Exhibit 10.17
Execution Copy
THIRD AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT ("Third
Amendment") is made as of this 13th day of April, 2005, by and among FLEET
CAPITAL CORPORATION ("Fleet"), a Rhode Island corporation with an office at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, individually as a
Lender and as Agent ("Agent") for itself and any other financial institution
which is or becomes a party hereto (each such financial institution, including
Fleet, is referred to hereinafter individually as a "Lender" and collectively as
the "Lenders"), the CANADIAN PARTICIPANTS party hereto, the U.K. PARTICIPANTS
party hereto, FLEET CAPITAL GLOBAL FINANCE, INC., individually as a Lender and
as Canadian Agent ("Canadian Agent"), BANK OF AMERICA, N.A., London branch (as
successor-in-interest to Fleet National Bank, London branch, trading as
FleetBoston Financial), individually as a Lender and as U.K. Agent ("U.K.
Agent"), ▇▇▇▇▇ FARGO FOOTHILL, LLC, as Syndication Agent, LASALLE BANK NATIONAL
ASSOCIATION, as Documentation Agent, the LENDERS, KATY INDUSTRIES, INC., a
Delaware corporation, with its chief executive office and principal place of
business at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Katy" or "U.S. Borrower"), ▇▇▇▇▇ INDUSTRIES (CANADA) INC., a Canadian
corporation with its chief executive office and principal place of business at
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ("▇▇▇▇▇ Canada" or "Canadian
Borrower") and CEH LIMITED ("CEH" or "U.K. Borrower"), a private limited company
incorporated under the laws of England and Wales and registered with Company No.
4992300 whose registered office is ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇. Katy, ▇▇▇▇▇ Canada and CEH are sometimes hereinafter referred to
individually as a "Borrower" and collectively as "Borrowers."
W I T N E S S E T H:
WHEREAS, Agent, Lenders, Canadian Participants, U.K. Participants,
Canadian Agent, U.K. Agent and Borrowers entered into a certain Amended and
Restated Loan Agreement dated as of April 20, 2004 as amended by a certain First
Amendment to Amended and Restated Loan Agreement dated June 29, 2004 by and
among Agents, Lenders and Borrowers and by a certain Second Amendment to Amended
and Restated Loan Agreement dated March 29, 2005 by and among Agents, Lenders
and Borrowers (said Loan Agreement, as so amended, is hereinafter referred to as
the "Loan Agreement"); and
WHEREAS, Borrowers desire to amend and modify certain provisions of the
Loan Agreement pursuant to the terms and conditions hereof;
WHEREAS, subject to the terms and conditions hereof, Agent, Lenders,
Canadian Participants, U.K. Participants, U.K. Agent and Canadian Agent are
willing to so amend and modify the Loan Agreement; and
NOW THEREFORE, in consideration of the premises, the mutual covenants and
agreements herein contained, and any extension of credit heretofore, now or
hereafter made by Agent and Lenders to Borrowers, the parties hereto hereby
agree as follows:
1. Definitions. All capitalized terms used herein without definition shall
have the meanings given to them in the Loan Agreement.
2. Additional and Amended Definitions. The definitions of "Availability
Block" and "Third Amendment Effective Date" are hereby inserted into
Appendix A to the Loan Agreement. The definition of "U.S. Borrowing Base"
is hereby deleted and the following is inserted in its stead.
"Availability Block - $5,000,000 from the Third Amendment Effective
Date until September 29, 2005, $7,500,000 from September 30, 2005 until
the date on which Borrowers have delivered to Agent the financial
statements for the period ending March 31, 2006 and $0 thereafter.
* * *
Third Amendment Effective Date - as defined in Section 8 of the
Third Amendment.
