EXECUTION COPY
SECOND AMENDMENT, dated as of December 23, 1996, to the
Credit Agreement, dated as of December 19, 1995 and amended
as of May 15, 1996 (as so amended, the "Credit Agreement"),
----------------
among International Mill Service, Inc., a Pennsylvania
corporation (the "Borrower"), EnviroSource, Inc., a Delaware
--------
corporation (the "Parent"), the several banks and other
------
financial institutions parties thereto (the "Lenders"),
-------
NationsBank, N.A., as administrative agent for the Lenders
(in such capacity, the "Administrative Agent"), and Credit
---------------------
Lyonnais New York Branch, the New York branch of a banking
organization organized under the laws of the Republic of
France, as syndication agent for the Lenders.
PRELIMINARY STATEMENTS:
(1) The Parent proposes to sell all the issued and outstanding shares of
common stock of IMSAMET to IMCO Recycling Inc., a Delaware corporation (the
"Purchaser"), pursuant to the Stock Purchase Agreement, dated November 26, 1996,
---------
among the Purchaser, the Parent and IMSAMET. The Borrower has requested that the
Lenders and the Administrative Agent agree to permit such sale and consent to
the release of IMSAMET and its Subsidiaries and SALTS from the Subsidiaries
Guarantee, the Security Documents and the Subordination Agreement.
(2) The Borrower has further requested that the Lenders agree to make
various changes in the covenants contained in subsection 7.1.
(3) The parties hereto have agreed, subject to the terms and conditions
hereof, to grant the requests of the Borrower and to amend the Credit Agreement
as provided herein.
(4) Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1.01. Amendment To Subsection 1.1. The definition of "Restricted
----------------------------
Companies" in subsection 1.1 of the Credit Agreement is hereby amended by
deleting from the second line thereof the word "IMSAMET,".
SECTION 1.02. Amendments To Subsection 2.6.
-----------------------------
(a) Subsection 2.6(a) of the Credit Agreement is hereby amended by adding
the following sentence to the end thereof:
"Notwithstanding the foregoing, in the case of the Prepayment Event
consisting of the sale by the Parent of the common stock of IMSAMET, the
Revolving Credit Commitments shall be reduced upon the consummation of such
sale to $65,000,000."
(b) Subsection 2.6(b) of the Credit Agreement is hereby deleted in its
entirety and the following is substituted in lieu thereof:
"(b) The Revolving Credit Commitments shall be reduced on each of
January 4, 1999 and January 3, 2000 by 12.5% of the Revolving Credit
Commitments then in effect."
SECTION 1.03. Amendment to Subsection 4.18(a). Subsection 4.18(a) of the
-------------------------------
Credit Agreement is hereby deleted in its entirety and the following is
substituted in lieu thereof:
"4.18 Collateral. (a) Except as otherwise provided for in subsection
----------
6.9 with respect to Subsidiaries acquired after the Closing Date, (i) all
of the shares of Capital Stock of each of the Parent's Subsidiaries (other
than (A) not more than 35% of the Capital Stock of each Foreign Subsidiary
and (B) until 60 days after the FINOVA Financing is terminated or any
refinancing thereof permitted by the terms hereof is terminated, all the
Capital Stock of IMS Funding), (ii) all Intercompany Notes issued to the
Parent or any of its domestic Subsidiaries (other than Intercompany Notes
issued to IMS Funding) and (iii) all trade accounts receivable of the
Parent and its domestic Subsidiaries (other than (A) trade accounts
receivable of IMS Funding and (B) trade accounts receivable to the extent
excluded by the Borrower Security Agreement) are pledged to the
Administrative Agent, for the ratable benefit of the Secured Parties,
pursuant to a Pledge Agreement, a Security Agreement or a supplement
thereto, as security for the Obligations."
SECTION 1.04. Amendments To Section 6.
------------------------
(a) Subsection 6.1(c) of the Credit Agreement is hereby amended by (i)
deleting the words "the IMSAMET Group, (iii)" in the fifth and sixth lines
thereof and (ii) by replacing "(iv)" in the sixth line thereof with "(iii)".
