EXHIBIT 10.18
FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
(WITH LETTER OF CREDIT FACILITY)
This FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT AND
TERM LOAN AGREEMENT (WITH LETTER OF CREDIT FACILITY) (this "FIFTH AMENDMENT") is
entered into effective the 31st day of December, 1998, by and between ALAMO
GROUP INC., a Delaware corporation (the "COMPANY"), Alamo Group (USA) Inc.,
Alamo Group (Tx) Inc., Alamo Group (Ks) Inc., Alamo Group (Il) Inc., Alamo Sales
Corp., Tiger Corporation f/k/a Alamo Group (SD) Inc. , M&W Gear Company, Adams
Hard-Facing Company, Inc., Herschel-Adams Inc., Alamo Group (IA) Inc.
(collectively, the "GUARANTORS") and NATIONSBANK, N.A. (the "BANK").
R E C I T A L S:
A. Company and Bank executed a Third Amended and Restated Revolving Credit
and Term Loan Agreement (With Letter of Credit Facility), dated December 29,
1995 (the "THIRD AMENDED LOAN AGREEMENT"), pursuant to which Bank provided to
Company a $35,000,000.00 loan facility to be used for general working capital
purposes, financing new acquisitions, and to support letters of credit;
B. Among the credit support for this facility are the Guaranty Agreements,
dated December 29, 1995 (collectively, the "GUARANTIES"), executed by Alamo
Group (USA) Inc., Alamo Group (Tx) Inc., Alamo Group (Ks) Inc., Alamo Group (Il)
Inc., Alamo Sales Corp., Tiger Corporation f/k/a Alamo Group (SD) Inc. , Alamo
Group (WA) Inc., M&W Gear Company, Adams Hard-Facing Company, Inc.,
Herschel-Adams Inc., Alamo Group (IA) Inc. (collectively, the "GUARANTORS");
C. Effective April 10, 1996, Company and Bank executed First Amendment to
Third Amended and Restated Revolving Credit and Term Loan Agreement (With Letter
of Credit Facility) (the "FIRST AMENDMENT"), pursuant to which Bank increased
the amount available under this facility to $40,000,000.00, on the terms and
conditions stated in the First Amendment.
D. Effective December 23, 1996, Company and Bank executed Second Amendment
to Third Amended and Restated Revolving Credit and Term Loan Agreement (with
Letter of Credit Facility) (the "SECOND AMENDMENT"), pursuant to which Bank
agreed to (i) give a one-year extension of the maturity of the term and
revolving loans evidenced by this facility; (ii) reduce the interest rate margin
on certain LIBOR-priced borrowings under the facility; and (iii) adjust the
threshold for application of an unused facility fee and the timing of payment
thereof.
E. Effective June 23, 1997, Company and Bank executed Third Amendment to
Third Amended and Restated Revolving Credit and Term Loan Agreement (with Letter
of Credit Facility) (the "THIRD AMENDMENT") pursuant to which (i) the loan and
note amounts were increased to $45,000,000.00; (ii) the interest rate margin on
certain LIBOR-priced borrowings under the facility was reduced; (iii) the
requirement for a separate Consolidated Tangible Net Worth Retention Percentage
of 60% on Tier 1 pricing was eliminated; (iv) the minimum Consolidated Tangible
Net Worth amount for calendar year 1996 was established at $80,000,000.00, less
adjustments for certain Treasury stock additions; and (v) Bank consented to
stock repurchases of up to $17,000,000.00.
F. Effective December 31, 1997, Company and Bank executed a Fourth
Amendment, to further amend the Third Amended Loan Agreement (the "FOURTH
AMENDMENT"), including (i) to eliminate the Total Liabilities to Tangible Net
Worth covenant, (ii) to replace the Current Maturity Coverage with a Fixed
Charge Coverage, (iii) to eliminate all Interest Margin Factors other than
Operating Leverage Ratio, (iv) to eliminate Company's ability to convert from
revolving credit advances to a term loan, and (v) to extend the maturity of the
Loan to December 31, 2002.
G. Company has requested, and Bank has agreed, to (i) modify the
definition in the third Amended Loan Agreement of Operating Cash Flow to take
into account non-recurring items relating to the third and fourth quarters of
1998 that do not constitute "extraordinary losses" for purposes of generally
accepted accounting
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principles, and (ii) modify the Fixed Charge Coverage Ratio, effective January
1, 1999. In addition, Company has agreed to limit the dividends that are payable
during calendar year 1999 and, beginning in calendar year 2000, to include
dividends as one of the "Fixed Charges" included within the "Fixed Charge
Coverage Ratio."
