EXHIBIT 10.11
NINTH AMENDMENT TO CREDIT AGREEMENT
THIS NINTH AMENDMENT TO CREDIT AGREEMENT (the "NINTH AMENDMENT") is
made and dated as of April 24, 2001, by and among SANWA BANK CALIFORNIA
("SANWA"), those other banks (each, including Sanwa, a "LENDER" and,
collectively, the "LENDERS"), party with Sanwa to the Agreement defined in
Recital A below, SANWA, as agent for the Lenders (in such capacity, the "AGENT")
and as the L/C Bank (as defined in the Agreement), and NTS TECHNICAL SYSTEMS, a
California corporation (the "BORROWER").
RECITALS
A. Pursuant to that certain Credit Agreement dated as of September 8,
1997 among the Agent, the Lenders and the Borrower (as amended, modified, or
waived, the "AGREEMENT"), the Lenders agreed to extend credit to the Borrower on
the terms and subject to the conditions set forth therein. All capitalized terms
not otherwise defined herein shall have the meanings given to such terms in the
Agreement.
B. The Borrower has asked the Agent, the L/C Bank and the Lenders to
waive certain terms of the Agreement and to modify certain other terms of the
Agreement.
C. The Agent, the L/C Bank and the Lenders have agreed to such requests
of the Borrower on the terms and conditions contained in this Ninth Amendment.
NOW, THEREFORE, in consideration of the foregoing Recitals and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. WAIVER. In reliance on the representations and warranties contained
in this Ninth Amendment and subject to the other terms and conditions of this
Ninth Amendment, as of the Effective Date, the Agent, the L/C Bank and the
Lenders waive the following Events of Default and Potential Defaults under the
Agreement, each such waiver being specific in time and intent and not
constituting a waiver of any other right or provision in the Agreement or any
other Loan Document:
(a) In breach of the covenant in PARAGRAPH 7(J)(5), the Borrower
permitted, as of fiscal year end January 31, 2001, the Debt Coverage
Ratio for the preceding four fiscal quarters to be less than 1.30 to
1.00;
(b) In breach of the covenant in PARAGRAPH 7(J)(3), the Borrower
permitted capital expenditures (calculated on a consolidated basis for
the Parent and its Consolidated Subsidiaries) in the fiscal year ending
January 31, 2001 to be in excess of $6,500,000;
(c) In breach of the covenant in PARAGRAPH 7(E), the Borrower
permitted during the fiscal year ending January 31, 2001 the Parent to
pay dividends or repurchase stock of the Parent in an aggregate amount
in excess of 40% of the consolidated net income of the Parent in the
immediately preceding fiscal year.
2. AMENDMENTS. The Agreement is amended as follows:
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2(a) REVOLVING CREDIT LIMIT. The definition of "Revolving Credit Limit"
in PARAGRAPH 1 is amended to read as follows:
"'REVOLVING CREDIT LIMIT' shall mean $10,000,000, as such amount may be
increased or decreased by written agreement of the Agent, the Borrower
and on hundred percent (100%) of the Lenders."
2(b) MANDATORY PREPAYMENT. PARAGRAPH 2(E)(1) is amended to add at the
end thereof a new clause (v) to read as follows:
"(v) Within two (2) Business Days after the date that the Parent or
Borrower receives a Federal income tax refund for fiscal year ended
January 31, 2001, the Revolving Loans shall be prepaid in an amount
equal to $544,000."
2(c) FINANCIAL STATEMENTS. PARAGRAPH 6(A) is amended to add at the end
thereof a new subparagraph (4) to read as follows:
"(4) Within thirty (30) days after the last day of each month
(beginning March 31, 2001), for reporting purposes only and not for
purposes of determining compliance with PARAGRAPH 7(J) of this
Agreement or preparation of a Compliance Certificate, the balance sheet
of the Parent as of the end of, and the related statement of income
for, the month and for the period from the first day of the then
current fiscal year through such month, prepared on a consolidated
basis and in accordance with GAAP applied on a basis consistent with
the audited financial statements of the Parent, subject to changes
resulting from audit and normal year-end adjustments."
2(d) ACCOUNT RECEIVABLES AGINGS. PARAGRAPH 6(B)(3) is amended to read
as follows:
"(3) Within 30 days after the last day of each month, beginning with
the month ended March 31, 2001, a summary accounts receivable aging for
the Parent and its Subsidiaries;"
2(e) ACQUISITIONS. PARAGRAPH 7(D)(5) of the Agreement is amended to
read:
"(5) Intentionally omitted;"
2(f) CAPITAL EXPENDITURES. PARAGRAPH 7(J)(3) is amended to read as
follows:
"(3) make capital expenditures in an aggregate amount in excess of
$3,000,000 in any fiscal year, beginning with the fiscal year ending
January 31, 2002."
