to 2007 is primarily due to the change in the tax effect of recurring permanent tax differences and FIN 48 reserves, the tax effect of a new permanent tax difference related to the issuance of preferred stock, and the tax effect of certain state taxes.
At September 30, 2007, we had cash of approximately $0.4 million and working capital of $32.3 million compared to cash of $0.1 million and working capital of $30.9 million at December 31, 2006. The decrease in working capital of $1.4 million was primarily due to the increase in our accounts receivable, other current assets and cash offset by decreases in current deferred income taxes and increase in accounts payable, accrued and other liabilities.
Net cash provided by operating activities was $55,000 for the nine months ended September 30, 2007, compared to net cash provided by operating activities of $2.4 million for the nine months ended September 24, 2006. Cash flows from operating activities decreased $2.4 million primarily due to an increase in our net loss, and a larger increase in other assets offset by a smaller increase in accounts receivable, a smaller increase in accounts payable, accrued and other liabilities and increases in certain non-cash expenses such as provision for deferred taxes and amortization of deferred financing during the nine months ended September 30, 2007 as compared to the nine months ended September 24, 2006.
Net cash used in investing activities was $3.3 million for the nine months ended September 30, 2007, compared to net cash used in investing activities of $1.0 million for the nine months ended September 24, 2006. Cash flows used in investing activities increased $2.3 million primarily due to increases in restricted cash as a result of a letter of credit obtained under the terms of the Monroe Term Loan (see below for discussion) and capital spending.
Net cash provided by financing activities was $3.6 million for the nine months ended September 30, 2007, compared to net cash used in financing activities of $0.4 million for the nine months ended September 24, 2006. Cash flows used in investing activities increased $4.0 million primarily due to net payments to our revolving credit facility and repayment of long-term debt offset by our financing of the Monroe Term Loan for $23.0 million (see below for discussion).
During the period ended September 30, 2007, General Electric Capital Corporation (“GECC”), provided Butler with a revolving credit facility for loans up to $47.0 million, including $9.0 million for letters of credit, Term Loan A for $20 million, and Term Loan B for $18 million. During such period, the sum of the aggregate amount of loans outstanding under the revolving credit facility plus the aggregate amount available for letters of credit may not exceed the lesser of (i) $47 million or (ii) an amount equal to 85% of eligible receivables plus 75% of eligible pending billed receivables. Please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, for a detailed discussion of such debt arrangements with GECC. The current interest rate with respect to revolving credit advances is the 30-day Commercial Paper Rate plus three hundred basis points. The interest rate on the term loan is based on the 30-day Commercial Paper Rate plus three hundred fifty basis points.
At September 30, 2007, Butler had $30.9 million of variable interest rate revolving credit facility loans plus $3.8 million of letters of credit under its revolving credit facility with GECC, leaving approximately $12.3 million of availability. The related interest rate in effect at September 30, 2007 was 8.26%.
On August 29, 2007, Butler obtained a $23.0 million term loan (the “Monroe Term Loan”) from Monroe Capital Management Advisors LLC (“Monroe”). The proceeds of the Monroe Term Loan were used to pay off the existing term loan with GECC, to pay off a portion of the existing revolving credit facility with GECC (the “Senior Revolving Loan”), to provide cash collateral for an existing letter of credit, and to provide additional working capital for Butler and its subsidiaries.
Under the Monroe Term Loan, $2.0 million of the proceeds were utilized to cash collateralize the facility mortgage letter of credit. The $2.0 million deposit is classified as restricted cash on the balance sheet. The letter of credit lapsed and the mortgage was satisfied upon the sale of the Company’s Montvale, New Jersey real property in March 2008.
In August 2007, the Company repaid one variable interest rate term loans (Term Loan B) with GECC with an outstanding balance of $14.0 million with an effective interest rate of 8.76% with the funding of a $23.0 million Monroe Term Loan.
The Monroe Term Loan matures on the earlier of August 29, 2012 or at such time as the Series A 7% Mandatorily Redeemable Preferred Stock become redeemable or the GECC Senior Revolving Loan becomes due. The Series A 7% Mandatorily Redeemable Preferred Stock is redeemable July 11, 2011. The Monroe Term Loan is subject to the lien of Butler’s secured lender, GECC, with whom Butler has also reached an agreement to extend the maturity date of its Senior Revolving Loan of $47 million to August 1, 2009.
There are certain events that can require the Company to prepay a portion of the outstanding Monroe Term Loan. Prior to July 1, 2008, the Monroe Term Loan bore interest at the per annum rate of LIBOR plus 4.25% to 6.0%. The interest rate may also be adjusted depending upon the syndication of the Monroe Term Loan. No warrants were issued in connection with the Monroe Term Loan.
Related to our current financing arrangement (as amended) with GECC, we entered into several subsequent amendments with GECC whereby GECC agreed to further forbear from the exercise of such rights and remedies through various extension dates. As a result of our failure to timely file our financial statements with the Securities and Exchange Commission and as a result of our recent financial performance, we were in violation of certain terms and covenants contained in our debt agreement with GECC. We have received several waivers of these covenants and have negotiated several amendments to the agreements with GECC for extensions of time to meet the covenants.
On April 30, 2007, Butler entered into a Sixteenth Amendment and Limited Waiver to Credit Agreement with GECC, whereby GECC waived defaults and events of defaults arising from the company’s failure to deliver financial statements, certifications, statements and other reporting requirements as agreed.
On July 3, 2007, effective June 30, 2007, Butler entered into an amendment with GECC, whereby GECC agreed to forbear from the exercise of any of their rights and remedies available under the Credit Agreement and the Loan Documents through July 31, 2007, as a result of Butler’s failure (i) to deliver to GECC certain of our financial information from fiscal years 2004, 2005 and 2006; (ii) to deliver to GECC a fully executed commitment letter for a $60 million revolving credit facility by April 30, 2007; and (iii) to repay GECC all principal, interest and other amounts due on the Loans prior to June 30, 2007.
Effective July 31, 2007, Butler entered into an amendment with GECC, whereby GECC agreed to extend the forbearance period to August 14, 2007.
On November 6, 2007, Butler entered into a Consent and Waiver to Third Amended and Restated Credit Agreement with GECC effective October 31, 2007, whereby GECC waived defaults and events of defaults arising from Butler’s failure to deliver 2006-year end financial information. Also, on November 6, 2007 Butler entered into a Consent and Waiver to Second Lien Credit Agreement with Monroe effective October 31, 2007 whereby Monroe waived defaults and events of default arising from Butler’s failure to deliver 2006-year end financial information. Both consents provide that defaults will be reinstated if 2006 year-end financial information is not provided by November 30, 2007.
