EXHIBIT 10.1
Execution Version
FOURTH AMENDMENT
TO
CREDIT
AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT
AGREEMENT (this “ Amendment ”), dated as of
August 1, 2008 (the “ Effective Date ”), by
and among, on the one hand, CECO ENVIRONMENTAL CORP ., a
Delaware corporation (“ Parent ”), CECO
GROUP, INC ., a Delaware corporation (“ Group
”) and each of the following Subsidiaries of Parent as
Borrowers under this Amendment and the Credit Agreement: CECO
FILTERS, INC ., a Delaware corporation (“ Filters
”), NEW BUSCH CO., INC ., a Delaware corporation
(“ New Busch ”), THE KIRK & BLUM
MANUFACTURING COMPANY , an Ohio corporation (“
K&B ”), KBD/TECHNIC, INC ., an Indiana
corporation (“ Technic ”), CECOAIRE, INC
., a Delaware corporation (“ Aire ”), CECO
ABATEMENT SYSTEMS, INC ., a Delaware corporation (“
Abatement ”), H.M. WHITE, INC. , a Delaware
corporation (“ H.M. White ”), EFFOX INC.,
formerly known as CECO ACQUISITION CORP. , a Delaware
corporation (“ Effox ”), GMD ENVIRONMENTAL
TECHNOLOGIES, INC. formerly known as GMD ACQUISITION CORP. , a
Delaware corporation (“ GMD ”), FKI, LLC
, a Delaware limited liability company (“ FKI LLC
”), CECO MEXICO HOLDINGS LLC , a Delaware limited
liability company (“ CECO Mexico LLC ”), and
FISHER-KLOSTERMAN, INC. formerly known as FKI ACQUISITION
CORP. , a Delaware corporation (“
Fisher-Klosterman ”), and, on the other hand, FIFTH
THIRD BANK , an Ohio banking corporation (“ Lender
”), is as follows:
Preliminary
Statements
A. Parent, Group and Borrowers (the “ Loan
Parties ”) and Lender are parties to a Credit Agreement
dated as of December 29, 2005, as amended by the First
Amendment to Credit Agreement dated as of June 8, 2006, the
Second Amendment to Credit Agreement dated as of February 28,
2007 and the Third Amendment to Credit Agreement dated as of
February 29, 2008 (as amended, the “ Credit
Agreement ”). Capitalized terms which are used, but not
defined, in this Amendment will have the meanings given to them in
the Credit Agreement.
B. The Loan Parties have requested that Lender:
(i) consent to the acquisition by Fisher-Klosterman of
substantially all of the assets of A.V.C. (collectively, the
“ A.V.C. Acquisition ”); (ii) consent to
the acquisition by 9199-3626 Quebec Inc., a newly created wholly
owned subsidiary of Parent, (“ Canadian Acquisition
Co. ”) of all of the shares of Flextor Inc., a
Québec company (the “ Flextor Acquisition
”); (iii) consent to a $5,000,000 loan to be made by
Phillip DeZwirek to Parent, the proceeds of which shall be used
fund the Flextor Acquisition and for other corporate purposes; and
(iv) make certain other amendments to the Credit Agreement and
certain of the other Loan Documents.
C. Lender is willing to consent to such requests
and to so amend the Credit Agreement and other Loan Documents, all
on the terms, and subject to the conditions, of this
Amendment.
Statement of
Agreement
In consideration of the mutual
covenants and agreements set forth in this Amendment, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Lender and the Loan Parties hereby
agree as follows:
1. Amendments to Credit
Agreement . Subject
to the satisfaction of the conditions of this Amendment, the Credit
Agreement is hereby amended as follows:
1.1 Section 1.1 of the Credit Agreement is hereby amended by the
addition of the following definitions, in their proper alphabetical
order, to provide in their entirety as follows:
“ A.V.C. ” means
Shideler, Inc., formerly known as A.V.C. Specialists, Inc., a
California corporation, and its successors and assigns.
“ A.V.C. Acquisition
” means the acquisition by Fisher-Klosterman of substantially
all of the assets of A.V.C., all in accordance with, and pursuant
to the terms of, the A.V.C. Acquisition Documents.
“ A.V.C. Acquisition
Agreement ” means the Asset Purchase Agreement dated as
of August 1, 2008 by and among Fisher-Klosterman, A.V.C. and
Tom Shideler and Barbara Shideler.
