1
EXHIBIT 10.17
FOURTH AMENDMENT
TO
THIRD AMENDED AND RESTATED CONSOLIDATED
REPLACEMENT CREDIT FACILITY AND SECURITY AGREEMENT
--------------------------------------------------
THIS FOURTH AMENDMENT TO THIRD AMENDED AND RESTATED
CONSOLIDATED REPLACEMENT CREDIT FACILITY AND SECURITY AGREEMENT (this
"Agreement") dated as of April 1, 2000, is entered into by and between
INTERNATIONAL TOTAL SERVICES, INC., an Ohio corporation ("Borrower"), and BANK
ONE, N.A., successor in interest by merger to BANK ONE, CLEVELAND, N.A., a
national banking association, as agent bank for itself and for THE PROVIDENT
BANK, an Ohio banking company (collectively, the "Lender").
WITNESSETH
----------
WHEREAS, the Borrower and the Lender are parties to that
certain Third Amended and Restated Consolidated Replacement Credit Facility and
Security Agreement dated as of March 31, 1997, as amended by that certain First
Amendment dated as of October 10, 1997, that certain Second Amendment dated as
of December 16, 1998 and that certain Third Amendment dated as of September 14,
1999 (the "Loan Agreement"; all terms defined in the Loan Agreement being used
herein shall have the same meanings), pursuant to which the Lender has agreed to
make a $25,000,000 Revolving Loan to the Borrower until March 31, 2000,
evidenced by a Second Amended and Restated Promissory Note dated September 14,
1999 and payable to the Lender, such Note being payable on March 31, 2000; and
WHEREAS, the Borrower and the Lender agreed to amend the Loan
Agreement (i) to extend the maturity date of the Revolving Loan to April 1,
2001; and, (ii) to modify certain definitions in Section 1 of the Loan
Agreement, to modify certain provisions of Section 2 of the Loan Agreement and
to modify certain covenants in Section 8 of the Loan Agreement.
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower and the Lender agree as follows:
AGREEMENT
---------
Section 1. AMENDMENT OF LOAN AGREEMENT.
Except as expressly modified herein, all terms, conditions,
definitions and provisions of the Third Amended and Restated Consolidated
Replacement Credit Facility and Security Agreement and the First, Second and
Third Amendment thereto, are in full force and effect.
1. The definitions of "Contract Rate" and "Notes" set forth in
Section 1 of the Agreement are, effective on the Effective Date (defined in
Section 2 below), hereby amended and restated to read in their entirety as
follows:
2
1. CONTRACT RATE - A fluctuating rate equal to
three-quarters of one percent (0.75%) above the Base Rate;
provided, however, that if on or before December 31, 2000, the
Borrower does not pay all Obligations to the Lender in full,
then, retroactive to the Effective Date, it shall be a
fluctuating rate equal to one and one-quarter percent (1.25%)
above the Base Rate (which differential shall be due and
payable to Lender on January 2, 2001), and from and after
January 1, 2001, it shall be a fluctuating rate equal to one
and one-half percent (1.50%) above the Base Rate.
2. NOTES - The Third Amended and Restated Replacement
Promissory Note (Revolving Loan) and any other promissory note
or other instrument evidencing Borrower's obligation to repay
any Obligations.
2. Subsections 2.3(A), (B) and (C) of the Loan Agreement are,
effective on the Effective Date, amended and restated to read in their entirety
as follows:
2.3 REVOLVING LOAN.
(1) REVOLVING LOAN. Subject at all times to
the terms hereof, the Lender will, from and after
April 1, 2000 and until April 1, 2001, make such
loans to the Borrower as from time to time the
Borrower requests (the "Revolving Loan") consisting
of advances made by Lender against the value of
Eligible Accounts-Domestic. Subject to the provisions
of Subsection (B) of this Section 2.3, the aggregate
unpaid principal of the Revolving Loan outstanding at
any one time shall not exceed the lesser of: (a) the
line of credit approved for Borrower, which is
currently Twenty-Five Million Dollars ($25,000,000),
less the face amount of all outstanding Letters of
Credit issued by Lender for the account of Borrower;
or, (b) eighty-five percent (85%) of the unpaid face
amount of Eligible Accounts-Domestic (or such other
percentages of Eligible Accounts-Domestic as may from
time to time be fixed by the Lender upon notice to
the Borrower), less the face amount of any
outstanding Letters of Credit.
