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EXIHIBT 10.42
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into as of the 5th day of May, 2000, by and among the banks listed on the
signature pages hereof (the "Lenders"), KEVCO, INC., a Texas corporation (the
"Borrower"), and BANK OF AMERICA, N.A., formerly known as NationsBank, N.A., as
administrative agent for the Lenders (the "Administrative Agent"), to the extent
and in the manner provided for in the Credit Agreement (defined below and herein
so called).
BACKGROUND
(a) The Lenders, the Borrower, and the Administrative Agent
are parties to that certain Third Amended and Restated Credit Agreement
dated as of July 14, 1999 (as amended through the date hereof and as
may be further amended, extended, renewed, or restated from time to
time, the "Credit Agreement"; terms defined in the Credit Agreement and
not otherwise defined herein shall be used herein as defined in the
Credit Agreement).
(b) The Borrower, the Administrative Agent, and the Lenders
desire to amend the Credit Agreement to provide for certain changes to
(i) the Borrowing Base, (ii) certain financial covenants and (iii) the
pricing structure.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the parties
hereto covenant and agree as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT. The Credit Agreement is hereby
amended as follows:
(a) Section 1.1 is amended by amending the introductory
language in the definition of "Applicable Base Rate Margin" as follows:
"Applicable Base Rate Margin" means the following per
annum percentages, applicable in the following situations,
provided that, such percentages shall be increased by 0.25%
commencing May 5, 2000, provided, further, that such increase
shall no longer be in effect after the first day of the
calendar month following the date the Borrower delivers its
financial statements for any fiscal quarter or fiscal year
ending on or after December 31, 2000 to the Administrative
Agent in accordance with Section 6.1 or Section 6.2
respectively, if such financial statements show compliance
with Sections 7.10, 7.11 and 7.12:
(b) Section 1.1 is amended by amending the introductory
language in the definition of "Applicable LIBOR Rate Margin" as
follows:
"Applicable LIBOR Rate Margin" means the following
per annum percentages, applicable in the following
situations, provided
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that, such percentages shall be increased by 0.25% commencing
May 5, 2000, provided, further, that such increase shall no
longer be in effect after the first day of the calendar month
following the date the Borrower delivers its financial
statements for any fiscal quarter or fiscal year ending after
December 31, 2000 to the Administrative Agent in accordance
with Section 6.1 or Section 6.2 respectively, if such
financial statements show compliance with Sections 7.10, 7.11
and 7.12:
(c) Section 1.1 is amended by entirely amending the definition
of "Borrowing Base" as follows:
"Borrowing Base" means for the Borrower and each of
its Subsidiaries which have executed a Subsidiary Security
Agreement, on a consolidated basis, the sum of (a) 80% of book
value of accounts receivable, minus, to the extent not
deducted in arriving at book value, the portion of any account
not paid within 90 days of when due, plus (b) 60% of book
value of inventory (including goods in transit backed by
Letters of Credit) net of reserves as determined by Borrower,
plus (c) at any time (i) prior to January 1, 2001, 55% of book
value of owned real property, equipment and other fixed
assets, net of depreciation, or (ii) on or after January 1,
2001, 50% of book value of owned real property, equipment and
other fixed assets, net of depreciation, plus (d) 100% of Cash
and Cash Equivalents (excluding amounts in the Restricted
Account). For purposes of this definition, "book value" means
the value of an asset as reflected in the Borrower's or the
appropriate Subsidiary's accounting books and records,
determined in accordance with GAAP.
