EXHIBIT 10(a)
THIRD AMENDMENT TO CREDIT AGREEMENT
This Amendment, dated as of March 30, 2001, is made by and among
INNOVEX, INC., a Minnesota corporation (the "Borrower"), each of the banks
appearing on the signature pages hereof, together with such other banks as may
from time to time become a party to the Credit Agreement (defined below)
pursuant to the terms and conditions of Article VIII of the Credit Agreement
(herein collectively called the "Banks" and individually each called a "Bank"),
and XXXXX FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, formerly known as Norwest
Bank Minnesota, National Association, a national banking association, in its
separate capacity as administrative agent for itself and all other Banks (in
such capacity, the "Agent").
Recitals
A. The Borrower has requested that the Banks and the Agent, among other
things, amend certain financial covenants, exclude certain foreign Accounts and
Inventory from the Borrowing Base, waive certain covenant and payment defaults
and provide other accommodations.
B. The Borrower, the Banks and the Agent have entered into a Credit
Agreement dated as of September 15, 1999, a First Amendment to Credit Agreement
dated as of June 29, 2000, and a Second Amendment to Credit Agreement dated as
of December 31, 2000 (as amended or restated from time to time, the "Credit
Agreement").
C. The Borrower has represented to the Banks that it is securing
additional financing from foreign financial institutions. The Borrower has
further represented it intends to offer, as collateral for this financing, its
real and personal property assets located in the country of Thailand. Among
other things, this Amendment provides for a Revolving Facility with a Borrowing
Base which excludes foreign Accounts and Inventory.
D. The Banks and the Agent are willing to grant the Borrower's requests
subject to the terms and conditions set forth below.
Agreement
ACCORDINGLY, in consideration of the premises and for other good and
valuable consideration, the Borrower, the Banks and the Agent agree as follows:
1. All capitalized terms used in this Amendment and not otherwise
specifically defined in this Amendment shall have the meanings given such terms
in the Credit Agreement.
2. Section 1.1 of the Credit Agreement is hereby amended by restating
the following definitions in the appropriate alphabetical location:
"Borrowing Base" means, at any time and subject to change from
time to time in the Banks' reasonable discretion, the lesser of:
(a) the Revolving Commitment Amount or
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(b) the sum of:
(i) 80% OF ELIGIBLE ACCOUNTS, PLUS
(ii) 50% OF ELIGIBLE INVENTORY.
"Borrowing Base Certificate" means a certificate in the form
attached hereto as Exhibit A.
"Eligible Accounts" means all unpaid Accounts of the Borrower,
Innovex Precision Components, Inc., and Innovex Southwest, Inc., net of
any credits, except the following shall not in any event be deemed
Eligible Accounts:
(i) That portion of Accounts unpaid 90 days or more after the
invoice date;
(ii) That portion of Accounts that is disputed or subject to a
claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by the
Borrower to the customer;
(iv) Accounts owed by any unit of government, whether foreign
or domestic (provided, however, that there shall be included in
Eligible Accounts that portion of Accounts owed by such units of
government for which the Borrower has provided evidence satisfactory to
the Banks that (A) the Banks have a first priority perfected security
interest and (B) such Accounts may be enforced by the Banks directly
against such unit of government under all applicable laws);
(v) Accounts owed by an account debtor located outside the
United States which are not (A) backed by a bank letter of credit
naming the Banks as beneficiary or assigned to the Banks, in the
Agent's possession and acceptable to the Banks in all respects, in
their sole discretion, (B) covered by a foreign receivables insurance
policy acceptable to the Banks in their sole discretion;
(vi) Accounts owed by an account debtor that is insolvent, the
subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a shareholder, Subsidiary, Affiliate,
officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected security
interest in the Banks' favor or which are subject to any lien, security
interest or claim in favor of any Person other than the Banks including
without limitation any payment or performance bond;
(ix) That portion of Accounts that has been restructured,
extended, amended or modified;
(x) That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
(xi) That portion of Accounts owed by any one Account debtor
that would cause the total of such Account debtor's Accounts to exceed
25% of the total Accounts of the Borrower, Innovex Precision
Components, Inc., and Innovex Southwest, Inc., excepting (A) Accounts
owed by Seagate Technology, Inc. and its Subsidiaries and Affiliates
which may constitute up to 75% of the total Accounts of the Borrower,
Innovex Precision Components, Inc., and Innovex Southwest, Inc., and
(B) Accounts owed by Little Fuse and its Subsidiaries and Affiliates
which may constitute up to 30% of the total Accounts of the Borrower,
Innovex Precision Components, Inc., and Innovex Southwest, Inc.;
(xii) Accounts owed by an account debtor, regardless of
whether otherwise eligible, if 10% or more of the total amount due
under Accounts from such debtor is ineligible under clauses (i), (ii)or
(ix) above; and
(xiii) Accounts, or portions thereof, otherwise deemed
ineligible by the Banks in their reasonable discretion.
