Exhibit 10.13
SECOND AMENDMENT TO
LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT ("Second Amendment") is made as of
this 12th day of September, 2003, by and among FLEET CAPITAL CORPORATION
("Fleet"), a Rhode Island corporation with an office at Xxx Xxxxx Xxxxxx Xxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000, individually as a Lender and as Agent
("Agent") for itself and any other financial institution which is or becomes a
party hereto (each such financial institution, including Fleet, is referred to
hereinafter individually as a "Lender" and collectively as the "Lenders"), the
CANADIAN PARTICIPANTS party hereto, the U.K. PARTICIPANTS party hereto, an
Affiliate of Fleet National Bank to be incorporated under the laws of Canada or
a province thereof and to be selected by Agent, individually as a Lender and as
Canadian Agent ("Canadian Agent"), FLEET NATIONAL BANK, London U.K. branch,
trading as FleetBoston Financial, individually as a Lender and as U.K. Agent
("U.K. Agent"), XXXXX FARGO FOOTHILL, INC. (f/k/a Foothill Capital Corporation),
as Syndication Agent ("Syndication Agent"), the LENDERS, KATY INDUSTRIES, INC.,
a Delaware corporation, with its chief executive office and principal place of
business at 000 Xxxxxxx Xxxxxxxx, Xxxxx 0000, Xxxxxxxxxx, Xxxxxxxxxxx 00000
("Katy" or "U.S. Borrower"), XXXXX INDUSTRIES (CANADA) INC., a Canadian
corporation with its chief executive office and principal place of business at
000 Xxxxxxx Xxxx, Xxxxxxxxxxx, Xxx. XxX 0X0 ("Xxxxx Canada" or "Canadian
Borrower") and CONTICO MANUFACTURING LIMITED ("CML" or U.K. Borrower"), a
private limited company incorporated under the laws of England and Wales and
registered with Company No. 1338772 whose registered office is Xxxxxxx Xxx,
Xxxxxxx Xxxxxxxx, XX00 0XX, Xxxxxxx. Katy, Xxxxx Canada and CML are sometimes
hereinafter referred to individually as a "Borrower" and collectively as
"Borrowers."
W I T N E S S E T H :
WHEREAS, Agent, Lenders, Canadian Participants, U.K. Participants, U.K.
Agent, Syndication Agent and Borrowers entered into a certain Loan Agreement
dated as of January 31, 2003 as amended by a certain First Amendment to Loan
Agreement dated as of April 30,2003 (said Loan Agreement, as so amended, is
hereinafter referred to as the "Loan Agreement"); and
WHEREAS, Borrowers desire to amend and modify certain provisions of the
Loan Agreement pursuant to the terms and conditions hereof;
WHEREAS, subject to the terms and conditions hereof, Agent, Lenders,
Canadian Participants, U.K. Participants and U.K. Agent are willing to so amend
and modify the Loan Agreement; and
NOW THEREFORE, in consideration of the premises, the mutual covenants and
agreements herein contained, and any extension of credit heretofore, now or
hereafter made by Agent and Lenders to Borrowers, the parties hereto hereby
agree as follows:
1. Definitions. All capitalized terms used herein without definition shall
have the meanings given to them in the Loan Agreement.
2. Disposition of Assets. Section 7.2.9 of the Loan Agreement is hereby
deleted and the following is inserted in its stead:
"7.2.9 Disposition of Assets. Sell, lease or otherwise dispose of
any of, or permit any Subsidiary of any Borrower to sell, lease or
otherwise dispose of any of, its Properties, including any disposition of
Property as part of a sale and leaseback transaction, to or in favor of
any Person, except for:
(i) sales of Inventory in the ordinary course of business;
(ii) transfers of Property to a Borrower by a Subsidiary of Borrower
or transfers of Property by a Loan Party to another Loan Party;
(iii) dispositions of Property that is substantially worn, damaged,
uneconomic, redundant or obsolete; provided that the sales proceeds from
such dispositions are (A) reinvested in Equipment or other real Property
in which Agent has a Lien (subject only to Permitted Liens that are not
Purchase Money Liens) within 90 days after the date of such disposition as
provided in subsection 3.3.1 of the Agreement or (B) applied to the Loans
pursuant to subsection 3.3.1 of the Loan Agreement.
