EXHIBIT 10.3
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT to Loan Agreement ("Third Amendment") is made and
entered into as of the 29th day of October, 1996, by and between CONSOLIDATED
GRAPHICS, INC., a Texas corporation, with offices and place of business at 2210
West Dallas, Houston, Texas 77019 (hereinafter called "Borrower") and
NATIONSBANK OF TEXAS, N.A., a national banking association, with offices and
banking quarters at 700 Louisiana, Houston, Texas 77002 (hereinafter called
"Lender"). For and in consideration of the mutual covenants and agreements
herein contained, Borrower and Lender hereby amend as of the date of this Third
Amendment that certain Amended and Restated Loan Agreement between Borrower and
Lender dated the 7th day of November, 1994, as previously amended by the First
Amendment to Loan Agreement dated August 23, 1995 and by the Second Amendment to
Loan Agreement dated October 21, 1996 (as amended, the "Loan Agreement"), in the
following respects:
Section 1. AMENDMENTS TO LOAN AGREEMENT.
A. Section 1.3(a) and (b) are deleted and the following are
substituted in their place:
1.3 REVOLVING LINE OF CREDIT. (a) The Lender, during the period
from the date of the Second Amendment to Loan Agreement until October
31, 1998, subject to the terms and conditions of this Agreement, and
subject to the condition that at the time of each borrowing hereunder,
no Default or Event of Default has occurred and is then continuing to
occur and, as to each borrowing which increases the principal amount
outstanding under the Revolving Note, that the representations and
warranties given by the Borrower in Section 2 as of the date of this
Agreement shall remain true and correct in all material respects (unless
such representation and warranty relates to an earlier date), agrees to
make
loans to Borrower pursuant to a Revolving Line of Credit up to but not
in excess of an aggregate principal amount outstanding at any time of
$35,000,000.00 on the same Business Day upon receipt from Borrower on or
before 1:00 p.m. Houston time of written applications for loans
hereunder in the form attached as Exhibit "1.3.1". Each advance shall be
in an amount of not less than $50,000.00. Letters of credit may be
issued pursuant to the Revolving Line of Credit provided that (i) the
aggregate face amount of outstanding letters of credit shall not exceed
$5,000,000 and (ii) the availability under the Revolving Line of Credit
will be reduced by an amount equal to the aggregate face amount of
outstanding letters of credit. Any letters of credit issued hereunder
will have expiry dates not exceeding November 30, 1998.
(b) The Borrower's obligation to repay the Revolving Line of
Credit shall be evidenced by a promissory note of the Borrower in
substantially the form attached as Exhibit "1.3.2" to the Second
Amendment to Loan Agreement, payable to the order of Lender. The
Revolving Note shall bear interest at the rates indicated below, but in
no event to exceed the maximum non-usurious interest rate permitted by
applicable law with the balance of principal plus accrued and unpaid
interest due and payable on or before October 31, 1998.
Applicable Interest Fees
Funded Debt/ Rate Unused Letters
Ebitda Ratio Options Portion of Credit
------------ ------- ------- ---------
Less than or LIBOR + .625% or
equal to .75 Prime Rate .10% .625%
Greater than .75 LIBOR + .875% or .175% .875%
to 1.0 but less Prime Rate
than or equal to
1.5 to 1.0
Greater than 1.5 LIBOR + 1.25% or .25% 1.25%
to 1.0 but less Prime Rate
than or equal to
2.0 to 1.0
Greater than 2.0 LIBOR + 1.50% or .375% 1.50%
to 1.0 but less Prime Rate + .25%
than or equal to
2.5 to 1.0
Greater than 2.5 LIBOR + 1.75% or .50% 1.75%
to 2.5 to 1.0 Prime Rate + .25%
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The adjustment in the interest rate options on the Revolving Note and
the fees charged pursuant to this Agreement shall be effective on (i)
the first of the month following receipt of a quarterly financial
statement and Compliance Certificate pursuant to Section 3.8 indicating
the Funded Debt to EBITDA Ratio, and no Default or Event of Default
exists, as more fully set forth in the Revolving Note and (ii) on an
Interim Rate Determination Date. As used herein, "Interim Rate
Determination Date" shall mean the effective date of the consummation of
a merger and acquisition either (i) requiring the approval of Lender
under the terms of this Agreement, or (ii) which does not require the
approval of Lender but as to which Borrower desires to add historical
EBITDA for the purposes of calculating compliance with financial
covenants hereunder. In such event Borrower shall deliver within sixty
(60) days following consummation of such merger or acquisition an
interim redetermination of the Funded Debt to EBITDA Ratio based upon
proforma financial statements which reflect such merger or acquisition,
which redetermination and the calculation related thereto shall be
subject to review and approval by Lender. The applicable interest rate
options on the Revolving Note and the fees charged pursuant to this
Agreement shall be adjusted effective as of the Interim Rate
Determination Date based upon such approved interim redetermination.