2(g) QUICK RATIO. PARAGRAPH 7(J)(4) is amended to read as follows:
"(4) beginning April 30, 2001, permit at any time the Quick Ratio to be
less than 1.00 to 1.00; or"
2(h) DEBT COVERAGE RATIO. PARAGRAPH 7(J)(5) is amended to read as
follows:
"(5) permit the Debt Coverage Ratio for the four fiscal quarters ending
(i) April 30, 2001, July 31, 2001, or October 31, 2001, to be less than
1.10 to 1.00 or (ii) January 31, 2002 or the end of any fiscal quarter
thereafter, 1.25 to 1.00."
2(i) MINIMUM PROFIT. PARAGRAPH 7(J) is amended to delete the "or" at
the end of subparagraph (4), to replace the period (.) at the end of
subparagraph (5) with ";or" and to insert thereafter a new subparagraph (6) to
read as follows:
"(6) as at the end of any fiscal quarter, beginning with fiscal quarter
ending April 30, 2001, permit net profit after taxes realized in the
quarter just ended to be less than $1.00."
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3. REAFFIRMATION OF SECURITY AGREEMENTS. The Borrower hereby affirms
and agrees that, except as otherwise provided herein, (a) the execution and
delivery by the Borrower of and the performance of its obligations under this
Ninth Amendment shall not in any way amend, impair, invalidate or otherwise
affect any of the Obligations of the Borrower or the rights of the Lenders under
the Security Documents or any other document or instrument made or given by the
Borrower in connection therewith, (b) the term "OBLIGATIONS" as used in the
Security Agreement includes, without limitation, the Obligations of the Borrower
under the Agreement as amended hereby, and (c) the Security Documents remain in
full force and effect and constitute a continuing first priority security
interest in and lien upon the Collateral described therein.
4. EFFECTIVE DATE. Subject to the terms contained in the last paragraph
of this PARAGRAPH 4, this Ninth Amendment shall be effective on the date (the
"EFFECTIVE DATE") when all of the following conditions precedent have been
satisfied:
(a) The Borrower shall have delivered or shall have had delivered to
the Agent each of the following (with sufficient copies for each of the
Lenders):
(i) A duly executed copy of this Ninth Amendment;
(ii) Such credit applications, financial statements,
authorizations and such information concerning the Borrower and its Guarantors
and their business, operations and condition (financial and otherwise) as any
Lender may reasonably request.
(b) Any and all fees and other amounts payable hereunder on or prior
to such date shall have been paid, and all acts and conditions (including,
without limitation, the obtaining of any necessary regulatory approvals and the
making of any required filings, recordings or registrations) required to be done
and performed and to have happened precedent to the execution, delivery and
performance of this Ninth Amendment and to constitute the same legal, valid and
binding obligations, enforceable in accordance with their respective terms,
shall have been done and performed and shall have happened in due and strict
compliance with all applicable laws.
(c) The representations and warranties made by or on behalf of the
Borrower and each Guarantor in or pursuant to the Loan Documents (and by
executing and delivering this Ninth Amendment, the Borrower represents that all
such representations and warranties) shall be accurate and complete in all
material respects as if made on and as of such date (or as of December 31, 2000
if such representations and warranties relate to the financial results or
condition of the Borrower).
(d) There shall not have occurred an Event of Default or Potential
Default not otherwise cured or waived. This Amendment shall cease to be
effective as of close of business of the Lenders on May 4, 2001 unless, prior to
that time, Mellon Bank, N.A., as a Lender under the Agreement, shall have
received from the Borrower an amendment fee of $17,500 and Sanwa Bank
California, as a Lender under the Agreement, shall have received from the
Borrower an amendment fee of $17,500.
8. REPRESENTATIONS AND WARRANTIES. As an inducement to the Agent, the
L/C Bank and each Lender to enter into this Ninth Amendment, the Borrower
represents and warrants to the Agent, the L/C Bank and each Lender that:
(a) CORPORATE EXISTENCE; COMPLIANCE WITH LAW. The Borrower and each
Guarantor (1) is duly organized, validly existing and in good standing as a
corporation under the laws of the state of its incorporation and is qualified to
do business in each jurisdiction where its ownership of property or conduct of
business requires such qualification and where failure to qualify would have a
material adverse effect on it or its property and/or business or on its ability
to pay or perform the Obligations, (2) has the corporate power and authority and
the legal right to own and operate its property and to conduct business in the
manner in which it does and proposes so to do, and (3) is in compliance with all
Requirements of Law and Contractual Obligations.
