CONSENT AND FIRST AMENDMENT TO
CREDIT AGREEMENT
This Consent
and First Amendment to Credit Agreement (“First
Amendment”) is made as of this 4 th day of September, 2009 by and among Borrowers
(as defined below), which are listed on attached Schedule 1,
the Lenders (as defined below) signatory hereto and Comerica Bank,
as Agent for the Lenders (in such capacity, the
“Agent”).
A. PMFG, Inc.
(“Holdings”), Peerless Mfg. Co. (the
“Company”), PMC Acquisition, Inc. (“PMC
Acquisition”), and, following the execution and delivery by
any other Subsidiary (as defined in the Credit Agreement), and
acceptance by the Agent, from time to time, of a Credit Agreement
Joinder Agreement from such Subsidiary, collectively with the
Company, PMC Acquisition and each such Subsidiary, the
“Borrowers” and each individually, a
“Borrower”) are party to that certain Revolving Credit
and Term Loan Agreement dated April 30, 2008, with the
financial institutions from time to time signatory thereto
(individually a “Lender,” and any and all such
financial institutions collectively the “Lenders”) and
Agent (as amended or otherwise modified from time to time, the
“Credit Agreement”).
B. Borrowers
have requested that Agent and the Lenders consent to certain
transactions and make certain amendments to the Credit Agreement as
set forth herein and Agent and the Lenders are willing to do so,
but only on the terms and conditions set forth in this First
Amendment.
NOW,
THEREFORE , in consideration of the mutual agreements herein
contained and other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged,
Borrowers, Agent and the Lenders agree as follows:
1. Holdings
has informed the Agent and the Lenders that it will enter into a
Securities Purchase Agreement (the “Securities Purchase
Agreement”) with the purchasers whose names are set forth on
the signature pages thereto (collectively, the
“Investors” and each, individually, an
“Investor”) and related transaction documents
(collectively with the Securities Purchase Agreement, the
“Equity Transaction Documents”) and plans to enter into
the following transactions thereunder (collectively, the
“Equity Transaction”): Investors will purchase from
Holdings up to $21,200,000 of Series A convertible preferred
stock of Holdings and warrants exercisable into shares of
Holdings’ common stock. The Credit Parties will use all of
the Net Cash Proceeds from the Equity Transaction, together with
cash on hand in an amount not to exceed $1,000,000, to prepay in
full the Mezzanine Subordinated Debt (as defined in the Credit
Agreement) (the “Subordinated Debt Prepayment”).
Effective upon the satisfaction of the conditions set forth in
Section 7 of this First Amendment, the Lenders and Agent
hereby (a) consent to the consummation of the Equity
Transaction, (b) acknowledge that the Net Cash Proceeds
generated from the issuance and sale of securities in connection
with the Equity Transaction shall be used, and consent to the use
of the Credit Parties’ cash on hand (as aforesaid), to make
the Subordinated Debt Prepayment, but only so long as no Default or
Event of Default has occurred and is continuing at the time that
the Subordinated Debt Prepayment is made, (c) waive the
advance notice requirements of Section 7.7(e) of the Credit
Agreement arising out of or relating to the Equity Transaction,
including the amendment of Holdings’
organizational
documents in connection with the Equity Transaction and
(d) acknowledge and agree that, for all purposes of the Credit
Agreement and the other Loan Documents, the Series A
convertible preferred stock (and each aspect and feature thereof),
and the warrants, in each case, issued and sold as part of the
Equity Transaction (and Holdings’ obligations in respect of
each thereof) shall be deemed not to be (i) “Debt,”
“Funded Debt,” or “Off Balance Sheet
Liabilities” within the meaning of each such term in the
Credit Agreement or (ii) debt or liabilities for purposes of
calculating the financial covenants set forth in Section 7.9
of the Credit Agreement regardless of the classification thereof in
accordance with GAAP.
2. The
following definitions are hereby added to Section 1 of the
Credit Agreement:
“First
Amendment to Credit Agreement” shall mean that certain
Consent and First Amendment to Credit Agreement dated as of
September 4, 2009, by and among Borrowers, the Lenders and the
Agent.
“Equity Transaction” shall have the
meaning ascribed to such term in Section 1 of the First Amendment
to Credit Agreement.
“Equity Transaction Documents” shall
have the meaning ascribed to such term in Section 1 of the
First Amendment to Credit Agreement.
“Reorganization Event” shall have
the meaning ascribed to such term in the Equity Transaction
Documents.
“Restricted Payment Threshold” shall
mean maintaining, as of the end of the most recent fiscal quarter
for which Holdings has reported under Section 7.1 hereof and,
on a pro forma basis as of the date of the proposed Distribution,
both before and after giving effect thereto, a Consolidated Total
Leverage Ratio of not greater than 3.00 to 1.00 and a Consolidated
Fixed Charge Coverage Ratio of not less than 1.4 to 1.0 (all
capitalized terms used in this definition being defined using the
definitions in effect on the First Amendment Effective
Date).
3. The
following definitions set forth in Section 1 of the Credit
Agreement are amended and restated in their entireties as
follows:
“Subordinated Debt” shall mean the
any unsecured Funded Debt of any Credit Party and other obligations
under the Subordinated Debt Documents and any other Funded Debt of
any Credit Party which has been subordinated in right of payment
and priority to the Indebtedness, all on terms and conditions
satisfactory to the Agent.
“Subordinated Debt Documents” shall
mean and include any documents evidencing any Subordinated Debt, in
each case, as the same may be amended, modified, supplemented or
otherwise modified from time to time in compliance with the terms
of this Agreement.
2
“Subordination Agreements” shall
mean, collectively, any subordination agreements entered into by
any Person from time to time in favor of Agent in connection with
any Subordinated Debt, the terms of which are acceptable to the
Agent, in each case as the same may be amended, restated or
otherwise modified from time to time, and “Subordination
Agreement” shall mean any one of them.
4. Article 8
of the Credit Agreement is amended as follows:
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(a)
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Clauses (b) through (d) of
Section 8.5 are each hereby amended and restated in their
entirety as follows:
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“(b) each Credit Party may
(i) declare and make Distributions to any holder of any of its
Equity Interests payable in such Credit Party’s Equity
Interests and/or (ii) make Purchases of such Credit
Party’s Equity Interests using such Credit Party’s
Equity Interests, in each case, provided that the issuance of such
Equity Interests does not violate the terms of this
Agreement;
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(c) each Credit Party may declare and
make Distributions to any holder of any of its Equity Interests,
but only to the extent necessary to enable Holdings and its
Domestic Subsidiaries to pay federal and state income taxes
attributable to income of the applicable recipient thereof;
and
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