FOURTH AMENDMENT TO SECOND AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT ("AMENDMENT"), dated effective as of October 30, 2001 (the "AMENDMENT
EFFECTIVE DATE"), is executed and entered into by and among the financial
institutions listed on the signature pages hereof (such financial institutions
are referred to herein individually as a "LENDER" and collectively as the
"LENDERS"), Bank of America, National Association (in its capacity as agent for
the Lenders, the "AGENT"), and Pentacon, Inc. (the "PARENT") and each of the
other undersigned subsidiaries of the Parent party to the Agreement (defined
below) (the Parent and such subsidiaries are referred to collectively herein as
the "BORROWERS").
RECITALS:
A. The Borrowers, the Lenders, and the Agent are parties to the certain
Second Amended and Restated Loan and Security Agreement, dated as of September
30, 1999, as amended by the certain First Amendment to Second Amended and
Restated Loan and Security Agreement dated effective as of November 15, 1999,
the certain Second Amendment to Second Amended and Restated Loan and Security
Agreement dated effective as of December 31, 1999, and the certain Third
Amendment to Second Amended and Restated Loan and Security Agreement dated
effective as of September 30, 1999 (collectively, the "AGREEMENT").
B. The Borrowers, the Lenders, and the Agent have agreed to amend the
Agreement as provided below.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINITIONS. Unless otherwise defined in this Amendment, terms
defined by the Agreement, where used in this Amendment, shall have the same
meanings in this Amendment as are prescribed by the Agreement.
ARTICLE 2
AMENDMENTS
Section 2.1 AMENDMENT TO DEFINITIONS IN SECTION 1.1 OF THE AGREEMENT.
Effective as of the Amendment Effective Date, the definitions of "Applicable
Margin," "Attorney Costs," "EBITDA" and "Stated Termination Date" in SECTION 1.1
of the Agreement are hereby amended and
FOURTH AMENDMENT TO SECOND AMENDMENT AND
RESTATED LOAN AND SECURITY AGREEMENT - Page 1
restated, and a new definition of "Commitment Termination Date" is hereby
added, each of which shall read in its entirety as follows:
"APPLICABLE MARGIN" means, with respect to Base Rate Revolving
Loans and all other Obligations, one percent (1.00%)
"ATTORNEY COSTS" means and includes all fees, expenses and
disbursements of any law firm or other counsel engaged by the
Agent, and all fees, expenses and disbursements of any
consultants, including financial consultants, employed by such
counsel on behalf of, or at the request of, the Agent.
"COMMITMENT TERMINATION DATE" means March 21, 2002.
"EBITDA" means for any period, the sum of Net Income, PLUS, the
sum of the following to the extent included in the determination
of Net Income: (a) the amount, if any, by which Interest Expense
exceeds interest income; PLUS (b) income and franchise taxes;
PLUS (c) depreciation and amortization expense; PLUS (d) all
restructuring charges, costs and expenses, retention bonuses,
expenses or writeoffs related to unamortized debt issuance costs,
and all professional fees, whether incurred by the Borrowers or
by the Agent, any Lender or for or on behalf of any holder of the
Subordinated Notes or any prospective refinancing lender and
reimbursed by Borrower, appraisal fees, due diligence costs, PLUS
(e) the Amendment Fee as defined in the Fourth Amendment to the
Second Amended and Restated Loan and Security Agreement, dated
October 30, 2001 by and among the Borrowers, the Agent and the
Lenders.
"STATED TERMINATION DATE" means March 31, 2002.
Section 2.2 AMENDMENT TO DEFINITION OF BORROWING BASE. Effective as of the
Amendment Effective Date, (i) CLAUSE (b)(v)(C) of the definition of Borrowing
Base in SECTION 1.1 of the Agreement hereby is amended to delete the word "and"
at the end thereof and replace same with a comma, (ii) CLAUSE (b)(v)(D) of the
definition of Borrowing Base hereby is re-designated as CLAUSE (b)(v)(E) (but
otherwise remains unchanged) and (iii) a new CLAUSE (b)(v)(D) hereby is added to
the definition of Borrowing Base, to be inserted immediately following existing
CLAUSE (b)(v)(C) thereof, which shall read as follows:
(D) a minimum availability reserve in an amount equal to (a)
$6,500,000 on any day during the period October 30, 2001 through and
including December 31, 2001, (b) $7,500,000 on any day during the
period January 1, 2002 through and including January 31, 2002, (c)
$8,500,000 on any day during the period February 1, 2002 through and
including February 28, 2002 or (d) $9,500,000 on any during the period
March 1, 2002 through and including March 31, 2002; and
FOURTH AMENDMENT TO SECOND AMENDMENT AND
RESTATED LOAN AND SECURITY AGREEMENT - Page 2
Section 2.3 AMENDMENT TO SECTION 2.2 AND SECTION 3.5. Effective as of the
Amendment Effective Date, the term "Termination Date," where used in the first
sentence of SECTION 2.2 of the Agreement and in SECTION 3.5 of the Agreement
hereby is amended and restated to read "Commitment Termination Date."