(d) Section 7.10 is amended by entirely amending clause (b)
thereof as follows:
(b)(i) 8.75 to 1.00 at the end of the March 31,
2000, fiscal quarter, (ii) 10.25 to 1.00 at the end of the
June 30, 0000, xxxxxx xxxxxxx, (xxx) 9.50 to 1.00 at the end
of the September 30, 2000, fiscal quarter, and (iv) 8.00 to
1.00 at the end of the December 31, 2000, fiscal quarter,
(e) Section 7.12 is entirely amended, as follows:
The Borrower shall not permit Net Worth to be less
than (a) at any time prior to the end of the fiscal quarter
of the Borrower ending December 31, 2000, the sum of (i)
$37,914,000, plus (ii) 50% of cumulative Net Income for the
period from and including April 1, 1999 (but excluding from
the calculation of such cumulative Net Income the effect, if
any, of any fiscal quarter (or portion of a fiscal quarter
not yet ended) for which Net Income was a negative number),
plus (iii) 50% of the Net Cash Proceeds from the Xxxxxxx
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Subordinated Debt and the Xxxxxxx Stock Acquisition and from
any other Equity Offering, (b) $51,000,000 as of the end of
the fiscal quarter of the Borrower ending December 31, 2000,
and (c) at any time after December 31, 2000, the sum of (i)
the greater of (A) $51,000,000 or (B) Net Worth as of the end
of the fiscal quarter of the Borrower ending December 31,
2000, plus (ii) 50% of cumulative Net Income for the period
from and including January 1, 2001 (but excluding from the
calculation of such cumulative Net Income the effect, if any,
of any fiscal quarter (or portion of a fiscal quarter not yet
ended) for which Net Income was a negative number), plus
(iii) 50% of the Net Cash Proceeds from any Equity Offering
after May 5, 2000.
2. AMENDMENT FEE. The Borrower shall pay to the Administrative Agent,
for the pro rata account of each Lender, an amendment fee equal to the product
of (a) 0.10% multiplied by (b) the sum of such Lender's Revolving Credit
Commitment and the total outstanding principal amount of all Term Loan Advances
owed to such Lender as of the date of this Amendment. Such amendment fee shall
be earned and payable as of the date of this Amendment in immediately available
funds.
3. ACKNOWLEDGMENT OF THE BORROWER. The Borrower acknowledges and agrees
that the Lenders executing this Amendment have done so in their sole discretion
and without any obligation.
4. SUBSIDIARIES ACKNOWLEDGMENT. By signing below, each of the
Subsidiaries which has executed a Subsidiary Guaranty (a) consents and agrees
to the execution and delivery of this Amendment, (b) ratifies and confirms its
obligations under its Subsidiary Guaranty, (c) acknowledges and agrees that its
obligations under its Subsidiary Guaranty are not released, diminished,
impaired, reduced, or otherwise adversely affected by this Amendment, and (d)
acknowledges and agrees that it has no claims or offsets against, or defenses
or counterclaims to, its Subsidiary Guaranty.
5. RELEASE.
(a) The Borrower and each Subsidiary Guarantor hereby
unconditionally and irrevocably remises, acquits, and fully and forever
releases and discharges the Administrative Agent and the Lenders and
all respective affiliates and subsidiaries of the Administrative Agent
and the Lenders, their respective officers, servants, employees,
agents, attorneys, principals, directors and shareholders, and their
respective heirs, legal representatives, successors and assigns
(collectively, the "Released Lender Parties") from any and all claims,
demands, causes of action, obligations, remedies, suits, damages and
liabilities (collectively, the "Borrower Claims") of any nature
whatsoever, whether now known, suspected or claimed, whether arising
under common law, in equity or under statute, which the Borrower or any
Guarantor ever had or now has against the Released Lender Parties which
may have arisen at any time on or prior to the date of this Amendment
and which were in any manner related to any of the Loan Documents or
the enforcement or attempted enforcement by the Administrative Agent or
the Lenders of rights, remedies or recourses related thereto.
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(b) The Borrower and each Subsidiary Guarantor covenants and
agrees never to commence, voluntarily aid in any way, prosecute or
cause to be commenced or prosecuted against any of the Released Lender
Parties any action or other proceeding based upon any of the Borrower
Claims which may have arisen at any time on or prior to the date of
this Amendment and were in any manner related to any of the Loan
Documents.
(c) The agreements of the Borrower and each Guarantor set
forth in this Section 5 shall survive termination of this Amendment
and the other Loan Documents.
6. REPRESENTATIONS AND WARRANTIES TRUE, NO EVENT OF DEFAULT. By its
execution and delivery hereof, the Borrower represents and warrants to the
Lenders that, as of the date hereof:
(a) the representations and warranties contained in the
Credit Agreement and the other Loan Documents are true and correct in
all material respects on and as of the date hereof as made on and as
of such date, except for any representations and warranties made as of
a specific date, which shall be true and correct in all material
respects as of such specific date; and
(b) after giving effect to this Amendment, no event has
occurred and is continuing which constitutes a Default or an Event of
Default.
