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