For the purposes of this agreement, the Borrower may
include in its borrowing base certificate, as
Eligible Accounts - Domestic, the anticipated tax
refund for the year ending March 31, 2000, which is
estimated to be $2,400,000. Upon filing by the
Borrower, for the tax refund the Borrower shall use
in the Borrowing Base Certificate the actual amount
of the requested refund as determined or verified by
their independent auditors.
(2) PAYMENT. The Revolving Loan shall be due
and payable on April 1, 2001, and bear interest at
the Contract Rate and shall otherwise be evidenced
by, and repayable in accordance with, the Note, but,
in the absence of such revolving promissory note,
shall be evidenced by the Lender's record of
disbursements and repayments.
2
3
(3) The form of Borrower's Certificate
attached to the Loan Agreement as EXHIBIT A is,
effective on the Effective Date, hereby deleted, and
the form of Borrower's Base Certificate attached to
this Agreement as EXHIBIT C is hereby substituted
therefor.
Section 2. EFFECTIVE DATE OF THE AGREEMENT.
The effective date of this Agreement ("Effective Date") shall
be April 1, 2000 but Lender shall have no duty to fund until the date on which
all conditions precedent have been satisfied, or waived by the Lender in
writing.
Section 3. CONDITIONS PRECEDENT.
Borrower hereby acknowledges and agrees that the effectiveness
of this Agreement is conditioned upon the receipt by the Lender, on or prior to
the date hereof, in form and substance satisfactory to the Lender and its
counsel, of the following:
3. A certificate, dated as of the date hereof, signed by the
Chief Executive Officer of Borrower certifying that:
1. As of such date, no Event of Default has occurred
and is continuing, and no event has occurred and is continuing
that, with the giving of notice or passage of time, or both,
would be an Event of Default; and
2. The representations and warranties of Borrower set
forth in Section 7 of the Loan Agreement are true and correct
as of such date; and
3. Borrower is in compliance with all of the terms
and conditions set forth in the Loan Agreement on and as of
such date.
4. A certificate, dated as of the date hereof, signed by the
Secretary of Borrower certifying as follows:
1. Borrower's Articles of Incorporation and Code of
Regulations have not been modified or amended since June 17,
1997 (or certifying that true, correct and complete copies of
all such modifications and amendments are attached thereto);
and
2. Copies of resolutions of Borrower's Board of
Directors are attached thereto with respect to the approval of
this Agreement and of the matters contemplated hereby and
authorizing the execution, delivery and performance of this
Agreement and each other document, instrument, agreement or
note to be delivered pursuant hereto; and
3
4
3. As to the incumbency and signatures of the
officers of Borrower signing this Agreement and each other
document, instrument, agreement or note to be delivered
pursuant hereto.
5. The Third Amended and Restated Replacement Promissory Note
(Revolving Loan) in the form of EXHIBIT A attached hereto, with all blanks
completed, duly executed and delivered by Borrower to Lender.
6. An Acknowledgment, Consent and Agreement in the form of
EXHIBIT B attached hereto, with all blanks completed, duly executed and
delivered by the Guarantors to Lender as identified in Schedule 1 attached
hereto.
7. The written opinion of counsel for Borrower as to the
enforceability of this Agreement, the Loan Agreement, Note and each of the other
Credit Documents and covering such other issues thereunder as requested by
Lender and its counsel.
8. Such other documents, instruments, agreements and notes as
the Lender may reasonably request to implement this Agreement and the
transactions contemplated hereby and by the Loan Agreement.
