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Exhibit 4.7
AMENDMENT AND FORBEARANCE
AGREEMENT
THIS AMENDMENT AND
FORBEARANCE AGREEMENT (this “ Agreement ”),
dated as of December 29, 2004, is entered into among Wells Fargo
Bank, National Association (“ Wells Fargo ”),
Union Bank of California, N.A. and Comerica Bank-California
(collectively, the “ Lenders ”), Modtech
Holdings, Inc. (the “ Borrower ”) and Wells
Fargo as administrative agent for the Lenders (in such capacity,
the “ Administrative Agent ”).
RECITALS
A. The Borrower, the Lenders
and the Administrative Agent have previously entered into that
certain Credit Agreement dated as of December 26, 2001 (as amended,
modified or supplemented as of the date hereof, the “
Credit Agreement ”), pursuant to which the Lenders
have made certain loans and financial accommodations available to
the Borrower. Terms used herein without definition shall have the
meanings ascribed to them in the Credit Agreement.
B. The following Events of
Default occurred as of September 30, 2004, and are continuing under
the Credit Agreement: (a) the Borrower was not in compliance with
Section 6.14 (Current Ratio); (b) the Borrower was in violation of
Section 6.15 (Tangible Net Worth); and (c) as of September 30,
2004, the Borrower was in violation of Section 6.27 (Minimum
EBITDA) and the Borrower has advised the Lenders that as of
December 31, 2004 it will not be in compliance with the foregoing
three sections of the Credit Agreement as well as Section 6.12
(Funded Debt Ratio) and Section 6.13 (Fixed Charge Coverage Ratio)
and will not be in compliance with Section 6.26 (Asset Coverage
Ratio) until the Maximum Revolving Credit Amount is reduced to
$24,000,000 (all of the foregoing, collectively, the “
Known Defaults ”).
C. The Borrower has asked the
Lenders to forbear from exercising their rights and remedies under
the Credit Agreement in order to give the Borrower time to either
bring its financial performance back in compliance with the terms
of the Credit Agreement or to refinance the amounts outstanding
under the Credit Agreement in their entities.
D. The Lenders are willing,
for a limited period of time and on the terms and conditions set
forth herein, to forbear from exercising their rights and remedies
under the Credit Agreement with respect to the Known
Defaults.
E. The Lenders and the
Borrower also wish to amend the terms of the Credit Agreement, all
as more fully set forth herein.
F. The Borrower is entering
into this Agreement with the understanding and agreement that,
except as specifically provided herein, none of the Lenders’
rights or remedies as set forth in the Credit Agreement is being
waived or modified by the terms of this Agreement.
AGREEMENT
NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants herein
contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Incorporation of
Recitals . Each of the above recitals is expressly incorporated
herein and is represented by the Borrower to be true and
correct.
2. Reaffirmation of
Obligations . The Borrower hereby acknowledges that the Loan
Documents and the Obligations constitute the valid and binding
obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms, and the Borrower hereby
reaffirms its obligations under the Loan Documents. The
Lenders’ entry into this Agreement or any of the documents
referenced herein, the Lenders’ negotiations with any party
with respect to any Loan Document, the Lenders’ conduct of
any analysis or investigation of any collateral for the Obligations
or any Loan Document, the Lenders’ acceptance of any payment
from the Borrower or any other party made to the Lenders prior to
the date hereof, or any other action or failure to act on the part
of the Lenders shall not constitute (a) except to the extent of the
specific amendments contained in Section 6 hereof, a modification
of any Loan Document, or (b) a waiver of any Default or Event of
Default under the Loan Documents, including, without limitation,
the Known Defaults, or a waiver of any term or provision of any
Loan Document.
3. Agreement to Forbear:
Termination of Agreement to Forbear .