Section 2.4 AMENDMENT TO SECTION 3.1. Effective as of the
Amendment Effective Date, SECTION 3.1 of the Agreement hereby is
amended to add the following sentence, immediately following the
existing last sentence thereof:
Notwithstanding the foregoing, on and after October 30, 2001, (i) the
Borrowers shall not have the option to designate portions of the Loans to
bear interest at a rate determined by reference to the LIBOR Rate, (ii) all
requests by the Borrowers for Loans, Continuations or Conversions shall be
deemed to be a request for or selection of a Base Rate Loan, and (iii) any
and all Loans funded, Continued or Converted shall bear interest at a rate
determined according to the Base Rate.
Section 2.5 AMENDMENT TO SECTION 4.3. Effective as of the Amendment
Effective Date, SECTION 4.3 of the Agreement is hereby amended and restated in
its entirety to read as follows:
Section 4.3 MANDATORY REDUCTION PAYMENT. On the Commitment
Termination Date the Borrowers shall make a mandatory prepayment,
to be applied to the Secured Obligations in the manner provided
by SECTION 4.8, in an amount sufficient to reduce the unpaid
balance of the Secured Obligations to an amount not greater than
one Dollar ($1).
Section 2.6 AMENDMENT TO SECTION 6.7. Effective as of the Amendment
Effective Date, CLAUSE (a) of SECTION 6.7 of the Agreement hereby is amended and
restated to read in its entirety as follows:
(a) at least two times during each calendar week, at such
intervals as are acceptable to the Agent, or more frequently if
requested by the Agent or needed by the Borrowers to redetermine
Availability, a schedule of each Borrower's Accounts created
since the last such schedule and a Borrowing Base Certificate as
of the close of business on the preceding Business Day;
Section 2.7 AMENDMENT TO SECTION 7.2(b). Effective as of the Amendment
Effective Date, the phrase "thirty (30) days" in the first sentence of
SECTION 7.2(b) of the Agreement hereby is amended and restated to read
"twenty (20) days."
FOURTH AMENDMENT TO SECOND AMENDMENT AND
RESTATED LOAN AND SECURITY AGREEMENT - Page 3
Section 2.8 AMENDMENT TO ADD SECTION 9.28. Effective as of the Amendment
Effective Date, SECTION 9.28 of the Agreement hereby is added to the Agreement,
which shall be deemed inserted immediately following SECTION 9.27 of the
Agreement and which shall read in its entirety as follows:
Section 9.28 MINIMUM MONTHLY EBITDA. The Borrowers shall not permit
aggregate EBITDA of the Borrowers, determined for each calendar month
listed below, to be less than the respective amounts specified for such
calendar month:
CALENDAR MONTH MINIMUM EBITDA
-------------- --------------
October $1,200,000
November $1,000,000
December $ 600,000
January $1,600,000
February $1,600,000
Section 2.9 AMENDMENT TO ADD SECTION 9.29. Effective as of the Amendment
Effective Date, SECTION 9.29 of the Agreement hereby is added to the Agreement,
which shall be deemed inserted immediately following SECTION 9.28 of the
Agreement and which shall read in its entirety as follows:
Section 9.29 MAXIMUM GROSS INVENTORY. The Borrowers shall not permit
aggregate gross amount of Inventory of the Borrowers, determined as of the
last day of each calendar month listed below, to be more than the
respective amounts specified for such calendar month:
CALENDAR MONTH MAXIMUM GROSS INVENTORY
-------------- -----------------------
October $133,500,000
November $133,000,000
December $130,500,000
January $130,000,000
February $130,200,000
Section 2.10 AMENDMENT TO SECTION 13.2. Effective as of the Amendment
Effective Date, SECTION 13.2 of the Agreement hereby is amended to add the
following PROVISO, to be inserted immediately following the end of the existing
last sentence thereof:
PROVIDED FURTHER, that no amendment shall, unless in writing and
signed by Bank of America (in its capacity as a Lender) and at
least two other Lenders and acknowledged by the Agent, do any of
the following: (A) reduce or release the minimum availability
reserve established under CLAUSE (b)(v)(D) of the definition of
FOURTH AMENDMENT TO SECOND AMENDMENT AND
RESTATED LOAN AND SECURITY AGREEMENT - Page 4
Borrowing Base or (B) release or reduce the $4,900,000 reserve
established by the Agent as provided in the certain letter by the
Agent to the Parent dated September 28, 2001.