Section 4. WARRANTS.
Contemporaneously with the execution of this Agreement, the
Borrower shall deliver to the Lender 300,000 warrants pursuant to the Common
Stock Warrant Agreement attached as EXHIBIT D (collectively, the "Warrants").
The grant and delivery of the Warrants to the Lender is a material inducement
for the Lender to enter into this Agreement.
Section 5. FACILITY FEE.
Contemporaneously with the execution of this Agreement,
Borrower shall pay to Lender a Facility Fee of $32,150.00.
Section 6. COVENANTS AND CONTINUING AGREEMENTS.
A. Subsections 8.1(O), 8.1(P), 8.1(Q), and 8.2(F) of the Loan
Agreement are, effective on the Effective Date, amended and restated to read in
their entirety as follows:
(O) Maintain a Tangible Net Worth equal to or greater
than (i), as of March 31, 2000, ($16,000,000), (ii),
as of June 30, 2000, ($17,500,000), (iii), as of
September 30, 2000, ($18,200,000), (iv), as of
December 31, 2000, ($17,100,000), and (v), as of
March 31, 2001, ($16,100,000). Such Tangible Net
Worth is to be calculated each quarter in accordance
with GAAP, based upon Borrower's quarterly financial
statements, and maintain Stockholder Equity equal to
or greater than (i) as of March 31, 2000,
$16,000,000, (ii) as of June 30, 2000, $14,500,000,
(iii) as of September 30, 2000, $13,800,000,
4
5
(iv) as of December 31, 2000, $14,900,000, and (v) as
of March 31, 2001, $15,900,000.
(P) Maintain Debt Coverage (as defined below) (i), as
of June 30, 2000, of not less than 3.0 to 1, (ii), as
of September 30, 2000, of not less than 3.0 to 1,
(iii), as of December 31, 2000, of not less than 3.5
to 1, and (iv) as of March 31, 2001 of not less than
4.0 to 1. Debt Coverage, as such term is used in this
Section 8.1(P), means the ratio, measured on
cumulative basis for fiscal year 2001 up to the date
of measurement, of Borrower's (a)(i) net income plus
(ii) depreciation and amortization, plus (iii) net
interest paid to Lender, plus (iv), the Borrower's
estimated tax refund for the year ending March 31,
2000, less (b) the sum of (i) any dividends paid to
Borrower's shareholders, plus (ii) purchases of
treasury stock, plus (iii) Capital Expenditures, to
the amount of all principal and interest payable to
Lender, calculated quarterly in accordance with GAAP
based upon Borrower's quarterly and fiscal year-end
financial statements.
(Q) The covenants set forth in paragraph 8.1(Q) are
hereby deleted.
B. Subsection 8.2(F) of the Loan Agreement is, effective on
the Effective Date, amended and restated to read in its entirety as follows:
(F) Become or be liable in respect of any Guaranty
except (i) by endorsement of instruments or items of
payment in the ordinary course of business for
deposit and collection, and (ii) the obligations on
Schedule 2 attached to the "Fourth Amendment to Third
Amended and Restated Consolidated Replacement Credit
Facility and Security Agreement" dated as of April 1,
2000, between Borrower and Lender.
Section 7. TRUST AGREEMENT.
Section 11.1(D) of the Loan Agreement is, effective on the
Effective Date, amended to add the following as the last sentence thereof:
For the purposes of this Section 11.1(D), the term
"Material Agreement" includes that certain Voting
Trust Agreement entered into between the Borrower,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇▇
▇▇▇▇▇, and ▇▇▇▇ ▇. ▇'▇▇▇▇▇.
Section 8. REFERENCES.
