THIRD AMENDMENT AND WAIVER AGREEMENT
THIS THIRD AMENDMENT AND WAIVER AGREEMENT (this "Agreement") is made
and entered into as of the 21st day of March, 2003, by and among FLEET CAPITAL
CORPORATION ("Lender"), a Rhode Island corporation with an office at 200
Glastonbury Boulevard, Glastonbury, Connecticut 06033; and UNITED INDUSTRIAL
CORPORATION, a Delaware corporation, and the following of its subsidiaries: AAI
CORPORATION ("AAI"), a Maryland corporation, DETROIT STOKER COMPANY, a Michigan
corporation; AAI ENGINEERING SUPPORT INC., a Maryland corporation, AAI/ACL
TECHNOLOGIES, INC., a Maryland corporation, and MIDWEST METALLURGICAL
LABORATORY, INC., a Michigan corporation (each a "Borrower" and collectively the
"Borrowers"). Capitalized terms used, but not defined, herein shall have the
meanings given to such terms in the Credit Agreement (defined below).
WHEREAS, the Borrowers and the Lender are parties to the Loan and
Security Agreement, dated as of June 28, 2001, as amended by the Waiver,
Amendment and Consent Agreement dated as of March 6, 2002 and the Second
Amendment and Consent Agreement dated as of June 28, 2002 (the "Credit
Agreement"); and
WHEREAS, the Borrowers have requested and the Lender has agreed to
waive certain of the provisions of the Credit Agreement, and the Borrowers and
the Lender have agreed to amend the Credit Agreement, all on the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the premises, and in reliance
thereon, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. WAIVER. The Lender hereby retroactively waives the
non-compliance by Borrowers with Sections 8.3.1 and 8.3.2 of the Credit
Agreement as of December 31, 2002.
Nothing in this Section 1 is intended to waive (a) any Default or Event
of Default other than those that would have occurred under Section 8.3.1 and
8.3.2 but for the waiver set forth in this Section 1, or (b) the Default and
Event of Default that would arise upon the failure of the Borrowers to satisfy
the covenants set forth in Sections 8.3.1 and 8.3.2 of the Credit Agreement as
of March 31, 2003 or any subsequent date.
SECTION 2. AMENDMENTS. Subject to the satisfaction in full, on or
prior to the Agreement Effective Date, of the conditions precedent set forth
in Section 3 below, the Credit Agreement is hereby amended as follows:
(i) The third sentence of Section 1.1.1 is amended and restated in its
entirety as follows:
Notwithstanding the amount of the Maximum Credit Facility
referred to above and anything to the contrary stated in this
Agreement, but subject to the right of the Lender to demand
repayment at any time of any Overadvance, if the aggregate of
all Loans outstanding hereunder and all LC Amounts exceeds at
any time $25,000,000 (the "Minimum Credit Facility"), the
Borrowers shall deliver to the Lender Cash and Cash
Equivalents equal to the excess of the sum of the Loans and LC
Amounts over $25,000,000, which Cash and Cash Equivalents
shall be held by the Lender as additional cash collateral for
the Obligations and which may be applied by the Lender to the
Obligations upon the occurrence and during the continuance of
any Event of Default.
(ii) The second sentence of Section 1.2 is amended and restated in its
entirety as follows:
No Letter of Credit or LC Guarantee (i) may have an expiration
date that is more than one week after the last day of the
Original Term (or, if a Renewal Term is then in effect, such
Renewal Term), or (ii) will be issued if the issuance thereof
would cause the sum of the LC Amount and outstanding Loans to
exceed the lesser of (a) the Maximum Credit Facility and (b)
the Borrowing Base.