On December 7, 2007, Butler entered into a Consent and Waiver to Third Amended and Restated Credit Agreement with GECC effective December 1, 2007, whereby GECC waived defaults and events of defaults arising from Butler’s failure to deliver 2006-year end financial information. Also, on December 10, 2007 Butler entered into a Consent and Waiver to Second Lien Credit Agreement with Monroe effective December 1, 2007 whereby Monroe waived defaults and events of default arising from Butler’s failure to deliver 2006-year end financial information. Both consents provide that defaults will be reinstated if 2006 year-end financial information is not provided by December 31, 2007. Butler was subject to a $25,000 per month penalty if the 2006-year end financial information was not provided by December 31, 2007. Butler’s Annual Report on Form 10-K for the year ended December 31, 2006 was filed with the SEC on January 18, 2008.
On January 11, 2008, Butler entered into a letter agreement with GECC dated as of January 9, 2008, whereby GECC agreed to forbear from the exercise of any of their rights and remedies available under the Senior Revolving Loan through February 1, 2008, as a result of Butler’s failure to deliver to GECC certain of our financial information from fiscal year 2006.
On January 16, 2008, Butler entered into a letter agreement with Monroe dated as of January 15, 2008, whereby Monroe agreed to forbear from the exercise of any of their rights and remedies available under the Monroe Term Loan through February 1, 2008, as a result of Butler’s failure to deliver to Monroe certain of our financial information from fiscal year 2006.
On January 31, 2008, Butler entered into a First Amendment to the Third Amended and Restated Credit Agreement (“First Amendment”) with General Electric Capital Corporation (“GECC”), dated as of February 1, 2008. The First Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from February 1, 2008 to February 29, 2008.
On February 28, 2008, Butler entered into a Second Amendment to the Third Amended and Restated Credit Agreement (“Second Amendment”) with GECC. The Second Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from February 29, 2008 to April 14, 2008. Pursuant to the Second Amendment, we paid an amendment fee of $450,000, in weekly installments of $75,000.
On April 14, 2008, Butler entered into a Third Amendment to the Third Amended and Restated Credit Agreement (“Third Amendment”) with GECC. The Third Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from April 14, 2008 to April 28, 2008.
On April 28, 2008, Butler entered into a Fourth Amendment to the Third Amended and Restated Credit Agreement (“Fourth Amendment”) with GECC. The Fourth Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from April 28, 2008 to May 12, 2008.
On April 30, 2008, Butler entered into a Second Amendment to Second Lien Credit Agreement (“Second Amendment”) with Monroe dated as of April 29, 2008. The Second Amendment provides, among other matters, that Monroe will until May 30, 2008, or
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the date upon which a Forbearance Default (as defined) occurs, forbear from the exercise of any of its rights and remedies arising out of any Event of Default (as defined).
On May 12, 2008, the Company entered into a Fifth Amendment to the Third Amended and Restated Credit Agreement (“Fifth Amendment”) with GECC. The Fifth Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from May 12, 2008 to May 30, 2008.
On May 29, 2008, the Company, entered into a Third Amendment to Second Lien Credit Agreement (“Third Amendment”) with Monroe dated as of May 28, 2008. The Third Amendment provides, among other matters, that Monroe will until June 15, 2008, or the date upon which a Forbearance Default (as defined) occurs, forbear from the exercise of any of its rights and remedies arising out of certain Events of Default (as defined).
On May 30, 2008, the Company entered into a Sixth Amendment to the Third Amended and Restated Credit Agreement (“Sixth Amendment”) with GECC. The Sixth Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from May 30, 2008 to June 15, 2008.
On June 13, 2008, the Company, entered into a Letter Agreement (“Letter Agreement”) regarding the Third Amendment to Second Lien Credit Agreement with Monroe. The Letter Agreement provides, among other matters, that Monroe will until July 1, 2008, or the date upon which a Forbearance Default (as defined) occurs, forbear from the exercise of any of its rights and remedies arising out of certain Events of Default (as defined).
On June 15, 2008, the Company entered into a Seventh Amendment to the Third Amended and Restated Credit Agreement (“Seventh Amendment”) with GECC. The Seventh Amendment provides, among other matters, for an extension of the Commitment Termination Date (as defined) from June 15, 2008 to July 1, 2008.
On June 27, 2008, the Company entered into a Fourth Amendment to Second Lien Credit Agreement (“Fourth Amendment”) with Monroe, dated as of June 26, 2008. The Fourth Amendment provided for the following matters, among others: (i) an extension of the “Term Loan B Maturity Date” (as defined) to July 15, 2008, (ii) a waiver of the principal payment due on July 1, 2008; and (iii) Monroe’s forbearance until July 15, 2008, or the date upon which a Forbearance Default (as defined) occurs, from the exercise of any of its rights and remedies arising out of certain Events of Default (as defined).
On July 1, 2008, the Company obtained an extension of its credit facilities with GECC and Monroe to August 1, 2009.
Pursuant to the terms of the Eighth Amendment and Waiver to the Third Amended and Restated Credit Agreement between the Company and GECC dated July 1, 2008 (“Amended Senior Revolving Facility”), interest will accrue on Revolving Credit Advances (as defined) at the following rates: (i) for the period commencing on July 1, 2008 and ending on September 30, 2008, either the Index Rate (as defined) plus 5.5% per annum, the applicable LIBOR Rate (as defined) plus 7.0% per annum, or the applicable Commercial Paper Rate (as defined) plus 7.0% per annum, at the election of the Company, and (ii) for the period commencing on October 1, 2008 and ending on the Commitment Termination Date (as defined), either the Index Rate plus 7.5% per annum, the applicable LIBOR Rate plus 9.0% per annum, or, the applicable Commercial Paper Rate plus 9.0% per annum, at the election of the Company. The Company also agreed to pay certain fees to GECC if Borrowing Availability drops below certain specified levels through the Commitment Termination Date (as defined). An amendment fee of $50,000 was paid in connection with execution of the Amended Senior Revolving Facility.
Pursuant to the terms of the Fifth Amendment to Second Lien Credit Agreement between the Company and Monroe dated July 1, 2008 (“Amended Term Loan”), interest will accrue on the Amended Term Loan at a rate equal to the greater of (A) the Index Rate (as defined) plus seven percent (7%) per annum, or, the applicable LIBOR Rate (as defined) plus eight percent (8%), at the election of the Company, and (B) the rate payable by BSG under the Amended Senior Revolving Facility, plus two percent (2%) per annum. Additionally, in-kind interest at a rate of two percent (2%) per annum is also payable. As a further provision to the Amended Term Loan, the principal payment due on or about October 1, 2008 under the original Monroe Term Loan was waived. An amendment fee of $500,000 will be due and payable to Monroe upon the earliest of (i) August 1, 2009, or (ii) termination of the Amended Term Loan, and additional work fees of $300,000 will be due and payable over the next four months.
Pursuant to the terms of both credit documents, the Company is required to take steps to increase liquidity. In addition, both facilities require the Company to have Funded Debt (as defined) on January 2, 2009, of not more than $44,872,006.67, and require compliance with certain other financial covenants on an on-going basis and other covenants to be met on or about January 2, 2009. Both facilities also require the Company to pay all future dividends on its preferred stock as payments in-kind. Finally, under both facilities, the Company was granted until September 15, 2008 to comply with certain reporting requirements, and all existing Defaults and Events of Default (as defined) were waived.