(a) For the Forbearance Term
(as defined below), the Lenders shall not take any action or
commence any proceedings with respect to the enforcement of any of
their rights or remedies under the Loan Documents as a result of
the Known Defaults. The parties agree that neither the foregoing
agreement by the Lenders nor the acceptance by the Lenders of any
of the payments provided for in the Loan Documents, nor any payment
prior to the date hereof shall, however, (a) excuse any party from
any of its obligations under the Loan Documents, or (b) toll the
running of any time periods applicable to any such rights and
remedies, including, without limitation, any time periods within
which the Borrower may cure defaults under the Loan Documents or
otherwise. The Borrower agrees that it will not assert laches,
waiver or any other defense to the enforcement of any of the Loan
Documents based upon the foregoing agreement by the Lenders to
forbear or the acceptance by the Lenders of any of the payments
provided for in the Loan Documents or any payment prior to the date
hereof. As used herein, “ Forbearance Term ”
shall mean the period commencing upon the effectiveness of this
Agreement and continuing until the earliest to occur of: (x) any
Default or Event of Default under any of the Loan Documents (other
than the Known Defaults or any Event of Default arising from a
failure to comply with the provisions of Sections 6.14, 6.15 or
6.27 of the Credit Agreement which occurs during the Forbearance
Term) or (y) March 31, 2005.
(b) The Borrower acknowledges
and agrees that upon the termination of the Lenders’
agreement to forbear as provided in Section 3(a) hereof, the
Lenders and the Administrative Agent shall be entitled to exercise
any or all of its remedies under the Loan Documents, including,
without limitation, the appointment of a receiver, the acceleration
of the Obligations and the enforcement under the UCC of any liens
in favor of the Lenders and the Administrative Agent, as a result
of the Known Defaults, and at any time the Lenders and the
Administrative Agent shall be entitled to exercise any or all of
their respective remedies under the Loan Documents as a result of
any other Default or Event of Default under the Loan
Documents.
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4. Termination of
Commitments . Each of the parties hereto agrees that as of the
Amendment and Forbearance Effective Date, the aggregate outstanding
principal amount of all Swing Line Advances is $1,700,000, the
aggregate outstanding principal amount of all Revolving Advances is
$21,200,000 and the Aggregate Effective Amount under all
outstanding Letters of Credit is $6,898,125. From and after the
Amendment and Forbearance Effective Date, the entire $201,875 of
unused Revolving Commitments shall be cancelled without further
action by any party and the Commitments of the Lenders to make
Swing Line Loans or Revolving Advances and to issue any Letters of
Credit under the Credit Agreement shall be terminated. Accordingly,
any prepayment or repayment of Swing Line Loans or Revolving
Advances shall permanently reduce the Revolving Commitment by the
amount of such prepayment or repayment. If any Letter of Credit
shall expire or be cancelled prior to its expiry date, the
Revolving Commitment shall be permanently reduced by the amount of
such Letter of Credit.
5. Prepayment of Swing
Line Loans and Revolving Advances; Default Rate .
(a) The Borrower shall on or
prior to the Amendment and Forbearance Effective Date, prepay in
full all outstanding Swing Line Loans in the amount of $1,700,000
and $4,300,000 of Revolving Advances. Upon such prepayment, the
Maximum Revolving Credit Amount shall be reduced to $23,798,125
without further action by any party.
(b) All Obligations under the
Credit Agreement shall continue to bear interest at the Default
Rate until further notice.
6. Amendments to Credit
Agreement .
(a) The following defined
terms are hereby added to Section 1.1 of the Credit
Agreement in appropriate alphabetical sequence:
“ Amendment and
Forbearance Agreement ” means that certain Amendment and
Forbearance Agreement dated as of December 29, 2004 among the
Borrower, the Lenders and the Administrative Agent.
“ Amendment and
Forbearance Effective Date ” means the date upon which
all conditions precedent set forth in Section 7 of the Amendment
and Forbearance Agreement shall have been satisfied.
(b) The following defined
terms in Section 1.1 of the Credit Agreement are hereby
amended in full to read as follows:
“ Maximum Revolving
Credit Amount ” means the lesser of (a) $23,798,125 and
(b) the Asset Borrowing Amount.
“ Revolving
Commitment ” means, with respect to each relevant Lender,
the commitment, if any, of such Lender to make Revolving Advances
(expressed as the maximum aggregate amount of the Revolving
Advances to be made by such Lender hereunder), as such commitment
may be (a) reduced from time to time pursuant to Section 2.6
and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 11.8 .
The amount of each relevant Lender’s
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Revolving Commitment as of
the Amendment and Forbearance Effective Date is set forth on
Schedule 1.1 . The aggregate amount of the Lenders’
Revolving Commitments as of the Amendment and Forbearance Effective
Date is $23,798,125.