(iii) The following Section 1.1.3 is added after Section 1.1.2 of the
Credit Agreement:
1.1.3 Foreign Exchange Facility. At the request of
any Borrower, the Lender will, from time to time, make
available (or cause the Bank to make available) to the
Borrowers up to US$1,000,000 of foreign exchange contracts on
terms acceptable to the Lender, provided that the amount of
Revolving Loans that are available to the Borrowers under
Section 1.1.1 shall be reduced by the amount of any such
outstanding foreign exchange contracts. The terms and
conditions applicable to each such foreign exchange contract
shall be those terms and conditions set forth in the standard
form of foreign exchange contract of the Lender or Bank, as
applicable, as modified or otherwise amplified by the terms of
any documents or confirmations applicable to any specific
transaction.
(iv) Section 4.2.1 of the Credit Agreement is amended and restated
in its entirety as follows:
4.2.1 Termination at End of Term or Termination by
Lender. This Agreement, and the right of the Borrowers to
request Loans, Letters of Credit and foreign exchange
contracts hereunder, shall automatically terminate at the end
of the Original Term or any Renewal Term unless, prior to the
end of the Original Term or Renewal Term then in effect, as
applicable, the Lender consents in writing to extend the term
hereof. The Lender shall also have the right to terminate this
Agreement and the right of the Borrowers to request Loans,
Letters of Credit and foreign exchange contracts hereunder at
any time that an Event of Default has occurred and is
continuing.
(v) The following Section 4.2.5 is added after Section 4.2.4 of the
Credit Agreement:
4.2.5 Effect of Termination on Letters of Credit.
Upon the termination of the Lender's commitment to make
Letters of Credit and LC Guaranties available to the
Borrowers, or the acceleration of the Obligations with respect
to all Letters of Credit and/or LC Guaranties, the Borrowers
will either (i) pay to the Lender an amount equal to LC Amount
as cash collateral for all Letters of Credit and LC Guaranties
or (ii) deliver to the Lender a Qualifying Letter of Credit.
(vi) The following Section 8.1.9 is added after Section 8.1.8:
8.1.9 Summerville Landlord Waiver. Use commercially
reasonable efforts to provide to the Lender on or before May
31, 2003, a landlord waiver, in form and substance reasonably
satisfactory to the Lender, executed by the landlord of the
properties located at 2735 and 2745 West 5th North Street,
Summerville, South Carolina.
(vii) Sections 8.3.1 and 8.3.2 of the Credit Agreement are amended and
restated in their entirety as follows and the following Sections 8.3.3
and 8.3.4 are added after Section 8.3.2:
8.3.1 Minimum Fixed Charge Coverage Ratio: not permit
the Consolidated Fixed Charge Coverage Ratio of UIC and its
Subsidiaries to be less than (a) 1.00 to 1.00 for the fiscal
quarter ending March 31, 2003; (b) 1.00 to 1.00 for the period
of two fiscal quarters ending June 30, 2003; (c) 1.30 to 1.00
for the period of three fiscal quarters ending September 30,
2003; or (d) 1.50 to 1.00 for the period of four fiscal
quarters ending on December 31, 2003 or ending on any March
31, June 30, September 30 or December 31 thereafter.
8.3.2 Maximum Balance Sheet Leverage Ratio: not
permit the ratio of UIC and its Subsidiaries' (a) total
liabilities, as determined on a consolidated basis in
accordance with GAAP (but, without duplication, including all
LC Amounts as liabilities), to (b) Tangible Total Net Worth,
to exceed 3.50 as at March 31, 2003 or as at the end of any
fiscal quarter thereafter.
8.3.3 Losses From Discontinued Transportation
Division: not permit the pre-tax losses incurred by UIC and
its Subsidiaries as a result of the cessation of business of
their transportation division to be more than $10,000,000 in
the aggregate at any time.
8.3.4 Variance of Audited Statements From Management
Statements: not permit the net income or Tangible Total Net Worth of
UIC and its Subsidiaries as of and for the fiscal year ended December
31, 2002, as determined on a consolidated basis in accordance
with GAAP, as set forth in the audited financial statements
delivered to the Lender pursuant to Section 8.1.3, to be more
than 5% less than the net income or Tangible Total Net Worth
of UIC and its Subsidiaries as set forth in the unaudited
financial statements delivered to the Lender pursuant to
Section 8.1.3 prior to the Third Amendment Date.
