EXHIBIT 10.4
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment"), dated as of February 5,
1998, among Acquisition Holdings, Inc. ("Holdings"), ATC Group Services Inc.
(the "Borrower"), the lenders party to the Credit Agreement referred to below
(the "Banks"), and Bankers Trust Company, as Agent (the "Agent"). All
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, Holdings, the Borrower (as successor-by-merger to
Acquisition Corp.), the Banks and the Agent are parties to a Credit Agreement,
dated as of January 29, 1998 (the "Credit Agreement");
WHEREAS, the Borrower has requested certain amendments to the
Credit Agreement; and
WHEREAS, subject to the terms and conditions of this
Amendment, the Banks are willing to grant such amendments;
NOW, THEREFORE, it is agreed:
I. Amendments
1. On and after the First Amendment Effective Date (as
defined in Section II(1) below), Section 9.07(a) of the Credit Agreement shall
be amended by deleting the table appearing therein in its entirety and inserting
the following new table in lieu thereof:
"Fiscal Year Ending Amount
------------------ ------
February 29, 2000 $3,500,000
February 28, 2001 $4,000,000
February 28, 2002 $5,200,000
February 28, 2003 $5,000,000".
2. Section 9.02(xii) of the Credit Agreement is hereby
amended by inserting the following language after the words ", in each case with
such earnings and financial covenants to be determined on a pro forma basis":
"consistent with Regulation S-X under the Securities Act (as
in effect on the Effective Date) (except that pro forma
adjustments of the type described on Schedule XIV need not be
done on a basis consistent with Regulation S-X) and".
3. On and after the First Amendment Effective Date, the
definition of "Consolidated Net Income" appearing in Section 11.01 of the Credit
Agreement shall be amended by inserting the following language at the end
thereof:
"but adjusted for the factually supportable and identifiable
pro forma adjustments of the type described on Schedule XIV
for such period that are directly attributable to the
acquisition of such Acquired Entity or Business pursuant to a
Permitted Acquisition (which pro forma adjustments need not be
done on a basis consistent with Regulation S-X under the
Securities Act)".
4. On and after the First Amendment Effective Date,
the Credit Agreement shall be further amended by adding a new Schedule XIV
thereto in the form of Schedule XIV attached hereto.
II. Miscellaneous Provisions
1. This Amendment shall become effective on the date (the
"First Amendment Effective Date") when Holdings, the Borrower and the Required
Banks shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Agent at the Notice Office.
2. In order to induce the Banks to enter into this
Amendment, each of Holdings and the Borrower hereby represents and warrants
that:
(a) no Default or Event of Default exists on the First
Amendment Effective Date, both before and after giving effect to
this Amendment;and
(b) on the First Amendment Effective Date, both before and
after giving effect to this Amendment, all representations and
warranties contained in the Credit Agreement and in the other
Credit Documents are true and correct in all
-2-
material respects as though such representations and warranties
were made on the First Amendment Effective Date.
3. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be delivered to Holdings, the Borrower and the Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.
5. From and after the First Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement as
modified hereby.
6. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
* * *
-3-
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
ACQUISITION HOLDINGS, INC.
By /s/ Wesley Lang
------------------------
Title: President
ATC GROUP SERVICES INC.
By /s/ Nicholas Malino
------------------------
Title: President
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/ Patricia Hogan
------------------------
Title: Principal
SCHEDULE XIV
PRO FORMA ADJUSTMENTS
(a) Adjustments to revenues to reflect customers not likely
to be retained;
(b) adjustments to labor and other direct costs to reflect
application of the Borrower's utilization rate (the billable
hours of the Borrower's employees divided by such employees'
available hours) to the Acquired Entity or Business and to
reflect the additional costs or savings, as the case may be,
from the continued use or elimination of outside laboratory
and technical personnel utilized by the Acquired Entity or
Business;
(c) adjustments to reflect home office functions of the Acquired
Entity or Business such as accounting, payroll and legal that
will be provided by the Borrower, including any adjustments
to eliminate outside professional services if such functions
are to be assumed by then existing Borrower personnel;
(d) adjustments with respect to savings that will be realized by
including the Acquired Entity or Business under the
Borrower's insurance coverage and adjustments to reflect
costs, if any, of transferring or termination duplicate
insurance policies of the Acquired Entity or Business;
(e) adjustments to reflect savings associated with the
elimination of duplicate facilities and adjustments to
reflect costs associated with such elimination (such as lease
termination costs, moving and storage, etc.);
(f) adjustments to employee benefit costs to
reflect the Borrower's actual employee benefit cost
structure, to the extent the Acquired Entity or Business'
employee benefits will be replaced with the Borrower's
employee benefits;
(g) adjustments to reflect the actual
impact of the departure or retention of highly compensated
executives of the Acquired Entity or Business (including
elimination of compensation, benefits and revenues
attributable to such executives, if departing, and any
increases to compensation or benefits for such executives
continuing);
(h) adjustments to replace the Acquired
Entity or Business' then-current goodwill depreciation and
amortization with such amounts as are derived from the
application to the Acquired Entity or Business of purchase
accounting, if applicable, under generally accepted
accounting principles; and
(i) interest expense adjustments to reflect refinancing of
existing debt or increase in borrowings used to effect the
subject Permitted Acquisition.
The pro forma adjustments described above also may be used,
to the extent factually supportable and identifiable, to determine whether the
Acquired Entity or Business had pro forma positive earnings (before interest
expense and taxes and adding back any amortization of intangibles and
depreciation) as required by Section 9.02(xii) of the Credit Agreement.
In addition, to the extent that any of the pro forma
adjustments described above are utilized for any Permitted Acquisition, the
Borrower also shall have delivered to the Banks a statement of its independent
accountants confirming that such pro forma adjustments are made on a basis
consistent with this Schedule XIV.
Further, as required by Section 9.02(xii) of the Credit
Agreement, all pro forma calculations shall be made as if the subject Permitted
Acquisition had been consummated on the first day of the respective Test Period
(and assuming that any Indebtedness incurred, issued or assumed in connection
therewith had been incurred, issued or assumed on the first day of, and had
remained outstanding throughout, such Test Period).