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EXHIBIT 10.3
Draft of March 15, 2005
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INSITUFORM TECHNOLOGIES, INC.
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SECOND AMENDMENT AND WAIVER
TO
NOTE PURCHASE AGREEMENT
Dated as of March 16, 2005
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Re: Note Purchase Agreement dated as of April 24, 2003
and
$65,000,000 Senior Notes, Series 2003-A,
Due April 24, 2013
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SECOND AMENDMENT AND WAIVER
TO
NOTE PURCHASE AGREEMENT
THIS
SECOND AMENDMENT AND WAIVER TO NOTE PURCHASE AGREEMENT dated as
of
March 16, 2005 (the or this "Second
Amendment") is between INSITUFORM
TECHNOLOGIES, INC., a Delaware corporation
(the "Company"), and each of the
institutions holding a Note (as hereinafter
defined) and party hereto
(collectively, the "Noteholders").
RECITALS:
A. The
Company entered into the Note Purchase Agreement dated as of
April
24, 2003 (as amended, supplemented or
otherwise modified through the date
hereof, the "Note Agreement"), pursuant to
which the Company issued its 5.29%
Senior Notes, Series 2003-A, due April 24,
2013 in the original aggregate
principal amount of $65,000,000 (as
amended, supplemented or otherwise modified
through the date hereof, the "Notes").
B. The
Company and the Noteholders now desire to amend the Note
Agreement
and the Notes in the respects, but only in
the respects, hereinafter set forth
in order to reflect certain agreements
between the Company and the Noteholders.
C. The
Company has also advised the Noteholders that the Company has
violated certain terms and conditions set
forth in the Note Agreement and more
particularly described herein and requests
that the Noteholders waive such
Defaults and Events of Default.
D.
Capitalized terms used herein shall have the respective
meanings
ascribed thereto in the Note Agreement
unless herein defined or the context
shall otherwise require.
E. All
requirements of law have been fully complied with and all other
acts and things necessary to make this
Second Amendment a valid, legal and
binding instrument according to its terms
for the purposes herein expressed have
been done or performed.
NOW,
THEREFORE, upon the full and complete satisfaction of the
conditions
precedent to the effectiveness of this
Second Amendment set forth in Section 4.1
hereof, and in consideration of good and
valuable consideration the receipt and
sufficiency of which is hereby
acknowledged, the Company and the Noteholders do
hereby agree as follows:
SECTION 1. WAIVER OF DEFAULTS.
Section
1.1. Waiver of Defaults (Cross-Default). The Company has
notified
the Noteholders that the Company has
violated the minimum Fixed Charges Coverage
Ratio required to be maintained under
Section 10.2 of the note purchase
agreement, under and pursuant to which the
1997 Notes (the "1997 Note
Agreement") were issued, for the fiscal
quarter ended December 31, 2004. The
Noteholders hereby waive the Event of
Default arising under the Note
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Agreement on account of the Company's
violation of the financial covenant
described above in the 1997 Note Agreement
for the fiscal quarter ended December
31, 2004.
Section
1.2. Waiver of Defaults and Consent (Acquisitions). The Company
has notified the Noteholders that
Insituform Technologies Limited, a foreign
Subsidiary of the Company organized in
England and Wales ("ITL"), entered into a
joint venture arrangement with
Environmental Techniques Limited, a Northern
Ireland company ("ETL"), during the fiscal
year ended 2004, pursuant to which
ITL and ETL formed a new company in
Northern Ireland called Insituform
Environmental Techniques Limited ("IETL"),
in connection with which ITL has
subscribed to purchase 499 shares of the
authorized share capital (the
"Subscribed Joint Venture Shares")
(comprised of a total of 1000 ordinary
shares) of IETL for an amount equal to
(pound)499 (approximately equivalent to
U.S. $1,000). The Noteholders hereby waive
compliance with Section 10.12 of the
Note Agreement to the extent necessary to
waive any Event of Default arising
under the Note Agreement on account of the
Subscribed Joint Venture Shares and
hereby consent to the purchase by ITL of
the Subscribed Joint Venture Shares.
Section 1.3.
Limited Waivers; Reservation of Rights. The Company
acknowledges and agrees that the waivers
granted in this Section 1 are specific
in intent and are valid only for the
specific purpose for which they are being
given, are waivers of the events described
in Sections 1.1 and 1.2 hereof only,
shall not in any way obligate the
Noteholders to agree to any additional waivers
of the provisions of the Note Agreement,
including but not limited to Section
10.12, Section 11(c) and Section 11(g), and
shall not in any way be deemed to
constitute or operate as a waiver of any
Noteholder's right under the Note
Agreement to exercise remedies resulting
from (i) existing and/or continuing
Defaults or Events of Default of which such
Noteholder is not actually aware or
(ii) other future Defaults or Events of
Default, whether or not of a similar
nature and whether or not known to any
Noteholder.