"Eligible Inventory" means all Inventory of the Borrower,
Innovex Precision Components, Inc., and Innovex Southwest, Inc., at the
lower of cost or market value as determined in accordance with GAAP;
provided, however, that the following shall not in any event be deemed
Eligible Inventory:
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(i) Inventory that is: in-transit; located at any warehouse,
job site or other premises not approved by the Banks in writing;
located outside of the states, or localities, as applicable, in which
the Banks have filed financing statements to perfect a first priority
security interest in such Inventory; covered by any negotiable or
non-negotiable warehouse receipt, xxxx of lading or other document of
title; on consignment from any Person; on consignment to any Person or
subject to any bailment unless such consignee or bailee has executed an
agreement with the Banks;
(ii) Supplies, packaging, parts or sample Inventory;
(iii) Work-in-process Inventory;
(iv) Inventory that is damaged, obsolete, slow moving or not
currently saleable in the normal course of the Borrower's operations;
(v) Inventory that the Borrower has returned, has attempted to
return, is in the process of returning or intends to return to the
vendor thereof;
(vi) Inventory that is perishable or live;
(vii) Inventory manufactured by the Borrower pursuant to a
license unless the applicable licensor has agreed in writing to permit
the Banks to exercise their rights and remedies against such Inventory;
(viii) Inventory classified as "deferred product variance";
(ix) Inventory that is subject to a security interest in favor
of any Person other than the Banks; and
(x) Inventory otherwise deemed ineligible by the Banks in
their reasonable discretion.
"Margin" means, with respect to computation of the applicable interest
rate on Fundings under a Facility, without regard to the Borrower's Leverage
Ratio and status: (a) until the aggregate principal amount outstanding under the
Term Notes is less than $17,500,000 and the Borrower is not in default under the
Credit Agreement, one and three-quarters percent (1.75%) for Floating Rate
Advances and three and one-half percent (3.50%) for Eurodollar Rate Advances,
and (b) after the aggregate principal amount outstanding under the Term Notes is
less than $17,500,000 and so long as the Borrower is not in default under the
Credit Agreement, one and one-half percent (1.50%) for Floating Rate Advances
three and one-quarter percent (3.25%) and for Eurodollar Rate Advances.
"Revolving Commitment" means, with respect to each Bank, such Bank's
Percentage of the Revolving Commitment Amount, unless such amount is reduced
pursuant to Section 2.14(a) hereof, in which event it means the amount to which
said amount is reduced pursuant thereto, or as the context may require, the
obligation of such Bank to make Revolving Advances, as contemplated in Section
2.1.
"Revolving Commitment Amount" shall mean Seven Million Five Hundred
Thousand Dollars ($7,500,000), being the maximum amount of the Revolving
Commitments of all Banks, in the aggregate, to make Revolving Advances to the
Borrower pursuant to Section 2.1, subject to reduction in accordance with
Section 2.14(a).
"Thai Guaranty" shall have the meaning set forth in Section 6.3(d) of
this Credit Agreement.
"Third Amendment" means the Third Amendment to Credit Agreement, dated
as of March 30, 2001, by and among the Borrower, the Banks and the Agent.
3. Article V of the Credit Agreement is hereby amended to add a new
Section 5.13 at the end thereof as follows:
"5.13 Mandatory Prepayment. The Borrower will, and will cause
each of its Subsidiaries to, take all action necessary to apply any and
all proceeds received from any sale or other disposition of the
Borrower's assets located in Mexico towards the prepayment of the Term
Notes in inverse order of their respective maturities. For purposes of
this covenant, "proceeds" shall include all amounts received by the
Borrower or its Subsidiaries upon the sale or other disposition of such
assets, net of any costs incurred by the Borrower or its Subsidiaries
in connection with such sale."