(c) Each of the parties
hereto hereby agrees that, as of the Amendment and Forbearance
Effective Date, the Revolving Commitment of each Lender is being
reduced to the amount set forth on Annex I hereto. Each of
the parties hereto agrees that new Revolving Notes are not being
issued in connection with this Agreement and that the stated amount
of each Revolving Note shall, as of the Amendment and Forbearance
Effective Date, be due and payable to each Lender in the amount (or
such lesser amount as shall be outstanding from time to time) of
such Lender’s Revolving Commitment.
(d) Schedule 1.1 of the
Credit Agreement is hereby amended to read in its entirety as set
forth on Annex I hereto.
(e) The second paragraph of
Section 2.1(a) of the Credit Agreement is hereby amended to read in
its entirety as follows:
Upon the Amendment and
Forbearance Effective Date, all unutilized Revolving Commitments
under the Credit Agreement will be terminated and from and after
such date the Borrower shall have no further right to reborrow
amounts repaid under the Revolving Commitment.
(f) There shall be added to
Section 2.5 of the Credit Agreement a new subsection (k) reading in
its entirety as follows:
(k) Notwithstanding anything
to the contrary herein, from and after the Amendment and
Forbearance Effective Date, no Letters of Credit shall be issued
under this Section 2.5.
(g) There shall be added to
Section 2.8 of the Credit Agreement a new subsection (f) reading in
its entirety as follows:
(f) Notwithstanding anything
to the contrary herein, from and after the Amendment and
Forbearance Effective Date, no Swing Line Loans shall be made under
this Section 2.8.
(h) Section 3.2 of the Credit
Agreement is hereby amended to read in its entirety as
follows:
3.2 [Intentionally
Omitted.]
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(i) Section 11.23 of the
Credit Agreement is hereby amended to read in its entirety as
follows:
11.23 Arbitration
.
(a) Arbitration . The
parties hereto agree, upon demand by any party, to submit to
binding arbitration all claims, disputes and controversies between
or among them (and their respective employees, officers, directors,
attorneys, and other agents), whether in tort, contract or
otherwise arising out of or relating to in any way the credit
Agreement or any Loan Document and the negotiation, execution,
collateralization, administration, repayment, modification,
extension, substitution, formation, inducement, enforcement,
default or termination of any such agreements.
(b) Governing Rules .
Any arbitration proceeding will (i) proceed in a location in
California selected by the American Arbitration Association
(“AAA”); (ii) be governed by the Federal Arbitration
Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the documents between
the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in
accordance with the AAA’s commercial dispute resolution
procedures, unless the claim or counterclaim is at least
$1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in
accordance with the AAA’s optional procedures for large,
complex commercial disputes (the commercial dispute resolution
procedures or the optional procedures for large, complex commercial
disputes to be referred to, as applicable, as the
“Rules”). If there is any inconsistency between the
terms hereof and the Rules, the terms and procedures set forth
herein shall control. Any party who fails or refuses to submit to
arbitration following a demand by any other party shall bear all
costs and expenses incurred by such other party in compelling
arbitration of any dispute. Nothing contained herein shall be
deemed to be a waiver by any party that is a bank of the
protections afforded to it under 12 U.S.C. §91 or any similar
applicable state law.
(c) No Waiver of
Provisional Remedies, Self-Help and Foreclosure . The
arbitration requirement does not limit the right of any party to
(i) foreclose against real or personal property collateral; (ii)
exercise self-help remedies relating to collateral or proceeds of
collateral such as setoff or repossession; or (iii) obtain
provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during
or after the pendency of any arbitration proceeding. This exclusion
does not constitute a waiver of the right or obligation of any
party to submit any dispute to arbitration or reference hereunder,
including those arising from the exercise of the actions detailed
in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator
Qualifications and Powers . Any arbitration proceeding in which
the amount in controversy is $5,000,000.00 or less will be decided
by a single arbitrator selected according to the Rules, and who
shall not render an award of greater than $5,000,000.00. Any
dispute in which the amount in controversy exceeds $5,000,000.00
shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will
be a neutral attorney licensed in the State of California or a
neutral retired judge of the state or federal judiciary of
California, in either case with a minimum of ten years experience
in the substantive law applicable to the subject matter
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of the dispute to be
arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation
in determining any claim. In any arbitration proceeding the
arbitrator will decide (by documents only or with a hearing at the
arbitrator’s discretion) any pre-hearing motions which are
similar to motions to dismiss for fail
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