(b) Subsection 6.2(c) of the Credit Agreement is hereby amended by deleting
the words ", the Imsamet Group" in the fourth line thereof.
(c) Subsection 6.9(c) of the Credit Agreement is hereby amended by deleting
the text thereof in its entirety.
SECTION 1.05. Amendments To Section 7.
------------------------
(a) Subsection 7.1(a) of the Credit Agreement is hereby deleted in its
entirety and the following is substituted in lieu thereof:
"(a) Interest Coverage. Permit the ratio of (i) EBITDA for the
------------------
Reference Period with respect to the last day of any fiscal quarter of the
Parent referred to below to (ii) Consolidated Interest Expense for such
Reference Period to be less than the ratio set forth below opposite such
fiscal quarter:
Fiscal Quarter Ratio
-------------- -----
Fiscal quarters from and including fourth
quarter of fiscal 1995 through and including
first quarter of fiscal 1996 2.35:1.00
Fiscal quarters from and including second
quarter of fiscal 1996 through and including
third quarter of fiscal 1996 2.25:1.00
Fiscal quarters from and including fourth
quarter of fiscal 1996 through and including
second quarter of fiscal 1997 1.95:1.00
Third fiscal quarter of fiscal 1997 2.00:1.00
Fiscal quarters from and including fourth
quarter of fiscal 1997 through and including
first quarter of fiscal 1998 2.10:1.00
Fiscal quarters from and including second
quarter of fiscal 1998 through and including
third quarter of fiscal 1998 2.60:1.00
Fourth quarter of fiscal 1998 and all fiscal
quarters thereafter 3.00:1.00"
(b) Subsection 7.1(c) of the Credit Agreement is hereby deleted in its
entirety and the following is substituted in lieu thereof:
"(c) Debt Service Coverage. Permit the ratio of (i) EBITDA for the
-----------------------
Reference Period with respect to the last day of any fiscal quarter of the
Parent referred to below, plus any income tax refunds received by the
Parent and its Subsidiaries during such Reference Period, plus (without
duplication) IU Cash Inflows received by the Parent and its Subsidiaries
during such Reference Period, less (without duplication) IU Cash Outflows
from the Parent and its Subsidiaries during such Reference Period, less
Cash Taxes for such Reference Period, less (without duplication) Landfill
Permit Expenditures during such Reference Period, less Closure Trust Fund
Payments during such Reference Period to (ii) Consolidated Interest Expense
for such Reference Period, plus scheduled principal payments under
Indebtedness of the Parent and its Subsidiaries for such Reference Period
to be less than the ratio set forth below opposite such fiscal quarter:
Fiscal Quarter Ratio
-------------- -----
Fiscal quarters from and including fourth
quarter of fiscal 1995 through and including
third quarter of fiscal 1996 1.35:1.00
Fiscal quarters from and including fourth
quarter of fiscal 1996 through and including
second quarter of fiscal 1997 1.40:1.00
Third fiscal quarter of fiscal 1997 1.45:1.00
Fiscal quarters from and including fourth
quarter of fiscal 1997 through and including
first quarter of fiscal 1998 1.50:1.00
Fiscal quarters from and including second
quarter of fiscal 1998 through and including
third quarter of fiscal 1998 2.05:1.00
Fiscal quarters from and including fourth
quarter of fiscal 1998 through and including
third quarter of fiscal 1999 2.45:1.00
Fourth quarter of fiscal 1999 and all fiscal
quarters thereafter 2.50:1.00"
(c) Subsection 7.1(d) of the Credit Agreement is hereby deleted in its
entirety and the following is substituted in lieu thereof:
"(d) Debt To EBITDA Ratio. Permit the ratio of (i) Consolidated Total
--------------------
Debt as of the last day of any fiscal quarter of the Parent referred to
below to (ii) EBITDA for the Reference Period with respect to such day to
be more than the ratio set forth below opposite such fiscal quarter:
Fiscal Quarter Ratio
-------------- -----
Fiscal quarters from and including fourth
quarter of fiscal 1995 through and including
