaround Consultant") of the Loan
Agreement are hereby suspended until January 31, 2000; that is, the breach of
any of such covenants, whether such breach occurred before or occurs after the
date of this Agreement, does not and will not constitute a Default or an Event
of Default unless the same is continuing on January 31, 2000. The Borrower
represents that the Capital Expenditures of the Borrower and its Subsidiaries
for the calendar quarter ending September 30, 1999 aggregated an amount greater
than $625,000 but less than $640,000; the Lenders hereby waive compliance with
Section 8.12 ("Capital Expenditures") of the Loan Agreement for such calendar
quarter (but such waiver shall not be effective (x) if the Capital Expenditures
for such quarter exceeded $640,000 or (y) for any other calendar quarter).
SECTION 3. FIRST AMENDMENT. Section 3 of the Amendment to Loan Agreement
dated as of March 21, 1999 among the Borrower, the Lenders and the Agent, as
heretofore amended and supplemented (the "FIRST AMENDMENT"), is hereby amended
to provide that the fees described therein shall now be due and payable in full
on the Revolving Loan Maturity Date; PROVIDED that if (a) the unpaid principal
of and accrued interest on the Notes are paid in full; (b) the Borrower provides
Cover for all then-outstanding Letters of Credit; (c) all of the Revolving Loan
Commitments are terminated; (d) the Borrower pays all amounts due under Section
11.3 of the Loan Agreement, including the fees and expenses of counsels to the
Agent and of PricewaterhouseCoopers, LLP for services rendered to the Agent, and
(e) the Loan Agreement is terminated and released (except (1) those provisions
of the Loan Agreement relating to Letters of Credit, if any Letter of Credit is
then outstanding, and (2) those provisions of the Loan Agreement which will
survive termination of the Loan Agreement in accordance with its terms; each of
the Borrower, the Lenders and the Agent agrees that it will enter into a Loan
Document, in Proper Form, releasing the Borrower and its Subsidiaries from all
claims of the Lenders and the Agent under or relating to the Loan Documents
[other than such surviving provisions] upon
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such termination and release), in each case before the Revolving Loan Maturity
Date, then (x) such fees shall be reduced to zero and (y) each Approving Lender
(as defined in the First Amendment) agrees that it will return to the Borrower
for cancellation the warrants (the "WARRANTS") issued by the Borrower to such
Approving Lender as a condition to the effectiveness of the First Amendment.
Furthermore, each Approving Lender agrees that it will not exercise its Warrants
before the Revolving Loan Maturity Date.
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. RELEASE; INDEMNITY. The Borrower hereby releases, acquits and
forever discharges, to the maximum extent not prohibited by applicable law, each
Lender, the Agent and their respective agents (including but not limited to
Xxxxx Xxxxxxx & Xxxx LLP; Xxxxxxx & Xxxxx LLP; PricewaterhouseCoopers LLP and
their respective partners and employees), successors, assigns, trustees,
receivers, shareholders, subsidiaries, directors, officers and employees (in
each case whether in their individual capacities or in their capacities as
representatives; collectively, the "INDEMNIFIED PERSONS") from and waives and
relinquishes any and all demands, claims, actions, suits, controversies,
damages, costs, expenses and causes of action whatsoever, in law, equity or
otherwise, known or unknown, suspected or unsuspected, which the Borrower ever
had, now has or hereafter can, shall or may have against any Indemnified Person
by reason of, or in connection with, arising out of or based in any way on any
one or more actions or inactions taken during the course of the negotiation,
documentation, performance and enforcement of the Loan Documents, in each case
through the date hereof, whether arising under tort, contract or otherwise, and
including, without limitation, claims, actions, suits, controversies, damages or
causes of action, sounding and arising out of breach of contract, fraud,
mistake, deceit, breach of obligation of good faith or fair dealing, lender
liability, usury, duress, coercion, control, overreaching, disparate bargaining
position, reliance, equitable subordination, material misrepresentation, failure
to disclose, detrimental reliance, promissory estoppel, interference with
business management or relationships, waiver, laches, breach of fiduciary duty,
negligence, fraudulent transfer, any theory of liability as partners or joint
venturers and deceptive trade practices; but this release shall not affect,
diminish or impair the obligations of the Lenders and the Agent under the Loan
Documents. The release contained in the immediately preceding sentence shall
survive the termination of the Loan Agreement. The Borrower indemnifies and
agrees to defend and hold the Indemnified Persons harmless from and against any
and all loss, liability, obligations, damage, penalty, judgment, claim,
deficiency and expense (including interest, penalties, attorneys' fees and
amounts paid in settlement) to which any Indemnified Person may become subject
by reason of, or in connection with, any claim released or purported to be
released by the Borrower in this Section, WHETHER BY ALLEGED OR ACTUAL
NEGLIGENCE OF SUCH INDEMNIFIED PERSON OR OTHERWISE, except and to the extent
caused by the gross negligence or willful misconduct of such Indemnified Person;
this indemnity shall terminate upon the termination of the Loan Agreement. This
Section is in addition to, and does not supersede or amend, any similar
provision contained in the Loan Documents.
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SECTION 6. AMENDMENT FEE; EXPENSES. The Borrower shall pay to the Agent
(a) an amendment fee of $150,000 in consideration for the execution and delivery
of this Amendment, such fee to be (1) shared among the Lenders in accordance
with their respective Revolving Loan Commitment Percentages; (2) due and payable
contemporaneously with the execution and delivery of this Amendment, and (3)
paid as a condition precedent to the effectiveness of this Amendment, and (b)
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 7. 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)
after giving effect to this Amendment, no Default or Event of Default has
occurred and is continuing (other than breaches of covenants which have been
waived or suspended by operation of SECTION 2 of this Amendment) or will occur
as a result of this Amendment.
SECTION 8. 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 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.
THE LOAN DOCUMENTS (INCLUDING THIS AMENDMENT) REPRESENT 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.
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:_______________________________________
Name:_____________________________________
Title:____________________________________
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XXXXX XXXX XX XXXXX, NATIONAL
ASSOCIATION, as Agent and as a Lender
By:_______________________________________
Name:_____________________________________
Title:____________________________________
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XXXXX FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:_______________________________________
Name:_____________________________________
Title:____________________________________
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BANK OF AMERICA, NA,
formerly known as Bank of America Texas, N.A.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
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COMERICA BANK-TEXAS
By:_______________________________________
Name:_____________________________________
Title:____________________________________
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XXXXXXXX XXXX XXXX XX XXXXXXXX
By:_______________________________________
Name:_____________________________________
Title:____________________________________
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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
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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 ________________, _______.
_____________________________________
[SIGNATURE OF AUTHORIZED OFFICER]
EXHIBIT J
Borrowing Base Certificate
Dated ________________
Gross Accounts Receivable ______________
as of the date above
Less:
Over 90 days old (_____________)
Foreign (_____________)
Total Eligible A/R ______________
Advance Rate 80%
A/R Borrowing Amount _____________
Base WIP as of ______________
Most Recent Financial Statement Date
Direct labor hours since
Most Recent Financial Statement Date ______________
4.17
Increase to WIP ______________
Additions to Eligible Accounts since
Most Recent Financial Statement Date ______________
70.5%
Decrease to WIP (______________)
WIP
____________
Advance Rate 80%
WIP Borrowing Amount
____________
Gross Inventory as of ______________
Most Recent Financial Statement Date
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
