Exhibit 4.2
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is
made as of the 13th day of August, 2002 to the Loan and Security Agreement dated
November 28, 2001 (as previously amended, the "Loan Agreement") among Numatics,
Incorporated, Micro-Filtration, Inc., Numation, Inc., Numatech, Inc., Ultra Air
Products, Inc., Microsmith, Inc., Empire Automation Systems, Inc. (formerly
Empire Air Systems, Inc.) (each a "Borrower" and collectively "Borrowers") and
LaSalle Business Credit, Inc., as Lender and Collateral Agent. Unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to them in the Loan Agreement.
WHEREAS, Borrowers have requested that Lender amend the Loan Agreement in
certain respects and Lender has agreed to do so subject to the terms and
conditions hereof.
WHEREAS, Borrowers have requested that Lender waive the Event of Default
arising from Borrowers' failure to maintain the Debt Service Coverage Ration and
Interest Coverage Ration required by Sections 14(b) and 14(c) of the Loan
Agreement as of June 30, 2002 (the "Existing Events of Default").
NOW, THEREFORE, in consideration of the foregoing, and the mutual covenants
herein contained, and such other consideration as the parties mutually agree,
the parties hereto agree as follows:
1. Amendments. Borrowers and Lender agree that Sections 14(a), 14(b) and
14(c) of the Loan Agreement are amended and restated in their entirety to read
as follows:
(a) Tangible Net Worth.
Borrowers shall not permit Tangible Net Worth at any time to be less
than the Minimum Tangible Net Worth; "Minimum Tangible Net Worth" being
defined for purposes of this subsection as (i) Fifteen Million Seven
Hundred Thousand and No/100 Dollars ($15,700,000.00) at all times from
November 28, 2001 through December 31, 2002, (ii) Eighteen Million Two
Hundred Thousand and No/100 Dollars ($18,200,000.00) at all times from and
including January 1, 2003 through December 30, 2003, and (iii) Twenty
Million Seven Hundred Thousand and No/100 Dollars ($20,700,000.00) at all
times from and including December 31, 2003 and thereafter; and "Tangible
Net Worth" being defined for purposes of this subsection as Numatics'
shareholders' equity (including retained earnings) on a consolidated basis
less the book value of all intangible assets and all "Investments", "Other
Current Assets", "Deferred Tax Assets" and "Other Assets" all as classified
on Numatics' consolidated balance sheet, including, but not limited to,
transaction costs not amortized, debt issuance costs not amortized and
product drawings, as determined solely by Lender on a consistent basis less
prepaid expenses and obligations due from officers, affiliates and
employees plus the amount of any LIFO reserve plus the amount of any debt
subordinated to the Liabilities in a manner satisfactory to Lender (but
excluding the indebtedness evidenced by the Subordinated Redemption Note
dated January 3, 2001 in the principal
amount of One Million Eighty-Nine Thousand Nine Hundred Ninety-Six and
No/100 Dollars ($1,089,996.00) issued by Numatics to Xxxxx X. Xxxxx
and, to the extent in excess of Five Hundred Thousand and No/100
Dollars ($500,000.00), indebtedness consisting of deferred
compensation owing to Xxxx Xxxxxx) plus deferred tax liabilities, all
as determined for Numatics and its Subsidiaries on a consolidated
basis under generally accepted accounting principles applied on a
basis consistent with the financial statement dated September 30, 2001
except as set forth herein and calculated without giving effect to any
unrealized non-cash foreign exchange gains and/or losses accumulating
after December 31, 2001;
(b) Debt Service Coverage.
Borrowers shall not permit Debt Service Coverage for any period of
twelve (12) consecutive months ending on the last day of a fiscal quarter
to be less than the ratio set forth below for such fiscal quarter:
Period Ratio
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Each fiscal quarter comprising Borrowers' 2001 Fiscal Year and 1.00 to 1.0
the fiscal quarters ending March 31, 2002, June 30, 2002 and
September 30, 2002
The fiscal quarter ending December 31, 2002 1.05 to 1.0
Each fiscal quarter comprising Borrowers' 2003 Fiscal Year and 1.10 to 1.0
each fiscal quarter comprising any subsequent Fiscal Year of
Borrowers
(c) Interest Coverage.