(iv) dispositions of investments described in clauses (iv), (v),
(vi) and (vii) of the definition of the term "Restricted Investments";
(v) other dispositions expressly authorized by this Agreement;
(vi) sales of Equipment and real Property in connection with the
closing of Xxxxx' wire fabrication facility in Mooresville, Indiana;
provided that the aggregate sales proceeds from such dispositions equal or
exceed $1,800,000 and that such sales proceeds net of amounts required to
remove Permitted Liens prior to the Liens of Agents as applied first, to
installments of principal due under the Term Notes ratably, to be applied
to future installments in inverse order of maturity in an amount equal to
eighty percent (80%) of the Appraised Value of the Equipment so sold,
until paid in full and second, to repay outstanding principal of U.S.
Revolving Credit Loans on a ratable basis.
(vii) sales of real Property in connection with the closing of the
Microtron facility in Pineville, North Carolina; provided that the
aggregate sales proceeds from such dispositions equal or exceed seventy
percent (70%) of the Appraised Value of the real Property so sold and that
such sales proceeds are applied to first, to installments of principal due
under the Term Notes ratably, to be applied to future installments in
inverse order of maturity, until paid in full and second, to repay
outstanding principal of U.S. Revolving Credit Loans ratably;
(viii) leases or subleases of unused real Property or Equipment;
provided that such leases or subleases are pursuant to arms-length
agreements with third parties at fair market rates;
(ix) the sale of all or substantially all of the Securities or
assets and business of GC/Waldom Electronics, Inc.; provided that the
aggregate sales proceeds from any such
2
disposition equal or exceed $8,000,000 and that such sales proceeds are
applied to the Loans pursuant to subsection 3.3.1 of the Agreement;
(x) Asset Sales of assets having a fair market value not in excess
of $10,000,000 in any single transaction (or a series of related
transactions) or in excess of $30,000,000 in the aggregate over the Term;
provided that in any such Asset Sale, (x) the consideration received for
such assets shall be in an amount at least equal to the greater of (i) the
fair market value thereof, and (ii) (A) in the case of Accounts and
Inventory, the aggregate value attributable to such Accounts and Inventory
in determining the Canadian, U.K. or U.S. Borrowing Base, as applicable
(but without giving effect to any reduction due to advance rates or any
reserves), and (B), as long as the Term Loan is outstanding, in the case
of Equipment and real Property Assets, seventy percent (70%), with respect
to real Property, or eighty percent (80%), with respect to Equipment, of
the Appraised Value of such asset; it being understood that in the case of
Asset Sales of capital stock or other equity interests (or any options or
warrants to purchase stock or other Securities exchangeable for or
convertible into stock or other equity interests) of any Person, the
consideration received therefore shall be in an amount equal to the
greater of (i) the fair market value thereof and (ii) the aggregate value
attributable to such Person's Accounts and Inventory in determining the
Canadian, U.K. or U.S. Borrowing Base, as applicable (but without giving
effect to any reduction due to advance rates or any reserves) plus seventy
percent (70%), with respect to real Property, or eighty percent (80%) with
respect to Equipment, of the Appraised Value of such Person's Equipment or
real Property; (y) the sole consideration received shall be cash or, if
the disposition in question is of a business line, entire facility or
division, assumption of Indebtedness; and (z) the proceeds of such Asset
Sales shall be applied as required by subsection 3.3.1 of the Agreement
or, with respect to sales proceeds of Equipment or real Property, are
reinvested in Equipment or other real Property in which Agent has a Lien
(subject only to Permitted Liens that are not Purchase Money Liens) within
90 days after the date of disposition as provided in subsection 3.3.1 of
the Agreement; and provided, further, that in any such Asset Sale in which
the consideration received exceeds $20,000, Agent shall have received a
certificate of an officer of Borrower Representative evidencing that the
conditions in clauses (x) and (y) above will be satisfied and certifying
that Borrowers and their Subsidiaries will comply with clause (z) above
and setting forth in reasonable detail the calculations relating thereto
and otherwise in form and substance satisfactory to Agent at least 5
Business Days prior to the consummation of the proposed Asset Sale;
(xi) sale of all or substantially all of the assets and business of
Duckback Products, Inc. (the "Duckback Asset Sale") if (x) the net sales
proceeds realized by Duckback Products, Inc. from such sale equals or
exceeds $15,000,000, (y) after giving effect to such sale, there is no
existing and continuing Event of Default, (z) Duckback Products, Inc. or
Katy shall pay to Agent for application to the U.S. Obligations the amount
of such net sales proceeds in accordance with subsection 3.3.1 of the
Agreement, which net sales proceeds shall be applied to outstanding U.S.