(b) CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Borrower and each Guarantor has the corporate power and authority and the legal
right to execute, deliver and perform this Ninth Amendment and the
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Agreement as amended hereby to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Ninth Amendment and the Agreement as amended hereby. This Ninth Amendment and
the Agreement as amended hereby have been duly executed and delivered on behalf
of the Borrower and each Guarantor party thereto and constitute such Person's
legal, valid and binding obligations enforceable against it in accordance with
their respective terms, subject to the effect of applicable bankruptcy and other
similar laws affecting the rights of creditors generally and the effect of
equitable principles whether applied in an action at law or a suit in equity.
(c) NO LEGAL BAR. The execution, delivery and performance of this
Ninth Amendment and the Agreement as amended hereby, the borrowings hereunder
and the use of the proceeds thereof, will not violate any Requirement of Law or
any Contractual Obligations of the Borrower or any Guarantor or create or result
in the creation of any Lien on any assets of the Borrower or any Guarantor
except as contemplated thereby.
(d) NO MATERIAL LITIGATION. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower or any Guarantor, threatened by or against the
Borrower or any Guarantor or against any of the Borrower's or any Guarantor's
properties or revenues which is likely to be adversely determined and which, if
adversely determined, is likely to have a material adverse effect on the
business, operations, property or financial or other condition of the Parent and
its Subsidiaries, taken as a whole.
(e) CONSENTS, ETC. No consent, approval, authorization of, or
registration, declaration or filing with any Governmental Authority is required
on the part of the Borrower or any Guarantor in connection with the execution
and delivery of this Ninth Amendment and the Agreement as amended hereby or the
performance of or compliance with the terms, provisions and conditions hereof or
thereof.
(f) NO DEFAULT. No Potential Default or Event of Default has
occurred under the Agreement which has not otherwise been cured or waived.
(g) FULL DISCLOSURE. None of the representations or warranties made
by the Borrower or any Guarantor in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Borrower or any Guarantor in connection with the Loan
Documents contains any untrue statement of a material fact or omits any material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they are made, not misleading
as of the time when made or delivered.
9. MISCELLANEOUS PROVISIONS.
(a) EXPENSES. In accordance with PARAGRAPH 6(G) of the Agreement,
the Borrower agrees to pay all reasonable out-of-pocket expenses of the Agent
incident to the preparation and negotiation of this Ninth Amendment.
(b) ENTIRE AGREEMENT. This Ninth Amendment embodies the entire
agreement and understanding between the parties hereto and supersedes all prior
agreements and understandings relating to the subject matter hereof and thereof.
(c) GOVERNING LAW. This Ninth Amendment shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to choice of law rules.
(d) COUNTERPARTS. This Ninth Amendment may be executed in any number
of counterparts, all of which together shall constitute one agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Ninth
Amendment to be executed as of the day and year first above written.
NTS TECHNICAL SYSTEMS, a California corporation
By: /s/ XXXXX XXXXXXX
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Name: Xxxxx Xxxxxxx
Title: Chief Financial Officer
SANWA BANK CALIFORNIA, as Agent and the L/C Bank
By: /s/ XXXXXX XXXXX
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Name: Xxxxxx Xxxxx
Title: Vice President
SANWA BANK CALIFORNIA, as a Lender
By: /s/ XXXXXX XXXXX
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Name: Xxxxxx Xxxxx
Title: Vice President
MELLON BANK, N.A., as a Lender
By: /s/ XXXXX XXXXXXXXX
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Name: Xxxxx Xxxxxxxxx
Title: Vice President
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REAFFIRMATION OF GUARANTIES
Each of the undersigned Guarantors agrees to the terms of this Ninth Amendment
and hereby ratifies and reaffirms its Guaranty of the Obligations of the
Borrower and its grant of a security interest in certain property to secure such
Guaranty in favor of the Agent, on behalf of itself, the Lender, and the L/C
Bank and agrees that, notwithstanding this Ninth Amendment and any other
amendment or supplement to the Agreement entered into prior to this Ninth
Amendment, its Guaranty shall remain in full force and effect with respect to
the Agreement as amended hereby.
NATIONAL TECHNICAL SYSTEMS, INC.
By: /s/ XXXXX XXXXXXX
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Name: Xxxxx Xxxxxxx
Title: Chief Financial Officer
ETCR, INC.
By: /s/ XXXXX XXXXXXX
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Name: Xxxxx Xxxxxxx
Title: Vice President
APPROVED ENGINEERING TEST
LABORATORIES, INC.
By: /s/ XXXXX XXXXXXX
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Name: Xxxxx Xxxxxxx
Title: Vice President
ACTON ENVIRONMENTAL TESTING CORPORATION
By: /s/ XXXXX XXXXXXX
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Name: Xxxxx Xxxxxxx
Title: Vice President
XXCAL, INC.
By: /s/ XXXXX XXXXXXX
------------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President
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