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EXHIBIT 10.17
THIRD AMENDMENT TO CREDIT AGREEMENT
This third amendment to credit agreement ("Amendment") is made and
entered into as of the 28th day of October, 1994, by and among U.S. BANK OF
WASHINGTON, NATIONAL ASSOCIATION ("U.S. Bank") and FLOW INTERNATIONAL
CORPORATION, a Delaware corporation ("Flow") and SPIDER STAGING CORPORATION, a
Washington corporation ("SSC").
RECITALS:
A. On or about October 14, 1992, U.S. Bank, Flow, and SSC entered
into that certain credit agreement (together with all amendments, supplements,
exhibits, and modifications thereto, the "Credit Agreement"), which amended,
restated, and combined the Original Loan Agreement, as amended, between U.S.
Bank and Flow with the SSC Loan Agreement between U.S. Bank and SSC. The
Credit Agreement also set forth the terms and conditions under which U.S. Bank
agreed to continue making certain loans and advances of credit to Flow and SSC.
On or about April 28, 1993, U.S. Bank, Flow, and SSC entered into that certain
first amendment to credit agreement ("First Amendment") whereby U.S. Bank
agreed to extend a new $9,659,174 loan to Flow which was used to replace
certain existing loans from U.S. Bank to Flow and from U.S. Bank to Flow and
SSC and to pay down the Revolving Loan. On or about September 2, 1993, U.S.
Bank agreed to increase the Revolving Loan to $14,000,000 and Flow executed and
delivered to U.S. Bank a new promissory note in such amount that replaced the
Revolving Note. On or about September 30, 1993, U.S. Bank, Flow and SSC
entered into that certain second amendment to credit agreement ("Second
Amendment") whereby U.S. Bank agreed to extend a new $3,000,000 loan to Flow
(Revolving Equipment Loan) along with making other changes to various other
loan/commitments.
B. Flow and SSC have requested U.S. Bank to: (i) increase Flow's
Revolving Line of Credit to $17,000,000, (ii) make a new $4,500,000 equipment
loan to Flow which would include the consolidation of two existing term loans,
and (iii) reduce the interest and make other miscellaneous amendments to the
existing credit agreement. The purpose of this Amendment is to set forth the
terms and conditions upon which U.S. Bank will do the foregoing pursuant to
Flows and SSC's request.
ARTICLE I. DEFINITIONS
As used herein, capitalized terms shall have the meanings given to
them in the Credit Agreement, except as otherwise defined herein or as the
context otherwise requires. Article I of the Credit Agreement is modified to
add or amend. (as the case may be) the definitions of the terms set forth
below:
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"Applicable Law" means all applicable provisions and requirements of
all (a) constitutions, statutes, ordinances, rules, regulations, standards,
orders, and directives of any Governmental Bodies, (b) authorizations,
consents, approvals, certificates of compliance, licenses, permits, or
exemptions from, contracts with, registrations or filings with, or reports or
notices to, any Governmental Body, and (c) orders, decisions, decrees,
judgments, injunctions, and writs of all courts and arbitrators; whither such
Applicable Laws presently exist, or are modified, promulgated, or implemented
after the date hereof.
"Cash Flow" means Flow's Consolidated net income before taxes, plus
noncash items (such as depreciation and amortization), less unfunded capital
expenditures and extraordinary items.
"Current Ratio" means the ratio of Flow's Consolidated current assets
to Flow's Consolidated current liabilities.
"Governmental Body" means the government of the United States, any
state, or any foreign country, or any governmental or regulatory official,
body, department, bureau, subdivision, agency, commission, court arbitrator, or
authority, or any instrumentality thereof, whether federal, state, or local.
"Interest Periods" means for LIBOR Rate Borrowing the one month period
designated by Flow in a Borrowing Notice. In the event that the last day of
any Interest Period would fall on a day other than a Business Day, the Interest
Period shall be extended to the next succeeding Business Day. Flow may not
elect any Interest Period which extends beyond the maturity date of the
Revolving Loan.