ARTICLE 3
ADDITIONAL AGREEMENTS
Section 3.1 CONVERSION OF OUTSTANDING LIBOR LOANS. On the Amendment
Effective Date, all outstanding LIBOR Loans shall be Converted to Base Rate
Loans, PROVIDED, that the Lenders waive any amounts chargeable pursuant to
SECTION 5.4 as a consequence of any such Conversion.
Section 3.2 INVENTORY APPRAISAL. The Borrowers acknowledge that the Agent
intends to engage, or cause its counsel to engage, an appraiser acceptable to
the Agent and the Lenders to prepare an appraisal of the Borrowers' Inventory on
an orderly liquidation valuation basis with methodology satisfactory to the
Agent and the Lenders, and to deliver same to the Agent and/or such counsel in
connection with administration of the Agreement. The Borrowers agree that the
Borrowers are obligated to pay or reimburse to the Agent all costs, expenses and
disbursements of such appraiser as Obligations of the Borrowers under
SECTION 15.7 of the Agreement. The Borrowers agree to cooperate with the Agent
and such appraiser as may be requested by the Agent or such appraiser in order
to deliver such appraisal to the Agent not later than December 15, 2001, with no
qualifications or exceptions except any such qualifications or exceptions as may
be acceptable to the Agent and the Lenders in their discretion.
Section 3.3 FINANCIAL CONSULTANT. The Borrowers acknowledge that the Agent
intends to engage, or cause its counsel to engage, a financial consultant
acceptable to the Agent to advise the Agent and/or such counsel in connection
with administration of the Agreement, and agrees that the Borrowers are
obligated to pay to the Agent all costs, expenses and disbursements of such
consultant as Obligations of the Borrowers under SECTION 15.7 of the Agreement.
Section 3.4 PENTACON USA, X.X. Xxxx Products, Inc. and Capitol Bolt &
Supply, Inc. (the "MERGED LOAN PARTIES") each merged with and into Pentacon USA,
L.P., a
Texas limited partnership and Wholly-Owned Subsidiary of Pentacon, Inc.
("PENTACON USA"), effective on November 6, 2000 with respect to Pace Products,
Inc. and effective on November 22, 2000 with respect to Capitol Bolt & Supply,
Inc. (each of the foregoing dates being herein called a "MERGER EFFECTIVE
DATE"), with Pentacon USA being the survivor of such mergers and thereby
succeeding to all titles, interests, rights and obligations of the Merged Loan
Parties, respectively, under and subject to the Loan Documents. Pentacon USA
hereby ratifies and confirms its obligation and liability for all obligations
and liabilities of the Merged Loan Parties under the Loan Documents and,
pursuant to SECTION 15.20 of the Agreement and effective on and after its
applicable Merger Date, joins as a Borrower and a Loan Party with all rights and
obligations of a Loan Party under the Agreement, and grants to the Agent, for
the benefit of the Lenders, a security interest, lien and collateral assignment
in and to the Collateral as security for the Obligations, in each case subject
to the terms of the Agreement. Pentacon USA and each of the other Loan Parties
agrees to promptly execute and
FOURTH AMENDMENT TO SECOND AMENDMENT AND
RESTATED LOAN AND SECURITY AGREEMENT - Page 5
deliver, or cause to be executed and delivered, to the Agent such documents,
certificates and agreements in connection with the referenced merger and as
required by the Loan Documents as the Agent may reasonably request.