Obligations as provided in said subsection 3.3.1, and (aa) the terms and
conditions of such sale, including, without limitation, any asset purchase
agreement entered into in connection with such sale, are reasonably
acceptable to Agent; and
3
(xii) sales or liquidations of Inactive Subsidiaries."
3. Financial Covenants. As of the "Second Amendment Effective Date" (as
defined in Section 4 of the Second Amendment), Exhibit 7.3 of the Loan
Agreement is hereby deleted and Exhibit 7.3 attached to this Second
Amendment is inserted in its stead.
4. Second Amendment Effective Date. This Second Amendment shall become
effective upon satisfaction of each of the following conditions:
(i) Borrowers, Agent and Majority Lenders shall have executed
and delivered to each other this Second Amendment; and
(ii) The Duckback Asset Sale shall have been consummated in
accordance with the provisions of subsection 7.2.9 of the Loan
Agreement as amended by this Second Amendment on before
September 30,2003.
The date on which each of the foregoing conditions precedent
is satisfied shall be referred to as the "Second Amendment Effective
Date."
5. Continuing Effect. Except as otherwise specifically set out herein, the
provisions of the Loan Agreement shall remain in full force and effect.
6. Governing Law. This Second Amendment and the obligations arising hereunder
shall be governed by, and construed and enforced in accordance with, the
laws of the State of Illinois applicable to contracts made and performed
in such state, without regard to the principles thereof regarding
conflicts of laws.
7. Counterparts. This Second Amendment may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
(Signature Page Follows)
4
(Signature Page to Second Amendment to Loan Agreement)
IN WITNESS WHEREOF, this Second Amendment has been duly executed on the
day and year specified at the beginning of this Second Amendment.
KATY INDUSTRIES, INC.
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Vice President
CONTICO MANUFACTURING LIMITED
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
XXXXX INDUSTRIES (CANADA) INC.
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
FLEET CAPITAL CORPORATION,
as Agent and as a Lender
By: /s/ Xxxxx Xxxxxx
-------------------------------------
Name: Xxxxx Xxxxxx
-------------------------------
Title: Vice President
------------------------------
XXXXX FARGO FOOTHlLL, INC. (f/k/a
Foothill Capital Corporation),
as a Lender
By: /s/ Xxx Xxxx
-------------------------------------
Name: Xxx Xxxx
-------------------------------
Title: Assistant Vice-President
------------------------------
GMAC COMMERCIAL FINANCE, as a Lender
By: /s/ Xxxxxxx Xxxxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxxxx
-------------------------------
Title: Senior Vice President
------------------------------
LASALLE BANK NATIONAL ASSOCIATION,
as a lender
By: /s/ Xxxx Xxxxx
-------------------------------------
Name: XXXX XXXXX
-------------------------------
Title: VICE PRESIDENT
------------------------------
U.S. BANK NATIONAL ASSOCIATION,
as a Lender
By: /s/ Xxxxx X. Van Meter
-------------------------------------
Name: Xxxxx X. Van Meter
-------------------------------
Title: Vice President
------------------------------
UPS CAPITAL CORPORATION, as a Lender
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxxx
-------------------------------
Title: SVP
------------------------------
Accepted and Agreed to this 12th of September, 2003.