first quarter of fiscal 1996 4.75:1.00
Fiscal quarters from and including second
quarter of fiscal 1996 through and including
third quarter of fiscal 1996 5.00:1.00
Fourth fiscal quarter of fiscal 1996 5.50:1.00
Fiscal quarters from and including first
quarter of fiscal 1997 through and including
third quarter of fiscal 1997 4.80:1.00
Fiscal quarters from and including fourth
quarter of fiscal 1997 through and including
first quarter of fiscal 1998 4.75:1.00
Fiscal quarters from and including second
quarter of fiscal 1998 through and including
third quarter of fiscal 1998 4.00:1.00
Fiscal quarters from and including fourth
quarter of fiscal 1998 through and including
third quarter of fiscal 1999 3.75:1.00
Fourth quarter of fiscal 1999 and all fiscal
quarters thereafter 3.50:1.00"
(d) Subsection 7.2(f) of the Credit Agreement is hereby amended by deleting
the text thereof in its entirety and substituting therefor the phrase "(f)
[intentionally deleted];".
(e) Subsection 7.4(g) of the Credit Agreement is hereby amended by deleting
the text thereof in its entirety and substituting therefor the phrase "(g)
[intentionally deleted].".
(f) Subsection 7.6(j) of the Credit Agreement is hereby amended by deleting
the text thereof in its entirety and substituting therefor the phrase "(j)
[intentionally deleted].".
(g) Subsection 7.7(b)(iv) of the Credit Agreement is hereby amended by
deleting the text thereof in its entirety and substituting therefor the phrase
"(iv) [intentionally deleted]; and".
(h) Subsection 7.9(g) of the Credit Agreement is hereby deleted in its
entirety and the following is substituted in lieu thereof:
"(g) investments, loans and advances in Unrestricted Companies;
provided that the aggregate amount (in cash, property or other
consideration) of investments, loans and advances made after the Closing
Date in: (i) IMS Funding shall not exceed the greater of (A) $100,000 and
(B) the sum of (1) the aggregate amount of cash dividend payments or other
cash distributions paid to the Borrower by IMS Funding and (2) the
aggregate amount of cash payments made to the Borrower by IMS Funding under
that certain Operation, Maintenance and Lease Agreement between the
Borrower and IMS Funding, dated as of March 31, 1993; and (ii) other
Unrestricted Companies shall not exceed $7,000,000; provided further that
all such loans and advances pursuant to this subsection 7.9(g) shall be
evidenced by Intercompany Notes which are pledged to the Administrative
Agent for the ratable benefit of the Secured Parties, pursuant to the terms
of appropriate Pledge Agreements or supplements thereto, and all such
Intercompany Notes shall be covered by the Subordination Agreement;"
(i) Subsection 7.11 of the Credit Agreement is hereby amended by (i)
deleting the phrase "transactions with SALTS in an aggregate amount not
involving more than $500,000 at any time outstanding, (b)" in the first, second
and third lines thereof and (ii) by replacing "(c)" in the fourth line thereof
with "(b)".
SECTION 1.06. Release. The Lenders hereby (a) release and discharge (i) the
-------
pledge made by the Parent pursuant to the Parent Pledge Agreement in respect of
(A) the capital stock of IMSAMET and (B) the Intercompany Notes issued to the
Parent by IMSAMET, Imsamet of Utah and III, (ii) the pledge made by the Borrower
pursuant to the Borrower Pledge Agreement in respect of the Intercompany Note
issued to the Borrower by III, (iii) the pledge made by TDS pursuant to the
Subsidiaries Pledge Agreement in respect of the Intercompany Note issued to TDS
by IMSAMET, (iv) the pledge made by IMSAMET pursuant to the Subsidiaries Pledge
Agreement of the capital stock of Imsamet of Utah and III and (v) IMSAMET,
Imsamet of Utah and III from their obligations under the Subsidiaries Guarantee,
the Subsidiaries Pledge Agreement, the Subsidiaries Security Agreement and the
Subordination Agreement and (b) authorize the Administrative Agent to execute
and deliver the Release and Agreement in the form of Exhibit A hereto.
