THIS WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT dated as of
October 27, 2000 ("Waiver and Amendment"), is entered into by and among Katy
Industries, Inc. (the "Company"), BANK OF AMERICA, N.A., as agent for itself
and the Banks (the "Agent"), and the several financial institutions parties
hereto.
RECITALS
WHEREAS, the Company, the lenders party thereto (collectively, the
"Banks"), and Agent are parties to an Amended and Restated Credit Agreement
dated as of December 11, 1998, as amended by the First Amendment thereto
dated as of November 18, 1999 and the Second Amendment thereto dated as of
March 22, 2000 (the "Credit Agreement"), pursuant to which the Agent and
the Banks have extended certain credit facilities to the Company; and
WHEREAS, pursuant to a Waiver to the Credit Agreement dated as of
September 28, 2000, the Banks temporarily waived compliance by the Company
with Section 8.19 of the Credit Agreement with respect to the fiscal quarter
ending September 30, 2000; and
WHEREAS, the Company has requested that the Banks make such waiver
permanent; and
WHEREAS, the Banks are willing to do so, and to amend the Credit
Agreement, subject to the terms and conditions of this Waiver and Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings, if any, assigned to them in the
Credit Agreement.
2. Waiver.
(a) The Banks hereby permanently waive compliance by the
Company with Section 8.19 of the Credit Agreement ("Maximum Leverage Ratio")
for the fiscal quarter ending September 30, 2000.
(b) The Banks hereby waive compliance by the Company with
Section 8.21 of the Credit Agreement ("Quarterly Losses") for the fiscal
quarters ending September 30, 2000 and December 31, 2000 and, if and only
if the Perfection Date has occurred on or before March 31, 2001, the Banks
hereby waive compliance by the Company with Section 8.21 for the quarter
ending March 31, 2001.
(c) Nothing contained herein shall be deemed a waiver of
(or otherwise affect the Agent's or the Banks' ability to enforce) any
Default or Event of Default arising at any time under Section 8.19 or
8.21 for any fiscal quarter as to which compliance is not waived herein
or arising under any other financial covenant contained in the Credit
Agreement.
3. Amendments to Credit Agreement.
(a) Article I of the Credit Agreement is amended to add,
each in its proper alphabetical order, the following defined terms:
"Event Obviating Security" shall mean either (a) on or before
February 28, 2001, a letter of intent reasonably satisfactory to the
Required Banks has been entered into by the Company for the sale to
a bona fide third party of either (i) the Company as a whole or (ii)
one or more of its material subsidiaries if (in the case of clause ii)
the Company demonstrates to the Required Banks' satisfaction that the
Leverage Ratio, calculated based upon the Company's December 31, 2000
financial statements and giving pro forma effect to the sale in
question and repayment of debt from available proceeds and by
excluding EBITDA with respect to the assets to be sold, would be
below 3.25 to 1.00, or (b) the Company's Leverage Ratio as of
December 31, 2000, is below 3.25 to 1.00, as determined using financial
data to be provided by the Company pursuant to Section 7.1(b) for the
fiscal quarter ending December 31, 2000.
"Facility A Pro Rata Share" shall mean the quotient obtained by
dividing the total Facility A Commitment by a particular Bank's
Facility A Commitment.
"Facility B Pro Rata Share" shall mean the quotient obtained by
dividing the total Facility B Commitment by a particular Bank's
Facility B Commitment.
"Net Proceeds" means, in respect of any sale or disposition of
assets, the proceeds in cash received by the Company or any of its
Subsidiaries with respect to or on account of such disposition, net
of: (a) the direct costs of such disposition then payable by the
recipient of such proceeds, (b) sales, use and other taxes paid or
payable by such recipient as a result thereof, and (c) amounts
required to be applied to repay principal, interest and prepayment
premiums and penalties on Indebtedness secured by a Lien permitted
hereunder on the properties subject to such disposition.
"Perfection Date" shall mean the first date on which each of the
following has occurred: (a) the Company shall have granted, as
collateral for the Obligations and, at the election of the Company,
any then outstanding Indebtedness permitted under Section 8.5(j),
to the Administrative Agent (on behalf of the Banks) a first
priority perfected security interest in and lien upon (i) all of
the capital stock of each of the material domestic subsidiaries
(direct or indirect) of the Company and 65% of the capital stock
of each material foreign subsidiary (direct or indirect) of the
Company, and (ii) all other present and future material assets and
properties of the Company and its domestic subsidiaries (including
accounts receivable, inventory, real property, machinery, equipment,
contracts, trademarks, copyrights, patents, license rights and
general intangibles), in each pursuant to documents and subject to
such exceptions as may be acceptable to the Agent and the Required
Banks, (b) the Company shall have taken all action deemed necessary
or advisable by the Agent and the Required Banks to establish,
protect and perfect the security described in clause (a), (c) the
Company shall have executed an amendment to the Credit Agreement
inserting additional provisions, including representations and
warranties and Events of Default, commonly found in secured
transactions of similar nature in form acceptable to the Agent
and the Required Banks, and (d) the Company shall have paid all
amounts owing under Section 11.4 in connection with the foregoing.
