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Exhibit 10.6
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT
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This First Amendment to Note Purchase Agreement (this "AMENDMENT"),
dated as of March 31, 1997, is entered into by and among INTERNATIONAL TOTAL
SERVICES, INC., an Ohio corporation (the "COMPANY"), and XXXXXXX CAPITAL
PARTNERS L.P., a Delaware limited partnership ("LENDER").
RECITALS
A. The Company and Lender have entered into that certain Note Purchase
Agreement, dated as of November 25, 1996 (the "NOTE AGREEMENT"), in connection
with the issuance by the Company to Lender of a 20.0% Note in the original
principal amount of $3,000,000.
B. The Company has notified Lender that the Company has entered into an
Asset Purchase Agreement (herein so called and together with all documents
executed in connection therewith, the "ACQUISITION DOCUMENTS") with Intex
Aviation Services, Inc. (the "TARGET"), dated March 7, 1997, pursuant to which
the Company will purchase substantially all of the assets of the Target for a
total purchase price of $5,141,772.00, subject to adjustment pursuant to the
terms of the Asset Purchase Agreement (the "ACQUISITION"). In connection with
the Acquisition, (i) the Company will issue a certain term note to the order of
the Senior Creditor (as defined in the Note Agreement) in the original principal
amount of $2,000,000.00 in substantially the form of ANNEX A attached hereto and
(ii) the Senior Creditor will increase its revolving credit facility as set
forth on ANNEX B attached hereto (collectively, the "SENIOR CREDITOR
TRANSACTIONS").
C. The Company has requested that Lender consent to the Acquisition and
the Senior Creditor Transactions because absent Lender's consent thereto, both
the Acquisition and the Senior Creditor Transactions would violate the terms and
conditions of the Note Agreement and allow an acceleration of the Senior
Subordinated Obligations.
D. The Company has requested that Lender amend the Note Agreement to
(i) allow and provide for the Acquisition and the Senior Creditor Transactions
and (ii) allow and provide for certain other amendments to the Note Agreement,
and Lender is willing to do so subject to the terms and conditions set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, agree to
follows:
1. DEFINITIONS. All capitalized terms used but not otherwise defined in this
Agreement shall have the meanings ascribed to them in the Note Agreement.
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2. AMENDMENTS. The Note Agreement is hereby amended as follows:
2.1 AMENDMENT TO SECTION 1.1; AMENDMENT AND RESTATEMENT OF CERTAIN
DEFINITIONS. Effective as of the date hereof, SECTION 1.1 is hereby amended and
amending and restating the following definitions as follows:
"SENIOR CREDITOR" means Bank One, Cleveland, NA, a national
banking association organized and existing under the laws of
the United States of America, or any of its assignees to which
Lender shall have consented in writing which consent shall not
be unreasonably withheld.
"SENIOR DEBT" means, at any given time, the Indebtedness
(whether now outstanding or hereafter incurred) of the Company
in respect of the Senior Loan Agreement in a principal amount
not to exceed $10,500,000.00 in revolving loans, $2,400,000.00
in term loans (less the aggregate amount of principal payments
made by the Company to the Senior Creditor under such term
loans), plus interest, fees, expenses and indemnities payable
under the Senior Loan Agreement and any notes, security
documents, guaranties or other loan documents referred to
therein or pursuant thereto, secured by all assets of the
Company and each Guarantor.
"SENIOR LOAN AGREEMENT" means the Third Amended and Restated
Consolidated Replacement Credit Facility and Security
Agreement, between the Company and the Senior Creditor, dated
as of March 31, 1997, and all documents and instruments
delivered pursuant thereto in connection with the
loans and advances made thereunder.
"SENIOR LOANS" means revolving loans in the maximum principal
amount of $10,500,000.00 and term loans in the maximum
aggregate principal amount of $2,400,000.00 (less the
aggregate amount of principal payments made by the Company to
the Senior Creditor under such term loans) made to the Company
by the Senior Creditor under the Senior Loan Agreement and any
permitted replacements and refinancings thereof."
"TANGIBLE NET WORTH" shall mean at any time, the aggregate of
subordinated debt of the Company (indebtedness which is
subordinated and junior in right of payment to the Obligations
(as defined in the Senior Loan Agreement as in effect on March
31, 1997) to the extent, in such manner, and pursuant to an
instrument evidencing such subordination, acceptable to
Lender) plus the sum of the following amounts set forth in a
consolidated balance sheet of the Company, prepared in
accordance with GAAP: (a) the par or stated value of all
outstanding capital stock; (b) capital surplus; (c) retaining
earnings, less the sum of: (i) any surplus resulting from any
write-up of assets of the Company subsequent to December 31,
1996; (ii) good will, contracts and non-competition
agreements, including any amounts, however designated on a
consolidated balance sheet of the Company, representing the
excess of the purchase price
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paid for assets or stock acquired over the value assigned
thereto on the books of the Company; (iii) proprietary rights
of the Company, including all patents, trademarks, trade names
and copyrights; (iv) loans, including principal and accrued
but unpaid interest, and advances to stockholders, directors,
officers or employees of the Company; and (v) deferred
expenses.
2.2. AMENDMENT TO SECTION 3.2. Effective as of the date hereof, the
second sentence of SECTION 3.2 is hereby deleted in its entirety and the
following substituted in lieu thereof:
"No Prepayment Premium will be due if the Company, prior to
November 1, 1997, prepays the Obligations in accordance with the terms
of this Section, with funds (a) which are internally generated in the
ordinary course of the Company's business; (b) which consist of direct
proceeds from a public offering of the Company's Securities for a
minimum of $15 million; (c) from the proceeds of a sale of all or
substantially all of the stock or assets of the Company or (d) pursuant
to SECTION 3.3 hereof."
2.3. ADDITION OF SECTION 3.9. Effective as of the date hereof, a new
SECTION 3.9 is hereby added to the Note Agreement as follows:
"3.9 MANDATORY PREPAYMENT. In the event of any Public Offering
by the Company of any of the Company's debt or equity securities, the
Company shall prepay the Obligations in an amount equal to the lesser
of the (i) net proceeds of any such Public Offering or (ii) the
aggregate amount of all Obligations (including any applicable
Prepayment Premium), any such prepayment to be made within five (5)
Business Days of receipt of such net proceeds. Any prepayment under
this SECTION 3.9 shall be applied first to accrued interest, second to
any applicable Prepayment Premium, third to installments of principal
in the inverse order of their maturities and fourth to any expenses
and/or damages for which Lender may be entitled."
2.4. AMENDMENT TO SECTION 8.8. Effective as of the date hereof, SECTION
8.8 is hereby deleted in its entirety and the following substituted in lieu
thereof:
"8.8 MODIFICATION OF SENIOR LOAN AGREEMENT AND REFINANCINGS OF
SENIOR DEBT. The Company will not agree or consent to any modification,
amendment or waiver of any of the terms or provisions of the Senior
Loan Documents in effect on the date hereof without Lender's prior
written consent except as set forth in the Subordination Agreement.
Notwithstanding anything to the contrary contained herein, the Company
will not agree to any refinancing of the Senior Debt without the prior
written consent of Lender."
2.5. AMENDMENT TO SECTION 8.9. Effective as of the date hereof, SECTION
8.9 is hereby deleted in its entirety and the following substituted in lieu
thereof:
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"8.9 CAPITAL EXPENDITURES. The Company will not incur or make
Capital Expenditures during any fiscal year of the Company which, in
the aggregate, exceed Seven Hundred Fifty Thousand Dollars ($750,000)."
2.6. AMENDMENT TO SECTION 8.10. Effective as of the date hereof,
Section 8.10 is hereby deleted in its entirety and the following substituted in
lieu thereof:
"8.10 FINANCIAL COVENANTS.
(a) RATIO OF LIABILITIES TO TANGIBLE NET WORTH. The Company
will, at all times during the term of this Agreement, maintain a ratio
of total unsubordinated liabilities (including deferred liabilities
and/or deferred income), computed in accordance with GAAP to Tangible
Net Worth of not more than 9.5 to 1.0 at March 31, 1998 and thereafter,
and a ratio of employable assets (current assets plus gross fixed
assets) in relation to current liabilities plus senior funded bank debt
of 1.1 to 1.0 through March 30, 1998 and 1.2 to 1.0 thereafter to be
tested quarterly beginning June 30, 1997, such covenant to be
calculated in accordance with GAAP based on Borrower's quarterly and
fiscal year-end financial statements.
(b) TANGIBLE NET WORTH. The Company will, at all times during
the periods listed below, maintain a Tangible Net Worth equal to or
greater than One Million Two Hundred Seventy Thousand Dollars
($1,270,000) at March 31, 1998 and thereafter, such covenant to be
calculated annually in accordance with GAAP based on the Company's
fiscal year-end financial statements. The Company's Tangible Net Worth
as of March 31, 1997 shall increase by at least $800,000 at September
30, 1997 and by an additional $800,000 at December 31, 1997.
(c) DEBT SERVICE COVERAGE RATIO. The Company will, at all
times, maintain Debt Coverage (as defined herein) of not less than 2.0
to 1.0 at March 31, 1997 and thereafter. "Debt COVERAGE" as used in
this SECTION 8.10(c) means the ratio of the Company's net income, plus
depreciation and amortization and net interest paid to the Lender, to
the sum of all principal and interest paid or payable to the Lender,
calculated quarterly in accordance with GAAP based upon the Company's
quarterly and fiscal year end financial statements."
2.7. AMENDMENT TO SCHEDULE 5.17 TO THE AGREEMENT. Effective as of the
date hereof, SCHEDULE 5.17 to the Note Agreement is hereby deleted in its
entirety and replaced with SCHEDULE 5.17 attached hereto as ANNEX C.
2.8. AMENDMENT TO SCHEDULE 5.27 TO THE NOTE AGREEMENT. Effective as of
the date hereof, SCHEDULE 5.27 to the Note Agreement is hereby deleted in its
entirety and replaced with SCHEDULE 5.27 attached hereto as ANNEX D.
3. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent, unless specifically
waived in writing by Lender:
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3.1 Lender shall have received:
(a) this Amendment, duly executed by the Company;
(b) a certificate of the Secretary of the Company (hereinafter
referred to as a "COMPANY GENERAL CERTIFICATE"), certified by the
Secretary of such Company and acknowledging (i) that its Board of
Directors has adopted, approved, consented to and ratified resolutions
which authorize the execution, delivery and performance of this
Amendment and all Other Agreements to which such party is or is to be a
party, and (ii) the names of the officers of such party authorized to
sign this Amendment and each of the Other Agreements to which such
party is or is to be a party hereunder (including the certificates
contemplated herein) together with specimen signatures of such
officers;
(c) copies of the Acquisition Documents and all exhibits
thereto,
(d) certificates of existence and good standing for the
Company, issued within 15 days prior to the date of this Amendment by
the Secretary of State or other appropriate official in the
jurisdiction in which it was incorporated which have not already been
received by Lender;
(e) a Consent Letter duly executed by the Senior Lender
substantially in the form of Annex E attached hereto;
(f) the results of Uniform Commercial Code searches showing
all filings on file against the Target (and its predecessors), each
such search dated a date reasonably close to the date of this
Amendment;
(g) a Collateral Assignment of Asset Purchase Agreement, duly
executed by the Company and acknowledged by the Target; and
(h) such additional documents, instruments and information as
Lender or its legal counsel may request.
3.2. All Uniform Commercial Code financing statements required or, in
Lender's opinion, advisable to be filed in order to create, in favor of the
Lender, a second priority perfected Lien on the Collateral of the Company with
respect to which a Lien can be perfected by means of filing a Uniform Commercial
Code financing statement, shall have been properly executed and delivered to
Lender, and all necessary filing, subscription and inscription fees and all
recording and other similar fees, and all taxes and other expenses related to
such filings and recordings have been paid in full by or on behalf of the
Company.
3.3. The representations and warranties contained herein and in the
Note Agreement and the Other Agreements, as amended hereby, shall be true and
correct on and as of the date hereof after giving effect to the Acquisition and
the Senior Creditor Transactions and the other transactions contemplated by this
Amendment.
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3.4. No Event of Default under the Note Agreement, as amended hereby,
shall have occurred and be continuing, unless such Event of Default has been
specifically waived in writing by Lender.
3.5. The Senior Loan Agreement shall have been duly executed and
delivered by the parties thereto and shall be on terms and conditions
satisfactory to Lender, and all conditions precedent to funding of the Senior
Loans contemplated thereunder shall have been satisfied or waived.
3.6. The Acquisition Documents shall have been duly executed and
delivered by the parties thereto, all conditions to the consummation of the
Acquisition shall have been satisfied or waived with Lender's consent, and the
terms and provisions of the Acquisition Documents and the structure of the
Acquisition shall be satisfactory to Lender.
3.7. The results of Lender's due diligence regarding the Company, the
Senior Creditor Transactions and the Acquisition shall be satisfactory to
Lender, and Lender shall be satisfied with the assets and books and records and
the business and financial condition of the Company, after giving effect to the
Acquisition and the Senior Creditor Transactions.
3.8. Lender shall have received the written legal opinion of the
Company's internal legal counsel.
3.9. All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents, instruments and
other legal matters incident thereto shall be satisfactory to Lender and its
legal counsel.
3.10 Lender shall have received an amendment fee in the amount of
$30,000 in immediately available funds.
4. RATIFICATIONS, REPRESENTATIONS, WARRANTIES AND COVENANTS.
4.1. The terms and provisions set forth in this Amendment shall modify
and supersede all inconsistent terms and provisions set forth in the Note
Agreement and the Other Agreements, and, except as expressly modified and
superseded by this Amendment, the terms and provisions of the Note Agreement and
the Other Agreements are ratified and confirmed and shall continue in full force
and effect. The Company and Lender agree that the Note Agreement, as amended
hereby, shall continue to be legal, valid, binding and enforceable in accordance
with its respective terms.
4.2. The Company hereby represents and warrants to Lender that (a) the
execution, delivery and performance of this Amendment and the Acquisition
Documents and any and all other agreements executed and/or delivered in
connection herewith or therewith have been authorized by all requisite corporate
action on the part of the Company, as applicable, and will not violate its
respective Articles of Incorporation or Bylaws; (b) the representations and
warranties contained in the Note Agreement and the Other Agreements, as amended
hereby,
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are, and after giving effect to the Acquisition and the Senior Creditor
Transactions will be, true and correct on and as of the date hereof as though
made on and as of such date; (c) no Event of Default under the Note Agreement,
as amended hereby, has occurred and is continuing, unless such Event of Default
has been specifically waived in writing by Lender; (d) the Company is, and after
giving effect to the Acquisition and Senior Creditor Transactions will be, in
full compliance with all covenants and agreements contained in the Note
Agreement, as amended hereby, and the Other Agreements; and (e) the Company has
not amended its Articles of Incorporation or its Bylaws since November 25, 1996
other than as previously disclosed to Lender.
5. LIMITED WAIVER.
Subject to the terms and conditions set forth herein and in reliance
upon the representations and warranties of the Company set forth herein, Lender
hereby consents to the Acquisition and the Senior Creditor Transactions. In
addition, Lender hereby waives any Event of Default arising under the Note
Agreement solely by reason of the Company's violation of (i) SECTION 8.1 of the
Note Agreement resulting from the Senior Creditor Transactions, (ii) SECTION
8.3(b) of the Note Agreement resulting from the Acquisition, and (iii) SECTION
8.8 of the Note Agreement resulting from the issuance of the Senior Creditor
Transactions. Other than as set forth in the preceding sentence, nothing
contained in this Amendment shall be construed as a waiver by Lender of any
covenant or provision of the Note Agreement, the Other Agreements, this
Amendment, or of any other contract or instrument between either of the Company
and Lender, and the failure of Lender at any time or times hereafter to require
strict performance by the Company of any provision thereof shall not waive,
affect or diminish any right of Lender to thereafter demand strict compliance
therewith. Lender hereby reserves all rights granted under the Note Agreement,
the Other Agreements, this Amendment and any other contract or instrument
between either of the Company and Lender.
6. MISCELLANEOUS.
6.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made in the Note Agreement or any Other Agreement, including,
without limitation, any document furnished in connection with this Amendment,
shall survive the execution and delivery of this Amendment and the Other
Agreements, and no investigation by Lender or any closing shall affect the
representations and warranties or the right of Lender to rely upon them.
6.2. REFERENCE TO NOTE AGREEMENT. Each of the Note Agreement and the
Other Agreements, and any and all other agreements, documents or instruments now
or hereafter executed and delivered pursuant to the terms hereof or pursuant to
the terms of the Note Agreement, as amended hereby, are hereby amended so that
any reference in the Note Agreement and such Other Agreements to the Note
Agreement shall mean a reference to the Note Agreement as amended hereby.
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6.3. EXPENSES OF LENDER. As provided in the Note Agreement, the Company
agrees to pay on demand all costs and expenses incurred by Lender in connection
with the preparation, negotiation and execution of this Amendment and any other
agreements executed pursuant hereto, including, without limitation, the
reasonable costs and fees of Lender's legal counsel.
6.4. SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6.5. SUCCESSORS AND ASSIGNS. This Amendment will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns.
6.6. HEADINGS. The headings of the sections and subsections of this
Amendment are inserted for convenience only and do not constitute a part of this
Amendment.
6.7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, which shall collectively constitute one agreement.
6.8. LAW GOVERNING. THIS AMENDMENT SHALL BE DEEMED TO HAVE BEEN
SUBSTANTIALLY NEGOTIATED AND MADE IN THE STATE OF MINNESOTA AND SHALL BE
INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS
OF THE UNITED STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF
MINNESOTA APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN,
WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE
THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER
JURISDICTION.
6.9. WAIVER; MODIFICATION. NO PROVISION OF THIS AMENDMENT MAY BE
WAIVED, CHANGED OR MODIFIED, OR THE DISCHARGE THEREOF ACKNOWLEDGED, ORALLY, BUT
ONLY BY AN AGREEMENT IN WRITING SIGNED BY THE PARTY AGAINST WHOM THE ENFORCEMENT
OF ANY WAIVER, CHANGE, MODIFICATION OR DISCHARGE IS SOUGHT.
6.10. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF LENDER IN
THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT THEREOF.
6.11. FINAL AGREEMENT. THE NOTE AGREEMENT, AS AMENDED HEREBY, AND THE
OTHER AGREEMENTS REPRESENT THE ENTIRE EXPRESSION OF THE
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PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS
EXECUTED. THE NOTE AGREEMENT, AS AMENDED HEREBY, AND THE OTHER AGREEMENTS MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, THE Company and Lender have caused this Amendment
to be executed and delivered as of the date first written.
Company
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INTERNATIONAL TOTAL SERVICES,
INC.
By:
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Its:
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Lender:
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XXXXXXX CAPITAL PARTNERS L.P.
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By: Xxxxxxx Capital, Ltd., its General
Partner
By:
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Xxxxx X. Xxxxxx
Managing Director
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CONSENT AND RATIFICATION
The undersigned, NBC Leasing, Inc., ITS Sales Corp, Crown-Technical
Systems, Inc., T.I.S., Incorporated, Certified Investigative Services Inc.
I.T.S. of New York, Inc., Selective Detective Services, Inc., International
Total Services (Holdings) Limited, International Total Services, Limited, NBC
Holdings, B.V., International Transport Security, LTD. and International
Transport Services, Ltd., have each executed a Guaranty Agreement, dated as of
November 25, 1996 (collectively, the "GUARANTIES" and individually a
"GUARANTY"), in favor of Xxxxxxx Capital Partners L.P. (the "LENDER"). The
undersigned hereby consent and agree to the terms of the First Amendment to Note
Purchase Agreement dated as of the 31st day of March, 1997 (the "AMENDMENT"),
executed by INTERNATIONAL TOTAL SERVICES, INC., an Ohio corporation (the
"BORROWER"), and Lender, a copy of which is attached hereto, and the undersigned
agree that the Guaranties shall remain in full force and effect and shall
continue to be the legal, valid and binding obligation of each of the
undersigned enforceable against each of the undersigned in accordance with its
terms. Furthermore, the undersigned hereby agrees and acknowledges that (a) its
respective Guaranty is not subject to any claims, defenses or offsets, (b)
nothing contained in the Amendment or any of the Other Agreement; shall
adversely affect any right or remedy of Lender under Amendment shall in no way
reduce, impair or discharge any obligations of the undersigned as guarantors
pursuant to the Guaranty and shall not constitute a waiver by Lender of any of
Lender's rights against the undersigned, and (e) by virtue hereof and by virtue
of the Guaranties, the undersigned hereby guarantees to Lender the prompt and
full payment and full and faithful performance by Borrower of that portion of
the Indebtedness set forth in the Guaranties on the terms and conditions set
forth therein and any time further modified or amended.
NBC LEASING, INC.
By:
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Its:
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ITS SALES CORP.
By:
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Its:
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CROWN TECHNICAL SYSTEMS, INC.
By:
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Its:
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T.I.S., INCORPORATED
By:
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Its:
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CERTIFIED INVESTIGATIVE
SERVICES, INC.
By:
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Its:
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I.T.S. OF NEW YORK, INC.
By:
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Its:
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SELECTIVE DETECTIVE SERVICES,
INC.
By:
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Its:
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INTERNATIONAL TOTAL SERVICES
(HOLDINGS) LIMITED
By:
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Its:
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INTERNATIONAL TOTAL SERVICES,
LIMITED
By:
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Its:
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NBC HOLDINGS, B.V.
By:
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Its:
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INTERNATIONAL TRANSPORT
SECURITY, LTD.
By:
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Its:
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INTERNATIONAL TRANSPORT
SERVICES, LTD.
By:
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Its:
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