H. Bank has agreed that Company's liquidation of its "Rhino International"
subsidiary, Alamo Group (WA) Inc., is not a violation of SECTION 9.07 of the
Third Amended Loan Agreement.
I. Although not required to do so for the Guaranties to continue to be
fully effective, the Guarantors confirm by their execution of this Fifth
Amendment that they acknowledge the amendments effected hereby and that their
Guaranties are unaffected.
J. Each capitalized term used in this Fifth Amendment shall have the
meaning given to it in the Third Amended Loan Agreement, as previously amended
by the First Amendment, Second Amendment, Third Amendment and Fourth Amendment.
NOW, THEREFORE, in consideration of the mutual promises herein contained
and for other valuable consideration, Company and Bank agree as follows:
A G R E E M E N T:
1. RECITALS. The foregoing recitals are true and correct.
2. AMENDMENTS. The following provisions of the Third Amended Loan
Agreement are hereby amended:
(a) The following terms are substituted for the current definitions of the
same terms contained in SECTION 1.01 of the Third Amended Loan Agreement, as
previously amended:
(I) "FIXED CHARGES" MEANS, FOR ANY PERIOD FOR COMPANY AND ITS
CONSOLIDATED SUBSIDIARIES, THE SUM OF (A) INTEREST EXPENSE, (B) OPERATING
LEASE EXPENSES, (C) RENT EXPENSES, (D) CURRENT MATURITIES OF LONG-TERM
DEBT AND CAPITAL LEASES, (E) CAPITAL EXPENDITURES AND (F) BEGINNING ON
APRIL 1, 2000, DIVIDENDS PAID BY COMPANY ON ITS SHARES OF ISSUED AND
OUTSTANDING COMMON STOCK.
(II) "OPERATING CASH FLOW" MEANS FOR THE COMPANY AND ITS
CONSOLIDATED SUBSIDIARIES, CONSOLIDATED ADJUSTED NET INCOME, MINUS (A)
EXTRAORDINARY GAINS, PLUS (B) EXTRAORDINARY LOSSES, MINUS (C) GAINS DUE TO
THE WRITE-UP OF ASSETS, PLUS (D) LOSSES DUE TO THE WRITE-DOWN OF ASSETS,
PLUS (E) THE SUM OF (I) DEPRECIATION EXPENSE, AND (II) AMORTIZATION
EXPENSE, PLUS (F) INTEREST EXPENSE, PLUS (G) INCOME TAXES, PLUS (H) FOR
THE QUARTER ENDING SEPTEMBER 30, 1998, THE AGGREGATE AMOUNT OF $2,411,000,
AND FOR THE QUARTER ENDING DECEMBER 31, 1998 THE AMOUNT OF $6,113,000
(REPRESENTING NON-RECURRING LITIGATION AND WRITE-DOWN COSTS RELATING TO
CLOSURE OF RHINO INTERNATIONAL AND MERGER EXPENSES), IN ALL CASES
DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR
THE TWELVE (12) MONTH PERIOD ENDING ON THE DATE OF DETERMINATION.
(b) Effective April 1, 1999, SECTION 2.04(D) is amended and restated to
read as follows:
(D) APPLICABLE MARGIN. AS USED IN THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, "APPLICABLE MARGIN" MEANS, AS TO THE LOANS, A RATE PER ANNUM
DETERMINED FOR EACH FISCAL QUARTER DURING COMPANY'S FISCAL YEAR, BEGINNING
WITH THE QUARTER ENDING DECEMBER 31, 1998, BY REFERENCE TO THE OPERATING
LEVERAGE RATIO (THE "INTEREST MARGIN FACTOR") AS OF THE END OF THE FISCAL
QUARTER (HEREIN CALLED THE "DATE OF DETERMINATION"), AND THE TYPE OF
ADVANCE, AS FOLLOWS:
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(I) IF, ON ANY DATE OF DETERMINATION, THE FOLLOWING IS MET: THE
OPERATING LEVERAGE RATIO IS EQUAL TO OR LESS THAN 1.25 TO 1.0, THEN
THE APPLICABLE MARGIN DURING THE FISCAL QUARTER FOLLOWING THE DATE
OF DETERMINATION, EXPRESSED AS A RATE PER ANNUM, SHALL BE (- 1%) FOR
FLOATING BASE ADVANCES, AND 7/8 OF 1% FOR EURODOLLAR ADVANCES; AND
IF NOT, THEN
(II) IF, ON ANY DATE OF DETERMINATION, THE FOLLOWING IS MET: THE
OPERATING LEVERAGE RATIO IS GREATER THAN 1.25 TO 1.0 AND LESS THAN
OR EQUAL TO 1.50 TO 1.0, THEN THE APPLICABLE MARGIN DURING THE
FISCAL QUARTER FOLLOWING THE DATE OF DETERMINATION, EXPRESSED AS A
RATE PER ANNUM, SHALL BE (-1/2 OF 1%) FOR FLOATING BASE ADVANCES,
AND 1.5% FOR EURODOLLAR ADVANCES; AND IF NOT, THEN.