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4. Section 6.1 of the Credit Agreement is hereby amended to add a new
subparagraph (i) at the end thereof as follows:
"(i) liens and security interests granted by Innovex
(Thailand) Limited in favor of the Industrial Finance Corporation of
Thailand and the Bank of Ayudhya Company Limited (together, the "Thai
Lenders") pursuant to the Credit Facilities Agreement between Innovex
(Thailand) Limited and the Thai Lenders dated as of April 23, 2001."
5. Section 6.3 of the Credit Agreement is hereby amended to add a new
subparagraph (d) at the end thereof as follows:
"(d) a guaranty by the Borrower in favor of the Industrial
Finance Corporation of Thailand and the Bank of Ayudhya Company Limited
(together, the "Thai Lenders") of the obligations of Innovex (Thailand)
Limited to the Thai Lenders in an amount not to exceed 1.2 Billion Baht
under the Credit Facilities Agreement between Innovex (Thailand)
Limited and the Thai Lenders dated on or about April 23, 2001 (the
"Thai Guaranty")."
6. Section 6.4 of the Credit Agreement is hereby amended to add a new
subparagraph (d) at the end thereof as follows:
"(d) equity investments in or loans or other extensions of
credit to Innovex (Thailand) Limited in excess of the amount of such
investments and extensions of credit outstanding and shown on the
consolidated and consolidating balance sheet of the Borrower as of
March 31, 2001."
7. The requirements of Section 5.9 regarding the Borrower's minimum
Interest Coverage Ratio, Section 5.10 regarding the Borrower's maximum Leverage
Ratio, Section 5.11 regarding the Borrower's minimum Net Worth, and Section 5.12
regarding Borrower's profitability, in each case as of March 31, 2001 are waived
by Banks. Such waivers are limited to the March 31, 2001 Covenant Computation
Date. In addition, the Banks waive the Borrower's failure to pay the regularly
scheduled principal payment of the Term Notes that was due April 1, 2001;
provided, however that such regularly scheduled principal payment shall be paid
in full not later than the earlier of May 1, 2001 or the date when Innovex
(Thailand) Limited shall have borrowed not less than 1.2 Billion Baht from The
Industrial Finance Corporation of Thailand, Bank of Ayudhya Public Company
Limited, and/or other Thai entities.
8. Section 5.1(b) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(b) as soon as available and in any event within twenty (20)
days after the end of each fiscal month of the Borrower, an
unaudited/internal balance sheet and statement of income, cash flow and
retained earnings of the Borrower and its Subsidiaries as at the end of
and for such month and for the year-to-date period then ended, prepared
on a consolidated and consolidating basis, in reasonable detail and the
figures for the corresponding date and periods in the previous year,
all prepared in accordance with GAAP hereof, subject to year-end audit
adjustments; and accompanied by a certificate of the chief financial
officer of the Borrower, substantially in the form of Exhibit B to the
Third Amendment, stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit
adjustments, (ii) whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder not theretofore
reported and remedied and, if so, stating in reasonable detail the
facts with respect thereto, and (iii) with respect to each such
month-end which is also a Covenant Computation Date, all relevant facts
in reasonable detail to evidence, and the computations as to whether or
not the Borrower is in compliance with the requirements set forth in
Sections 5.9, 5.10, 5.11, 5.12 and 6.12;".
9. Article VI of the Credit Agreement is hereby amended by adding the
following new Section 6.14 immediately following Section 6.13:
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"Section 6.14. Prohibition on Certain Payments under the Thai
Guaranty. The Borrower shall not make any payment pursuant to the Thai
Guaranty if such payment could reasonably be expected to create a
default under this Credit Agreement, including, without limitation, a
default under the financial covenants contained in Article V. The
Borrower shall provide the Agent with ten (10) days prior written
notice of any payment it proposes to make under the Thai Guaranty."
