AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT
Exhibit 10.9
AMENDMENT NO. 2
TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into as of September 16, 2003 by and among Webco
Industries, Inc. (the "Borrower"), the financial institutions named on the
signature page hereto, and Bank One, NA (successor by merger with American National Bank
and Trust Company of Chicago), as agent (in such capacity, the "Agent") for the
Lenders.
RECITALS:
WHEREAS, the Borrower, the financial
institutions from time to time parties thereto (the "Lenders") and the Agent
have entered into that certain Loan and Security Agreement dated as of June 14, 2002 (as
amended, the "Loan Agreement"); and WHEREAS, the Borrower desires that the Loan
Agreement be amended as set forth herein and the undersigned Lenders and the Agent are
willing so to amend the Loan Agreement, but only on the terms and subject to the
conditions set forth below;
NOW, THEREFORE, in
consideration of the premises set forth above, the terms and conditions contained herein,
and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Terms defined in the Loan Agreement which are used herein shall have the
same meanings as are set forth in the Loan Agreement for such terms unless otherwise
defined herein.
2. Amendments. Subject to Section 3 below:
2.1 The following definitions are added to Subsection 1.1 of the Loan Agreement in their
alphabetically proper places:
"Excess Availability" shall mean, at
any time, an amount equal to the amount by which the Current Asset Base exceeds the
aggregate balance of the unpaid principal amount of the Revolving Loans.
"Revolver Financed Mannford Capital Expenditures" shall mean, for any period,
the lesser of (a) $2,000,000, and (b) the aggregate amount of Capital Expenditures for
such period (i) incurred for the expansion of Borrower's Mannford, Oklahoma facility and
for the conversion of TIG xxxxx into laser xxxxx at Borrower's Mannford, Oklahoma
facility, and (ii) which do not represent capitalized lease obligations incurred or which
were not financed through the incurrence of Purchase Money Secured Financing (other than
the Revolving Loans) or paid for with Applied Financing Proceeds.
2.2 The following definitions appearing in Subsection 1.1 of the Loan Agreement are
amended and restated in their entirety as follows:
"Maximum Facility Amount" shall mean
$53,500,000. "Total Revolving Commitments" shall mean the aggregate of the
Revolving Credit Commitments of all Lenders, which in the aggregate shall not exceed
$38,000,000.
2.3 Subsection 1.1 of the Loan Agreement is amended by deleting the following definitions
therefrom: "Average Availability" and "Leverage Ratio."
2.4 Subsection 8.6 of the Loan Agreement is amended and restated in its entirety as
follows:
8.6 Capital Investment Limitations. Borrower
shall not incur Capital Expenditures in any Fiscal Year in an amount in excess of the sum
of (the "Cap"): (i) the net proceeds received by Borrower in such Fiscal Year
from the sale of Equipment, plus (ii) Capital Expenditures paid for with Applied Financing
Proceeds, plus (iii) the amount set forth below opposite such Fiscal Year, plus (iv) the
lesser of (x) $500,000, and (y) the amount, if any, by which the Cap for the immediately
preceding Fiscal Year exceeds the actual amount of Capital Expenditures incurred by
Borrower during the immediately preceding Fiscal Year (excluding, for the purpose of
computing such excess, any excess amount from a prior Fiscal Year), plus (v) for the
Fiscal Year ending July 31, 2003, up to $2,000,000 to the extent funded with additional
Indebtedness permitted by Subsection 8.2(iv):
Fiscal Years Ending:
Amount:
July 31, 2003
$3,500,000
July 31, 2004
$5,500,000
July 31, 2005 and thereafter
$3,500,000
2.5 Subsection 8.13 of the Loan Agreement is amended and restated in its entirety as
follows:
8.13 Financial Covenants. Borrower shall not:
(A) Adjusted Debt Coverage Ratio. Permit its
Adjusted Debt Coverage Ratio for any period of four Fiscal Quarters to be less than 1.20
to 1.0. As used herein the term "Adjusted Debt Coverage Ratio" shall mean for
any period, without duplication, Borrower's ratio of (A) EBITDA, to (B) an amount equal to
the sum of the following for such period: the sum of (i) interest expense (other than
non-cash interest expense representing the amortization of deferred finance charges or
original issue discount); plus (ii) the sum of all scheduled or mandatory principal
payments on Indebtedness of Borrower, other than payments required pursuant to Subsections
2.6(E), (F) and (G) hereof and payments on the Revolving Loan. As used herein, the term
"EBITDA" shall mean, as to any period, an amount equal to the sum of the
following for Borrower for such period: (i) earnings before income tax expense (determined
based on the valuation of inventory on an average cost basis, and excluding gains or
losses from or in connection with the QuikWater Division and Borrower's sale of the assets
of such division (including without limitation the QuikWater Charge)); plus (ii) interest
expense subtracted in determining earnings; plus (iii) depreciation, amortization, and
other non-cash charges deducted in determining earnings; minus (iv) gains from the sales
of assets other than the sale of inventory or obsolete equipment in the ordinary course of
business of Borrower; minus (v) to the extent included in the earnings of Borrower for
such period, equity in undistributed earnings of Subsidiaries; minus (vi) the aggregate
amount of Dividends and other Distributions; minus (vii) Capital Expenditures for such
period other than (x) for any period of four Fiscal Quarters which includes any of the
Fiscal Quarters ended October 31, 2003, January 31, 2004 and April 30, 2004 (the
"Applicable Quarters"), the aggregate amount of Revolver Financed Mannford
Capital Expenditures incurred by Borrower during each Applicable Quarter which is included
in such period of four Fiscal Quarters, and (y) Capital Expenditures representing
capitalized lease obligations incurred or which were financed through the incurrence of
Purchase Money Secured Financing (other than the Revolving Loans) or paid for with Applied
Financing Proceeds; and minus (viii) income taxes paid in cash.