“ A.V.C. Acquisition
Documents ” means the A.V.C. Acquisition Agreement and
every other document or agreement executed or delivered by any Loan
Party in connection with the A.V.C. Acquisition.
“ A.V.C. Earn-out
Payment ” means any Earn-out Amount (as defined in the
A.V.C. Acquisition Agreement) paid by a Loan Party in accordance
with the A.V.C. Acquisition Agreement.
“ Canadian Acquisition
Co. ” means 9199-3626 Quebec Inc. a company organized
under the laws of the Province of Quebec, Canada, and its
successors and assigns, including the successor of the Flextor
Amalgamation.
“ Copyright Security
Agreements ” means the Copyright Security Agreement dated
as of the Effective Date (as defined in the Third Amendment)
between Fisher-Klosterman and Lender.
“ Fisher-Klosterman
” means Fisher-Klosterman, Inc. formerly known as FKI
Acquisition Corp., a Delaware corporation.
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“ Flextor ” means
Flextor Inc., a Québec company, and its successors and
assigns, including the successor of the Flextor
Amalgamation.
“ Flextor Acquisition
” means the acquisition by Canadian Acquisition Co. of all of
the shares of stock of Flextor, all in accordance with, and
pursuant to the terms of, the Flextor Acquisition
Documents,
“ Flextor Acquisition
Agreement ” means the Stock Purchase Agreement dated as
of August 1, 2008, by and among Parent, Canadian Acquisition
Co., Michael dos Santos, an individual resident of Quebec, The Dos
Santos Family Trust, a Québec trust and, 9162-2563 Québec
Inc., a Québec company.
“ Flextor Acquisition
Documents ” means the Flextor Acquisition Agreement and
every other document or agreement executed or delivered by Canadian
Acquisition Co., Flextor and any Loan Party in connection with the
Flextor Acquisition.
“ Flextor Amalgamation
” means the amalgamation of Canadian Acquisition Co. and
Flextor under the laws of Canada.
“ Flextor Brazil
” means Flextor do Brasil Importacao e Exportacao Ltda., a
company organized under the laws of Brazil.
“ Flextor Chile ”
means Flextor Chile S.A., a company organized under the laws of
Chile.
“ Flextor Earn-out
Payment ” means any Earn-out Amount (as defined in the
Flextor Acquisition Agreement) paid by a Loan Party, Canadian
Acquisition Co. or Flextor in accordance with the Flextor
Acquisition Agreement.
“ Flextor Loan ”
has the meaning given in Section 5.9(a)(F) .
“ Fourth Amendment
” means the Fourth Amendment to this Agreement dated as of
August 1, 2008.
1.2 The following definitions in
Section 1.1 of the Credit Agreement are hereby amended
in their entirety by substituting the following in their respective
steads:
“ Adjusted EBITDA
” means the total (without duplication and all as determined
on a consolidated basis in accordance with GAAP), in Dollars, of
EBITDA for the applicable period, (a) minus
Non-financed Capital Expenditures for that same period, exclusive
of Excluded Capital
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Expenditures (as defined in
Section 5.3 ); (b) minus the aggregate
cash amount of the Parent and its Subsidiaries’ income and
franchise tax expense for that same period to the extent deducted
in the determination of Net Income; (c) minus any gain
or plus any non-cash loss arising from the sale of capital
assets to the extent included or deducted in the determination of
Net Income; (d) minus any gain arising from the
write-up of any assets (excluding inventory) or plus any
non-cash loss from the write-down of any assets, each to the extent
included (or deducted in the case of non-cash losses) in the
determination of Net Income; (e) minus any
extraordinary gains and items of income to the extent included in
the determination of Net Income or plus any non-cash
extraordinary items of loss to the extent deducted in the
determination of Net Income; (f) minus any gains (or
plus any non-cash losses) recognized by the Parent and its
Subsidiaries as earnings which relate to adjustments made by the
Parent and its Subsidiaries as a result of any extraordinary
accounting adjustment to the extent included (or deducted in the
case of non-cash losses) in the determination of Net Income;
(g) minus non-operating, non-recurring gains (or
plus any non-cash losses) from time to time occurring to the
extent included (or deducted in the case of non-cash losses) in the
determination of Net Income; (h) plus any non-cash
expense or minus any non-cash gain or income during such
period resulting from (i) a change in the price of
Parent’s common stock opposite the strike price of its
options and warrants outstanding from time to time, (ii) stock
award expenses, and (iii) impairment of goodwill; (i)
minus the aggregate amount of any dividends to
Parent’s stockholders, if any, permitted expressly by Lender
which are paid in cash by Parent during the applicable period; and
(j) minus the aggregate amount of Effox Earn-out
Payments, FKI Earn-out Payments, A.V.C Earn-out Payments or Flextor
Earn-out Payments made by the Parent and its Subsidiaries in cash
during the applicable period to the extent not deducted in
the determination of Net Income which was used to determine such
EBITDA. The term “applicable period” in this definition
means Test Period in the case of determining the Fixed Charge
Coverage Ratio or the Maximum Total Funded Debt to Adjusted EBITDA
Ratio and Fiscal Year in the case of determining Excess Cash
Flow.