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On December 15, 2006, Butler issued to certain institutional investors, non-institutional investors and related parties $8.5 million in shares of Series A 7% Mandatorily Redeemable Preferred Stock (the “Shares”) and vested warrants to purchase 2,125,000 shares of the Company’s common stock at $2.00 per share, in a private placement. The warrants are callable under certain circumstances. Each share of preferred stock, along with warrants to purchase 250 shares of the Company’s common stock, was issued at a price of $1,000 per share. Butler’s Series A 7% Mandatorily Redeemable Preferred Stock consists of 8,500 outstanding shares, has no voting rights, except in limited circumstances, and are not convertible into common stock. The Series A 7% Mandatorily Redeemable Preferred Stock accrues dividends at the rate of 7% per annum, based upon a liquidation value of $1,000 per share, payable in cash and are redeemable July 11, 2011. The aggregate liquidation preference at September 30, 2007 and December 31, 2006 was $8.5 million.
In September 2007, the Company issued 212,500 shares of common stock at $1.10 per share to the stockholders’ of the Series A 7% Mandatorily Redeemable Preferred Stock with a fair value of approximately $234,000. The common stock was issued in connection with an amendment to the Company’s Series A 7% Mandatorily Redeemable Preferred Stock charter provision. The fair value of the common stock is amortized over the term of the Series A 7% Mandatorily Redeemable Preferred Stock which is through July 11, 2011.
Butler has a 10-year, mortgage for its corporate office facility in Montvale, New Jersey, totaling $6.6 million as of September 30, 2007. The mortgage note has a fixed interest rate at 6.85%. The mortgage note contains various financial and other covenants including the requirement to meet certain fixed charge coverage and liquidity amounts. The Company is in compliance with all covenants at September 30, 2007 and December 31, 2006.
On March 6, 2008, Butler’s wholly-owned subsidiary, Butler of New Jersey Realty Corp., (“Seller”), pursuant to the terms of an Agreement of Purchase and Sale, closed the transaction involving the sale of its Montvale, New Jersey property (“Property”). The Purchase Price for the sale of the Property was $9,350,000. The Buyer, Montvale KSL, LLC, is wholly-owned by private investors, Mr. & Mrs. Jong Lim, of Saddle River, New Jersey.
As part of the Agreement of Purchase and Sale, the Seller retained rights to approximately six (6) acres of undeveloped land that is part of the parcel being sold. The retained parcel may be sold for development, subject to subdivision approvals. Subsequent to the Closing the Seller’s affiliate will lease from the Buyer approximately 12,600 square feet of office space for a period of seven years at an annual base rent of $207,000, pursuant to the terms and conditions of an Office Lease Agreement.
As part of the Agreement of Purchase and Sale, the Seller has agreed to provide property management services to the Buyer subsequent to the Closing, which agreement is terminable by the Seller upon sixty (60) days notice, or immediately if the Seller’s affiliate terminates its tenancy under the Office Lease Agreement. If the property management agreement ends then the annual base rent under the Office Lease Agreement will increase by $50,000 per annum. Butler’s debt decreased by approximately $10,000,000 as a result of the sale.
Anticipated cash flows
As we approach the maturity of the Senior Revolving Loan and the maturity of the Monroe Term Loan on August 1, 2009, we will be required to either refinance with GECC and Monroe or to find a new lender. If we are unable to obtain new financing upon the termination of our current financing arrangement, it would have a material adverse effect on our business, financial condition and results of operations. See Liquidity and Capital Resources – Financing Activities section for discussion of our debt arrangements.
Further, pursuant to the terms of both credit documents, we are required to take steps to increase liquidity. Both lenders require us to have Funded Debt (as defined) on January 2, 2009, of not more than approximately $45 million, and require compliance with certain other financial covenants on an on-going basis and other covenants to be met on or about January 2, 2009 and require us to pay all future dividends on our preferred stock as payments in-kind.
We fund operations primarily with cash generated by operations and borrowings under our existing revolving credit facility with GECC. The ability to borrow under the existing revolving credit facility varies weekly and depends on the amount of eligible collateral, which, in turn, depends on certain advance rates applied to the value of accounts receivable. Daily cash collected from customers is deposited into bank accounts controlled by GECC and is transferred to pay down our borrowings. Our cash requirements are funded daily by GECC provided there are available funds. Butler has borrowed under the revolving credit facility to pay required quarterly term loan payments.
Revenue, and gross margin levels, and selling, general, and administrative expenses, along with working capital requirements affect operating cash flow and any deterioration in our performance on these financial measures would have a negative impact on our liquidity. Additionally, capital spending activity and letters of credit required by insurance companies or lenders reduce the availability of borrowing from GECC. We are in compliance with required covenants, as amended and/or waived as described above.
Management anticipates that the existing resources and working capital should be sufficient to satisfy our foreseeable cash requirements. Of course, such expectations may prove to be incorrect. Moreover, GECC’s Senior Revolving facility and our Monroe Term Loan mature on August 1, 2009 requiring the Company to obtain new financing upon the termination of our current financing arrangement. While the Company is of the opinion that good faith estimates of the Company’s ability to secure additional capital in the future to reach our goals have been made, there is no guarantee that the Company will receive sufficient funding to sustain operations or implement any future business plan steps.
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Off-balance sheet arrangements
We have no off-balance sheet arrangements or transactions with unconsolidated limited purpose entities, nor do we have any undisclosed material transactions or commitments involving related persons or entities.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There were no material changes during the nine months ended September 30, 2007 to the critical accounting policies reported in our Annual Report on Form 10-K for the year ended December 31, 2006 with the exception of our adoption of FIN 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109. See below for discussion of the impact of the provisions of FIN 48.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In September 2006, the Financial Accounting Standards Board (FASB) issued FAS No. 157, Fair Value Measurements (FAS 157). FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. FAS 157 does not expand or require any new fair value measures, however, the application of this statement may change current practice. The requirements of FAS 157 are first effective for the Company’s fiscal year beginning December 31, 2007. However, in February 2008, the FASB decided that an entity need not apply this standard to non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis until the subsequent year. Accordingly, the Company’s adoption of this standard on December 31, 2007 is limited to financial assets and liabilities. The Company does not believe the initial adoption of FAS 157 will have a material effect on its consolidated financial statements. However, the Company is still in the process of evaluating this standard with respect to its effect on non-financial assets and liabilities and therefore has not yet determined the impact that it will have on its consolidated financial statements upon full adoption.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115, which allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on an instrument-by-instrument basis. Subsequent measurements for the financial assets and liabilities an entity elects to record at fair value will be recognized in earnings. SFAS No. 159 also establishes additional disclosure requirements. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted provided that the entity also adopts SFAS No. 157. The Company is currently evaluating the impact of the provisions of SFAS No. 159 and will adopt this standard for our fiscal year beginning on December 31, 2007.