SECTION 1.07. Representations And Warranties. The Parent and the Borrower
-------------------------------
hereby represent and warrant to the Agents and each Lender that:
(a) The representations and warranties set forth in Section 4 of the Credit
Agreement, and in each other Loan Document, are true and correct in all material
respects on and as of the date hereof and on and as of the Second Amendment
Effective Date (as defined in Section 1.08) with the same effect as if made on
and as of the date hereof or the Second Amendment Effective Date, as the case
may be, except to the extent such representations and warranties expressly
relate solely to an earlier date (in which case such representations and
warranties shall have been true and correct in all material respects on and as
of such earlier date).
(b) Each of the Loan Parties is in compliance with all the terms and
conditions of the Credit Agreement and the other Loan Documents on its part to
be observed or performed and no Default or Event of Default has occurred or is
continuing.
(c) The execution, delivery and performance by each of the Borrower and the
Parent of this Second Amendment have been duly authorized by such party.
(d) This Second Amendment constitutes the legal, valid and binding
obligation of each of the Borrower and the Parent, enforceable against it in
accordance with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws affecting
creditors' rights generally.
(e) The execution, delivery and performance by each of the Borrower and the
Parent of this Second Amendment (i) do not conflict with or violate (A) any
provision of law, statute, rule or regulation, or of the certificate of
incorporation or by-laws of the Borrower or the Parent, (B) any order of any
Governmental Authority or (C) any provision of any indenture, agreement or other
instrument to which the Borrower or the Parent is a party or by which it or any
of its property may be bound and (ii) do not require any consents under, result
in a breach of or constitute (with notice or lapse of time or both) a default
under any such indenture, agreement or instrument.
(f) The assets of IMSAMET and its Subsidiaries represent less than 25% of
the total assets of the Parent and its Subsidiaries reported on the consolidated
balance sheet of the Parent and its Subsidiaries as of September 30, 1996, and
the operating income, revenue and EBITDA of IMSAMET and its Subsidiaries each
represent less than 25% of the operating income, revenue and EBITDA,
respectively, of the Parent and its Subsidiaries reported on the consolidated
statements of operations and cash flows of the Parent and its Subsidiaries for
the nine-month period ended September 30, 1996.
(g) The Parent and the Borrower shall, upon the consummation of the sale of
the common stock of IMSAMET, transfer an amount in immediately available funds
equal to 100% of the Net After-Tax Cash Proceeds of such sale to the
Administrative Agent, to be applied by the Administrative Agent to outstanding
Loans in accordance with Sections 2.6(d) and 2.13 of the Credit Agreement.
SECTION 1.08. Effectiveness. This Second Amendment shall become effective
--------------
only upon satisfaction of the following conditions precedent on or prior to
January 31, 1997 (the first date upon which each such condition has been
satisfied being herein called the "Second Amendment Effective Date"):
-------------------------------
(a) The Administrative Agent shall have received duly executed counterparts
of (i) this Second Amendment which, when taken together, bear the authorized
signatures of the Borrower, the Parent and the Lenders and (ii) the Release and
Agreement, in the form of Exhibit A hereto, which, when taken together, bear the
---------
authorized signatures of the Borrower, the Parent, IMSAMET, Imsamet of Utah,
III, TDS and the Administrative Agent.
(b) (i) The representations and warranties set forth in Section 1.07 are
true and correct on and as of the Second Amendment Effective Date, (ii) no
Default or Event of Default has occurred or is continuing and (iii) there shall
not be any action pending or any judgment, order or decree in effect which is
likely to restrain, prevent or impose materially adverse conditions upon
performance by any Loan Party of its obligations under the Loan Documents.