On and after the Effective Date of this Agreement, each
reference in the Loan Agreement to "this Agreement", "hereunder", "hereof", or
words of like import referring to the Loan Agreement, and in the Note to the
"Loan Agreement", "thereof", or words of like import referring to the Loan
Agreement, shall mean and refer to the Loan Agreement and shall be deemed to
refer to
5
6
the form of Borrowing Base Certificate attached hereto as EXHIBIT C. References
to EXHIBIT C-1 in the definition of "Revolving Note" in the Loan Agreement
shall be deemed to refer to the Note, a copy of which is attached hereto as
EXHIBIT A. The Loan Agreement, as previously amended and as amended by this
Agreement, and all Credit Documents are and shall continue to be in full force
and effect and are hereby and in all respects ratified and confirmed.
References to the Loan Agreement in the Note shall be deemed to include all
amendments to the Loan Agreement whether specified in the Note or not.
Section 9. APPLICABLE LAW.
This Agreement shall be deemed to be a contract under the laws
of the State of Ohio, and for all purposes shall be construed in accordance with
the laws of the State of Ohio.
Section 10. RELEASE.
The Borrower hereby represents and warrants to the Lender, and
agrees with the Lender, that it has no claim or offset against, or defense or
counterclaim to, any Obligation or Indebtedness to the Lender under the Loan
Agreement or other Credit Documents and, in consideration of this Agreement, the
Borrower hereby releases and discharges the Lender and its shareholders,
directors, officers, employees, attorneys, affiliates and subsidiaries from any
and all claims, demands, liability and causes of action whatsoever, now known or
unknown, existing on the Effective Date and arising prior to the date hereof and
arising out of or in any way related to Obligations, the Loan Agreement, this
Agreement, or any security interest related thereto or the administration of the
Revolving Loan or any other Indebtedness of Borrower, the Guarantors, or any
Affiliate to the Lender.
Section 11. COUNTERPARTS.
This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any one of the parties hereto may execute this Agreement by signing any such
counterpart.
IN WITNESS WHEREOF, the Borrower and the Lender have caused
this Agreement to be executed by their duly authorized officers as of the date
and year first above written.
BANK ONE, N.A. INTERNATIONAL TOTAL SERVICES, INC.
By: /s/ T. ▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: T. ▇▇▇▇▇▇ ▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: First Vice President, Managed Assets Title: Chief Executive Officer
6
7
SCHEDULE 1
----------
List of Guarantors
------------------
Domestic
--------
Crown Technical Systems, Inc. (Ohio)
T.I.S. Incorporated (Texas)
Certified Investigative Services, Inc. (Texas)
I.T.S. of New York, Inc. (New York)
Selective Detective Services, Inc. (New Jersey)
Foreign
-------
International Total Services, Ltd. (United Kingdom)
International Transport Security, s.r.o. (Czech Republic)
International Transport Services, Ltd. (Thailand)
7
8
SCHEDULE 2
----------
Guarantied Debt
---------------
Frankfurter Sparkasse 444,700 DM
Dated: 7/7/99
8
9
EXHIBIT A
Form of Third Amended and Restated Replacement Promissory Note (Revolving Loan)
-------------------------------------------------------------------------------
[SEE ATTACHED]
9
10
THIRD AMENDED AND RESTATED
REPLACEMENT PROMISSORY NOTE
(Revolving Loan)
$25,000,000 Cleveland, Ohio
April 1, 2000
FOR VALUE RECEIVED, INTERNATIONAL TOTAL SERVICES, INC., a
corporation organized under the laws of the State of Ohio (hereinafter referred
to as the "Company"), promises to pay to the order of BANK ONE, N.A., successor
by merger to BANK ONE, CLEVELAND, N.A. (hereinafter referred to as the "Bank"),
the principal amount of Twenty-Five Million Dollars ($25,000,000), or such
lesser amount as shall have from time to time been borrowed by the Company, on
April 1, 2001, or sooner as hereinafter provided, with interest on the unpaid
balance of said principal amount from the date hereof at the Contract Rate, as
defined in the Agreement hereinafter referred to, which definition is hereby
accepted by the Company, as the same may from time to time be established.