In December 2007, the FASB issued SFAS No. 141 (revised), Business Combinations. The standard changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. Statement 141(R) is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company will evaluate the impact the provisions of SFAS No. 141(R) and will adopt this standard for our fiscal year beginning on December 29, 2008.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. The standard changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to noncontrolling interests reported as part of consolidated earnings. Additionally, SFAS No. 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company will evaluate the impact of the provisions of SFAS No. 160 and will adopt this standard for our fiscal year beginning on December 29, 2008.
RECENTLY ISSUED AND ADOPTED FINANCIAL ACCOUNTING STANDARDS
In July 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109. FIN 48 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. FIN 48 also provides guidance related to transition, derecognition, classification, accounting in interim periods, accounting for interest and penalties associated with tax positions, and disclosure requirements.
The Company recognized interest and penalties accrued related to unrecognized tax benefits in our provision for income taxes. Our classification of interest and penalties did not change as a result of adopting FIN 48. Due to the existence of net operating loss (“NOL”) carryforwards, the Company has currently accrued interest on only a portion of its unrecognized tax benefits.
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The Company’s federal income tax returns for the tax years 2003 and beyond remain subject to examination by the Internal Revenue Service; in addition, nominal amounts related to the 2001 and 2002 federal tax years remain open due to utilization of NOL carryforwards. We are generally no longer subject to state income tax examinations for tax years prior to 2002, although earlier tax years remain open in certain states.
The Company has a $5.3 million liability recorded for unrecognized tax benefits as of January 1, 2007, which includes interest and penalties of approximately $0.4 million. Our liability for unrecognized tax benefits increased by approximately $0.3 million for the three months ended September 30, 2007, and approximately $0.9 million for the nine months ended September 30, 2007, including interest and penalties. We expect increases comparable to the current quarter for the remaining quarter of our 2007 fiscal year. Due to the expiration of certain statutes of limitation, we anticipate decreases to our unrecognized tax benefits of approximately $1.7 million within the next twelve months.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
Market risk is the potential economic loss that may result from adverse changes in the fair value of financial instruments. Butler uses financial instruments, including fixed and variable rate debt, to finance operations, for capital spending programs and for general corporate purposes. Butler is exposed to market risk primarily from changes in interest rates, and to a lesser extent, changes in foreign currency rates. In managing exposure to these fluctuations, Butler may engage in various hedging transactions that have been authorized according to documented policies and procedures. Butler does not use derivatives for speculative or trading purposes. Butler’s capital costs are directly linked to financial and business risks.
Our exposure to market risk for changes in interest rates relates primarily to medium- and long-term debt. Variable interest rates disclosed represent the weighted average rates at the end of the period. There were no interest rate swap agreements outstanding at September 30, 2007. See Management’s Discussion and Analysis of Results of Operations and Financial Condition - Liquidity and Capital Resources for discussion of new debt and refinancing.
Butler’s international operations are directed from its office in Hyderabad, India. International operations accounted for approximately 1% of our sales for each of the three and nine month periods ended September 30, 2007 September 24, 2006, respectively. In each of the three and nine months ended September 30, 2007 and September 24, 2006, changes in foreign currency rates had an immaterial impact on sales and earnings per share.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Disclosure controls and procedures are procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as this Form 10-Q, is recorded, processed, summarized and reported within the time periods specified by the SEC. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of them and their effect on the information generated for use in this Form 10-Q. In the course of the controls evaluation, we reviewed any data errors or control problems that we had identified and sought to confirm that appropriate corrective actions, including process improvements, were being undertaken. This type of evaluation is performed on a quarterly basis so that the conclusions of management, including our Chief Executive Officer and Chief Financial Officer, concerning the effectiveness of the disclosure controls can be reported in our periodic reports on Form 10-K and Form 10-Q. Many of the components of our disclosure controls and procedures are also evaluated on an ongoing basis by our finance organization. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures and to modify them as necessary. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report, as this Form 10-Q has not been filed timely with the SEC.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the three months ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management Certifications
The certifications of our Chief Executive Officer and Chief Financial Officer required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 are attached as exhibits to this Quarterly Report on Form 10-Q. The disclosures set forth in this Item 4 contain information concerning (i) the evaluation of our disclosure controls and procedures referred to in paragraph 4 of the certifications, and (ii) material weaknesses in the design or operation of our internal control over financial reporting referred to in paragraph 5 of the certifications. Those certifications should be read in conjunction with this Item 4 for a more complete understanding of the matters covered by the certifications.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations “Liquidity and Capital Resources – Financing Activities” for a discussion of certain defaults (none of which were payment related), all of which have been cured.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits
Exhibit Index is included after signatures.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Date: July 15, 2008 | BUTLER INTERNATIONAL, INC. |
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| (Registrant) |
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| | By: /s/ Edward M. Kopko |
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| | Edward M. Kopko |
| | Chairman of the Board of Directors |
| | Chief Executive Officer |
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| | By: /s/ Mark Koscinski. |
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| | Mark Koscinski |
| | Chief Financial Officer |
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BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX
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Exhibit No. | | Description |
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3.1 | | | Articles of Incorporation of the Registrant, as amended, filed as Exhibit No. 3(a) to the Registrant’s Registration Statement on Form S-4, Registration No. 33-10881 (the “S-4”), and hereby incorporated by reference. |
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3.2 | | | Amended and Restated By-laws of the Registrant, as filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K dated December 13, 2004 and hereby incorporated by reference. |
| | | |
3.3 | | | Articles Supplementary to the Articles of Incorporation (Series B 7% Cumulative Convertible Preferred Shares), as filed with the Department of Assessments and Taxation of the State of Maryland on September 29, 1992, filed as Exhibit No. 4.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 27, 1992, and hereby incorporated by reference. |
| | | |
3.4 | | | Amendment to Articles Supplementary to the Articles of Incorporation (Series B 7% Cumulative Convertible Preferred Shares) as filed with the Department of Assessments and Taxation of the State of Maryland on July 12, 1993, filed as Exhibit No. 3.4 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2001, and hereby incorporated by reference. |