GUARANTORS:
KKTY HOLDING C0MPANY, L.L.C.
By: /s/ Xxxxxxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxxxxxx Xxxxxxxx
Title: Authorized Manager
AMERICAN GAGE & MACHINE CO.
By:
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Secretary
---------------------------
CONTICO COMMERCIAL PRODUCTS, L.L.C.
By:
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Authorized Manager
---------------------------
DUCKBACK PRODUCTS, INC.
By:
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Secretary
---------------------------
GCW, INC.
By:
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Secretary
---------------------------
PTR MACHINE CORP.
By:
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Secretary
---------------------------
SAVANNAH ENERGY SYSTEMS COMPANY
By:
---------------------------------------
Name: Xxxx Xxxxxxxxx
Accepted and Agreed to this 12th of September, 2003.
GUARANTORS:
KKTY HOLDING C0MPANY, L.L.C.
By:
---------------------------------------
Name: Xxxxxxxxxxx Xxxxxxxx
Title: Authorized Manager
AMERICAN GAGE & MACHINE CO.
By: /s/ Xxxx Xxxxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Secretary
---------------------------
CONTICO COMMERCIAL PRODUCTS, L.L.C.
By: /s/ Xxxx Xxxxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Authorized Manager
---------------------------
DUCKBACK PRODUCTS, INC.
By: /s/ Xxxx Xxxxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Secretary
---------------------------
GCW, INC.
By: /s/ Xxxx Xxxxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Secretary
---------------------------
PTR MACHINE CORP.
By: /s/ Xxxx Xxxxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Secretary
---------------------------
SAVANNAH ENERGY SYSTEMS COMPANY
By: /s/ Xxxx Xxxxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Secretary
---------------------------
XX XXXXX XXXX PRESERVING COMPANY
By: /s/ Xxxx Xxxxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Secretary
---------------------------
XXXXX INDUSTRIES, INC.
By: /s/ Xxxx Xxxxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Secretary
---------------------------
EXHIBIT 7.3
FINANCIAL COVENANTS
DEFINITIONS
Consolidated EBITDA - for any period, the sum, without duplication,
of the amounts for such period of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) all unusual expenses
and all other non-capitalized restructuring expenses (including costs and
expenses attributable to employee severance obligations and facility
consolidation costs) for such period to the extent not disallowed by Agent in
its sole discretion, (vii) any payment of or accrual for the Management Fee
under the Management Agreement, (viii) all other payments made to K&C and its
Affiliates during such period for expenses incurred on behalf of Parent, Katy or
any of their respective Subsidiaries pursuant to Kohlberg Agreements, (ix) any
non-cash expense incurred with respect to Katy's stock appreciation rights plan
("SAR"); and (x) other non-cash items (other than any such non-cash item to the
extent that it represents an accrual of or reserve for cash expenditures in any
future period), but only, in the case of clauses (ii)-(ix), to the extent
deducted in the calculation of Consolidated Net Income less other non-cash items
added in the calculation of Consolidated Net Income (other than any such
non-cash item to the extent that it will result in the receipt of cash payments
in any future period), all of the foregoing as determined on a consolidated
basis for Katy and its Subsidiaries in conformity with GAAP; provided that there
shall be subtracted from the sum of items (i) through (xi) above the amount of
any cash expenditure made within the applicable period pursuant to the SAR, to
the extent that the amount of such cash expenditure was expensed or will be
expensed against a prior or future period's Consolidated Net Income; provided,
further, that (a) in the event any Loan Party makes an acquisition of any Person
or any division or any business unit permitted hereunder or consented to by
Majority Lenders during such period, if Katy provides Agent and Lenders
financial statements with respect to the business so acquired (which financial