The Company agrees to pay interest on the unpaid principal
amount outstanding of this Note in monthly installments, commencing on the 1st
day of May, 2000 and continuing on the 1st day of each month thereafter. The
unpaid balance of the principal amount outstanding and all accrued interest
thereon shall be due and payable on April 1, 2001.
Payments of both principal of and interest on this Note shall
be made in lawful money of the United States of America, at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, or at such other place as the Bank or any subsequent
holder hereof shall have designated to the Company in writing. Interest payable
on this Note shall be computed on a three hundred sixty (360) day per year basis
counting the actual number of days elapsed.
This Note, in part, evidences, but does not extinguish or
satisfy, a pre-existing indebtedness of the Company to the Bank heretofore
evidenced by a $25,000,000 Second Amended and Restated Replacement Promissory
Note, a $30,000,000 Amended and Restated Replacement Promissory Note (Revolving
Loan) dated October 10, 1997 to the Bank, which note was issued in substitution
for that certain $10,500,000 Replacement Promissory Note (Revolving Loan) dated
March 31, 1997 to the Bank and is issued pursuant to and is entitled to the
benefits of a Third Amended and Restated Consolidated Replacement Credit
Facility and Security Agreement dated as of March 31, 1997, as amended by that
certain First Amendment to Third Amended and Restated Consolidated Replacement
Credit Facility and Security Agreement dated as of October 10, 1997, that
certain Second Amendment to Third Amended and Restated Consolidated Replacement
Credit Facility and Security Agreement dated as of December 16, 1998 and that
certain Third Amendment to Third Amended and Restated Consolidated Replacement
Credit Facility and Security Agreement dated September 1999, and a Fourth
Amendment to Third Amended and Restated Consolidated Replacement Credit Facility
and Security Agreement of even date herewith, each by and between the Company
and the Bank (collectively, the "Agreement"), to which Agreement reference is
hereby
11
made for a statement of the rights and obligations of the Bank and the duties
and obligations of the Company in relation thereto; but neither this reference
to the Agreement nor any provisions thereof shall affect or impair the absolute
and unconditional obligation of the Company to pay the principal of or interest
on this Note when due.
The Company may prepay all or any portion of this Note at any
time or times and in any amount only as provided in the Agreement.
In case an Event of Default, as defined in the Agreement,
shall occur and be continuing beyond any applicable grace period, the principal
of this Note may be declared immediately due and payable at the option of the
Bank.
No delay on the part of any holder hereof in exercising any
power or rights hereunder shall operate as a waiver of any power or rights. Any
demand or notice hereunder to the Company may be made by delivering the same to
the address last known to the Bank, or by mailing the same to such address, with
the same effect as if delivered to the Company in person.
The Company hereby authorizes any attorney-at-law to appear in
any court of record in the State of Ohio, or in any other state or territory of
the United States, at any time or times after the above sum becomes due, and
waive the issuance and service of process and confess judgment against it, in
favor of any holder of this Note, for the amount then appearing due, together
with the costs of suit, and thereupon to release all errors and waive all rights
of appeal and stay of execution. The foregoing warrant of attorney shall survive
any judgment, it being understood that should any judgment be vacated for any
reason, the foregoing warrant of attorney nevertheless may thereafter be used
for obtaining an additional judgment or judgments.
"WARNING. BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO
NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN
AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED
TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR
WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT OR ANY OTHER CAUSE."
This Note is executed at Cleveland, Cuyahoga County, Ohio.
INTERNATIONAL TOTAL SERVICES, INC.