Section 3.5 RELEASE. In consideration of this Amendment, each of the
Borrowers on its own behalf and on behalf of their respective Subsidiaries,
predecessors, successors and assigns (collectively, the "RELEASING PARTIES"),
hereby irrevocably and forever releases, remises, discharges and holds harmless
the Agent and each Lender and all of their respective officers, directors,
employees, agents, attorneys and representatives, and all of their respective
predecessors, successors, and assigns, from any and all claims, causes of
action, demands, and liabilities of any kind whatsoever, if any, whether direct
or indirect, fixed or contingent, liquidated or nonliquidated, disputed or
undisputed, asserted or non-asserted, known or unknown, which any of the
Releasing Parties has relating in any way to any event, circumstance,
occurrence, act, action, or failure to act in connection with or otherwise
concerning this Agreement, the other Loan Documents or the transactions
contemplated therein from the beginning of time through the Amendment Effective
Date.
ARTICLE 4
MISCELLANEOUS
Section 4.1 CONDITIONS PRECEDENT. The effectiveness of this Amendment is
subject to the satisfaction of each of the following conditions precedent:
(a) The Agent shall have received all of the following, each dated the
date of this Amendment (unless otherwise indicated), in form and substance
satisfactory to the Agent:
(i) AMENDMENT DOCUMENTS. This Amendment and any other
agreement, certificate, document, or instrument required by the Agent
to be executed or delivered by any Borrower, the Agent, or the Lenders
in connection with this Amendment, in each case duly executed (the
"AMENDMENT DOCUMENTS");
(ii) FEES AND EXPENSES. Evidence that the costs and expenses
(including, without limitation, reasonable attorneys' fees and
expenses) incurred by the Agent incident to this Amendment or
otherwise required to be paid in accordance with SECTION 15.7 of the
Agreement, to the extent incurred and submitted to the Borrowers,
shall have been paid in full;
(iii) ADDITIONAL INFORMATION. The Agent shall have received such
additional documents, instruments, and information as the Agent may
reasonably request to effect the transactions contemplated hereby;
(iv) AMENDMENT FEE. Payment of the Amendment Fee required by
SECTION 4.2 of this Amendment; and
FOURTH AMENDMENT TO SECOND AMENDMENT AND
RESTATED LOAN AND SECURITY AGREEMENT - Page 6
(v) CONSENTS. All consents required by SECTION 13.2 of the
Agreement shall have been obtained.
(b) The representations and warranties contained herein, in the
Agreement, and in all other Loan Documents, as amended hereby, shall be
true and correct as of the date hereof as if made on the date hereof
(except those, if any, which by their terms specifically relate only to a
different date).
(c) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all other agreements,
documents, and instruments executed and/or delivered pursuant hereto, and
all legal matters incident thereto, shall be satisfactory to the Agent.
(d) No Default or Event of Default shall have occurred and be
continuing.
Section 4.2 AMENDMENT FEE. The Borrowers agrees to pay to the Agent, on
the Closing Date, solely for the benefit of the Lenders who execute this
Agreement on or before the Effective Date, an amendment fee in the amount of
$500,000 in consideration for the Agent's and each such Lender's execution of
this Amendment. Upon the effectiveness of this Amendment, the Borrowers shall be
deemed to have made a request for a Revolving Loan in the amount of such
amendment fee and the Agent and the Lenders are authorized, but not obligated,
to fund such Revolving Loan and apply the proceeds thereof in payment of such
amendment fee.
Section 4.3 REPRESENTATIONS AND WARRANTIES. The Borrowers hereby represent
and warrant to, and agree with, the Agent, for the benefit of the Lenders, that,
as of the date of and after giving effect to this Amendment, (a) the execution,
delivery, and performance of this Amendment and any and all other Amendment
Documents executed and/or delivered in connection herewith have been authorized
by all requisite corporate action on the part of each of the Borrowers (as
applicable) and will not violate any of such Borrower's certificate of
incorporation or bylaws, (b) all representations and warranties set forth in the
Agreement and in any other Loan Document are true and correct as if made again
on and as of such date (except those, if any, which by their terms specifically
relate only to a different date) in the Agreement), (d) no Default or Event of
Default has occurred and is continuing, (e) the Agreement (as amended by this
Amendment), and all other Loan Documents are and remain legal, valid, binding,
and enforceable obligations in accordance with the terms thereof, and (f) the
certifications delivered to the Agent under CLAUSE (i), CLAUSE (ii),
CLAUSE (iii), and CLAUSE (iv) of SECTION 10.1(a) of the Agreement remain true,
correct, and complete as of the Amendment Effective Date.