(b) Article I of the Credit Agreement is further amended
adding the following sentence at the end of the definition of Applicable
Margin and Facility Fee Percentage:
Notwithstanding the foregoing, Pricing Level VI shall apply from
and after October 27, 2000 through the third Business Day after
the Company delivers to the Agent a Compliance Certificate pursuant
to Section 7.2 of the Credit Agreement demonstrating that a lower
Pricing Level should apply, at which time, such lower Pricing Level
shall apply until the next succeeding Pricing Level Change Date.
(c) Clause (a) of the definition of "Facility A Revolving
Termination Date" is hereby amended and restated in its entirety as follows:
"(a) initially, the earlier of December 9, 2000 or such earlier date
identified as the "Facility A Revolving Termination Date" in a notice by
the Company to the Agent and each of the Banks, which date shall be at
least five Business Days after the effective date of such notice, and,
if the Facility A Revolving Termination Date is thereafter extended
pursuant to Section 2.16, such later date to which it is so extended;
and".
(d) The references to the term "Pro Rata Share" in the
following definitions and sections of the Credit Agreement are hereby
amended to read "Facility A Pro Rata Share": (i) definition of "L/C
Advance"; (ii) subsection 3.3(a); (iii) subsection 3.3(c); (iv) subsection
3.4(a); and (v) subsection 3.4(b).
(e) The references to the term "Pro Rata Share" in the
following sections of the Credit Agreement are hereby amended to read
"Facility A Pro Rata Share or Facility B Pro Rata Share, as applicable":
(i) subsection 2.3(b); (ii) subsection 2.3(c); (iii) Section 2.5; (iv)
Section 2.6; (v) subsection 2.12(a); and (vi) subsection 2.13(a).
(f) Section 2.16 of the Credit Agreement is hereby amended
and restated in its entirety as follows:
2.16 Extension of Facility A Revolving Termination Date.
At any time and from time to time, at the request of the Company,
any Bank or Banks holding Facility A Commitments may extend the
Facility A Revolving Termination Date, effective on the Facility A
Revolving Termination Date then in effect, to a date that is not more
than 364 days following the Facility A Revolving Termination Date then
in effect. In connection therewith, (1) each such Bank may decrease
or, with the consent of the Company, increase its Facility A
Commitment, and (2) upon the request of the Company, any Bank not
then holding a Facility A Commitment or any Eligible Assignee
desiring to become a Bank with a Facility A Commitment may provide
the Company with a Facility A Commitment. Each such extension shall
be evidenced by a writing satisfactory to the Agent executed by each
Bank participating in such extension or provision of the Facility A
Commitments, the Company, and the Agent. Notwithstanding the
foregoing, in no event may the aggregate Facility A Commitments at
any time exceed $23,837,209.31. If the Facility A Revolving
Termination Date shall be so extended, all Facility A Loans shall
be repaid in full with proceeds of new Facility A Loans or
otherwise on the effective date of such extension.
(g) Section 2.7 of the Credit Agreement ("Mandatory Prepayments
of Loans; Mandatory Commitment Reductions") shall be amended by adding
the following at the end thereof:
Within 5 days after receipt by the Company or any Restricted
Subsidiary of any Net Proceeds attributable to any sale or
disposition (or series of related sales or dispositions) of assets
having a book value of $1,000,000 or more, the Company shall prepay
Facility B Loans in the amount of such Net Proceeds and the aggregate
Facility B Commitments shall be permanently reduced by the amount of
such required prepayment.
(h) Subsection 7.1(b) of the Credit Agreement ("Financial
Statements") is hereby amended by replacing the phrase "each of the first
three fiscal quarters of each fiscal year" with the phrase "each fiscal
quarter" and inserting "(60 days in the case of the fiscal quarter ending
December 31, 2000)" after the phrase "45 days".