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Chief Executive Officer
12
EXHIBIT B
Acknowledgment, Consent and Agreement
-------------------------------------
[SEE ATTACHED]
12
13
ACKNOWLEDGMENT, CONSENT AND AGREEMENT
-------------------------------------
The undersigned each hereby acknowledges receipt of a copy of
the Fourth Amendment to Third Amended and Restated Consolidated Replacement
Credit Facility and Security Agreement dated as of April 1, 2000, by and between
International Total Services, Inc. ("Borrower") and Bank One, N.A., successor by
merger to Bank One, Cleveland, N.A. ("Bank One") and by executing this
Acknowledgment, Consent and Agreement the undersigned each hereby agrees to
remain bound by the terms and conditions of its respective Amended and Restated
Replacement Guaranty Agreement, Guaranty Agreement, Amended and Restated
Replacement Guarantor Security Agreement and Guarantor Security Agreement, as
applicable, each dated as of August 11, 1995, executed and delivered to Bank One
in connection with the Second Amended and Restated Replacement Credit Agreement
dated as of August 11, 1995, as subsequently amended, and each other document
hereafter executed in connection herewith or therewith by the undersigned.
Dated: April 1, 2000 CROWN TECHNICAL SYSTEMS, INC.
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman of the Board
T.I.S. INCORPORATED
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
13
14
EXHIBIT C
Borrowing Base Certificate
--------------------------
[SEE ATTACHED]
14
15
BORROWING BASE CERTIFICATE
--------------------------
At the close of business on 0/00/00 Report # 479
------------------------------------
Date 0/00
Collateral Status Computation
----------------- of Collateral
-------------
1. Balance (Domestic A/R) $0
2. Less: Ineligible Collateral (Domestic) $0
--
3. Eligible Collateral $0
4. Advance % rate 85%
TOTAL AVAILABILITY 0%
------------------ ==
5. Available - Not To Exceed $25,000,000 $0
6. Less Reserves (Letters to Credit) # $0
7. NET AVAILABLE TO BORROW $0
==
LOAN STATUS
-----------
8. Previous Loan Balance $0
9. Less: Collections $0
10. Add: Request for Funds $0
Wire Transfers $0
Other (interest, fees, etc.) $0
--
11. New Loan Balance $0
--
12. Excess Available (Line 7-11) $0
==
Borrower represents and warrants to Bank One, N.A. that all of the information
presented above and accompanying this Certificate is true, complete and correct
in every aspect as of the date hereof and has been computed in compliance with
the terms of the Fourth Amendment to Third Amended and Restated Consolidated
Replacement Credit Facility and Security Agreement dated 4/1/00, as amended,
between Bank One, N.A., and International Total Services, Inc. (the "Credit
Agreement"). In the event of any conflict between the terms of this Certificate
and the Credit Agreement, the terms of the Credit Agreement shall control.
Borrower further represents and warrants that as of the date hereof, after
giving effect to any loan or advance requested by Borrower contemporaneously
herewith, except as may have been otherwise expressly disclosed in writing by
Borrower to and received by Bank One N.A., that; (I) no Event of Default under
the terms of the Credit Facility, and no event which, but for a requirement of
giving notice or passage of time, or both, would constitute such an Event of
Default, has occurred or is continuing; (ii) each representation and warranty
contained in the Credit Agreement and related documents are true and correct;
(iii) there has been no material adverse change in Borrower's financial
position, operations or assets since the date of the latest financial statements
of Borrower delivered to Bank One, N.A.; (iv) to the extent that any loan or
advance requested contemporaneously herewith, or that is otherwise based upon
this certificate, will be used, in whole or in part, for the payment of wages,
Borrower has paid or deposited or is able to pay and intends to and shall make
timely payment or deposit of all taxes required to be deducted and withheld from
said wages; (v) all said wages incurred in the production of any inventory
included in this Certificate have been paid or will be timely paid. Borrower
acknowledges that Bank One is entitled to rely on this Certificate in making
loans and advances to Borrower.
---------------------------------------- ------------------------------------- -------------------------------------
Borrower Name: Authorized Signature: Title:
International Total Services, Inc. EVP
---------------------------------------- ------------------------------------- -------------------------------------
Prepared By: Cash Mgmt. Dir.
------------------------------------- -------------------------------------
#Includes the reserve for Delta G-Max accounts and the FAA Fine Accrual.
15