statements shall have been audited by one of the "Big 4" accounting firms or
another nationally recognized accounting firm reasonably satisfactory to Agent
or financial statements otherwise satisfactory to Agent) reasonably satisfactory
to Majority Lenders, Consolidated EBITDA for such period shall be calculated on
a pro forma basis, taking into account the elimination of non-recurring
expenses, based on the results of such acquired Person or acquired assets as if
such acquisition had occurred on the first day of such period, and (b) in the
event any Loan Party makes a Permitted Disposition (or any other disposition of
any Person or any division or any business unit permitted hereunder or consented
to by the Majority Lenders) during such period, Consolidated EBITDA for such
period shall be calculated on a pro forma basis, based on the results of such
disposed Person or disposed assets as if such Permitted Disposition (or such
other disposition) had occurred on the first day of such period. The foregoing
notwithstanding, Consolidated EBITDA for: (i) the fiscal quarter ended June
30,2002 shall be deemed to equal $6,800,000; (ii) for the fiscal quarter ended
September 30,2002 shall be deemed to equal $12,000,000; and (iii) for the fiscal
quarter ended December 31, 2002 shall be deemed to equal $10,800,000.
Consolidated Interest Expense -for any period, total interest
expense of Katy and its Subsidiaries on a consolidated basis with respect to all
outstanding Indebtedness of Katy and its Subsidiaries, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and net costs
under Interest Rate Agreements, but excluding, however, (i) any amounts referred
to in the Fee Letter.
Consolidated Leverage Ratio, as at any date, the ratio of (a)
Consolidated Total Debt as at such date to (b) Consolidated EBITDA for the
consecutive four fiscal quarters ending on the last day of the most recently
ended fiscal quarter.
Consolidated Net Income, for any period, the net income (or loss) of
Katy on a Consolidated basis for such period taken as a single accounting period
determined in conformity with GAAP; provided that there shall be excluded (i)
the income (or loss) of any Person (other than a Subsidiary of Katy) in which
any other Person (other than Katy or any of its Subsidiaries) has a joint
interest, except to the extent of the amount of dividends or other distributions
actually paid to Katy or any of its Subsidiaries by such Person during such
period, (ii) the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary of Katy or is merged into or consolidated with Katy or any
of its Subsidiaries or that Person's assets are acquired by Katy or any of its
Subsidiaries, (iii) the income of any Subsidiary of Katy to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary, (iv) any after-tax gains
or losses attributable to Asset Sales or returned surplus assets of any Pension
Plan, (v) any LIFO reserves of Contico to the extent such LIFO reserves decrease
or increase net income of Contico, and (vii) (to the extent not included in
clauses (i) through (v) above) any net extraordinary gains or net extraordinary
losses.
Consolidated Total Debt means, as at any date of determination, the
aggregate stated balance sheet amount (which shall not include the face amount
of undrawn Letters of Credit) of all Money Borrowed of Katy and its Subsidiaries
on the last day of the most recently ended fiscal quarter, determined on a
Consolidated basis in accordance with GAAP.
Minimum Consolidated EBITDA. Katy shall not permit Consolidated
EBITDA for any period set forth below to be less than the amount set forth below
opposite such period:
Period Amount
------ ------
Four Fiscal Quarters Ending March 31,2003 and $30,000,000
June 30,2003
Four Fiscal Quarters Ending September 30,2003 and $26,000,000
each December 31, March 31, June 30 and
September 30 thereafter
Consolidated Leverage Ratio. Katy shall not permit the Consolidated
Leverage Ratio as of any date set forth below to be more than the amount set
forth below opposite such date:
Period Ratio
------ -----
March 31 and June 30,2003 3.25 to 1
September 30,2003 and each December 31, March 31, 3.00 to 1
June 30 and September 30 thereafter