10. This Amendment, including without limitation the covenant and
payment waivers contained herein, shall not be or become effective unless the
Agent receives each of the following items in form and substance acceptable to
the Agent on or before May 1, 2001:
(a) This Amendment, duly executed by the Agent, the Banks and
the Borrower, and duly acknowledged by the Guarantors;
(b) A certified copy of the resolutions of the Board of
Directors of the Borrower evidencing that the officers of the Borrower
have authority to enter into this Amendment and the transactions
contemplated by this Amendment (which resolutions may, at the option of
the Agent, be in the form of ratifying resolutions);
(c) An opinion of counsel to the Borrower and the Guarantors
in form and content acceptable to the Agent;
(d) Payment of all legal fees incurred by the Agent through
the date of this Amendment;
(e) An Escrow Agreement in form and substance satisfactory to
the Banks among the Borrower, the Banks, Innovex (Thailand) Limited,
The Industrial Finance Corporation of Thailand, Bank of Ayudhya Public
Company Limited, and Citibank, N.A., Bangkok Branch, as Escrow Agent,
duly executed by each of the parties thereto, pursuant to which
Citibank, N.A., Bangkok Branch will hold certificates evidencing the
capital stock of Innovex (Thailand) Limited.
(f) A Prioritization Agreement in form and substance
satisfactory to the Banks among the Borrower, the Banks, The Industrial
Finance Corporation of Thailand, and the Bank of Ayudhya Public Company
Limited, duly executed by each of the parties thereto, whereby the
parties agree as to the priority of certain payments.
(g) Payment of the Revolving Notes in an amount not less than
$5,700,000 and payment of the Term Notes in an amount not less than
$1,562,500.
11. Except as amended by this Amendment, all of the terms and
conditions of the Credit Agreement and the other Loan Documents shall remain in
all other respects in full force and effect.
12. This Amendment may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which counterparts taken
together shall constitute but one and the same instrument.
13. The Borrower and each Guarantor, by signing its respective
Acknowledgment and Agreement set forth below, each hereby absolutely and
unconditionally releases and forever discharges the Agent and each of the Banks,
and any and all participants, parent corporations, subsidiary corporations,
affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents and
employees of any of the foregoing (the "Released Parties"), from any and all
claims, demands or causes of action of any kind, nature or description, whether
arising in law or equity or upon contract or tort or under any state or federal
law or otherwise, which the Borrower or such Guarantor has had, now has or has
made claim to have against such Released Party for or by reason of any act,
omission, matter, cause or
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thing whatsoever arising from the beginning of time to and including the date of
this Amendment in connection with or related to the transactions evidenced by
the Loan Documents, whether such claims, demands and causes of action are mature
or unmatured or known or unknown.
14. Except as expressly set forth herein, the execution of this
Amendment shall not be deemed to be a waiver of any Event of Default under the
Credit Agreement, whether or not known to the Agent and/or the Banks and whether
or not existing on the date of this Amendment.
15. The Borrower hereby represents and warrants to the Agent and the
Banks as follows:
(a) The Borrower has all requisite power and authority to
execute this Amendment and to perform all of its obligations under the
Credit Agreement, as amended by this Amendment, and the Credit
Agreement, as amended by this Amendment, and the other Loan Documents
executed on behalf of the Borrower have been duly executed and
delivered by the Borrower and constitute the legal, valid and binding
obligations of the Borrower, enforceable in accordance with their
respective terms.
(b) The execution, delivery and performance by the Borrower of
the Credit Agreement, as amended by this Amendment, and the other Loan
Documents executed on behalf of the Borrower have been duly authorized
by all necessary corporate action and do not (i) require any
authorization, consent or approval by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) violate any provision of any law, rule or regulation or
of any order, writ, injunction or decree presently in effect, having
applicability to the Borrower, or the Articles of Incorporation or
By-laws of the Borrower, or (iii) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which the Borrower is a party or by
which it or its properties may be bound or affected.
(c) All of the representations and warranties contained in
Article IV of the Credit Agreement are correct on and as of the date
hereof as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier date.
16. References. All references in the Credit Agreement to "this
Agreement" shall be deemed to refer to the Credit Agreement as amended by this
Amendment; and any and all references in any of the other Loan Documents to the
"Credit Agreement" shall be deemed to refer to the Credit Agreement as amended
by this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized
as of the date first above written.
INNOVEX, INC.
By
Its
WELLSFARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, formerly known as Norwest
Bank Minnesota, National Association, as
Bank and as Agent
By
Its
U.S. BANK NATIONAL ASSOCIATION, as Bank
By
Its
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