Borrowers shall not permit the ratio of (i) Adjusted Net Income to
(ii) scheduled payments of interest and fees, to the extent carried as
interest expense on Numatics' and its Subsidiaries' consolidated financial
statements, with respect to indebtedness for borrowed money (including the
interest component payments with respect to capitalized leases) for any
period of twelve (12) consecutive months ending on the last day of a fiscal
quarter, to be less than the ratio set forth below for such fiscal quarter:
Period Ratio
-------------------------------------------------------------- -----------
Each fiscal quarter comprising Borrowers' 2001 Fiscal Year and 1.15 to 1.0
the fiscal quarters ending March 31, 2002 and June 30, 2002
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Period Ratio
--------------------------------------------------------------- -----------
Borrowers' fiscal quarter ending September 30, 2002 1.10 to 1.0
Borrowers' fiscal quarter ending December 31, 2002 1.20 to 1.0
Each fiscal quarter, comprising Borrowers' 2003 Fiscal Year and 1.35 to 1.0
each fiscal quarter comprising any subsequent Fiscal Year of
Borrowers
2. Representations and Warranties of Borrowers. Each Borrower represents
and warrants that, as of the date hereof:
(a) Each Borrower has the right and power and is duly authorized to enter
into this Agreement and all other agreements executed in connection herewith;
(b) No Event of Default or an event or condition which upon notice, lapse
of time or both will constitute an Event of Default has occurred and is
continuing;
(c) The execution, delivery and performance by each Borrower of this
Amendment and the other agreements to which such Borrower is a party (i) have
been duly authorized by all necessary action on its part; (ii) do not and will
not, by the lapse of time, giving of notice or otherwise, violate the provisions
of the terms of its Articles of Certificate of Incorporation or By-Laws, or of
any mortgage, indenture, security agreement, contract, undertaking or other
agreement to which such Borrower is a party, or which purports to be binding on
such Borrower or any of its properties; (iii) do not and will not, by lapse of
time, the giving of notice or otherwise, contravene any governmental restriction
to which such Borrower or any of its properties may be subject; and (iv) do not
and will not, except as contemplated in the Loan Agreement, result in the
imposition of any lien, charge, security interest or encumbrance upon any of
such Borrower's properties under any indenture, mortgage, deed of trust, loan or
credit agreement or other agreement or instrument to which such Borrower is a
party or which purports to be binding on such Borrower or any of its properties;
(d) No consent, license, registration or approval of any governmental
authority, bureau or agency is required in connection with the execution,
delivery, performance, validity or enforceability of this Amendment and the
other agreements executed by any Borrower in connection herewith;
(e) This Amendment and the other agreements executed by any Borrower in
connection herewith have been duly executed and delivered by any Borrower and
are enforceable against any Borrower in accordance with their terms; and
(f) All information, reports and other papers and data heretofore furnished
to Lender or Collateral Agent by any Borrower in connection with this Amendment,
the Loan
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Agreement and Other Agreements are accurate and correct in all material respects
and complete insofar as may be necessary to give Lender true and accurate
knowledge of the subject matter thereof. Each Borrower has disclosed to Lender
every fact of which it is aware which would reasonably be expected to materially
and adversely affect the business, operations or financial condition of such
Borrower or the ability of such Borrower to perform its obligations under this
Amendment, the Loan Agreement or under any of the Other Agreements. None of the
information furnished to Lender by or on behalf of any Borrower contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained herein or therein not materially
misleading.
3. Conditions Precedent. The amendments to the Loan Agreement set forth in
this Amendment shall become effective as of the date of this Amendment when
Lender has received:
(a) a copy of this Amendment executed by each party hereto;
(b) an amendment fee of Twenty-Five Thousand and No/100 Dollars
($25,000.00); and
(c) a copy of a fully executed amendment to the ACS Purchase Agreement in
form and substance satisfactory to Lender.
4. Fees and Expenses. Borrowers agree to pay all legal fees and other
expenses, whether for in-house or outside counsel, incurred by Lender in
connection with this Agreement and the transactions contemplated hereby.
5. Foreign Pledge Agreements. Borrowers agree to execute such documents and
take such actions as are necessary to grant Lender a valid and enforceable first
priority security interest in sixty-five percent (65%) of the equity in each of
Numatics S.A. de C.V. (Mexico), Numatics S.R.L. (Italy) and Numatics Ltd.
(Taiwan) by September 30, 2002. This Section 5 supersedes Section 5 of the
Second Amendment to the Loan and Security Agreement.
6. Loan Agreement Remains in Force. Except as specifically amended hereby,
all of the terms and conditions of the Loan Agreement shall remain in full force
and effect and this Agreement shall not be a waiver of any rights or remedies
which Lender has provided for in the Loan Agreement and all such terms and
conditions are herewith ratified, adopted, approved and accepted.
7. No Novation. This Amendment and all other agreements executed by
Borrowers on the date hereof are not intended to nor shall be construed to
create a novation or accord and satisfaction, and shall only be a modification
and extension of the existing Liabilities of Borrowers to Lender.
8. Entire Agreement. This Amendment and the other documents it refers to
comprise the entire agreement relating to the subject matter they cover and
supersede any and all prior written or oral agreements among Lender and
Borrowers relating thereto.
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9. Severability. Any provision of this Amendment that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
Except as expressly provided for herein, the terms and conditions of the
Loan Agreement shall remain in full force and effect.
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IN WITNESS WHEREOF, Borrowers and Lender have caused this Amendment to be
duly executed by their proper duly authorized officers of the day and year
first set forth above.
LASALLE BUSINESS CREDIT, INC.
By /s/ Xxxx X. Xxxxxxx
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Its Vice President
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NUMATICS, INCORPORATED
MICRO-FILTRATION, INC.
NUMATION, INC.
NUMATECH, INC.
ULTRA AIR PRODUCTS, INC.
MICROSMITH, INC.
EMPIRE AUTOMATION SYSTEMS, INC.
Each By /s/ Xxxxxx X. Xxxxxxx
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Their Secretary
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