"LIBOR Rate" means a fixed rate of interest equal to the London
Interbank Offered Rate, which is the per annum rate of interest determined by
U.S. Bank to be the rate at which deposits in U.S. dollars are offered in the
London Interbank market at approximately 11:00 a.m. (London time), and two
Business Days prior to the commencement of the applicable Interest Period for a
period of time comparable to such Interest Rate Borrowing, which rate shall be
adjusted from time to time to take into account the cost to U.S. Bank to
maintain any reserves for a Eurodollar deposit required to fund the amount of
the applicable LIBOR Rate Borrowing, and also to take into account any required
statutory reserves for foreign loans to United States residents, whether or not
the applicable LIBOR Rate Borrowing is so funded by U.S. Bank.
"LIBOR Rate Borrowing" means any borrowing under the Revolving Loan
for which Flow has elected a rate based upon the LIBOR Rate to apply.
Computations of interest for a LIBOR Rate Borrowing shall be based upon a
360-day year for the actual number of days elapsed.
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"Loans" means the Revolving Loan, the BHF Letter of Credit, the
Letters of Credit, the Controlled Disbursement Loan, the Combined Loan, and the
Revolving Equipment Loan, as well as all renewals and modifications thereof.
"Notes" means the Revolving Note, the Demand Note, the Controlled
Disbursement Note, and Combined Note, and the Revolving Equipment Note, as well
as all replacements and modifications thereof.
"Prime Rate Borrowing" means any Funding or portion of the Revolving
Loan pursuant to the terms of the Agreement that bears interest at the Prime
Rate.
"Revolving Equipment Loan" has the meaning set forth in Section 3.1 of
this Amendment, as well as all renewals and modifications thereof.
"Revolving Equipment Note" has the meaning set forth in Section 3.3 of
this Amendment, as well as all renewals and modifications thereof.
"Working Capital" means the amount by which Flows Consolidated current
assets exceeds Flow's Consolidated current liabilities.
ARTICLE II. AMENDMENT
The Credit Agreement, as well as all of the other Loan Documents, are
hereby amended as set forth herein. Except as specifically provided for
herein, all of the terms and conditions of the Credit Agreement and each of the
other Loan Documents shall remain in full force and effect throughout the term
of the Loans, as well as any extensions or renewals thereof.
ARTICLE III REVOLVING EQUIPMENT LOAN
3.1 Commitment. Subject to and upon the terms and conditions set
forth herein, and in reliance upon the representations, warranties, and
covenants of Flow contained herein or in the Credit Agreement or make pursuant
hereto or pursuant to the Credit Agreement, U.S. Bank will make Fundings to
Flow from time to time and during the period ending on November 30, 1996, but
such Fundings shall not exceed, in the aggregate principal amount at any one
time outstanding, $4,500,000 (the "Revolving Equipment Loan"). Flow may
borrow, repay, and reborrow hereunder either the full amount of the Revolving
Equipment Loan or any lesser sum.
3.2 Use of Proceeds. The proceeds of the Revolving Equipment loan
shall only be used by Flow for the purchase of equipment related to its
business.
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3.3 Revolving Equipment Note. The Revolving Equipment Loan shall
be evidenced by a promissory note in the form attached hereto as Exhibit A (the
"Revolving Equipment Note").
3.4 Interest Rates. The Revolving Equipment Loan shall bear
interest on the principal amount thereof remaining unpaid from time to time, at
a rate of interest equal to:
(a) The Prime Rate plus 0.25 percent per annum; or
(b) The LIBOR Rate plus 175 basis points per annum.
3.5 Payment of Interest. Flow shall pay U.S. Bank an amount equal
to all accrued interest under the Revolving Equipment Loan on the first day of
each month until the principal balance under the Revolving Equipment Loan has
been paid in full, commencing on the first such day after any Funding has been
disbursed under the Revolving Equipment Loan.
3.6 Reduction of Commitment. On a monthly basis, the principal
amount of this commitment shall be reduced by 1/60th.
3.7 Repayment of Principal. All outstanding principal, accrued
interest, and other charges shall be due in full by November 30, 1996.
3.8 Revolving Equipment Loan Fee. Flow shall be assessed a 0.25
percent fee on the amount of each Funding under the Revolving Equipment Loan
which shall be due and payable concurrently with the disbursement of each
Funding.
3.9 Limitation on Fundings.
(a) The aggregate principal balance of the Revolving Equipment
Loan shall not exceed an amount equal to 75 percent of the cost to Flow of the
equipment purchased with Fundings under the Revolving Equipment Loan.
(b) If at any time the aggregate principal balance of the
Revolving Equipment loan exceeds the amount determined pursuant to subparagraph
(a) above, Flow shall immediately repay such outstanding portion of the
Revolving Equipment Loan in an amount equal to such excess.
4.0 Fundings. Flow shall submit to U.S. Bank prior to each
Funding under the Revolving Equipment Loan, a Borrowing Notice as set forth in
Section 12.3 of the Credit Agreement, which shall set forth the purchase price
of the equipment to be purchased with the requested Funding. Section 12.3 of
the Credit Agreement is hereby amended to include Fundings under the Revolving
Equipment Loan.
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ARTICLE IV. REVOLVING LOAN MODIFICATIONS
4.1 Revolving Loan Increase and Extension of Expiry Date. Section
2.1 of the Credit Agreement is hereby amended to reflect that U.S. Bank will
make Fundings to Flow under the Revolving Loan from time to time and during the
period ending on November 30, 1995, but such Fundings (together with the
outstanding Letters of Credit with the exception of the BHF Letter of Credit)
shall not exceed, in the aggregate principal amount at any one time
outstanding, $17,000,000.
4.2 Replacement Revolving Note. Concurrently with the execution
hereof, Flow shall execute and deliver a replacement revolving note in the form
attached hereto as Exhibit B ("Replacement Revolving Note") which shall replace
that certain promissory note dated September 30, 1993. All references in the
Credit Agreement to the Revolving Note shall hereafter constitute reference to
the Replacement Revolving Note, U.S. Bank shall mark the promissory note dated
September 30, 1993 "replaced" and shall retain the note until the Revolving
Loan has been paid in full.
4.3 Extension of Maturity Date. Section 2.5 (b) of the Credit
Agreement is hereby amended to reflect that Flow shall pay U.S. Bank all
outstanding principal, accrued interest, and other charges with respect to the
Revolving Loan on November 30, 1995.
4.4 Decrease in Interest Rate. Section 2.4 of the Loan Agreement
is hereby deleted in its entirety and replaced with the following:
2.4 Interest. Each time Flow requests a Funding under
the Revolving Loan or prior to the expiration of each Interest Period for
all LIBOR Rate Borrowings or at any other time with respect to Prime Rate
Borrowings so long as there exists no Event of Default, Flow may elect one
of the following described interest rates in a Borrowing Notice:
(a) The Prime Rate per annum; or
(b) The LIBOR Rate plus 150 basis points per annum. Upon the
following permanent reduction to the maximum Funding
based upon Eligible Inventory, the LIBOR Rate option
will be adjusted as follows:
Maximum Inventory Reliance LIBOR Rate Formula
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$3,000,000 LIBOR + 140 basis points per annum
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In the event Flow does not specify an interest rate election as provided for
above for a requested Funding or at the end of any Interest Period with respect
to a LIBOR Rate Borrowing, then such Funding shall be deemed to constitute a
Prime Rate Borrowing.
4.5 Illegality.
(a) If after the date of this Amendment the adoption of any
Applicable Law or any change therein or any change in the interpretation or
administration thereof by any Governmental Body, central bank, or comparable
agency charged with the interpretation or administration thereof, or if
compliance by U.S. Bank with any request or directive (whether or not having
the force of Applicable Law) of any such Governmental Body, central bank, or
comparable agency makes it against Applicable Law or impossible for U.S. Bank
to maintain the Revolving Loan at the LIBOR Rate, U.S. Bank shall immediately
give notice thereof to Flow.
(b) Upon receipt by Flow of notice set forth in Section 4.5 (a)
herein, the interest rate of the Revolving Loan shall automatically be
converted to the Prime Rate per annum.
4.6 Interest Cost. If after the date hereof any revision of
Regulation D announced by the Board of Governors of the Federal Reserve Board,
or if the adoption of any Applicable Law related to Regulation D or any change
therein or any change in the interpretation or administration thereof by any
Governmental Body, central bank, or comparable agency charged with the
interpretation or administration thereof, or if compliance by U.S. Bank with
any request or directive (whether or not having the force of Applicable Law) of
any such Governmental Body, central bank, or comparable agency related to
Regulation D:
(a) Shall subject U.S. Bank to any tax, duty, or other charge with
regard to its maintenance of the interest rate under the Revolving Loan at the
LIBOR Rate; or
(b) Shall impose or modify any reserve (including but not limited
to any reserve imposed by the Board of Governors of the Federal Reserve
System), special deposit, or similar requirement against assets of, deposits
with, or for the account of, or credit extended by U.S. Bank or shall impose
on U.S. Bank any other condition affecting the Revolving Loan with interest
accruing at the LIBOR Rate;
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and the result of any of the foregoing is to increase the cost to U.S. Bank of
maintaining the interest rate on the Revolving Loan at the LIBOR Rate or to
reduce the return of U.S. Bank under this Amendment, then from time to time,
within ten days after demand by U.S. Bank, Flow shall pay to U.S. Bank such
additional amount or amounts as will compensate U.S. Bank for such increase in
cost or reduction in return. In no event shall Flow have any liability for
changes in or imposition of new taxes by any Governmental Agency based on the
net or gross income of U.S. Bank.
4.7 Borrowing Base Modification. Section 2.6 of the Credit
Agreement is hereby amended to reflect that the Borrowing Base is (a) 80
percent of Eligible Accounts Receivable plus (b) 50 percent of Eligible
Inventory up to a maximum Funding based upon Eligible Inventory in the amount
of $7,000,000.
ARTICLE V. LETTERS OF CREDIT MODIFICATION
Section 3.1 of the Credit Agreement is hereby amended to reflect, that
the maximum aggregate amount of Letters of Credit at any one time outstanding
shall not exceed $2,500,000.
ARTICLE VI. BHF LETTER OF CREDIT MODIFICATION
6.1 Extension.
(a) Section 7.1 of the Credit Agreement is hereby amended to
reflect that the expiration date of the BHF Letter of Credit is March 1, 1996.
(b) Section 7.4 of the Credit Agreement is hereby amended to
reflect that any draw on the BHF Letter of Credit issued by U.S. Bank shall be
repaid by Flow within the earlier of 60 days of such Funding or March 1, 1996.
6.2 Interest Rate. Section 7.3 of the Credit Agreement is hereby
amended to reflect that the Demand Note shall bear interest on the principal
amount thereof remaining unpaid from time to time, at a rate of interest equal
to the Prime Rate plus 0.25 percent per annum.
6.3 Replacement Letter of Credit Note. Concurrently with the
execution hereof, Flow and SSC shall execute and deliver a replacement letter
of credit note in the form attached hereto as Exhibit "C" ("Replacement Letter
of Credit Note").
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ARTICLE VII. CONTROLLED DISBURSEMENT LOAN MODIFICATION
7.1 Extension of Expiry Date. Section 11.1 of the Credit
Agreement is hereby amended to reflect that U.S. Bank will make Fundings to
Flow and SSC from time to time and during the period ending on November 30,
1995, but such Fundings shall not exceed, in the aggregate principal amount at
any one time outstanding, $500,000.
7.2 Replacement Controlled Disbursement Note. Concurrently with
the execution hereof Flow and SSC shall execute and deliver a replacement
controlled disbursement note in the form attached hereto as Exhibit D
("Replacement Controlled Disbursement Note") which shall replace the Controlled
Disbursement Note executed in conjunction with the Credit Agreement. All
references in the Credit Agreement to the Controlled Disbursement Note shall
hereafter constitute references to the Replacement Controlled Disbursement
Note. U.S. Bank shall mark the Controlled Disbursement Note "replaced" and
shall retain it until the Controlled Disbursement Loan has been paid in full.
7.3 Loan Fee. In the event of any Fundings under the Controlled
Disbursement Loan, Flow and SSC shall pay U.S. Bank a loan fee of $1,250
concurrently with the Funding under the Controlled Disbursement Loan.
ARTICLE VIII. CONDITIONS PRECEDENT
8.1 Conditions Precedent for Initial Funding Under the Revolving
Equipment Loan. U.S. Bank shall not be required to make the initial Funding
under the Revolving Equipment Loan unless or until the following conditions
have been fulfilled to the satisfaction of U.S. Bank:
(a) U.S. Bank shall have received this Amendment and the Revolving
Equipment Note, duly executed and delivered by Flow.
(b) U.S. Bank shall have received a certified resolution of the
directors of Flow and incumbency certificate in a form reasonably satisfactory
to U.S. Bank authorizing Flow to enter into this Amendment and execute the
Revolving Equipment Note and all other instruments, agreements, and documents
related thereto.
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8.2 Conditions Precedent to Each Funding Under the Revolving
Equipment Loan. The obligation of U.S. Bank to make any Funding (including the
initial Funding) under the Revolving Equipment Loan is subject to the
fulfillment, to the satisfaction of U.S. Bank, of the following:
(a) U.S. Bank shall have received a Borrowing Notice with respect
to the requested Funding, duly executed and delivered by Flow.
(b) U.S. Bank shall have received evidence deemed satisfactory to
U.S. Bank reflecting that the requested Funding is less than or equal to 75
percent of the purchase price of the equipment to be purchased with the
requested Funding.
(c) There shall not then exist any Default or Event of Default
under the Credit Agreement, or after having given effect to the requested
Funding, there would not exist a Default or Event of Default.
(d) Each of the conditions provided for in Section 15.3 of the
Credit Agreement shall have been satisfied.
8.3 Conditions Precedent to Each Subsequent Funding. There shall
be added to Section 15.3 of the Credit Agreement the following:
(f) There shall not then exist any Default or Event of Default
hereunder, or after having given effect to the requested Funding, there would
not exist a Default or Event of Default.
ARTICLE IX. COVENANT MODIFICATIONS
9.1 Sections 17.17, 17.18, 17.19, 17.20 and 17.21 of the Credit
Agreement are hereby deleted in their entirety and replaced with the following:
17.17 Capital Ratio. Permit the Capital Ratio to be
greater than 1.25:1.00 from the date of this Amendment until April 29,
1995, and greater than 1.05:1.00 at any time thereafter.
17.18 Tangible Net Worth. Permit Tangible Net Worth to be
less than $33,000,000 any time during the terms of the Loans.
17.19 Debt Service Coverage Ratio. Permit the Debt Service
Coverage Ratio to be less than 1.50:1.00 at any time during the terms
of the Loans.
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17.16 Working Capital. Permit Working Capital to be less
than $21,000,000 any time during the terms of the Loans.
17.15 Current Ratio. Permit the Current Ratio to be less
than 1.70:1.00 any time during the terms of the Loans.
ARTICLE X. GENERAL PROVISIONS
10.1 Notices. Section 20.1 of the Credit Agreement is hereby
amended to reflect U.S. Bank's new address:
(b) If to U.S. Bank:
U.S. Bank of Washington, National Association
10800 N.E. 8th Street
Suite 1000
Bellevue, Washington 98004
Attention: Mark E. Tsutakawa, Vice President
Facsimile No.: (206) 450-5989
10.2 Representations and Warranties. Flow and SSC hereby represent
and warrant to U.S. Bank that as of the date of this Amendment, there exists no
Default or Event of Default. All representations and warranties of Flow and
SSC contained in the Credit Agreement and the other Loan Documents, or
otherwise made in writing in connection therewith, are true and correct as of
the date of the Amendment. Flow and SSC acknowledge and agree that all of
Flow's Indebtedness to U.S. Bank is payable without offset, defense, or
counterclaim.
10.3 Security Each of the Loan Documents evidencing U.S. Bank's
security interest in the Collateral shall remain in full force and effect and
shall secure the payment and performance of the Revolving Equipment Loan, as
well as the Revolving Loan, the SSC Term Loan, the BHF Letter of Credit, the
Letters of Credit, the Controlled Disbursement Loan, and the Combined Loan, as
amended hereunder.
10.4 SSC Guaranty. SSC acknowledges and agrees that the SSC
Guaranty shall remain in full force and effect; affirms that the SSC Guaranty
shall secure all of the past, present, and future Indebtedness of Flow to U.S.
Bank, including without limitation, the Revolving Equipment Loan, and the
Revolving Loan as increased hereunder; and agrees that its obligation under the
SSC Guaranty is enforceable without defense, offset, or counterclaim.
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10.5 Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original agreement, but all of
which together shall constitute one and the same agreement.
10.6 Statutory Notice, ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, U.S. Bank, Flow, and SSC have caused this
Amendment to be duly executed by their respective duly authorized signatories
as of the date first above written.
U.S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION
By: MARK TSUTAKAWA
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Mark Tsutakawa
FLOW INTERNATIONAL CORPORATION,
a Delaware Corporation
By: R.W. TARRANT
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R.W. Tarrant
Title: Chairman President & CEO
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SPIDER STAGING CORPORATION, a
Washington Corporation
By: R.W. TARRANT
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R.W. Tarrant
Title: President & CEO
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