B. Section 3.11 is deleted and the following is substituted
in its place:
3.11 BORROWING BASE. During any period the Revolving Line of
Credit is required to be secured pursuant to Section 3.10, the aggregate
indebtedness pursuant to the Revolving Line of Credit plus the amount of
any unexpired letters of credit shall never exceed the sum of (i) ninety
percent (90%) of the Eligible Accounts Receivable of (y) corporations
whose securities are publicly traded with debt ratings of "A" or better
as determined by Lender based upon Moody's or Standard & Poor's
classification and (z) the United States government and any agency
thereof; plus (ii) eighty percent (80%) of other Eligible Accounts
Receivable; plus (iii) (y) sixty percent (60%) of the book value of
unopened inventory plus (z) forty percent (40%) of book value of other
inventory, provided inventory shall not include work-in-process and (iv)
fifty percent (50%) of work-in-process, provided that the amount
determined under this subsection (iii) shall never exceed forty percent
(40%) of the Borrowing Base. In accordance with Section 3.1(d), Borrower
shall provide
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the Lender a calculation of the foregoing Borrowing Base in the form
attached as Exhibit "3.11" ("Borrowing Base Report"). In the event the
aggregate unpaid principal balance under the Revolving Line of Credit
plus the amount of any unexpired letters of credit exceeds the Borrowing
Base calculated as described above, the Borrower will promptly, but in
any event no later than within five (5) Business Days (no additional
notice or cure period being required prior to such failure becoming an
Event of Default hereunder), reduce the unpaid principal balance under
the Revolving Line of Credit until the amount owed is less than that
calculated as described above. In the event such required payment
involves a LIBOR Portion, such amount shall be prepaid without premium
or restriction.
Section 2. RATIFICATION.
Except as amended hereby, the Loan Agreement shall remain unchanged and
the terms, conditions, representations, warranties, and covenants of said Loan
Agreement, are true as of the date hereof (unless such representations and
warranties relate to an earlier date), are ratified and confirmed in all
respects and shall be continuing and binding upon the parties.
Section 3. DEFINED TERMS.
All terms used in this Amendment which are defined in the Loan Agreement
shall have the same meaning as in the Loan Agreement, except as otherwise
indicated in this Amendment.
Section 4. MULTIPLE COUNTERPARTS.
This Amendment may be executed by the parties hereto in several separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
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Section 5. APPLICABLE LAW.
This Amendment shall be deemed to be a contract under and subject to,
and shall be construed for all purposes in accordance with the laws of the State
of Texas.
Section 6. FINAL AGREEMENT.
THE WRITTEN LOAN AGREEMENTS IN CONNECTION WITH THIS THIRD AMENDMENT
REPRESENT THE FINAL AGREEMENT BETWEEN THE BORROWER AND THE LENDER AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE BORROWER AND THE LENDER. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE LENDER AND THE BORROWER.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their duly authorized officers as of the 29th day of October, 1996.
CONSOLIDATED GRAPHICS, INC.
By:/s/ JOE R. DAVIS
Joe R. Davis
Chief Executive Officer
NATIONSBANK OF TEXAS, N.A.
By: /s/ JAMES D. RECER
James D. Recer
Vice President
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EXHIBIT "3.11"
BORROWING BASE REPORT
FORM OF
BORROWING BASE CERTIFICATE
NO. ____________________ Dated ____________, 19_______
In accordance with a loan agreement dated November 7, 1994 (as amended
"Loan Agreement") between NATIONSBANK OF TEXAS, N.A. ("Lender") and CONSOLIDATED
GRAPHICS, INC. ("Borrower"), I, ____________________________ of the Borrower
hereby certify and warrant that the following schedule accurately states
Borrower's and the Guarantors' Eligible Accounts Receivables and Inventory and
Borrower's Borrowing Base as of the date hereof and that no Default or Event of
Default under the Loan Agreement has occurred and is continuing:
1. Total Accounts Receivable Control as of ______________________ $___________
2. Less: (A) Accounts 120 days from date of Invoice$_____________
(B) Affiliate Accounts $_____________
(C) Intercompany Accounts $_____________
(D) Disputed Accounts $_____________
(E) Bankrupt/Financially Distressed $_____________
(F) Foreign (No L/C) $_____________
3. ELIGIBLE Accounts Receivable [Line 1 minus Line 2] $____________
4. ELIGIBLE Accounts Receivable - Public/Governmental
(A) ELIGIBLE Accounts from "A" Rated
Public Companies $_____________
(B) ELIGIBLE Accounts from
U.S. Government $_____________
5. ELIGIBLE Accounts Receivable - Public/Governmental
[Line 4(A) plus Line 4(B) $____________
6. 90% of Line 5 $____________
7. Other ELIGIBLE Accounts Receivable
[Line 3 minus Line 5] $____________
8. 80% of Line 7 $____________
9. Total Account Receivable Borrowing Base [Line 6 plus Line 8] $____________
10. Unopened Paper and Ink Inventory $____________
11. 60% of Line 10 $____________
12. Opened Paper, Ink and Other Inventory $____________
13. 40% of Line 12 $____________
14. Work-In-Process at Cost $____________
15. 50% of Line 14 $____________
16. Total Inventory Borrowing Base [Line 11 plus Line 13 plus Line 15]$____________
17. Preliminary Borrowing Base [Line 9 plus Line 16] $____________
18. 40% of Line 17 $____________
19. Lesser of Line 16 and Line 18 $____________
20. Borrowing Base [Line 9 plus Line 19] $____________
21. Loan Balance this report $____________
22. Outstanding Letters of Credit $____________
23. Excess of Line 20 over Line 21 plus Line 22 $____________
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Signature of Certifying Officer
Title:________________________________