| | | |
3.5 | | | Articles Supplementary dated December 18, 2006 establishing and fixing the rights and preferences of a series of shares of preferred stock (Series A Preferred Stock) filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated December 21, 2006 and hereby incorporated by reference. |
| | | |
3.6 | | | Articles Supplementary to the Articles of Incorporation (Series A Preferred Stock) filed with the Maryland State Department of Assessments and Taxation on August 31, 2007, filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated September 4, 2007 and hereby incorporated by reference. |
| | | |
4.1 | | | Specimen Stock Certificate for the Registrant’s common stock, par value $.001 per share, filed as Exhibit No. 4.1 to the Registrant’s Registration Statement on Form S-1, Registration No. 33- 2479 (the “S-1”), and hereby incorporated by reference. |
| | | |
4.2 | | | Specimen Stock Certificate representing the Registrant’s Series B 7% Cumulative Convertible Preferred Stock, par value $.001 per share, filed as Exhibit No. 4.5 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992, and hereby incorporated by reference. |
| | | |
10.1 | * | | Incentive Stock Option Plan of the Registrant, as amended, filed as Exhibit No. 10.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.2 | * | | Stock Option Plan of the Registrant, as amended, filed as Exhibit No. 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.3 | * | | 1989 Directors Stock Option Plan of the Registrant, dated November 1, 1988, as amended, filed as Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.4 | * | | Stock Purchase Agreement, dated September 19, 1990, between North American Ventures, Inc. and Edward M. Kopko, filed as Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.5 | * | | Plan Pledge Agreement, dated September 19, 1990, between North American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No. 10.32 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.6 | * | | Plan Promissory Note, dated January 16, 1991, executed by Edward M. Kopko, and made payable to the order of North American Ventures, Inc. in the amount of $445,000, filed as Exhibit No. 10.33 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
|
* Denotes compensatory plan, compensation arrangement, or management contract. |
31
BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)
| | | |
Exhibit No. | | Description |
| |
|
10.7 | * | | Pledge Agreement, dated January 16, 1991, between North American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No. 10.34 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.8 | * | | Promissory Note, dated January 16, 1991, executed by Edward M. Kopko and made payable to the order of North American Ventures, Inc. in the amount of $154,999.40, filed as Exhibit No. 10.35 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.9 | * | | Form of Plan Pledge Agreement, dated September 19, 1990, between North American Ventures, Inc. and each of John F. Hegarty, Hugh G. McBreen, and Frederick H. Kopko, Jr. (“Outside Directors”), filed as Exhibit No. 10.36 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.10 | * | | Form of Plan Promissory Note, dated September 19, 1990, each executed by an Outside Director and each made payable to the order of North American Ventures, Inc. in the amount of $185,000, filed as Exhibit No. 10.37 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.11 | * | | Form of Stock Purchase Agreement, dated November 4, 1988, between North American Ventures, Inc. and each of the Outside Directors, filed as Exhibit No. 10.38 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.12 | * | | Form of Pledge Agreement, dated January 16, 1991, between North American Ventures, Inc. and each of the Outside Directors, filed as Exhibit No. 10.39 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.13 | * | | Form of Promissory Note, dated January 16, 1991, executed by each of the Outside Directors and each payable to the order of North American Ventures, Inc., in the amount of $63,000, filed as Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.14 | * | | Form of Pledge Agreement, dated January 16, 1991, between North American Ventures, Inc. and each of the Outside Directors, filed as Exhibit No. 10.41 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.15 | * | | Form of Promissory Note, dated January 16, 1991, executed by each of John F. Hegarty and Hugh G. McBreen and each made payable to the order of North American Ventures, Inc. in the amount of $54,000, filed as Exhibit No. 10.42 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.16 | * | | Form of Promissory Note, dated January 16, 1991, executed by each of the Outside Directors and each payable to the order of North American Ventures, Inc., in the amount of $225,450, filed as Exhibit No. 10.43 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.17 | * | | Form of Pledge Agreement, dated January 16, 1991, between North American Ventures, Inc. and each of the Outside Directors, filed as Exhibit No. 10.44 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.18 | * | | Form of Security Agreement, dated January 16, 1991, between North American Ventures, Inc. and each of the Outside Directors, filed as Exhibit No. 10.45 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
10.19 | * | | 1990 Employee Stock Purchase Plan of the Registrant, as amended, filed as Exhibit No. 10.46 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990, and hereby incorporated by reference. |
| | | |
|
* Denotes compensatory plan, compensation arrangement, or management contract. |
32
BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)
| | | |
Exhibit No. | | Description |
| |
|
10.20 | (a)* | | Second Amended and Restated Employment Agreement, dated December 12, 2002 among Butler International, Inc., Butler Service Group, Inc. and Edward M. Kopko, filed as exhibit 10.20(a) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 and hereby incorporated by reference. |
| | | |
10.20 | (b)* | | Amendment to Second Amended and Restated Employment Agreement, dated March 28, 2008 among Butler International, Inc., Butler Service Group, Inc. and Edward M. Kopko, filed as exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 3, 2008 and hereby incorporated by reference. |
| | | |
10.21 | * | | Stock Purchase Agreement, dated December 17, 1991, between North American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No. 10.34 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991, and hereby incorporated by reference. |
| | | |
10.22 | * | | Plan Pledge Agreement, dated December 17, 1991, between North American Ventures, Inc. and Edward M. Kopko, filed as Exhibit No. 10.35 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991, and hereby incorporated by reference. |
| | | |
10.23 | * | | Plan Promissory Note, dated December 17, 1991, executed by Edward M. Kopko, and made payable to the order of North American Ventures, Inc. in the amount of $84,000, filed as Exhibit No. 10.36 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991, and hereby incorporated by reference. |
| | | |
10.24 | * | | Form of Stock Purchase Agreement, dated December 17, 1991, between North American Ventures, Inc. and each of John F. Hegarty and Hugh G. McBreen, filed as Exhibit 10.37 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991, and hereby incorporated by reference. |
| | | |
10.25 | * | | Form of Plan Pledge Agreement, dated December 17, 1991, between North American Ventures, Inc. and each of John F. Hegarty and Hugh G. McBreen, filed as Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991, and hereby incorporated by reference. |
| | | |
10.26 | * | | Form of Plan Promissory Note, dated December 17, 1991, executed each of John F. Hegarty and Hugh G. McBreen, and each made payable to the order of North American Ventures, Inc., in the amount of $42,000, filed as Exhibit No. 10.39 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991, and hereby incorporated by reference. |
| | | |
10.27 | * | | 1992 Stock Option Plan, filed as Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992, and hereby incorporated by reference. |
| | | |
10.28 | * | | 1992 Incentive Stock Option Plan, filed as Exhibit 10.41 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992, and hereby incorporated by reference. |
| | | |
10.29 | * | | 1992 Stock Bonus Plan, filed as Exhibit No. 10.42 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992, and hereby incorporated by reference. |