Section 4.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made in this Amendment or any other Loan Document shall survive
the execution and delivery of this Amendment and the other Loan Documents, and
no investigation by the Agent or
FOURTH AMENDMENT TO SECOND AMENDMENT AND
RESTATED LOAN AND SECURITY AGREEMENT - Page 7
any Lender, or any closing, shall affect the representations and warranties or
the right of the Agent and the Lenders to rely upon them.
Section 4.5 REFERENCE TO AGREEMENT. Each of the Loan Documents, including
the Agreement, the Amendment Documents, and any and all other agreements,
documents, or instruments now or hereafter executed and/or delivered pursuant to
the terms hereof or pursuant to the terms of the Agreement as amended hereby,
are hereby amended so that any reference in such Loan Documents to the
Agreement, whether direct or indirect, shall mean a reference to the Agreement
as amended hereby.
Section 4.6 SEVERABILITY. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 4.7 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall inure to the benefit of the Agent, the Lenders, the Borrowers, and their
respective successors and assigns, except no Borrower may assign or transfer any
of its rights or obligations hereunder without the prior written consent of the
Agent and the Lenders.
Section 4.8 GENERAL. This Amendment, when signed by each signatory as
required by the Agreement (a) shall be deemed effective prospectively as of the
Amendment Effective Date, (b) contains the entire agreement among the parties
and may not be amended or modified except in writing signed by all parties as
required by the Agreement, (c) shall be governed and construed according to the
laws of the State of
Texas, and (d) may be executed in any number of
counterparts, each of which shall be valid as an original and all of which shall
be one and the same agreement. A telecopy or other electronic transmission of
any executed counterpart shall be deemed valid as an original.
THIS WRITTEN AGREEMENT REPRESENTS 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 ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers in several
counterparts effective as of the date specified in the introductory
paragraph hereof.
THE BORROWERS:
PENTACON, INC.
FOURTH AMENDMENT TO SECOND AMENDMENT AND
RESTATED LOAN AND SECURITY AGREEMENT - Page 8
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
PENTACON AEROSPACE GROUP, INC., a
Nevada corporation and successor by
merger to
Texas International
Aviation, Inc., West Coast Aero
Products Holding Corp., Xxxxxxx
Acquisition Corp., ASI Aerospace
Group, Inc. and Alatec Products,
Inc.
ALATEC CABLE HARNESS &
ASSEMBLY DIVISION, INC. ALATEC
FASTENER AND COMPONENT GROUP, INC.
ALATEC RACE, INC. TRACE ALATEC
SUPPLY COMPANY, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
PENTACON INDUSTRIAL GROUP, INC, a
Nevada corporation and successor by
merger to AXS Solutions, Inc.,
Maumee Industries, Inc. and Sales
Systems Limited
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
PENTACON USA, L.P., a
Texas limited
partnership and successor by merger
to Pace Products, Inc. and Capitol
Bolt & Supply, Inc.
By: JIT Holdings, Inc., a
Texas
corporation
FOURTH AMENDMENT TO SECOND AMENDMENT AND
RESTATED LOAN AND SECURITY AGREEMENT - Page 9
Its: General Partner
By:
--------------------------
Name:
------------------------
Title:
-----------------------
FOURTH AMENDMENT TO SECOND AMENDMENT AND
RESTATED LOAN AND SECURITY AGREEMENT - Page 10
THE AGENT:
BANK OF AMERICA, NATIONAL
ASSOCIATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
FOURTH AMENDMENT TO SECOND AMENDMENT AND
RESTATED LOAN AND SECURITY AGREEMENT - Page 11
THE LENDERS:
BANK OF AMERICA, NATIONAL
ASSOCIATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
FLEET CAPITAL CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
UNION BANK OF CALIFORNIA, N.A.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
FOURTH AMENDMENT TO SECOND AMENDMENT AND
RESTATED LOAN AND SECURITY AGREEMENT - Page 12