“ Affiliate ”
means, as to any Person (the “ Subject Person
”), any other Person which, directly or indirectly, is in
control of, is controlled by, or is under common control with, the
Subject Person. For purposes of this definition,
“control” of a Person means the power, direct or
indirect, (a) to vote 5% or more of the securities (or other
Ownership Interests) having voting power for the election of
directors (or managers in the case of a limited liability company)
of the Person or (b) otherwise to direct or cause the
direction of the management and policies of the Person, whether by
contract or otherwise. Without limiting the generality of the
foregoing, each of the following will be deemed an Affiliate of a
Borrower for purposes of this Agreement, Parent, Group, FKI, LLC,
CECO Mexico
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LLC, CECO India, Fisher Klosterman
Shanghai, CECO Environmental Mexico, CECO Environmental Services,
Canadian Acquisition Co., Flextor, Flextor Brazil and Flextor Chile
and each officer and director of a Loan Party.
“ Borrower ”
means each of Filters, New Busch, K&B, Technic, Aire,
Abatement, H.M. White, CECO Acquisition (now known as Effox Inc.),
GMD, Fisher-Klosterman and the Domestic Subsidiaries of Parent or
Group hereafter becoming a party to this Agreement pursuant to
Section 5.9(b) , and “ Borrowers ”
means, collectively, Filters, New Busch, K&B, Technic, Aire,
Abatement, H.M. White, CECO Acquisition (now known as Effox Inc.),
GMD, Fisher-Klosterman and such additional Domestic Subsidiaries.
To the extent a term or provision of this Agreement or any of the
other Loan Documents is applicable to a “Borrower”, it
is applicable to each and every Borrower unless the context
expressly indicates otherwise. For the avoidance of doubt, neither
FKI, LLC nor CECO Mexico LLC shall be a Borrower.
“ Borrowing Base
” means, as of the relevant date of determination, the sum
of:
(a) 70% of the then net amount of
Eligible Accounts ( i.e. , less sales, excise or similar
taxes, and less returns, discounts, claims, credits and allowances
of any nature at any time issued, owing, granted, outstanding,
available or claimed);
plus (b) the lesser of: (i) $1,000,000 or
(ii) 50% of the then Eligible Net Unbilled Revenue;
plus (c) the lesser of: (i) $7,500,000 or
(ii) 50% of the then net amount of Eligible Inventory;
and
less (d) all then Borrowing Base Reserves.
“ EBITDA ” means
the total (without duplication), in Dollars, of Net Income for the
applicable period, plus (a) the aggregate amount of the
Parent and its Subsidiaries’ depreciation and amortization
expense determined on a consolidated basis in accordance with GAAP
for such period to the extent deducted in the determination of Net
Income, plus (b) the aggregate amount of the Parent and
its Subsidiaries’ interest expense determined on a
consolidated basis in accordance with GAAP for such period to the
extent deducted in the determination of Net Income, and plus
(c) the aggregate amount of the Parent and its
Subsidiaries’ income and franchise tax expense for such
period determined on a consolidated basis in accordance with GAAP
to the extent deducted in the determination of Net Income. The term
“applicable period” in this definition means
Test
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Period in the case of determining
the Fixed Charge Coverage Ratio or the Maximum Total Funded Debt to
Adjusted EBITDA Ratio and Fiscal Year in the case of determining
Excess Cash Flow.