(III) IF, ON ANY DATE OF DETERMINATION, THE FOLLOWING IS MET: THE
OPERATING LEVERAGE RATIO IS GREATER THAN 1.50 TO 1.0 AND LESS THAN
OR EQUAL TO 1.75 TO 1.0, THEN THE APPLICABLE MARGIN DURING THE
FISCAL QUARTER FOLLOWING THE DATE OF DETERMINATION, EXPRESSED AS A
RATE PER ANNUM, SHALL BE ZERO (0) FOR FLOATING BASE ADVANCES, AND
1-3/4% FOR EURODOLLAR ADVANCES, AND IF NOT, THEN
(IV) IF, ON ANY DATE OF DETERMINATION, THE FOLLOWING IS MET: THE
OPERATING LEVERAGE RATIO IS GREATER THAN 1.75 TO 1.0 AND LESS THAN
OR EQUAL TO 2.25 TO 1.0, THEN THE APPLICABLE MARGIN DURING THE
FISCAL QUARTER FOLLOWING THE DATE OF DETERMINATION, EXPRESSED AS A
RATE PER ANNUM, SHALL BE ZERO (0) FOR FLOATING BASE ADVANCES, AND 2%
FOR EURODOLLAR ADVANCES, AND IF NOT, THEN
(V) IF, ON ANY DATE OF DETERMINATION, THE FOLLOWING IS MET: THE
OPERATING LEVERAGE RATIO IS GREATER THAN 2.25 TO 1.0, THEN THE
APPLICABLE MARGIN DURING THE FISCAL QUARTER FOLLOWING THE DATE OF
DETERMINATION, EXPRESSED AS A RATE PER ANNUM, SHALL BE 1/4% FOR
FLOATING BASE ADVANCES, AND 2-1/4% FOR EURODOLLAR ADVANCES,,
THE PRICING PROVIDED IN SUBPARAGRAPH (V) SHALL BE APPLICABLE IF COMPANY
FAILS TO SATISFY THE INTEREST MARGIN FACTOR STATED THEREIN, BUT HAS NOT
SUFFERED AN EVENT OF DEFAULT (E.G. BY FAILING TO SATISFY EACH OF THE
COVENANTS CONTAINED IN SECTIONS 8.15, AND 8.17).
FOR CONVENIENCE OF REFERENCE, SECTION 2.04(D) IS SUMMARIZED IN THE PRICING
GRID ATTACHED AS EXHIBIT "K".
FOR EURODOLLAR ADVANCES, THE APPLICABLE MARGIN FOR A LOAN YEAR APPLIES
BOTH TO (I) ADVANCES MADE DURING THE CURRENT LOAN YEAR AND (II) ADVANCES
OUTSTANDING DURING THE CURRENT LOAN YEAR THAT WERE MADE DURING A PRIOR
LOAN YEAR.
IF THE INTEREST RATE CHANGES HEREUNDER BECAUSE OF A CHANGE IN THE
APPLICABLE MARGIN, INTEREST SHALL ACCRUE AT THE CHANGED RATE BEGINNING THE
FIRST DAY OF THE MONTH AFTER THE EARLIER OF THE DATE ON WHICH THE COMPANY
PROVIDES, OR BY WHICH IT WAS REQUIRED TO PROVIDE, PURSUANT TO SECTION
8.01(D) OF THE THIRD AMENDED LOAN AGREEMENT, THE FINANCIAL INFORMATION
NECESSARY TO DETERMINE THE APPLICABLE MARGIN.