(i) The Credit Agreement is hereby amended by the addition
of the following new Section 7.15:
7.15 Preparation for Perfection Date. Unless an Event Obviating
Security has occurred, upon the request of the Agent, the Company
shall cooperate with the Agent in the preparation and negotiation of
collateral documents, conduct lien searches, and take such other
action as Agent may reasonably request to enable the creation and
perfection of first priority liens contemplated in the definition
of "Perfection Date" on or before March 31, 2001.
(j) Subsections 8.2(d) and 8.2(e) of the Credit Agreement
("Disposition of Assets") are hereby deleted and replaced with
"[Intentionally left blank]" and subsection 8.2(f) shall be amended and
restated in its entirety as follows:
(f) dispositions not otherwise permitted hereunder for fair market
value as long as either (x) the book value of assets disposed of in
any single transaction or series of related transactions is $1,000,000
or less, or (y) each of the following is true: (1) at the time of such
disposition, no Event of Default shall exist or shall result from such
disposition, (2) the aggregate sales price from such disposition shall
be paid in cash (except that in the case of dispositions of the assets
of Thorsen Tool, up to 50% of the purchase price for such assets may
be taken in the form of a promissory note), (3) the aggregate book
value of all assets so sold in any single transaction or series of
related transactions under this subsection (f) shall not exceed
$5,000,000 unless such assets constitute the stock or assets of
Thorsen Tool, Hamilton Precision Metals, or operations that are
accounted for as "Discontinued Operations" in the Company's
June 30, 2000 financial statements, and (4) prior to becoming
contractually committed to make any such disposition, the Company
shall have delivered to the Banks evidence of compliance with (1)
through (3) above and pro forma consolidated financial statements
accompanied by a Compliance Certificate signed by a Responsible
Officer certifying that at the end of the last fiscal quarter for
which such financial statements and Compliance Certificate have
been delivered pursuant to Sections 7.1 and 7.2, after giving pro
forma effect for four trailing quarters to such disposition by
excluding EBITDA with respect to the assets so sold, the Company
and its Restricted Subsidiaries would have been in compliance with
the financial covenants set forth in Sections 8.18, 8.19, 8.20 and
8.21 (giving effect to the Third Amendment to this Agreement).
(k) Subsection 8.4(b) of the Credit Agreement is amended to
add the following clause at the end thereof before the semicolon: "or in
the form of the promissory note permitted by Subsection 8.2(f)(y)(2)".
(l) Section 8.19 of the Credit Agreement is hereby amended
by deleting the chart contained therein and inserting the following in
its place:
Quarters Ending Maximum Leverage Ratio
Through September 30, 1999 3.50 to 1.00
December 31, 1999 through 3.25 to 1.00
June 30, 2000
December 31, 2000 4.00 to 1.00
March 31, 2001 if the
Perfection Date has occurred
on or before that date
March 31, 2001 if the 4.00 to 1.00
Perfection Date has occurred
on or before that date
March 31, 2001 if the 3.00 to 1.00
Perfection Date has not occurred
on or before that date
Thereafter 3.00 to 1.00
(m) Section 8.20 of the Credit Agreement is hereby amended by
deleting the chart contained therein and inserting the following in its
place:
Quarters Ending Minimum Fixed Charge
Coverage Ratio
Through September 30, 2000 1.10 to 1.00
December 31, 2000 1.15 to 1.00
March 31, 2001 if the Perfection 1.10 to 1.00
Date has occurred on or before
that date
March 31, 2001 if the Perfection 1.25 to 1.00
Date has not occurred on or
before that date
Thereafter 1.25 to 1.00
(n) Section 8.5 ("Limitation on Indebtedness") is hereby
amended by adding the following subsection 8.5(j):
(j) Indebtedness incurred for working capital purposes in an
aggregate amount not to exceed $23,837,209.31 minus the aggregate
Facility A Commitments, such Indebtedness to be unsecured unless
the Perfection Date has occurred, in which case, at the Company's
election, such Indebtedness may be secured on a pari passu basis
with the Obligations as long as the holders of such Indebtedness have
entered into intercreditor agreements reasonably satisfactory to the
Agent and the Required Banks.
(o) Section 9.1 ("Events of Default") is hereby amended by
adding a new subsection 9.1(q):
(q) the Perfection Date has not occurred on or before March 31,
2001, unless an Event Obviating Security has occurred on or before
February 28, 2001.