7. CONDITIONS OF EFFECTIVENESS. This Amendment shall not be effective
until each of the following conditions precedent shall have been satisfied:
(a) All reasonable out-of-pocket fees and expenses in
connection with the Loan Documents, including this Amendment,
including legal and other professional fees and expenses incurred on
or prior to the date of this Amendment by the Administrative Agent,
including, without limitation, the fees and expenses of Xxxxxxxx
Xxxxxxxx & Xxxxxx P.C. and Xxxxxx Xxxxxxxx L.L.P., shall have been
paid; and
(b) The Administrative Agent shall have received such
documents, certificates and instruments as the Administrative Agent
shall reasonably require; and
(c) The Administrative Agent shall have received for the
account of the Lenders the Amendment Fee described in Section 2 of this
Amendment.
8. REFERENCE TO CREDIT AGREEMENT. Upon the effectiveness of this
Amendment, each reference in the Credit Agreement to "this Agreement,"
"hereunder," or words of like import shall mean and be a reference to the Credit
Agreement, as affected and amended by this Amendment.
9. COUNTERPARTS; EXECUTION VIA FACSIMILE. This Amendment may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. This
Amendment may be validly executed and delivered by facsimile or other electronic
transmission.
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10. GOVERNING LAW: BINDING EFFECT. This Amendment shall be governed by
and construed in accordance with the laws of the State of Texas and shall be
binding upon the Borrower, the Administrative Agent, each Lender and their
respective successors and assigns.
11. 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.
12. LOAN DOCUMENT. This Amendment is a Loan Document and is subject to
all provisions of the Credit Agreement applicable to Loan Documents, all of
which are incorporated in this Amendment by reference the same as if set forth
in this Amendment verbatim.
13. NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT 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 UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
the date first above written.
KEVCO, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx
Executive Vice President and Chief
Financial Officer
BANK OF AMERICA, N.A., formerly known as
NationsBank, N.A., as Administrative
Agent and as a Lender
By: /s/ Xxxxxxx X. Xxxxxxxxxxx, XX
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Xxxxxxx X. Xxxxxxxxxxx, XX
Managing Director
NATIONAL CITY BANK KENTUCKY
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
Senior Vice President
GUARANTY FEDERAL BANK, F.S.B.
By: /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx
Senior Vice President
XXXXX FARGO BANK, N.A.
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
Relationship Manager
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PILGRIM PRIME RATE TRUST
By: Pilgrim Investments, Inc., as its
Investment Manager
By: /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx, CFA
Vice President
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc., as
Collateral Manager
By: /s/ Xxxxxxxx Xxxxx
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Xxxxxxxx Xxxxx
Vice President
ALLIANCE CAPITAL FUNDING, L.L.C.
By: Alliance Capital Management, L.P., as
Manager on behalf of ALLIANCE CAPITAL
FUNDING, L.L.C.
By: ALLIANCE CAPITAL MANAGEMENT
CORPORATION
General Partner of Alliance
Capital Management, L.P.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Senior Vice President
XXXXXXX XXXXX DEBT STRATEGIES
PORTFOLIO
By: Xxxxxxx Xxxxx Asset Management, L.P.,
as Investment Advisor
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By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
Authorized Signatory
Xxxxxxx Xxxxx Debt Global Investment
Series:
INCOME STRATEGIES PORTFOLIO
By: Xxxxxxx Xxxxx Asset Management, L.P.,
as Investment Advisor
By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
Authorized Signatory
BANK ONE, TEXAS, N.A.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Vice President
XXX CAPITAL FUNDING LP
By: Highland Capital Management, L.P., as
Collateral Manager
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx, CFA, CPA
President
Highland Capital Management L.P.
ACKNOWLEDGED AND AGREED:
KEVCO MANAGEMENT, INC.
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
Executive Vice President
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KEVCO HOLDING, INC.
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
Executive Vice President
KEVCO GP, INC.
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
Executive Vice President
KEVCO COMPONENTS, INC.
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
Executive Vice President
DCM DELAWARE, INC.
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
Executive Vice President
KEVCO MANUFACTURING, L.P.
By: KEVCO GP, INC., its General Partner
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
Executive Vice President
KEVCO DISTRIBUTION, L.P.
By: KEVCO GP, INC., its General Partner
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
Executive Vice President