* * *
U.S. Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
(i) the U.S. Revolving Loan Commitment minus the Availability Block,
or
(ii) an amount equal to the sum of:
(a) 85% of the net amount of Eligible Accounts of U.S. Loan
Parties (as defined below) outstanding at such date; plus
(b) the lesser of (1) $60,000,000 or (2) 65% of the value of
Eligible Inventory of U.S. Loan Parties at such date; plus
(c) if, on such date, no Eligible Account or Eligible
Inventory of U.K. Loan Parties are included in the U.K. Borrowing
Base as evidenced by a Borrowing Base Certificate, 85% of the net
amount of Eligible Accounts of U.K. Loan Parties outstanding at such
date; plus
(d) if, on such date, no Eligible Accounts or Eligible
Inventory of U.K. Loan Parties are included in the U.K. Borrowing
Base as evidenced by a Borrowing Base Certificate, the lesser of (1)
$6,000,000 or (2) 65% of the Value of Eligible Inventory of U.K.
Loan Parties at such date, minus (subtract from the sum of (a), (b),
(c) and (d) above);
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(e) the sum of (1) the Hedge Reserve applicable to U.S. Loan
Parties, (2) Dilution Reserves applicable to U.S. Loan Parties, (3)
Rent Reserves applicable to U.S. Loan Parties, (4) the Revolving
Loan Repayment Reserve applicable to U.S. Loan Parties, (5) the PAYE
Reserve (to the extent Eligible Accounts and Eligible Inventory of
U.K. Loan Parties are included in the U.S. Borrowing Base), (6) the
aggregate amount of other reserves applicable to U.S. Loan Parties,
if any, established by Agent in the exercise of its Permitted
Discretion against Eligible Accounts and Eligible Inventory and (7)
the Availability Block.
provided that Agent, in the exercise of its Permitted Discretion, may (a)
increase or decrease reserves against Eligible Accounts Receivable and
Eligible Inventory and (b) reduce the advance rates provided in this
definition, or restore such advance rates to any level equal to or below
the advance rates in effect as of the Closing Date.
For purposes hereof, (1) the net amount of Eligible Accounts at any
time shall be the face amount of such Eligible Accounts, less any and all
returns, rebates, discounts (which may, at Agent's option, be calculated
on shortest terms), credits allowance or excise taxes of any nature at any
time issued, owing, claimed by Account Debtors, granted, outstanding or
payable in connection with such accounts at such time and (2) the amount
of Eligible Inventory shall be determined on a first-in, first-out, lower
of cost or market basis in accordance with GAAP, with costs adjusted for
differences between standard and actual costs."
* * *
3. Availability Block. Any amendment or modification to the definition of
U.S. Borrowing Base that has the effect of deleting, changing or modifying
the manner in which the Availability Block is used in determining the U.S.
Borrowing Base or amends or modifies the definition of Availability Block
shall require the consent of Borrowers, all Lenders and Agent.
4. Capital Expenditure. Subsection 7.2.8 of the Loan Agreement is hereby
deleted and the following is inserted in its stead:
"7.2.8 Capital Expenditures.
(a) Make Non-Restructuring Capital Expenditures (including,
without limitation, by way of capitalized leases but excluding (x)
Capital Expenditures funded from insurance, condemnation or sale
proceeds of Equipment and real Property and (y) Capital Expenditures
made in connection with the purchase of the ▇▇▇▇▇ Facility (to the
extent such Capital Expenditures are no more than $500,000 greater
than the net proceeds received from the ▇▇▇▇▇ Sale and Leaseback))
which, in the aggregate, as to Borrowers and all of their
Subsidiaries, exceed $10,000,000 during the fiscal year ending
December 31, 2005 or $15,000,000 during any other fiscal year of
Katy, except that up to $3,000,000 of
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the unused portion of the Non-Restructuring Capital Expenditure
allowance for any fiscal year may be carried over to the immediately
succeeding fiscal year only (excluding, however, the fiscal year
ending December 31, 2005), to be used in such succeeding fiscal year
after all of the Capital Expenditure allowance for that year has
been used.