(p) Section 11.8 ("Assignments, Participations, etc.") is
hereby amended (i) by deleting the following language after the proviso in
subsection 11.8(a) thereof: "(1) such assignment shall be null and void if
not undertaken on a pro rata basis between Facility A Loans and Commitments
and Facility B Loans and Commitments, and Term Loans and term Loan
Commitments, and (2)", (ii) by deleting the following language in
subsection 11.8(d) thereof: "(i) such participation shall be null and
void if not undertaken on a pro rata basis between Facility A Loans and
Commitments, Facility B Loans and Commitments and Term Loans and Term
Loan Commitment", and (iii) by renumbering clauses (ii), (iii), (iv)
and (v) in subsection 11.8(d) thereof to clauses (i), (ii), (iii)
and (iv).
(q) The Credit Agreement is hereby amended by the addition
of the following new Section 11.19:
11.19 Preparation for Perfection Date. If the Company elects to
accomplish the Perfection Date notwithstanding that an Event Obviating
Security exists, the Agent will provide reasonable cooperation to
achieve the Perfection Date.
4. Amendments Relating to Security. The Company agrees for the
benefit of each of the parties hereto that no amendment or waiver of the
Credit Agreement shall be effective if such waiver or amendment amends
the definitions of "Event Obviating Security" or "Perfection Date",
Section 7.15, or subsection 9.1(q), in each case as set forth herein,
or waives compliance by the Company with Section 7.15 or subsection
9.1(q), unless such amendment or waiver is executed or consented to
by each of the Banks signatory to this Waiver and Amendment on the
Effective Date.
5. Representations and Warranties. The Company hereby
represents and warrants as follows:
(a) After giving effect to this Waiver and Amendment,
no Default or Event of Default exists.
(b) The execution, delivery and performance by the Company
of this Waiver and Amendment have been duly authorized by all necessary
corporate and other action and does not and will not require any
registration with, consent or approval of, notice to or action by, any
person (including any governmental agency) in order to be effective and
enforceable. The Credit Agreement as amended by this Waiver and
Amendment constitutes the legal, valid and binding obligations of the
Company, enforceable against it in accordance with its respective terms,
without defense, counterclaim or offset.
(c) After giving effect to this Waiver and Amendment, all
representations and warranties of the Company contained in the Credit
Agreement are true and correct.
(d) The Company is entering into this Waiver and Amendment
on the basis of its own investigation and for its own reasons, without
reliance upon the Agent, the Banks or any other person.
6. Effective Date. This Waiver and Amendment will become effective
on the first Business Day that each of the following conditions precedent
has been satisfied (the "Effective Date"):
(a) The Agent has received from the Company and the Required
Banks a duly executed original or facsimile of this Waiver and Amendment,
together with a duly executed Guarantor Acknowledgment and Consent in the
form attached hereto ("Consent").
(b) Each Bank executing this Waiver and Amendment and
providing facsimile of its signature page to the Agent on or before 3:00
p.m. (San Francisco time) on October 25, 2000, shall have received from
the Company an amount equal to .25% of such Bank's respective Facility
B Commitment, representing payment in full of a nonrefundable amendment
fee, which fee shall have been paid to the Agent by the Company for the
account of each such Bank.
7. Reservation of Rights. The Company acknowledges and agrees
that neither the execution and delivery by the Agent and the Banks of
this Waiver and Amendment shall be deemed (i) to create a course of
dealing or otherwise obligate the Agent or the Banks to forbear or
execute similar waivers under the same or similar circumstances in the
future, or (ii) to waive, relinquish or impair any right of the Agent
or the Banks to receive any indemnity or similar payment from any person
or entity as a result of any matter arising from or relating to the
defaults waived hereunder.
8. Miscellaneous.
(a) Except as herein expressly amended, all terms,
covenants and provisions of the Credit Agreement are and shall remain
in full force and effect and all references therein to such Credit
Agreement shall henceforth refer to the Credit Agreement as amended by
this Waiver and Amendment. This Waiver and Amendment shall be deemed
incorporated into, and a part of, the Credit Agreement.
(b) This Waiver and Amendment shall be binding upon and
inure to the benefit of the parties hereto and thereto and their
respective successors and assigns. No third party beneficiaries are
intended in connection with this Waiver and Amendment.
(c) This Waiver and Amendment shall be governed by and
construed in accordance with the law of the State of California
(without regard to principles of conflicts of laws).
(d) This Waiver and Amendment may be executed in any
number of counterparts, each of which shall be deemed an original,
but all such counterparts together shall constitute but one and the
same instrument.