(viii) The second sentence of the definition of "Appraised Machinery
and Equipment" in Appendix A to the Credit Agreement is deleted and the
following sentence is substituted therefor:
Such appraisal shall set forth the liquidation value of such
machinery and equipment and shall be in form and substance
acceptable to the Lender.
(ix) The first paragraph of the definition of "Borrowing Base" in
Appendix A to the Credit Agreement is amended and restated in its
entirety as follows:
Borrowing Base - as at the date of determination
thereof an amount equal to 75% of the aggregate amount of
Eligible Accounts arising from Government Contracts; plus 70%
of the aggregate amount of Eligible Accounts arising from
Non-Government Contracts; plus 30% of Eligible Inventory; plus
up to $2,703,000 of Appraised Machinery and Equipment; plus up
to $10,000,000 of Cash or Cash Equivalents to be held at the
Bank or such higher amount as is required by the third
sentence of Section 1.1.1 of the Agreement; plus the Real
Property Overadvance; minus, at any time that any contracts or
transactions are outstanding under any foreign exchange
facility provided by the Bank or the Lender or any Affiliate
thereof to any of the Borrowers, $750,000; minus the aggregate
amount of Landlord Waiver Reserves; provided that the
Borrowing Base shall be increased by an amount equal to the
Real Property Valuation in accordance with Section 10.3 hereof
and shall be decreased by the amount of any payments of the
Real Property Overadvance pursuant to Section 3.3.1 or any
other provision of this Agreement.
(x) The words "Initial Term" are deleted from the definition of
"Termination Date" in Appendix A to the Credit Agreement and the words
"Original Term" are substituted therefor.
(xi) The following definitions in Appendix A are amended and restated
in their entirety as follows:
Applicable Margin - the margin applied to each LIBOR
Advance and Base Rate Advance, which margin shall fluctuate in
accordance with the then existing Fixed Charge Coverage Ratio,
as follows:
Fixed Charge Base Rate LIBOR
Level Coverage Ratio Advances Advances
---------- ------------------------- --------- --------
I Greater than 2.00 to 1.00 0.00% 1.75%
II Greater than or equal to 0.00% 2.00%
1.75 to 1.00 but less
than 2.00 to 1.00
III Greater than or equal to 0.25% 2.25%
1.50 to 1.00 but less
than 1.75 to 1.00
IV Greater than or equal to 0.50% 2.50%
1.30 to 1.00 but less
than 1.50 to 1.00
V Less than 1.30 to 1.00 0.75% 2.75%
The Applicable Margin shall be determined on the basis of the
financial statements required to be delivered to the Lender
pursuant to Section 8.1.3 and any change in the Applicable
Margin shall be effective at the time of the delivery of such
financial statements. Anything in this Agreement to the
contrary notwithstanding, the Applicable Margin shall be (a)
the rates listed for Level V above if the financial statements
required to be delivered by Section 8.1.3 shall not be
delivered when due, and the rates listed in Level V above
shall remain in effect until the delivery of such financial
statements, and (b) the rates listed for Level V above between
the Third Amendment Date and the first date thereafter that
financial statements are delivered pursuant to Section 8.1.3.