(B) Excess Availability. Permit its Excess
Availability at any time to be less than $1,750,000.
2.6 Schedule I to the Loan Agreement is amended and restated in its entirety in the form
of Schedule I attached hereto.
3. Conditions of Effectiveness. Section 2 of this Amendment shall become effective on the
date (the "Effective Date") that the Agent has determined that each of the
following conditions has been satisfied:
3.1 The Agent shall have received each of the following agreements, instruments and other
documents, in each case in form and substance acceptable to the Agent:
(a) this Amendment executed by each of the
parties hereto;
(b) the documents, instruments, agreements,
opinions, certificates and other items listed on the Document Checklist attached hereto as
Exhibit A; and
(c) such other documents, instruments,
agreements, opinions, certificates and other items as Agent may reasonably request.
3.2 All fees and out-of-pocket expenses required to be paid to Agent and each Lender and
Agent's special counsel on or prior to the Effective Date shall have been paid in full
including, without limitation, to induce the Lenders to enter into this Amendment, a
non-refundable fee in the amount of $40,025 paid to the Agent for the ratable benefit of
the Lenders.
4. Representations, Warranties and Agreements of the Borrower.
4.1 The Borrower represents and warrants that this Amendment and the Loan Agreement, as
amended hereby, constitute legal, valid and binding obligations of the Borrower and are
enforceable against the Borrower in accordance with their terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally or by general equitable principles.
4.2 The Borrower hereby reaffirms all covenants, representations and warranties made in
the Loan Agreement as amended hereby. The Borrower hereby agrees that all covenants,
representations and warranties made in the Loan Agreement shall be deemed to have been
remade as of the date hereof and (if different) the Effective Date.
4.3 The Borrower represents and warrants that as of the date hereof, and (if different) as
of the Effective Date, there exists no Default or Event of Default after giving effect to
this Amendment and the consummation of the transactions contemplated hereby.
5. Reference to the Effect on the Loan Agreement.
5.1 On and after the Effective Date, (i) each reference in the Loan Agreement to
"this Agreement," "hereunder," "hereof," "herein,"
or words of like import shall mean and be a reference to the Loan Agreement as amended
hereby, and (ii) each reference to the Loan Agreement in all other Financing Agreements
shall mean and be a reference to the Loan Agreement, as amended hereby.
5.2 Except as specifically amended above, the Loan Agreement, and all other documents,
instruments and agreements executed and/or delivered in connection therewith, shall remain
in full force and effect, and are hereby ratified and confirmed.
5.3 Except as specifically provided in this Amendment, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any Default or Event of
Default (including without limitation any Defaults or Events of Default existing on the
date hereof), nor operate as a waiver of any right, power or remedy of the Agent or the
Lenders (including without limitation any rights, powers or remedies of the Agent or the
Lenders with respect to the Defaults or Events of Default existing on the date hereof),
nor constitute a waiver of, or consent to and departure from, any provision of the Loan
Agreement, or any of the other Financing Agreements.
6. Governing Law. This Amendment shall be governed by and construed in accordance with the
internal laws (as opposed to conflicts of law provisions) of the State of Illinois.
7. Headings. Section headings in this Amendment are included herein for convenience of
reference only and shall not constitute a part of this Amendment for any other purpose.
8. Counterparts. This Amendment may be executed by one or more of the parties to this
Amendment on any number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. Delivery by any party
of telecopied copies of executed counterparts hereof shall constitute execution and
delivery hereof by such party.
IN WITNESS WHEREOF, this Amendment No. 2 to Loan and Security Agreement has been duly
executed as of the day and year first above written.
WEBCO INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer
BANK ONE, NA (successor by merger with American National Bank and Trust Company of
Chicago), individually and as Agent
By: /s/ Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxx X. Xxxxx
Name: Xxxx X. Xxxxx
Title: Vice President
TRANSAMERICA BUSINESS CAPITAL CORPORATION
By: /s/ Xxx Xxxxxxxx
Name: Xxx Xxxxxxxx
Title: Vice President