| | | |
10.30 | * | | 1992 Stock Option Plan for Non-Employee Directors, filed as Exhibit 10.43 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992, and hereby incorporated by reference. |
| | | |
10.31 | * | | Butler Service Group, Inc. Employee Stock Ownership Plan and Trust Agreement, filed as Exhibit No. 19.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1987, and hereby incorporated by reference. |
| | | |
10.32 | * | | Form of Promissory Note dated May 3, 1995 in the original principal amount of $142,500 executed by Frederick H. Kopko, Jr. and Hugh G. McBreen, and made payable to the order of Butler International, Inc., filed as Exhibit 10.43 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1995, and hereby incorporated by reference. |
| | | |
10.33 | * | | Form Pledge Agreement dated May 3, 1995 between Butler International, Inc. and each of Frederick H. Kopko, Jr. and Hugh G. McBreen, filed as Exhibit 10.44 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1995, and hereby incorporated by reference. |
| | | |
|
* Denotes compensatory plan, compensation arrangement, or management contract. |
33
BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)
| | | |
Exhibit No. | | Description |
| |
|
10.34 | | | Second Amended and Restated Credit Agreement dated September 28, 2001, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.37 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, and hereby incorporated by reference. |
| | | |
10.35 | (a) | | First Amendment Agreement, dated as of February 27, 2002, between Butler Service Group, Inc. and General Electric Corporation, filed as Exhibit 10.37(a) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, and hereby incorporated by reference. |
| | | |
10.35 | (b) | | Second Amendment and Waiver, dated November 14, 2002, between Butler Service Group, Inc. and General Electric Corporation, filed as Exhibit 10.36(b) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002, and hereby incorporated by reference. |
| | | |
10.35 | (c) | | Third Amendment and Waiver, dated March 27, 2003, between Butler Service Group, Inc. and General Electric Corporation, filed as Exhibit 10.36(c) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 and hereby incorporated by reference. |
| | | |
10.35 | (d) | | Fourth Amendment and Waiver, dated May 14, 2003, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.36(d) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 and hereby incorporated by reference. |
| | | |
10.35 | (e) | | Fifth Amendment and Waiver, dated November 14, 2003, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.36(e) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2003 and hereby incorporated by reference. |
| | | |
10.35 | (f) | | Sixth Amendment and Waiver, dated March 30, 2004, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.36(f) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, and hereby incorporated by reference. |
| | | |
10.35 | (g) | | Seventh Amendment, dated July 1, 2004, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.35(g) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 and hereby incorporated by reference. |
| | | |
10.35 | (h) | | Eighth Amendment, dated November 10, 2004, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.35(h) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004 and hereby incorporated by reference. |
| | | |
10.35 | (i) | | Ninth Amendment, dated March 25, 2005, among the Registrant, Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.35(i) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004, and hereby incorporated by reference. |
| | | |
10.35 | (j) | | Tenth Amendment and Limited Waiver, dated July 19, 2005, among the Registrant, Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.35(j) to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004, and hereby incorporated by reference. |
| | | |
10.35 | (k) | | Eleventh Amendment and Limited Waiver, dated September 1, 2005, among the Registrant, Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.35(k) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 and hereby incorporated by reference. |
| | | |
10.35 | (l) | | Twelfth Amendment, dated November 30, 2005, between Butler Service Group, Inc. and General Electric Capital Corporation, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated December 1, 2005 and hereby incorporated by reference. |
| | | |
10.35 | (m) | | Thirteenth Amendment to Credit Agreement dated September 29, 2006, executed on October 2, 2006, by and between Registrant, certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 6, 2006 and hereby incorporated by reference. |
34
BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)
| | | |
Exhibit No. | | Description |
| |
|
10.35 | (n) | | Fourteenth Amendment to Credit Agreement dated October 31, 2006, 2006, by and between Registrant, certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 3, 2006 and hereby incorporated by reference. |
| | | |
10.35 | (o) | | Fifteenth Amendment to Credit Agreement dated December 14, 2006, 2006, by and between Registrant, certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 14, 2006 and hereby incorporated by reference. |
| | | |
10.35 | (p) | | Sixteenth amendment and Limited Waiver to Credit Agreement dated as of April 30, 2007, by and between Registrant, certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 22, 2007 Articles Supplementary dated December 18, 2006 establishing and fixing the rights and preferences of a series of shares of preferred stock filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated December 21, 2006 and hereby incorporated by reference. |
| | | |
10.35 | (q) | | Amendment dated as of June 30, 2007 by and among Butler Service Group, Inc., certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated July 10, 2007, and hereby incorporated by reference. |
| | | |
10.35 | (r) | | Amendment dated as of July 31, 2007, by and among Butler Service Group, Inc., certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated August 9, 2007, and hereby incorporated by reference |
| | | |
10.35 | (s) | | Second Amendment dated as of August 14, 2007, by and among Butler Service Group, Inc., certain of its subsidiaries, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated August 22, 2007, and hereby incorporated by reference. |
| | | |
10.35 | (t) | | Third Amendment dated as of August 20, 2007, by and among Butler Service Group, Inc., certain of its subsidiaries, and GECC, filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated August 22, 2007, and hereby incorporated by reference. |
| | | |
10.35 | (u) | | Third Amended and Restated Credit Agreement dated as of August 29, 2007, among BSG, as Borrower, the other Credit Parties signatory thereto, as Credit Parties, the Lenders signatory thereto from time to time, as Lenders, and GECC, as Agent and Lender, filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated September 4, 2007, and hereby incorporated by reference. |
| | | |
10.35 | (v) | | Amendment to Credit Agreement, dated as of August 29, 2007, among BSG, as Borrower, and GECC, as Agent and Lender, filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated September 4, 2007, and hereby incorporated by reference. |
| | | |
10.35 | (w) | | Consent and Waiver to Third Amended and Restated Credit agreement, dated October 31, 2007 among BSG as borrower, and GECC, as lenders, filed as Exhibit 10.82 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 25, 2006 and hereby incorporated by reference. |
| | | |
10.35 | (x) | | Consent and waiver to Third Amended and Restated Credit Agreement, dated as of December 7, 2007, among BSG, as borrower, and GECC, as agent for the lenders, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 12, 2007, and hereby incorporated by reference. |
| | | |
10.35 | (y) | | Letter Agreement, dated as of January 9, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on January 17, 2008, and hereby incorporated by reference. |
| | | |
10.35 | (z) | | First Amendment to Third Amended and Restated Credit Agreement dated as of February 1, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on February 6, 2008 and hereby incorporated by reference. |
| | | |
10.35 | (aa) | | Second Amendment to Third Amended and Restated Credit Agreement dated as of February 28, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on March 4, 2008 and hereby incorporated by reference. |
35
BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)
| | | |
Exhibit No. | | Description |
| |
|