Consolidated Fixed Charge Coverage Ratio - means for
the period in question, for UIC and its Subsidiaries, the
ratio of (i) the sum of (a) earnings before interest, taxes,
depreciation and amortization, plus (b) the Transportation
Division Addback Amount, minus (c) Unfunded Capital
Expenditures, divided by (ii) the sum of (a) taxes paid in
Cash during such period, (b) dividends, (c) stock repurchases
and redemptions, (d) scheduled principal payments of the Loans
and any other Indebtedness, including Capitalized Lease
Obligations, (e) all interest in respect of Indebtedness
accrued or paid during such period (whether or not actually
paid during such period), and all fees and expenses payable
under this Agreement, (f) amounts paid in Cash or Cash
Equivalents with respect to asbestos litigation or claims, and
(g) amounts paid in Cash or Cash Equivalents with respect to
pension plans or other ERISA plans, each of the foregoing as
determined on a consolidated basis without duplication in
accordance with GAAP.
Other Agreements - any and all agreements,
instruments and/or documents (other than this Agreement and
the Security Documents), heretofore, now or hereafter executed
by any Borrower, or any other third party on any such
Borrower's behalf and delivered to Lender and/or Bank in
respect of the transactions contemplated by this Agreement,
including, without limitation, any Hedging Agreements.
(xii) The following new definitions are added to Appendix A of the
Credit Agreement in alphabetical order:
Hedging Agreement - means any interest rate
protection agreement, foreign currency exchange agreement,
commodity price protection agreement or other interest or
currency exchange rate or commodity price hedging arrangement.
Landlord Waiver Reserve - at any time of reference,
with respect to the leases by Kores Nordic (USA) Corporation
and Capital Imaging Incorporated of the properties located at
2735 and 2745 West 5th North Street, respectively, each in
Summerville, South Carolina, an amount equal to the rental
obligations under such leases for a period of 90 days, as
reasonably determined by the Lender, as a reserve against
inventory located at the leasehold created by such leases.
Qualifying Letter of Credit - means an irrevocable
letter of credit in form and substance satisfactory to the
Lender in an amount equal to 105% of the LC Amount which is
issued by a bank acceptable to the Lender and which provides
that such letter of credit may be drawn upon by the Lender by
delivery of a sight draft in the amount by which any
outstanding Letter of Credit and/or LC Guaranty has been
drawn.
Third Amendment Date - the "Agreement Effective Date"
as defined in the Third Amendment and Waiver Agreement with
respect to this Agreement.
Transportation Division Addback Amount - with respect
to any fiscal period, the amount of losses incurred by UIC and
its Subsidiaries during such period as a result of the
cessation of business of their transportation division,
provided that the Transportation Division Addback Amount shall
not exceed $1,500,000 with respect to the fiscal quarter
ending March 31, 2003; $3,000,000 in the aggregate with
respect to the two fiscal quarters ending June 30, 2003;
$4,500,000 in the aggregate with respect to the three fiscal
quarters ending September 30, 2003; and $5,500,000 in the
aggregate with respect to the fiscal year ending December 31,
2003.
Unfunded Capital Expenditures - all Capital
Expenditures which are paid in cash and not financed with
Indebtedness for borrowed money; provided that Capital
Expenditures financed with the proceeds of Revolving Loans or
with the proceeds of Indebtedness that is supported by Letters
of Credit shall be deemed to constitute "Unfunded Capital
Expenditures" for purposes of this Agreement.
SECTION 3. CONDITIONS TO EFFECTIVENESS OF AGREEMENT. This Agreement shall
become effective as of the date hereof only when the following conditions shall
have been satisfied (the date of satisfaction of such conditions being referred
to herein as the "Agreement Effective Date"):
(i) The Lender shall have executed this Agreement and shall have received
a copy of this Agreement duly executed by the Borrowers.
(ii) The Borrowers shall have paid a fee of $25,000 to Lender in
consideration of the waiver set forth herein.
(iii) The Borrowers shall have paid to counsel for the Lender the amount of
reasonable fees and disbursements owed to such counsel in connection
with this Agreement and matters related hereto.
(iv) The Lender shall have received such other information, approvals,
opinions, documents or instruments as it may reasonably request.
SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender to
enter into this Agreement, the Borrowers jointly and severally represent and
warrant to the Lender that, as of the Agreement Effective Date, after giving
effect to the effectiveness of this Agreement, the following statements are true
and correct in all material respects:
(i) Authorization of Agreements. The execution and delivery of this
Agreement by each Borrower and its performance under the Credit
Agreement as amended by this Agreement (the "Amended Agreement") are
within each such Borrower's corporate powers and have been duly
authorized by all necessary corporate action on the part of each such
Borrower.
(ii) No Conflict. The execution and delivery by each Borrower of this
Agreement and the performance by each Borrower of the Amended Agreement
do not contravene any such Borrower's certificate of incorporation or
by laws or any other contractual restriction where such a contravention
has a reasonable possibility of having a Material Adverse Effect or
contravening any law or governmental regulation or court decree or
order binding on or affecting any such Borrower.
(iii) Binding Obligation. This Agreement has been duly executed and
delivered by each Borrower and this Agreement and the Amended Agreement
constitute the legal, valid and binding obligations of each Borrower,
enforceable against each Borrower in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally and by general principles of equity.
(iv) Governmental Approval, Regulation, etc. No authorization or approval
or other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other Person is required for the
due execution, delivery or performance of this Agreement by any
Borrower.
(v) Incorporation of Representations and Warranties from Credit Agreement.
Other than as amended hereby each of the representations and warranties
set forth in Section 7 of the Credit Agreement is true and correct.
SECTION 5. ACKNOWLEDGEMENT. Each Borrower acknowledges and agrees that
each of the Security Documents to which it is a party or otherwise bound shall
continue in full force and effect. Each Borrower hereby agrees and confirms that
each Security Document to which it is a party or otherwise bound and all
Collateral encumbered thereby will continue to guaranty or secure, as the case
may be, the payment and performance of all obligations guaranteed or secured
thereby, as the case may be, and that none of the Borrowers has any defense,
offset, counterclaim or right of recoupment with respect to the Obligations of
the Borrowers under the Amended Agreement.
SECTION 6. MISCELLANEOUS.
(i) Effect on the Credit Agreement and the Other Loan Documents. Except as
specifically set forth herein, the terms, provisions and conditions of
the Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed and the
Borrowers remain bound to pay and perform their obligations thereunder.
(ii) Applicable Law. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO SUCH LAWS RELATING TO CONFLICTS OF LAWS.
(iii) Headings. The various headings of this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of
this Agreement or any provision hereof.
(iv) Counterparts and Incorporation. This Agreement may be executed by the
parties hereto in several counterparts and by the different parties on
separate counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same
instrument. Following execution and delivery of this Agreement, any
reference to the Credit Agreement shall be deemed a reference to such
document as hereby amended.
(v) Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such provision and such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such
provisions in any other jurisdiction.
IN WITNESS WHEREOF, this Third Amendment and Waiver Agreement has been
duly executed and delivered as of the day and year first above written.
FLEET CAPITAL CORPORATION
By: /s/ Matthew Bourgeois
---------------------------------------------
Name: Matthew Bourgeois
Title: Vice President
UNITED INDUSTRIAL CORPORATION
By: /s/ James H. Perry
---------------------------------------------
Name: James H. Perry
Title: Vice President
AAI CORPORATION
By: /s/ James H. Perry
---------------------------------------------
Name: James H. Perry
Title: Vice President
DETROIT STOKER COMPANY
By: /s/ James H. Perry
---------------------------------------------
Name: James H. Perry
Title: Vice President
AAI ENGINEERING SUPPORT INC.
By: /s/ James H. Perry
---------------------------------------------
Name: James H. Perry
Title: Vice President
AAI/ACL TECHNOLOGIES, INC.
By: /s/ James H. Perry
---------------------------------------------
Name: James H. Perry
Title: Vice President
MIDWEST METALLURGICAL
LABORATORY, INC.
By: /s/ James H. Perry
---------------------------------------------
Name: James H. Perry
Title: Vice President