(c) SECTION 8.14 is hereby amended to read as follows:
"8.14 MINIMUM FIXED CHARGE COVERAGE RATIO. THE COMPANY SHALL
MAINTAIN A MINIMUM FIXED CHARGE COVERAGE RATIO (I) FOR THE PERIOD
BEGINNING OCTOBER 1, 1998 AND ENDING ON MARCH 31, 2000, OF AT LEAST 1.25
TO 1.0, (II) FOR THE PERIOD BEGINNING APRIL 1, 2000 AND ENDING ON
SEPTEMBER 30, 2000, OF AT LEAST 1.15 TO 1.0, AND (III) FOR THE PERIOD
BEGINNING ON OCTOBER 1, 2000 AND ENDING ON THE TERMINATION DATE, OF AT
LEAST 1.25 TO 1.0. THE FOREGOING COVENANT SHALL BE
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MET BY THE COMPANY AT THE END OF EACH OF ITS FISCAL QUARTERS USING A
ROLLING FOUR QUARTERS OF HISTORICAL OPERATING CASH FLOW AND FIXED CHARGES
INFORMATION.
(d) There shall be added a new SECTION 9.11 to read as follows:
"9.11 LIMITATION ON DIVIDENDS. FOR THE PERIOD FROM JANUARY 1, 1999
THROUGH MARCH 31, 2000, COMPANY SHALL NOT PAY DIVIDENDS ON ITS ISSUED AND
OUTSTANDING SHARES OF COMMON STOCK IN ANY CALENDAR QUARTER, IN EXCESS OF
$0.11 PER SHARE.
3. LIQUIDATION OF RHINO. Bank agrees that Company's liquidation of Alamo
Group (WA) Inc., a/k/a Rhino International, did not and does not constitute a
breach of the covenant contained in SECTION 9.07 of the Third Amended Loan
Agreement. Effective with its liquidation, Alamo Group (WA) Inc., a/k/a Rhino
International, is no longer a member of the Obligated Group, as defined in the
Third Amended Loan Agreement (as previously amended).
4. LIMITATION ON ACQUISITIONS. Notwithstanding anything to the contrary
contained in the Third Amended Loan Agreement, as previously amended, Company
shall make no Acquisitions without Bank's prior written consent.
5. AMENDMENT FEE. In consideration of Bank's efforts to structure this
Fifth Amendment, Company shall pay to Bank within three (3) business days after
the execution of this Agreement by Bank, an amendment fee of $56,250.00 (1/8 of
1% of the aggregate Commitment of Bank under the Third Amended Loan Agreement).
6. GUARANTIES. The Guarantors (excluding Alamo Group (WA) Inc.) hereby
confirm that the Guaranties cover the entire amount of the Loans, as previously
increased, are in full force and effect and are in no way diminished or
adversely affected by this Fifth Amendment.
7. NO OTHER AMENDMENTS. All other provisions of the Third Amended Loan
Agreement, as previously amended by the First Amendment, Second Amendment, Third
Amendment and Fourth Amendment, that are not specifically modified or amended by
this Fifth Amendment, shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Fifth
Amendment as of the day and year first above written.
COMPANY: BANK:
ALAMO GROUP INC. NATIONSBANK, N.A.
By: /S/ ROBERT H. GEORGE By:/S/ R. MARK BEARFIELD
Robert H. George R. Mark Bearfield,
Vice President Vice President
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GUARANTORS:
ALAMO GROUP (USA) INC. M&W GEAR COMPANY
By:/S/ ROBERT H. GEORGE By:/S/ROBERT H. GEORGE
Robert H. George Robert H. George
Vice President - Administration Vice President - Administration
ALAMO GROUP (Tx) INC. ADAMS HARD-FAClNG COMPANY, INC.
By:/S/ROBERT H. GEORGE By:/S/ROBERT H. GEORGE
Robert H. George Robert H. George
Vice President - Administration Vice President - Administration
ALAMO GROUP (Ks) INC. HERSCHEL-ADAMS INC.
By:/S/ROBERT H. GEORGE By:/S/ROBERT H. GEORGE
Robert H. George Robert H. George
Vice President - Administration Vice President - Administration
ALAMO GROUP(Il) INC. ALAMO GROUP (IA) INC.
By:/S/ROBERT H. GEORGE By:/S/ROBERT H. GEORGE
Robert H. George Robert H. George
Vice President - Administration Vice President - Administration
ALAMO SALES CORP.
By:/S/ROBERT H. GEORGE
Robert H. George
Vice President - Administration
TIGER CORPORATION
By:/S/ROBERT H. GEORGE
Robert H. George
Vice President - Administration
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