“ Excess Cash Flow
” means, for the applicable Fiscal Year, an amount equal to
the sum of (a) the Adjusted EBITDA solely of the Loan Parties
for the applicable Fiscal Year minus (b) the aggregate
Fixed Charges solely of the Loan Parties for such Fiscal Year,
provided, however , solely for the purposes of determining
Excess Cash Flow, the principal and Suspended Interest (as defined
in the Subordination Agreement) paid on the Subordinated Debt shall
be excluded for purposes of determining Fixed Charges. All of the
foregoing amounts will be determined based on the annual audited
financial statements required to be delivered to Lender pursuant to
Section 4.3(b) .
“ Fiscal Year ”
means the Parent’s fiscal year for financial accounting
purposes, beginning on January 1st and ending on
December 31st.
“ Fixed Charges ”
means, for the applicable period, the total (without duplication),
in Dollars, of (all as determined on a consolidated basis in
accordance with GAAP): (a) the principal amount of the Parent
and its Subsidiaries’ long-term Indebtedness, in each case
paid during the applicable period, including those under Term Loan
Note C (other than any Excess Cash Flow Payment with respect to
Term Loan C), the ICS Note, the Sandler Note, and the Subordinated
Debt Note (as defined within the definition of Subordinated Debt
Documents) (whether classified, as of any date, as long-term
Indebtedness); plus (b) scheduled capital lease
payments by the Parent and its Subsidiaries during the applicable
period; and plus (c) the Parent and its
Subsidiaries’ aggregate cash interest expense for the
applicable period, including interest paid on the Obligations, all
capital lease obligations, the Subordinated Debt, and any other
Indebtedness for the applicable period; provided, however ,
that the following amounts will be excluded for purposes only of
determining Fixed Charges, that portion of the Subordinated Debt
which, with Lender’s prior consent, is converted into shares
of the Parent as a result of the exercise of the conversion rights
of the Subordinated Creditor under the Subordinated Debt Note. The
term “applicable period” in this definition means Test
Period in the case of determining the Fixed Charge Coverage Ratio
or the Maximum Total Funded Debt to Adjusted EBITDA Ratio and
Fiscal Year in the case of determining Excess Cash Flow.
“ Funded Debt ”
means, as of any date, all Indebtedness of the Parent and its
Subsidiaries: (a) in respect of any money borrowed, including
the undrawn face amount (and any unreimbursed drawings under) any
letters of credit or acceptance facilities (other than
the
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Subordinated Debt);
(b) evidenced by any loan or credit agreement, promissory
note, debenture, bond (other than a Surety Bond), guaranty or other
similar written obligation to pay money (other than the
Subordinated Debt); (c) under any capitalized lease, synthetic
lease or any form of off-balance sheet financing; and (d) for
the deferred and unpaid purchase price of any property or business
or any services (other than trade accounts payable incurred in the
ordinary course of business and constituting current liabilities
not more than ninety (90) days in arrears measured from the
date of billing), all as determined in accordance with
GAAP.
“ Guaranties ”
means, collectively, the Borrower Guaranties, the Group Guaranty,
the Parent Guaranty and each guaranty made by Fisher-Klosterman,
FKI, LLC, GMD and CECO Mexico LLC in favor of Lender and
Lender’s Affiliates of the Obligations.
“ Loan Party ”
and “ Loan Parties ” mean each of Borrowers,
Group, Parent, FKI, LLC, and CECO Mexico LLC and collectively,
Borrowers, Group, Parent, FKI, LLC and CECO Mexico LLC,
respectively.
“ Net Income ”
means, for the applicable 12 Month Period, the Parent and its
Subsidiaries after tax net income as determined on a consolidated
basis in accordance with GAAP.
“ Non-financed Capital
Expenditures ” means the total amount of capital
expenditures for any period, as determined in accordance with GAAP,
made by the Parent and its Subsidiaries on a consolidated basis
determined exclusive of those capital expenditures made from
(a) funds borrowed by the Parent or its Subsidiaries (for
purposes of this clause (a) “funds borrowed” will
not include funds borrowed from Lender as a Revolving Loan or from
any other bank or lender as a revolving or working capital
facility) or pursuant to any capitalized lease or (b) the
proceeds of condemnation or eminent domain proceedings or any
insurance proceeds resulting from any Event of Loss.
“ Patent Security
Agreements ” means, collectively, (a) the Patent
Assignment and Security Agreement dated as of the date of this
Agreement between Filters and Lender, (b) the Patent
Assignment and Security Agreement dated as of the date of this
Agreement between K&B and Lender, (c) the Patent
Assignment and Security Agreement dated as of the date of this
Agreement between New Busch and Lender, (d) the Patent
Assignment and Security Agreement dated as of the Effective Date
(as defined in the Third Amendment) between Fisher-Klosterman and
Lender, and (e) the Patent Assignment and Security Agreement
dated as of the Effective Date (as defined in the Third Amendment)
between GMD and Lender.