(b) Make Restructuring Capital Expenditures (including,
without limitation, by way of capitalized leases but excluding
Capital Expenditures funded from insurance, condemnation or sale
proceeds of Equipment and real Property), which in the aggregate, as
to Borrowers and all of their Subsidiaries exceed $2,000,000 in the
fiscal year ending December 31, 2004, or $0 in any subsequent fiscal
year, except that up to $500,000 of the unused portion of the
Restructuring Capital Expenditures allowance for any fiscal year may
be carried over to the immediately succeeding fiscal year only to be
used in such succeeding fiscal year after all the Restructuring
Capital Expenditure allowance for that year has been used."
5. Financial Covenants. Upon the Third Amendment Effective Date, Exhibit 7.3
attached to the Loan Agreement shall be deemed deleted and Exhibit 7.3
attached hereto and incorporated herein shall be inserted in its stead.
6. Interest Rates. From the Third Amendment Effective Date until the date on
which Borrowers deliver to Agent the financial statements for the period
ending March 31, 2006 in compliance with subsection 7.1.3(ii), the
Applicable Margin shall equal the following:
(a) U.K. and Canadian Loans. With respect to Revolving Credit Loans to
U.K. Borrower in Sterling and Euros, to Revolving Credit Loans to
Canadian Borrower in Canadian Dollars and the issuance of Canadian
Letters of Credit or Canadian LC Guaranties or U.K. Letters of
Credit or U.K. LC Guaranties, the percentages set forth below with
respect to the Base Rate Revolving Portion, Canadian Prime Loans,
the LIBOR Revolving Portion, Canadian BA Rate Loans and the Letter
of Credit and LC Guaranty Fees:
Base Rate Revolving Portion or 2.75%
Canadian Prime Loans
LIBOR Revolving Portion or Canadian 2.75%
BA Rate Loans
LC Fee 2.50%
(b) U.S. Loans. With respect to Revolving Credit Loans to U.S. Borrower
in Dollars, the Term Loan, U.S. Letters of Credit, U.S. LC
Guaranties and the Unused Line Fee, the percentages set forth below
with respect to the Base Rate Revolving Portion, the Base Rate Term
Portion, the LIBOR Revolving Portion, the LIBOR
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Term Portion, the Letter of Credit and LC Guaranty Fees and the
Unused Line Fee:
Base Rate Revolving Portion 1.00%
Base Rate Term Portion 1.25%
LIBOR Revolving Portion 2.75%
LIBOR Term Portion 3.00%
LC Fee 2.50%
Unused Line Fee 0.50%
Upon the delivery to Agent of the financial statements for the
period ending March 31, 2006 in compliance with subsection 7.1.3(ii)
of the Loan Agreement, the Applicable Margin shall be determined as
provided in the definition of such term contained in Appendix A of
the Loan Agreement.
7. 2004 Annual Audited Financial Statements. Agent and Lenders waive any
Event of Default arising from the failure of Borrowers to deliver Katy's
annual unaudited financial statements for the fiscal year ending December
31, 2004 by March 31, 2005 as required by subsection 7.1.3(i) of the Loan
Agreement. Borrowers covenant to deliver to Agent and each Lender such
annual audited financial statements on or prior to April 15, 2005.
8. Condition Precedent. This Third Amendment shall become effective when
Borrowers, Agents and all Lenders shall have executed and delivered to
each other this Third Amendment. The date on which each of the foregoing
conditions precedent is satisfied shall be referred to as the "Third
Amendment Effective Date."
9. Continuing Effect. Except as otherwise specifically set out herein, the
provisions of the Loan Agreement shall remain in full force and effect.
10. Governing Law. This Third Amendment and the obligations arising hereunder
shall be governed by, and construed and enforced in accordance with, the
laws of the State of Illinois applicable to contracts made and performed
in such state, without regard to the principles thereof regarding
conflicts of laws.