10.35 | (bb) | | Third Amendment to Third Amended and Restated Credit Agreement dated as of April 14, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on April 17, 2008 and hereby incorporated by reference. |
| | | |
10.35 | (cc) | | Fourth Amendment to Third Amended and Restated Credit Agreement dated as of April 28, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on May 1, 2008 and hereby incorporated by reference. |
| | | |
10.35 | (dd) | | Fifth Amendment to Third Amended and Restated Credit Agreement dated as of May 12, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on May 14, 2008 and hereby incorporated by reference. |
| | | |
10.35 | (ee) | | Sixth Amendment to Third Amended and Restated Credit Agreement dated as of May 30, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on June 4, 2008 and hereby incorporated by reference. |
| | | |
10.35 | (ff) | | Seventh Amendment to Third Amended and Restated Credit Agreement dated as of June 15, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and GECC, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on June 17, 2008 and hereby incorporated by reference. |
| | | |
10.35 | (gg) | | Eighth Amendment and Waiver to the Third Amended and Restated Credit Agreement dated as of July 1, 2008, by and among Butler Service Group, Inc., certain of its affiliates, and General Electric Capital Corporation in its individual capacity and as agent for the Lenders, filed as Exhibit No. 10.1 to the Registrant’s current report on Form 8-K, filed on July 3, 2008 and hereby incorporated by reference. |
| | | |
10.36 | * | | Form of Promissory Note dated January 28, 1998 in the original amount of $168,278.74 executed by Hugh G. McBreen and made payable to the order of Butler International, Inc., filed as Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, and hereby incorporated by reference. |
| | | |
10.37 | * | | Form Pledge Agreement dated January 28, 1998 between Butler International, Inc. and Hugh G. McBreen, filed as Exhibit 10.41 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, and hereby incorporated by reference. |
| | | |
10.38 | * | | Form of Promissory Note dated October 13, 1998 in the original amount of $181,000 executed by Frederick H. Kopko, Jr. and made payable to Butler International, Inc. filed as Exhibit 10.48 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, and hereby incorporated by reference. |
| | | |
10.39 | * | | Form Pledge Agreement dated October 13, 1998 between Butler International, Inc. and Frederick H. Kopko, Jr., filed as Exhibit 10.49 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1998, and hereby incorporated by reference. |
| | | |
10.40 | * | | Form of Promissory Note dated March 2, 1999 in the original amount of $890,625 executed by Edward M. Kopko and made payable to Butler International, Inc. filed as Exhibit 10.50 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, and hereby incorporated by reference. |
| | | |
10.41 | * | | Form Pledge Agreement dated March 2, 1999 between Butler International, Inc. and Edward M. Kopko, filed as Exhibit 10.51 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, and hereby incorporated by reference. |
| | | |
10.42 | * | | Form of Promissory Note dated March 2, 1999 in the original amount of $822,441 executed by Edward M. Kopko and made payable to Butler International, Inc. filed as Exhibit 10.52 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, and hereby incorporated by reference. |
| | | |
10.43 | * | | Form of Promissory Note dated September 12, 2000 in the original amount of $367,000 executed by Edward M. Kopko and made payable to Butler International, Inc. filed as Exhibit 10.48 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000, and hereby incorporated by reference. |
| | | |
10.44 | * | | Form Pledge Agreement dated September 12, 2000 between Butler International, Inc. and Edward M. Kopko, filed as Exhibit 10.49 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000, and hereby incorporated by reference. |
| | | |
10.45 | * | | 1992 Stock Option Plan for Non-Employee Directors, filed as Exhibit 10.43 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992, and hereby incorporated by reference. |
| | | |
|
* Denotes compensatory plan, compensation arrangement, or management contract. |
36
BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)
| | | |
Exhibit No. | | Description |
| |
|
10.47 | * | | Form of Promissory Note dated January 2, 2002 in the original amount of $362,250 executed by Bridge Financing Partners LLC and made payable to Butler International, Inc. filed as Exhibit 10.53 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and hereby incorporated by reference. |
| | | |
10.48 | * | | Form Pledge Agreement dated January 2, 2002 between Butler International, Inc. and Bridge Financing Partners LLC filed as Exhibit 10.54 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and hereby incorporated by reference. |
| | | |
10.49 | * | | Form of Promissory Note dated March 12, 2002 in the original amount of $219,750 executed by Frederick H. Kopko, Jr. and made payable to Butler International, Inc. filed as Exhibit 10.55 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and hereby incorporated by reference. |
| | | |
10.50 | * | | Form Pledge Agreement dated March 12, 2002 between Butler International, Inc. and Frederick H. Kopko, Jr. filed as Exhibit 10.56 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and hereby incorporated by reference. |
| | | |
10.51 | * | | Form of Promissory Note dated March 12, 2002 in the original amount of $186,180 executed by Hugh G. McBreen and made payable to Butler International, Inc. filed as Exhibit 10.57 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and hereby incorporated by reference. |
| | | |
10.52 | * | | Form Pledge Agreement dated March 12, 2002 between Butler International, Inc. and Hugh G. McBreen filed as Exhibit 10.58 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, and hereby incorporated by reference. |
| | | |
10.53 | | | Mortgage and Security Agreement dated September 30, 2002, between Butler of New Jersey Realty Corp. and GMAC Commercial Mortgage Corp., filed as Exhibit 10.58 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002, and hereby incorporated by reference. |
| | | |
10.53 | (a) | | Promissory Note dated September 30, 2002, between Butler of New Jersey Realty Corp. and GMAC Commercial Mortgage Corp., filed as Exhibit 10.58(a) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002, and hereby incorporated by reference. |
| | | |
10.54 | * | | Notification of Default Letter date May 12, 2003 to Board of Directors, Butler International, Inc. regarding Edward M. Kopko’s employment agreement, filed as Exhibit 10.55 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, and hereby incorporated by reference. |
| | | |
10.55 | * | | Senior Management Employment Agreement between Butler Technology Solutions and Ivan Estes filed as Exhibit 10.56 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000, and hereby incorporated by reference. |
| | | |
10.56 | * | | Senior Management Employment Agreement between Butler Technical Group and James Beckley filed as Exhibit 10.57 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000, and hereby incorporated by reference. |
| | | |
10.57 | | | Settlement and Release Agreement, dated May 5, 2004, filed as Exhibit 10.57 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004 and hereby incorporated by reference. |
| | | |
10.58 | * | | Employment Agreement dated April 11, 2005 between the Registrant and Thomas J. Considine, Jr. filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated April 15, 2005. |
| | |
|
* Denotes compensatory plan, compensation arrangement, or management contract. |
37
BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)
| | | |
Exhibit No. | | Description |
| |
|
10.59 | | | Securities Purchase Agreement dated June 30, 2006, by and among Registrant, certain of its subsidiaries, and Levine Leichtman Capital Partners II, L.P., a California limited partnership (“LLCP”), filed as Exhibit 10.1 to the Registrant’s Current Report on form 8-K filed on July 7, 2006 and hereby incorporated by reference. |
| | | |
10.60 | | | Unsecured Note due 2006, dated June 30, 2006, in the original principal amount of $2,500,000, from BI and certain of its subsidiaries in favor of LLCP, filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference. |
| | | |
10.61 | | | Warrant to purchase 1,041,254 shares of common stock, dated June 30, 2006 from Registrant in favor of LLCP, filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference. |
| | | |