SECTION 2. AMENDMENTS TO NOTE AGREEMENT AND
THE NOTES.
Section
2.1. Amendment to Interest Rate on the Series 2003-A Notes.
Upon
the Effective Date (as defined in Section
4.1 of this Second Amendment), the
rate of interest payable on each
outstanding Series 2003-A Note shall be changed
from 6.04% per annum to 6.54% per annum. As
used in the Note Agreement and the
Notes "Applicable Rate" shall mean (i)
6.04% for the period commencing October
24, 2004 to but not including the Effective
Date and (ii) 6.54% from and after
the Effective Date.
Section
2.2. Amendment to Section 8.4 (Maturity; Surrender; Etc.).
Section
8.4 of the Note Agreement shall be and is
hereby amended by deleting the
reference to "Section 8" therein and
substituting in lieu thereof a reference to
"Section 8 or Section 10.5".
Section
2.3. Amendment to Section 9 (Additional Financial Covenants).
Section 9.8 of the Note Agreement shall be
and is hereby amended in its entirety
to read as follows:
"Section 9.8. Additional Covenants. If the Bank Credit
Agreement is amended, replaced or renewed after the Effective
Date
in a manner which makes the financial covenants set forth
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therein more restrictive on the Company and its Subsidiaries
than
the financial covenants contained in Section 10 of this Agreement
or
to add additional financial covenants or to make the existing
Bank
Credit Agreement covenants more restrictive than the financial
covenants in the Bank Credit Agreement on the Effective Date,
then
such more restrictive financial covenants and any related
definitions (the "Additional Financial Covenants") shall
automatically be deemed to be incorporated into Section 7.2(a)
and
Section 10 of this Agreement by reference and Section 11(c) shall
be
deemed to be amended to include such Additional Financial
Covenants
from the time such Additional Financial Covenants become
binding
upon the Company. No amendment or modification of the
Additional
Financial Covenants shall result in any change in the covenants
expressly set forth in Section 10 which shall at all times remain
in
effect. Promptly but in no event more than 5 Business Days
following
the execution of any new Bank Credit Agreement, or any amendment
to
the Bank Credit Agreement, the Company shall furnish each holder
of
the Notes with a copy of such agreement. In no event shall the
Company or any Subsidiary provide any collateral or other
security
to secure Indebtedness under the Bank Credit Agreement."
Section
2.4. Amendment to Section 10.1 (Consolidated Net Worth).
Section
10.1 of the Note Agreement shall be and is
hereby amended in its entirety to
read as follows:
"Section 10.1. Consolidated Net Worth. The Company will not,
at any time, permit Consolidated Net Worth to be less than the
sum
of (i) $260,000,000 plus (ii) 50% of Consolidated Net Income
(if
positive) on a cumulative basis for each fiscal quarter ending
after
December 31, 2004."
Section
2.5. Amendment to Section 10.2. (Limitation on Consolidated
Indebtedness). Section 10.2 of the Note
Agreement shall be and is hereby amended
in its entirety to read as follows:
"Section 10.2. Limitation on Consolidated Indebtedness. The
Company will not at any time permit:
(a) (i) the Consolidated Leverage Ratio to exceed 4.25 to 1.0
for the fiscal quarter ending March 31, 2005, 4.0 for the
fiscal
quarters ending June 30, 2005 and September 30, 2005, and 3.0 to
1.0
for each fiscal quarter ending thereafter; and (ii) the ratio
of
Consolidated Total Indebtedness to Consolidated Total
Capitalization
to exceed 0.45 to 1.0; provided that in connection with any
calculation of Indebtedness for purposes of determining
compliance
with this
Section 10.2(a), there shall be excluded all Indebtedness
of the Company and its Subsidiaries
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outstanding under any revolving credit agreement between the
Company
and
a committed bank or banks if, during the 365-day period
immediately preceding the date of any such calculation of
Indebtedness, there shall have been a period of at least 60
consecutive days on each day of which Indebtedness of the
Company
and its Subsidiaries outstanding under such revolving credit
agreement is equal to zero by virtue, and solely by virtue, of
such
Indebtedness having been paid from general corporate funds of
the
Company and not from funds borrowed by the Company or any
Subsidiary
pursuant to any other revolving credit agreement for the purpose
of
paying such Indebtedness. If there shall not have been such 60
consecutive day period on each day of which such Indebtedness
was
equal to zero, then and in such event there shall be included
in
such calculation of Indebtedness for purposes of this Section
10.2(a) an amount equal to the average aggregate amount of all
Indebtedness outstanding under such revolving credit agreement
during such preceding 365-day period; and
(b) Priority Debt to exceed $7,500,000 at any time. In
addition from and after the Effective Date, no Priority Debt
shall
be incurred except by foreign Subsidiaries of the Company under
agreements for which the Company shall have no liability except
pursuant to an unsecured Guaranty of such Subsidiary
obligation."
Section
2.6. Amendment to Section 10.3 (Fixed Charge Coverage Ratio).
Section 10.3 of the Note Agreement shall be
and is hereby amended in its
entirety to read as follows:
"Section 10.3. Fixed Charge Coverage Ratio. The Company will
not at any time permit the Fixed Charge Coverage Ratio to be
less
than 1.25 to 1.0 for the fiscal quarters ending March 31, 2005
and
June 30, 2005, 1.50 to 1.0 for the fiscal quarter ending
September
30, 2005, 1.75 to 1.0 for the fiscal quarter ending December
31,
2005, 2.0 to 1.0 for each of the fiscal quarters ending March
31,
2006 and June 30, 2006, 2.25 to 1.0 for each of the fiscal
quarters
ending September 30, 2006 and December 31, 2006, and 2.5 to 1.0
for
each fiscal quarter ending thereafter."
Section
2.7. Amendment to Section 10.5 (Sale of Assets). Section 10.5
of
the Note Agreement shall be and is hereby
amended in its entirety to read as
follows:
"Section 10.5. Sale of Assets. The Company will not, and will
not permit any Subsidiary to, sell, lease or otherwise dispose
of
any substantial part (as defined below) of the assets of the
Company
and its Subsidiaries; provided, however, that the Company or
any
Subsidiary may sell, lease or otherwise dispose of assets
(including
the sale of Receivables pursuant to Securitization
Transactions)
constituting a substantial part of the assets of the
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Company and its Subsidiaries if such assets are sold in an arms
length transaction and, at such time and after giving effect
thereto, no Default or Event of Default shall have occurred and
be
continuing and an amount equal to the Net Proceeds received
from
such sale, lease or other disposition shall be used within 365
days
of such sale, lease or
disposition, in any combination:
(1) to acquire productive assets used or useful in carrying on
the business of the Company and its Subsidiaries and having a
value
at least equal to the value of such assets sold, leased or
otherwise
disposed of; or
(2) to prepay or retire Senior Indebtedness of the Company
and/or its Subsidiaries; provided that the Company (i) shall
offer
to prepay each outstanding Note in a principal amount which
equals
the Ratable Portion for such Note, and (ii) any such prepayment
of
the Notes shall be made at par, together with accrued interest
and
the applicable Make-Whole Amount or other premium to the date
of
such prepayment.
Any offer of prepayment of the Notes pursuant to this Section
10.5 shall be given to each holder of the Notes by written
notice
which shall be delivered not less than 120 days and not more
than
180 days prior to the proposed prepayment date. Each such
notice
shall state that it is given pursuant to this Section and that
the
offer set forth in such notice must be accepted by such holder
in
writing and shall also set forth (i) the prepayment date, (ii)
a
description of the circumstances which give rise to the
proposed
prepayment, and (iii) a calculation of the Ratable Portion for
such
holder's Notes. Each holder of the Notes which desires to have
its
Notes prepaid shall notify the Company in writing delivered not
more
than 60 days nor less than 30 days prior to the proposed
prepayment
date of its acceptance of such offer of prepayment. If any holder
of
the Notes (or any other Senior Indebtedness) elects not to
accept
such offer of prepayment, then, only for purposes of such
application of an amount equal to such Net Proceeds for the
prepayment of Senior Indebtedness, the Company nevertheless will
be
deemed on such particular occasion to have paid Senior
Indebtedness
in an amount equal to the Ratable Portion of such Note (or such
other Senior Indebtedness, as the case may be).
As used in this Section 10.5, a sale, lease or other
disposition of assets shall be deemed to be a "substantial part"
of
the assets of the Company and its Subsidiaries if the book value
of
such assets, when added to the book value of all other assets
sold,
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leased or otherwise disposed of by the Company and its
Subsidiaries
from the date of this Agreement to and including the date of
the
sale, lease or other disposition of such assets exceeds
$20,000,000;
provided that there shall be excluded from any determination of
a
"substantial part" any (i) sale or disposition of assets in the
ordinary course of business of the Company and its
Subsidiaries,
(ii) any transfer of assets from the Company to any Subsidiary
or
from any Subsidiary to the Company or another Subsidiary, and
(iii)
any Excluded Sale and Leaseback Transaction."
Section
2.8. Amendment to Section 10.9 (Restricted Payments). Section
10.9
of the Note Agreement shall be and is
hereby amended in its entirety to read as
follows:
"Section 10.9. Restricted Payments. The Company will not:
(1) declare or pay any dividends, either in cash or property,
on any shares of its capital st