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“ Permitted Liens
” means (a) current taxes and assessments not yet due
and payable; (b) any Liens granted to Lender or its Affiliates
to secure the repayment or performance of the Obligations;
(c) any Liens arising from a Contested Claim in the manner,
and to the extent, provided for in Section 4.6 ;
(d) purchase money security interests granted by, or capital
lease obligations incurred by, a Borrower in connection with
Permitted Purchase Money Indebtedness; (e) the Liens listed on
Schedule 3.9 ; (f) Liens of mechanics (including those
Persons having the right to file a mechanics’ lien),
materialmen, shippers and warehousemen for services or materials
incurred in the ordinary course of business for which payment is
not yet due; (g) Liens on cash deposits in connection with
bids, tenders or real property leases or as security for surety or
appeal bonds in the ordinary course of business; (h) Liens
resulting from any judgment that is not an Event of Default;
(i) easements, rights of way and other restrictions that do
not materially interfere with or impair the use or operation of any
of Borrower’s Facilities; and (j) Liens granted to the
Subordinated Creditor to secure the obligations of the Loan Parties
under the Subordinated Debt Documents, to the extent and subject to
the restrictions in the Subordination Agreement.
“ Security Agreements
” means, collectively, (i) each Security Agreement dated
as of the date of this Agreement between a Borrower and Lender,
(ii) the Security Agreement dated as of the date of this
Agreement between Group and Lender, (iii) the Security
Agreement dated as of the date of this Agreement between Parent and
Lender, (iv) the Security Agreement dated as of the Effective
Date (as defined in the First Amendment) between H.M. White and
Lender, (v) the Security Agreement dated as of the Effective
Date (as defined in the Second Amendment) between Effox and Lender,
(vi) the Security Agreement dated as of the Effective Date (as
defined in the Third Amendment) between Fisher-Klosterman and
Lender, and (vii) the Security Agreement dated as of the
Effective Date (as defined in the Third Amendment) between GMD and
Lender.
“ Security Documents
” means the Life Insurance Assignments, the Mortgages, the
Patent Security Agreements, the Pledge Agreements, the Security
Agreements, the Trademark Security Agreements, the Copyright
Security Agreements, and all security agreements, pledge
agreements, collateral assignments, mortgages, deeds of trust and
other documents executed in connection with this Agreement and
granting to Lender or Lender’s Affiliates Liens on the Loan
Collateral, together with all financing statements and other
documents necessary to record or perfect the Liens granted by any
of the foregoing.
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“ Subordinated Creditor
” means Phillip DeZwirek and, subject to the Subordination
Agreement, his successors and assigns of the Subordinated Debt and
any Person holding Refinancing Debt of the Subordinated Debt as
permitted under this Agreement.
“ Subordinated Debt
Default ” means any of the following (or any combination
of the following): (i) a default or breach of or under any of
the Subordinated Debt Documents, (ii) any event or
circumstance that would become a default or breach on the
Subordinated Creditor’s election or would become a default or
breach after notice, the lapse of time, or on the satisfaction of
any other condition, or all of the foregoing, (iii) the
acceleration of any or all of the Subordinated Debt, or
(iv) the maturity of the Subordinated Debt having a maturity
date earlier than six months past the then Termination Date with
respect to the Line of Credit.
“ Subordinated Debt
Documents ” means, collectively, (i) the
Subordinated Debt Note (as defined in the Subordination Agreement),
(ii) the Subordinated Debt Documents (as defined in the
Subordination Agreement), and (iii) all other agreements,
instruments, and documents signed or delivered by or on behalf of a
Loan Party in connection with the Subordinated Debt, as any or all
of the foregoing documents, instruments, and agreements are now in
effect or, subject to Section 5.2 , as at any time
after the date of this Agreement amended, modified, supplemented,
restated, renewed, extended, or otherwise changed and any
documents, instruments, or agreements given, subject to
Section 5.2 , in substitution of any of
them.
“ Subordination
Agreement ” means the Subordination Agreement between the
Subordinated Creditor and Lender dated as of July 31,
2008.
“ Trademark Security
Agreements ” means, collectively, (i) the Trademark
Secu