10.62 | | | Registration Rights Agreement dated June 30, 2006 between Registrant and LLCP, filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference. |
| | | |
10.63 | | | Letter Agreement dated June 30, 2006 between Registrant and LLCP, filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference... |
| | | |
10.64 | | | Investor Rights Agreement dated June 30, 2006 by and among Registrant, Edward M. Kopko and Frederick H. Kopko, Jr., filed as Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference. |
| | | |
10.65 | | | Intercompany Subordination Agreement dated June 30, 2006 by and among Registrant, certain of our subsidiaries and LLCP, filed as Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference. |
| | | |
10.66 | | | General and Continuing Guaranty dated June 30, 2006, by certain subsidiaries of Registrant in favor of LLCP, filed as Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference. |
| | | |
10.67 | | | Noncompetition Agreement dated June 30, 2006, by and between Registrant and Edward M. Kopko, filed as Exhibit 10.9 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference. |
| | | |
10.68 | | | Personal Guaranty dated June 30, 2006, by Edward M. Kopko in favor of LLCP, filed as Exhibit 10.10 to the Registrant’s Current Report on Form 8-K filed on July 7, 2006 and hereby incorporated by reference. |
| | | |
10.69 | | | First Amendment to Securities Purchase Agreement and to Unsecured Note Due 2006 dated August 14, 2006, by and among Registrant, certain of its subsidiaries, and LLCP, filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on August 16, 2006 and hereby incorporated by reference. |
| | | |
10.70 | * | | Senior Management Employment Agreement dated February 1, 2006, between the Registrant and mark Koscinski, filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on September 22, 2006 and hereby incorporated by reference. |
| | | |
10.71 | | | Form of Registration Rights Agreement dated December 15, 2006, between Registrant and certain non-institutional investors, filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed on December 21, 2006 and hereby incorporated by reference. |
| | | |
10.72 | | | Form of Registration Rights Agreement dated December 15, 2006, between Registrant and certain non-institutional investors, filed as Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed on December 21, 2006 and hereby incorporated by reference. |
| | |
|
* Denotes compensatory plan, compensation arrangement, or management contract. |
38
BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)
| | | |
Exhibit No. | | Description |
| |
|
10.73 | | | Form of Warrant dated December 15, 2006, between Registrant and certain institutional investors, filed as Exhibit 10.4 to Registrant’s Current Report on Form 8-K filed on December 21, 2006 and hereby incorporated by reference. |
| | | |
10.74 | | | Form of Warrant dated December 15, 2006, between Registrant and certain non-institutional investors, filed as Exhibit 10.5 to Registrant’s Current Report on Form 8-K filed on December 21, 2006 and hereby incorporated by reference. |
| | | |
10.75 | | | Form of Subscription Agreement dated December 15, 2006, between Registrant and certain institutional investors, filed as Exhibit 10.6 to Registrant’s Current Report on Form 8-K filed on December 21, 2006 and hereby incorporated by reference. |
| | | |
10.76 | | | Settlement and Mutual Release by and among Registrant, certain of its subsidiaries, and LLCP, dated December 27, 2006, filed as exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on January 4, 2007 and hereby incorporated by reference. |
| | | |
10.77 | | | Second Lien Credit Agreement dated as of August 29, 2007, among Butler Service Group, Inc. (“BSG”), as Borrower, the other Credit Parties signatory thereto, as Credit Parties, the Lenders signatory thereto from time to time, as Lenders, and Monroe Capital, as Agent and Lender, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated September 4, 2007, and hereby incorporated by reference. |
| | | |
10.77 | (a) | | Consent and Waiver to Second Lien Credit Agreement, dated as of December 1, 2007 among Butler Service Group, as borrower, and Monroe Capital, as agent, filed as Exhibit No. 10.2 to the Registrant’s Current Report on Form 8-K filed on December 12, 2007 and hereby incorporated by reference. |
| | | |
10.77 | (b) | | Letter Agreement, dated as of January 9, 2008 by and among Butler Service Group Inc., certain of its affiliates and Monroe Capital, filed as Exhibit No. 10.2 to the Registrant’s Current Report on Form 8-K filed on January 17, 2008 and hereby incorporated by reference. |
| | | |
10.77 | (c) | | Second Amendment to Second Lien Credit Agreement, dated as of April 29, 2008 and executed April 30, 2008, by and among Butler Service Group, Inc., a New Jersey corporation, and Monroe, in its individual capacity and as agent for the Lenders, MC Funding Usters II LLC and MC Funding Ltd. filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 6, 2008, and hereby incorporated by reference. |
| | | |
10.77 | (d) | | Third Amendment to Second Lien Credit Agreement, dated as of May 28, 2008 and executed May 29, 2008, by and among Butler Service Group, Inc., a New Jersey corporation, and Monroe, in its individual capacity and as agent for the Lenders, MC Funding Usters II LLC and MC Funding Ltd. filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on June 4, 2008, and hereby incorporated by reference. |
| | | |
10.77 | (e) | | Letter Agreement, dated as of June 13, 2008, by and among Butler Service Group, Inc., a New Jersey corporation, and Monroe, in its individual capacity and as agent for the Lenders, Garrison Funding-2008-1 LTD., and Mc Funding Ltd. filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on June 17, 2008, and hereby incorporated by reference. |
| | | |
10.77 | (f) | | Fourth Amendment to Second Lien Credit Agreement, dated as of June 26, 2008, and entered into on June 27, 2008 by and among Butler Service Group, Inc. and Monroe, in its individual capacity and as agent for the Lenders, Garrison Funding-2008-1 LTD, and MC Funding Ltd., filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on July 3, 2008, and hereby incorporated by reference. |
| | | |
10.77 | (g) | | Fifth Amendment to Second Lien Credit Agreement, dated as of July 1, 2008, by and among Butler Service Group, Inc., and Monroe, in its individual capacity and as agent for the Lenders, Garrison Funding-2008-1 LTD, and MC Funding Ltd., filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on July 3, 2008, and hereby incorporated by reference. |
| | | |
10.78 | | | Intercreditor Agreement, dated as of August 29, 2007, among GECC and Monroe Capital, acknowledged and agreed to by BSG, filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated September 4, 2007, and hereby incorporated by reference. |
| | | |
10.79 | | | Mortgage Subordination Agreement, dated as of August 29, 2007, by and among Butler of New Jersey Realty Corp. (“BNJRC”), a New Jersey corporation, GECC and Monroe Capital, filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K dated September 4, 2007, and hereby incorporated by reference. |
39
BUTLER INTERNATIONAL, INC.
EXHIBIT INDEX (continued)
| | | |
Exhibit No. | | Description |
| |
|
10.80 | | | Subordinate Mortgage Security Agreement and Fixture Filing, dated as of August 29, 2007, by and among BNJRC and Monroe Capital, filed as Exhibit 10.6 to the Registrant’s Current Report on Form 8-K dated September 4, 2007, and hereby incorporated by reference. |
| | | |
10.81 | | | Agreement of Purchase and Sale between Butler of New Jersey Realty Corp and Jong P. Lim and Young H. Lim, dated December 13, 2007 filed as Exhibit No. 10.1 to Form 8-k filed on December 19, 2007, and hereby incorporated by reference. |
| | | |
10.82 | | | Form of Office Lease Agreement with Butler Services, Inc. field as Exhibit No. 10.2 to Form 8-k filed on December 19, 2007, and hereby incorporated by reference. |
| | | |
21.1 | | | List of subsidiaries |
| | | |
31.1 | | | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer, filed herewith as Exhibit 31.1. |
| | | |
31.2 | | | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer filed herewith as Exhibit 31.2. |
| | | |
32.1 | | | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer, filed herewith as Exhibit 32.1. |
| | | |
32.2 | | | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer filed herewith as Exhibit 32.2. |
| | | |
99.1 | | | Commitment letter, dated August 9, 2007 from Monroe Capital, LLC to BSG, filed as Exhibit 99.1 to the Registrant’s current report in Form 8-K dated August 9, 2007 and hereby incorporated by reference. |
40