(c) The Borrower shall have paid in full all fees and expenses accrued and
payable as of the Second Amendment Effective Date under the Credit Agreement and
under the Fee Letter.
(d) The Borrower shall have paid to the Administrative Agent 100% of the
Net After-Tax Cash Proceeds of the sale of the common stock of IMSAMET, which
proceeds shall be distributed to the Lenders in accordance with Sections 2.6(d)
and 2.13 of the Credit Agreement.
(e) The Administrative Agent shall have received from each of the
Guarantors duly executed Consents, in the form attached hereto as Exhibit B,
---------
which bear the authorized signatures of such Guarantors.
(f) The Administrative Agent shall have received an opinion of counsel to
the Borrower, the Parent and the other Loan Parties in form and substance
satisfactory to the Administrative Agent.
(g) The Administrative Agent shall have received such other documents,
legal opinions, instruments and certificates as it shall reasonably request and
such other documents, legal opinions, instruments and certificates shall be
satisfactory in form and substance to the Administrative Agent and its counsel.
All corporate and other proceedings taken or to be taken in connection with this
Second Amendment and all documents incidental thereto, whether or not referred
to herein, shall be satisfactory in form and substance to the Administrative
Agent and its counsel.
SECTION 1.09. APPLICABLE LAW. THIS SECOND AMENDMENT SHALL BE
---------------
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
SECTION 1.10. Expenses. The Borrower shall pay all reasonable out-of-pocket
--------
expenses incurred by the Agents in connection with the preparation, negotiation,
execution and delivery and the Agents' and the Lenders' enforcement of this
Second Amendment, including, but not limited to, the reasonable fees and
disbursements of counsel. The agreement set forth in this Section 1.10 shall
survive the termination of this Second Amendment and the Credit Agreement.
SECTION 1.11. Counterparts. This Second Amendment may be
-------------
executed in any number of counterparts, each of which shall constitute an
original but all of which when taken together shall constitute but one
agreement.
SECTION 1.12. Reference To And Effect On The Loan Documents.
----------------------------------------------
(a) On and after the Second Amendment Effective Date, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like
import referring to the Credit Agreement, and each reference in the other Loan
Documents to "the Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement as amended by this Second Amendment.
(b) Each of the amendments provided herein shall apply and be effective
only with respect to the provisions of the Credit Agreement specifically
referred to by such amendment. Except as specifically amended above, the Credit
Agreement and the Revolving Credit Notes, and all other Loan Documents, are and
shall continue to be in full force and effect and are hereby in all respects
ratified and confirmed.
(c) Except as specifically provided above, the execution, delivery and
effectiveness of this Second Amendment shall not operate as a waiver of any
right, power or remedy of any Lender, any Agent or any Secured Party under any
of the Loan Documents, nor constitute a waiver of any provision of any of the
Loan Documents.
SECTION 1.13. Waiver Of Notice Of IMSAMET Prepayment. The Lenders hereby
--------------------------------------
waive any notice required under Section 2.7 of the Credit Agreement in respect
of the prepayment contemplated by Section 1.08(d) hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be duly executed by their duly authorized officers, all as of the date first
above written.
INTERNATIONAL MILL SERVICE, INC.
By: /s/Xxxxxxx X. Xxxxx
--------------------
Title: Treasurer
ENVIROSOURCE, INC.
By: /s/Xxxxxxx X. Xxxxx
-------------------
Title: Treasurer
NATIONSBANK, N.A., as Administrative
Agent, as Issuing Lender, as Swingline Lender
and as a Lender
By: /s/Xxxxxx X. Xxxx
------------------
Title: Corporate Finance Officer
CREDIT LYONNAIS NEW YORK BRANCH, as
Syndication Agent and as a Lender
By: /s/Xxxxxx Xxx
--------------
Title: Vice President
BANQUE PARIBAS, as a Lender
By: /s/Pierre-Xxxx xx Xxxxxxxx
---------------------------
Title: General Manager
By: /s/Xxxxxx X. Xxxxxx
--------------------
Title: Assistant Vice President