11. Counterparts. This Third Amendment may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
(Signature Page Follows)
5
(Signature Page to Third Amendment to Loan Agreement)
IN WITNESS WHEREOF, this Third Amendment has been duly executed on the day
and year specified at the beginning of this Third Amendment.
KATY INDUSTRIES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President and CFO
CEH LIMITED
By: /s/ C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Title: Director
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and
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------
Title: Director
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▇▇▇▇▇ INDUSTRIES (CANADA) INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Secretary
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FLEET CAPITAL CORPORATION,
as Agent and as a Lender
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
------------------------
Title: VP
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▇▇▇▇▇ FARGO FOOTHILL LLC,
as Syndication Agent and Lender
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------
Title: Vice President
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LASALLE BANK NATIONAL ASSOCIATION,
as Documentation Agent and as a Lender
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
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Title: First Vice President
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UPS CAPITAL CORPORATION, as a Lender
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Title: Director of Portfolio Management
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BANK OF AMERICA, N.A., London branch,
as U.K. Agent and U.K. Lender
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Title: VP
-----------------------------------
FLEET CAPITAL GLOBAL FINANCE, INC.,
as Canadian Agent and Canadian Lender
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Title: Vice President
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Accepted and Agreed to this 13th day of April, 2005.
GUARANTORS:
KKTY HOLDING COMPANY, L.L.C.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Title: Authorized Manager
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AMERICAN GAGE & MACHINE CO.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Secretary
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CONTINENTAL COMMERCIAL PRODUCTS, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Secretary
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PTR MACHINE CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
Title: Secretary
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SAVANNAH ENERGY SYSTEMS COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Secretary
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▇▇▇▇▇ INDUSTRIES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Secretary
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EXHIBIT 7.3
FINANCIAL COVENANTS
DEFINITIONS
Consolidated EBITDA - for any period, the sum, without duplication,
of the amounts for such period of (i) Consolidated Net Income, (ii) interest
expense, (iii) provisions for taxes based on income, (iv) total depreciation
expense, (v) total amortization expense, (vi) all unusual expenses and all other
non-capitalized restructuring expenses (including costs and expenses
attributable to employee severance obligations and facility consolidation costs)
for such period to the extent not disallowed by Agent in its sole discretion,
(vii) any payment of or accrual for the Management Fee under the Management
Agreement, (viii) all other payments made to K&C and its Affiliates during such
period for expenses incurred on behalf of Parent, Katy or any of their
respective Subsidiaries pursuant to Kohlberg Agreements, (ix) any non-cash
expense incurred with respect to Katy's stock appreciation rights plan ("SAR")
and (x) any non-cash expense with respect to changes in market value of any
options to purchase Katy's Common Stock and (xi) other non-cash items (other
than any such non-cash item to the extent that it represents an accrual of or
reserve for cash expenditures in any future period), but only, in the case of
clauses (ii)-(xi), to the extent deducted in the calculation of Consolidated Net
Income less other non-cash items added in the calculation of Consolidated Net
Income (other than any such non-cash item to the extent that it will result in
the receipt of cash payments in any future period), all of the foregoing as
determined on a consolidated basis for Katy and its Subsidiaries in conformity
with GAAP; provided that there shall be subtracted from the sum of items (i)
through (xi) above the amount of any cash expenditure made within the applicable
period pursuant to the SAR, to the extent that the amount of such cash
expenditure was expensed or will be expensed against a prior or future period's
Consolidated Net Income; provided, further, that (a) in the event any Loan Party
makes an acquisition of any Person or any division or any business unit
permitted hereunder or consented to by Majority Lenders during such period, if
Katy provides Agent and Lenders financial statements with respect to the
business so acquired (which financial statements shall have been audited by one
of the "Big 4" accounting firms or another nationally recognized accounting firm
reasonably satisfactory to Agent or financial statements otherwise satisfactory
to Agent) reasonably satisfactory to Majority Lenders, Consolidated EBITDA for
such period shall be calculated on a pro forma basis, taking into account the
elimination of non-recurring expenses, based on the results of such acquired
Person or acquired assets as if such acquisition had occurred on the first day
of such period, and (b) in the event any Loan Party makes a Permitted
Disposition (or any other disposition of any Person or any division or any
business unit permitted hereunder or consented to by the Majority Lenders)
during such period, Consolidated EBITDA for such period shall be calculated on a
pro forma basis, based on the results of such disposed Person or disposed assets
as if such Permitted Disposition (or such other disposition) had occurred on the
first day of such period.