(e) This Waiver and Amendment, together with the
Credit Agreement, contains the entire and exclusive agreement of the
parties hereto with reference to the matters discussed herein and
therein. This Waiver and Amendment supersedes all prior drafts and
communications with respect thereto. This Waiver and Amendment may
not be amended except in accordance with the provisions of
Section 11.1 of the Credit Agreement.
(f) If any term or provision of this Waiver and
Amendment shall be deemed prohibited by or invalid under any
applicable law, such provision shall be invalidated without
affecting the remaining provisions of this Waiver and Amendment or
the Credit Agreement, respectively.
(g) Company covenants to pay to or reimburse the Agent,
upon demand, for all costs and expenses (including allocated costs of
in-house counsel) incurred in connection with the development,
preparation, negotiation, execution and delivery of this Waiver and
Amendment and the administration of the existing defaults, including
without limitation appraisal, audit, search and filing fees incurred in
connection therewith.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Waiver and Amendment as of the date first above written.
KATY INDUSTRIES, INC.
By:
Title:
By:
Title:
BANK OF AMERICA, N.A., as Agent and as a Bank
By:
Title: Vice President
LASALLE BANK NATIONAL ASSOCIATION,
as Managing Agent and a Bank
By:
Name:
Title:
KEYBANK NATIONAL ASSOCIATION, as a Bank
By:
Name:
Title:
FIRSTSTAR BANK, N.A., as a Bank
By:
Name:
Title:
THE NORTHERN TRUST COMPANY, as a Bank
By:
Name:
Title:
WELLS FARGO BANK, N.A., as a Bank
By:
Name:
Title:
UNION BANK OF CALIFORNIA, N.A., as a Bank
By:
Name:
Title:
UNION PLANTERS BANK, N.A., as a Bank
By:
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION, as a Bank
By:
Name:
Title:
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
The undersigned, each a Guarantor with respect to the Company's
obligations to the Agent and the Banks under the Credit Agreement, each
hereby (i) acknowledge and consent to the execution, delivery and
performance by Company of the foregoing Amendment to Credit Agreement
("Amendment"), and (ii) reaffirm and agree that the respective guaranty
to which the undersigned is party and all other documents and agreements
executed and delivered by the undersigned to the Agent and the Banks in
connection with the Credit Agreement are in full force and effect, without
defense, offset or counterclaim. (Capitalized terms used herein have the
meanings specified in the Amendment.)
IN WITNESS WHEREOF, each Guarantor hereto has caused its duly
authorized officers to execute and deliver this acknowledgement and consent
as of October ___, 2000.
Aetna Liquidating Company,
as Guarantor
By:
Name:
Title:
American Gage & Machine Company,
as Guarantor
By:
Name:
Title:
Bach Simpson, Inc.,
as Guarantor
By:
Name:
Title:
Bush Universal, Inc.,
as Guarantor
By:
Name:
Title:
Chatham Resource Recovery Systems, Inc.,
as Guarantor
By:
Name:
Title:
Duckback Products, Inc.,
as Guarantor
By:
Name:
Title:
Fulton Iron Works Company,
as Guarantor
By:
Name:
Title:
GC Thorsen International Limited,
as Guarantor
By:
Name:
Title:
GC/Waldom Electrical, Inc. (formerly known as
GC Thorsen, Inc.), as Guarantor
By:
Name:
Title:
Glit/DISCO, Inc.,
as Guarantor
By:
Name:
Title:
Glit/Gemtex, Inc.,
as Guarantor
By:
Name:
Title:
Hallmark Holdings, Inc.,
as Guarantor
By:
Name:
Title:
Hamilton Precision Metals, Inc.,
as Guarantor
By:
Name:
Title:
Katy International, Inc. (formerly named
HMO, Inc.), as Guarantor
By:
Name:
Title:
Katy-Seghers, Inc.,
as Guarantor
By:
Name:
Title:
K-S Energy Corp.,
as Guarantor
By:
Name:
Title:
Panhandle Industrial Company, Inc.,
as Guarantor
By:
Name:
Title:
PTR Machine Corp. (formerly known as
Peters Machinery Company), as Guarantor
By:
Name:
Title:
Savannah Energy Systems Company,
as Guarantor
By:
Name:
Title:
Wabash Liquidation Corp. (formerly known
as Diehl Machines, Inc.), as Guarantor
By:
Name:
Title:
Wilen Products, Inc.,
as Guarantor
By:
Name:
Title:
W.J. Smith Wood Preserving Company,
as Guarantor
By:
Name:
Title:
Woods Industries, Inc.,
as Guarantor
By:
Name:
Title:
WP Liquidating Corp.,
as Guarantor
By:
Name:
Title: