AMENDMENT NO. 4
TO
REVOLVING CREDIT, TERM LOAN, GUARANTY
AND SECURITY AGREEMENT
THIS AMENDMENT NO. 4 (this "Amendment") is entered into as of December
___, 2000, by and among SUNSOURCE INC., a corporation organized under the laws
of the State of Delaware ("SunSource"), SUNSOURCE TECHNOLOGY SERVICES INC., a
corporation organized under the laws of the State of Delaware ("STSI"), THE
HILLMAN GROUP, INC. ("Hillman"), a Delaware corporation, AXXESS TECHNOLOGIES,
INC. ("Axxess"), a Delaware corporation (SunSource, STSI, Hillman and Axxess,
each a "Borrower" and collectively "Borrowers"), the other Credit Parties (as
defined herein) which are now or which hereafter become a party hereto, the
financial institutions which are now or which hereafter become a party hereto
(collectively, the "Lenders" and individually a "Lender") and PNC BANK, NATIONAL
ASSOCIATION ("PNC"), as agent for Lenders (PNC, in such capacity, the "Agent").
BACKGROUND
Borrowers, the other Credit Parties, Lenders and Agent are parties to
that certain Revolving Credit, Term Loan, Guaranty and Security Agreement dated
as of December 15, 1999 (as amended, restated, supplemented or otherwise
modified from time to time, the "Loan Agreement") pursuant to which Agent and
Lenders provide Borrowers with certain financial accommodations.
Borrowers and the other Credit Parties have requested that Agent and
Lenders amend the Loan Agreement and Agent and Lenders are willing to do so on
the terms and conditions hereafter set forth herein.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrowers by Agent
and Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction of the
conditions precedent set forth in Section 3 below, the Loan Agreement is hereby
amended as follows:
(a) Section 1.2 is amended by adding the following defined terms in
their appropriate alphabetical order to provide as follows:
"Allied Capital" shall mean Allied Capital Corporation, a Maryland
corporation.
"Allied Capital Subordinated Note" shall have the meaning given to the
term "Debentures" in the Allied Investment Agreement.
"Allied Capital Subordination Agreement" shall mean that certain
Subordination Agreement dated as of December __, 2000 among Agent,
Allied Capital and Credit Parties.
"Allied Investment Agreement"" shall mean that certain Investment
Agreement by and among the Borrowers, each of the other Credit Parties
that is a party thereto and Allied Capital, dated as of December __,
2000.
"Amendment No. 4 Effective Date" shall mean December __, 2000.
"Mexican Liquidation" shall mean the liquidation by SunSource of all or
substantially all of the stock and/or assets of SunSource Integrated
Services de Mexico for cash liquidation proceeds of at least
$1,000,000.
(b) Section 1.2 is amended by amending the following defined terms in
their entirety to provide as follows:
"Applicable Percentage" shall mean (a) during the period from the
Amendment No. 4 Effective Date through June 30, 2001, 2.75% with
respect to the Revolving Interest Rate for Revolving Advances
consisting of Eurodollar Rate Loans and 3.00% with respect to the Term
Loan Rate for Eurodollar Rate Loans and (b) thereafter, as of any date
of determination, a per annum rate equal to the rate set forth below
for the applicable type of Eurodollar Rate Loans based upon the Fixed
Charge Coverage Ratio for the most recently ended fiscal quarter for
the four fiscal quarters then ended as follows:
- --------------------------- ------------------------------- --------------------------
Fixed Charge Coverage Ratio Revolving Eurodollar Rate Loans Term Eurodollar Rate Loans
- --------------------------- ------------------------------- --------------------------
less than 1.00 to 1.00 3.25% 3.50%
- --------------------------- ------------------------------- --------------------------
1.00 - 1.09 to 1.00 3.00% 3.25%
- --------------------------- ------------------------------- --------------------------
1.10 - 1.35 to 1.00 2.75% 3.00%
- --------------------------- ------------------------------- --------------------------
1.36 - 1.50 to 1.00 2.50% 2.75%
- --------------------------- ------------------------------- --------------------------
Greater than 1.50 to 1.00 2.25% 2.50%
- --------------------------- ------------------------------- --------------------------
The Applicable Percentage shall be adjusted (up or down) prospectively
on a quarterly basis as determined by the Fixed Charge Coverage Ratio
and shall be effective for each calendar month commencing at least five
(5) Business Days after the date of delivery to Agent of the quarterly
unaudited or annual audited (as applicable) financial statements
evidencing the need for an adjustment. Failure to timely deliver such
financial statements shall, in addition to any other remedy provided
for in this Agreement, result in an increase to the highest level set
forth in the foregoing and until the first day of the first calendar
month following the delivery of the required financial statements
demonstrating that such an increase is not required. If a Default or
Event of Default has occurred and is continuing at the time any
reduction in the Applicable Percentage is to be implemented, that
reduction shall be deferred until the first day of the first calendar
month following the date on which such Default or Event of Default is
waived or cured.
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"Earnings Before Interest and Taxes" shall mean for any period the sum
of (i) net income (or loss) of Borrowers on a consolidated basis for
such period (excluding extraordinary gains), plus (ii) all interest
expense of Borrowers on a consolidated basis for such period, plus
(iii) all charges against income of Borrowers on a consolidated basis
for such period for federal, provincial, state and local taxes
expensed, plus (iv) loss on the Harding Divestiture net of any tax
benefit from such loss and loss on the Mexican Liquidation net of any
tax benefit from such loss minus (v) all credits to income of Borrowers
on a consolidated basis for such period for federal, provincial, state
and local taxes credited and minus (vi) gain on contribution of Kar and
A & H Bolt.
"EBITDA" shall mean for any period the sum of (i) Earnings Before
Interest and Taxes for such period plus (ii) depreciation expenses for
such period, plus (iii) amortization expenses for such period plus (iv)
non cash charges for such period related to the write-off of inventory
step-up as a result of the application of Accounting Principles Board
#16, Accounting for Business Combinations, for acquisitions consummated
by SunSource or any other Credit Party.
"Fixed Charge Coverage Ratio" shall mean and include, with respect to
any fiscal period, the ratio of (a) EBITDA minus non-financed capital
expenditures made by Borrowers on a consolidated basis during such
period minus taxes paid in cash by Borrowers on a consolidated basis
during such period to (b) all Senior Debt Payments and all Subordinated
Debt Payments during such period, except for payments paid in calendar
year 2001 of principal on the Axxess Subordinated Notes and of
principal and interest on the Axxess Long Term Note.
"Subordinated Debt Payments" shall mean and include all cash actually
expended to make payments of principal and interest on the Junior
Subordinated Debentures, the Axxess Subordinated Notes, Axxess Long
Term Subordinated Note, SunSource Long Term Subordinated Guaranty,
SunSource Subordinated Guaranties and the Allied Capital Subordinated
Note.
(c) Section 2.2(b)(iii) is hereby amended by deleting "one, two three
or six months" and inserting "one, two or three months" in its place and stead.
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(d) Section 2.4 is amended by adding the following at the end thereof:
"Notwithstanding the foregoing, following the repayment of the Term
Loan required by Section 2.14(e) hereof, the Term Loan shall be payable
(subject to acceleration or termination of this Agreement) based upon
equal quarterly installments of $125,000 each commencing on April 1,
2001 and on the first day of each July, October, January and April
thereafter until December 14, 2004 when the entire unpaid principal
balance of the Term Loan shall be due and payable."
(e) A new Section 2.14(e) is added immediately after Section 2.14(d) to
provide as follows:
"(e) Upon execution of the Allied Investment Agreement, the Borrowers
shall make a repayment of the (i) Term Loan in an amount sufficient to
reduce the outstanding principal balance of the Term Loan to
$2,500,000, such repayment shall be applied, to the outstanding
principal installments of the Term Loan in the inverse order of the
maturities thereof, and (ii) Revolving Advances in an amount equal to
all proceeds remaining following the closing of the $30,000,000 loan
under the Allied Investment Agreement and the repurchase of certain of
the Axxess Subordinated Notes and of the Axxess Long Term Subordinated
Note, subject to Borrowers' ability to reborrow Revolving Advances in
accordance with the terms hereof."
(f) Sections 6.6, 6.7 and 6.8 are hereby amended in their entirety to
provide as follows:
"6.6. Fixed Charge Coverage Ratio. Maintain, with respect to Borrowers
on a consolidated basis, a Fixed Charge Coverage Ratio of not less than
the ratio as of the end of the applicable periods set forth below:
Period Ratio
- ------ -----
Three months ending March 31, 2001 0.65 to 1.0
Four months ending April 30, 2001 0.70 to 1.0
Five months ending May 31, 2001 0.80 to 1.0
Six months ending June 30, 2001 1.00 to 1.0
Seven months ending July 31, 2001 1.00 to 1.0
Eight months ending August 31, 2001 1.00 to 1.0
Nine months ending September 30, 2001 1.00 to 1.0
Ten months ending October 31, 2001 1.00 to 1.0
Eleven months ending November 30, 2001 1.00 to 1.0
Twelve months ending December 31, 2001 and on the last day 1.00 to 1.0
of each month ending thereafter for the twelve month period
then ending
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Compliance with this Section 6.6 shall not be required if, at all times
during the three month period preceding the test date, Undrawn
Availability was in excess of $10,000,000; provided, however, if the
Axxess Long Term Subordinated Note and Axxess Subordinated Notes have
not been repaid in full, then the Undrawn Availability test for the
three months ending March 31, 2001 shall be $16,000,000.
6.7 Undrawn Availability. Maintain, with respect to Borrowers on a
consolidated basis, at all items (i) during the period commencing on
the Amendment No. 4 Effective Date and ending on May 15, 2001, at least
$10,000,000 of Undrawn Availability (as calculated under Section
2.1(a)(y)) and (ii) commencing May 16, 2001 and thereafter, at least
$2,500,000 of Undrawn Availability (as calculated under Section
2.1(a)(y)) including, without limitation, in either case, after giving
effect to any payments made under the Junior Subordinated Debentures,
the Axxess Subordinated Notes, the Axxess Long Term Subordinated Note,
the SunSource Long Term Subordinated Guaranty, the SunSource
Subordinated Guaranties and the Allied Capital Subordinated Note.
6.8. Deferred Interest. In the event the Fixed Charge Coverage Ratio
for the (i) three (3) month period ending March 31, 2001 is less than
0.65 to 1.0, (ii) six (6) month period ending June 30, 2001 is less
than 1.00 to 1.00, (iii) nine (9) month period ending on September 30,
2001 is less than 1.05 to 1.00, (iv) four (4) fiscal quarter period
ending on December 31, 2001 and on the last day of each fiscal quarter
thereafter tested on a rolling four (4) quarter basis is less than 1.10
to 1.00, Credit Parties shall exercise their right to defer interest
due under the Junior Subordinated Debentures and prior to paying any
such deferred interest under the Junior Subordinated Debentures prior
to the end of such deferral period, Credit Parties shall obtain the
written consent of Required Lenders to make such payment.
Notwithstanding the foregoing, the Credit Parties may make regularly
scheduled payments of interest on the Junior Subordinated Debentures on
or prior to June 30, 2001 if Undrawn Availability with respect to
Borrowers on a consolidated basis exceeds $10,000,000 after giving
effect to each such payment."
(g) Section 7.6 is amended in its entirety to provide as follows:
"7.6 Capital Expenditures. Contract for, purchase or make any
expenditure or commitments for fixed or capital assets (including
capitalized leases) in any fiscal year in an aggregate amount for all
Credit Parties in excess of $15,000,000."
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(h) Section 7.8 is amended in its entirety to provide as follows:
"7.8 Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (i)
Indebtedness to Agent or to Lenders; (ii) Indebtedness incurred for
capital expenditures permitted under Section 7.6 hereof; (iii)
Indebtedness due under the Junior Subordinated Debentures as in effect
on the date hereof, (iv) Indebtedness set forth in the financial
statements delivered pursuant to Section 5.5 hereof, (v) Indebtedness
due under the Axxess Subordinated Notes and Axxess Long Term
Subordinated Note as each is in effect on the Joinder, Consent and
Amendment No. 2 Effective Date and (vi) Indebtedness due under the
Allied Investment Agreement as in effect on the Amendment No. 4
Effective Date."
(i) Section 7.11 is amended in its entirety to provide as follows:
"7.11 Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6
hereof) if, after giving effect thereto, aggregate annual rental
payments for all leased property would exceed $18,000,000 in any one
fiscal year in the aggregate for all Credit Parties."
(j) Section 7.18 is amended in its entirety to provide as follows:
"7.18. Junior Subordinated Debentures, the Axxess Subordinated Notes,
Axxess Long Term Subordinated Note, SunSource Long Term Subordinated
Guaranty, the SunSource Subordinated Guaranties and the Allied Capital
Subordinated Note. At any time, directly or indirectly, pay, prepay,
repurchase, redeem, retire or otherwise acquire, or make any payment on
account of any principal of, interest on or premium payable in
connection with the repayment or redemption of the Junior Subordinated
Debentures, the Axxess Subordinated Notes, Axxess Long Term
Subordinated Note, SunSource Long Term Subordinated Guaranty, the
SunSource Subordinated Guaranties or the Allied Capital Subordinated
Note, except for (a) payments of interest (subject to Section 6.8
hereof) required by the terms of the Junior Subordinated Debentures as
in effect on the Closing Date and (b) payments permitted by the (i)
Axxess Subordination Agreement on the Axxess Subordinated Notes, Axxess
Long Term Subordinated Note and the SunSource Subordinated Guaranties
and (ii) Allied Capital Subordination Agreement on the Allied Capital
Subordinated Note." Notwithstanding the foregoing, the Axxess
Subordinated Notes and the Axxess Long Term Subordinated Note may be
prepaid on or after the Amendment No. 4 Effective Date; provided that
not more than $8,500,000 shall constitute payment in full of the Axxess
Long Term Subordinated Note."
(k) Section 9.12 is amended by deleting "fifteen (15) days" and
inserting "one (1) day" in its place and stead.
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(l) Section 10.12 is amended in its entirety to provide as follows:
"10.12. an event of default has occurred and been declared under the
Junior Subordinated Debentures, the Axxess Subordinated Notes, Axxess
Long Term Subordinated Note, SunSource Long Term Subordinated Guaranty,
SunSource Subordinated Guaranties or the Allied Investment Agreement,
which default shall not have been cured or waived within any applicable
grace period;"
3. Conditions of Effectiveness. This Amendment shall become effective
as of the Amendment No. 4 Effective Date, provided that all of the following
conditions shall have been satisfied: (i) Agent shall have received four (4)
copies of this Amendment executed by all Credit Parties and Lenders; (ii) Agent
shall have received four (4) copies of the Allied Capital Subordination
Agreement executed by Allied Capital and the Credit Parties; (iii) Agent shall
have received an amount sufficient to reduce the outstanding principal balance
of the Term Loan to $2,500,000 shall have been remitted to Agent pursuant to
Section 2.14(e) of the Loan Agreement and (iv) Agent shall have received such
other certificates, instruments, documents, agreements and opinions of counsel
as may be required by Agent or its counsel (including all items provided to
Allied Capital in connection with the Allied Investment Agreement), each of
which shall be in form and substance satisfactory to Agent and its counsel.
4. Representations, Warranties and Covenants. Each Borrower and each of
the other Credit Parties hereby represents, warrants and covenants as follows:
(a) This Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of each Borrower and each of the
other Credit Parties and are enforceable against each Borrower and each of the
other Credit Parties in accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, each Borrower and each of
the other Credit Parties hereby reaffirms all covenants, representations and
warranties made in the Loan Agreement to the extent the same are not amended
hereby and agrees that all such covenants, representations and warranties shall
be deemed to have been remade as of the effective date of this Amendment.
(c) No Event of Default has occurred and is continuing or would exist
after giving effect to this Amendment.
(d) Each Borrower and each of the other Credit Parties has no defense,
counterclaim or offset with respect to the Loan Agreement or the Obligations.
5. Effect on the Loan Agreement.
(a) Upon the effectiveness of Section 2 hereof, each reference in the
Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
like import shall mean and be a reference to the Loan Agreement as amended
hereby.
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(b) Except as specifically amended herein, the Loan Agreement, and all
other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of Agent or any Lender,
nor constitute a waiver of any provision of the Loan Agreement, or any other
documents, instruments or agreements executed and/or delivered under or in
connection therewith.
6. Governing Law. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York.
7. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
8. Counterparts; Facsimile Signatures. This Amendment may be executed
by the parties hereto in one or more counterparts, each of which shall be deemed
an original and all of which taken together shall constitute one and the same
agreement. Any signature received by facsimile transmission shall be deemed an
original signature hereto.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day
and year first written above.
SUNSOURCE INC., as a Borrower
SUNSOURCE TECHNOLOGY SERVICES INC., as a Borrower
THE HILLMAN GROUP, INC., as a Borrower
AXXESS TECHNOLOGIES, INC., as Borrower
A & H HOLDING COMPANY, INC., as a Guarantor
SUNSOURCE CORPORATE GROUP, INC., as a Guarantor
SUNSOURCE INDUSTRIAL SERVICES COMPANY, INC., as a Guarantor
SUNSOURCE INVENTORY MANAGEMENT COMPANY, INC., as a Guarantor
SUNSOURCE INVESTMENT COMPANY, INC., as a Guarantor
SUNSUB A INC., as a Guarantor
SUNSUB C INC., as a Guarantor
By: /s/ Joseph M. Corvino
-----------------------------
Name: Joseph M. Corvino
Title: Vice President of each of the foregoing
corporations
SUNSUB HOLDINGS LLC
By: SunSub C Inc., its sole member
By: /s/ Joseph M. Corvino
-----------------------------
Name: Joseph M. Corvino
Title: Manager
J. N. FAUVER (CANADA) LIMITED, as a Guarantor
By: /s/ Joseph M. Corvino
-----------------------------
Name: Joseph M. Corvino
Title: President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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1394066 ONTARIO INC., as a Guarantor
By: /s/ Joseph M. Corvino
-----------------------------
Name: Joseph M. Corvino
Title:
PNC BANK, NATIONAL ASSOCIATION, as Lender and as Agent
By: /s/ Peter H. Schryver
-----------------------------
Name: Peter H. Schryver
Title: Senior Vice President
BANK OF AMERICA BUSINESS CREDIT, as Co-Agent and Lender
By: /s/ Richard Levenson
----------------------------
Name: Richard Levenson
Title: Senior Vice President
FIRSTAR BANK, N.A., as Co-Agent and Lender
By: /s/ Donald K. Mitchell
-----------------------------
Name: Donald K. Mitchell
Title: Vice President
FIFTH THIRD BANK, as Lender
By: /s/ Ann Pierson
----------------------------
Name: Ann Pierson
Title: Corporate Banking Officer
LASALLE BUSINESS CREDIT, as Lender
By: /s/ Stephen V. Riege
-----------------------------
Name: Stephen V. Rieger
Title: Asst. Vice President/Regional Manager
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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IBJ WHITEHALL BUSINESS CREDIT CORPORATION, as Lender
By: /s/ Andrew C. Sepe
-----------------------------
Name: Andrew C. Sepe
Title: Assistant Vice President
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