Consolidated Fixed Charges, with respect to any period, the sum of:
(i) scheduled principal payments required to be made during such period in
respect to Indebtedness for Money Borrowed (including the principal portion of
Capitalized Lease Obligations), plus (ii) Consolidated Interest Expense payable
in cash for such period, all as determined for Borrowers and their Subsidiaries
on a Consolidated basis and in accordance with GAAP.
Exhibit 7.3 - Page 1
Consolidated Interest Expense - for any period, total interest
expense of Katy and its Subsidiaries on a consolidated basis with respect to all
outstanding Indebtedness of Katy and its Subsidiaries, including, without
limitation, net costs under Interest Rate Agreements, but excluding, however,
(i) any amounts referred to in the Fee Letter or amortization thereof, (ii) any
deferred financing fees or amortization thereof, (iii) commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, (iv) unused line charges, (v) non-cash charges included in
interest expense other than in clauses (i) and (ii) and (vi) to the extent
included in interest expense, costs associated with the unsuccessful second lien
financing abandoned prior to the Closing Date.
Consolidated Net Income, for any period, the net income (or loss) of
Katy on a Consolidated basis for such period taken as a single accounting period
determined in conformity with GAAP; provided that there shall be excluded (i)
the income (or loss) of any Person (other than a Subsidiary of Katy) in which
any other Person (other than Katy or any of its Subsidiaries) has a joint
interest, except to the extent of the amount of dividends or other distributions
actually paid to Katy or any of its Subsidiaries by such Person during such
period, (ii) the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary of Katy or is merged into or consolidated with Katy or any
of its Subsidiaries or that Person's assets are acquired by Katy or any of its
Subsidiaries, (iii) the income of any Subsidiary of Katy to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary, (iv) any after-tax gains
or losses attributable to Asset Sales or returned surplus assets of any Pension
Plan, (v) any LIFO reserves of CCP to the extent such LIFO reserves decrease or
increase net income of CCP, and (vii) (to the extent not included in clauses (i)
through (v) above) any net extraordinary gains or net extraordinary losses.
Fixed Charge Coverage Ratio, with respect to any period, the ratio
of (i) Consolidated EBITDA for such period minus the sum of (a) any income taxes
paid in cash during such period and restructuring payments made in cash after
the Closing Date during such period plus (b) non-financed Capital Expenditures
during such period, to (ii) Consolidated Fixed Charges for such period, all as
determined for Borrowers and their Subsidiaries on a Consolidated basis and in
accordance with GAAP.
A. Fixed Charge Coverage Ratio. Katy shall not permit the Fixed
Charge Coverage Ratio for any period set forth below to be less than the ratio
set forth below opposite such period:
Period Ratio
------ -----
Four Fiscal Quarters Ending March 31, 2006 1.10 to 1
and each June 30, September 30, December 31
and March 31 thereafter
Exhibit 7.3 - Page 2
The foregoing notwithstanding, Agent, Borrowers and Lenders agree that
this financial covenant (Fixed Charge Coverage Ratio) shall not be measured
until Borrowers have delivered to Agent financial statements for the period
ending March 31, 2006 in compliance with subsection 7.1.3(ii) of the Loan
Agreement.
Exhibit 7.3 - Page 3
