EXECUTION COPY
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
c/o Prudential Capital Group
Four Gateway Center
Newark, New Jersey 07102
August 21, 1995
Intermet Corporation
0000 Xxxxx Xxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Ladies and Gentlemen:
Reference is made to the Note Agreement dated as of December 11,
1992 (as amended, the "Note Agreement") between Intermet Corporation
(the "Company") and The Prudential Insurance Company of America
("Prudential"). Capitalized terms used herein without definition have
the meaning ascribed to such terms in the Note Agreement.
Pursuant to Paragraph 11C of the Note Agreement, Prudential and
the Company agree as follows:
1. Paragraph 4A of the Note Agreement is hereby amended by
deleting "(i)" and deleting clause (ii) in its entirety.
2. Paragraph 5A(vi) of the Note Agreement is hereby amended and
restated in its entirety as follows:
"(vi) [Intentionally Omitted];"
3. Paragraph 5A(f) of the Note Agreement is hereby amended by
deleting "$250,000" and inserting in lieu thereof "$750,000."
4. Paragraph 5A(ix) of the Note Agreement is hereby deleted in
its entirety.
5. Paragraph 5K of the Note Agreement is hereby amended and
restated in its entirety as follows:
"5K. ADDITIONAL GUARANTORS AND COLLATERAL.
Promptly after (i) the formation or acquisition
(provided that nothing in this paragraph shall be
deemed to authorize the acquisition of any entity)
of any Material Subsidiary not listed on Exhibit
D, (ii) the transfer of assets to any Consolidated
Company if as a result thereof the recipient of
such assets becomes a Material Subsidiary, (iii)
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August 21, 1995
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the domestication of any Foreign Subsidiary that
is a Material Subsidiary, or (iv) the occurrence
of any other event creating a new Material
Subsidiary, the Company shall execute and deliver,
and cause to be executed and delivered (x) in the
case of a Foreign Subsidiary a Subsidiary Guaranty
Agreement or, if , in the reasonable opinion of
the Company's accountants, delivery of a guarantee
would cause the Company to be subject to tax on
the undistributed earnings and profits of such
Subsidiary pursuant to Subpart F of Part III,
Subchapter N of the Internal Revenue Code, a
Pledge Agreement with respect to 66% (or such
greater percentage as would not result in such
adverse tax consequences to the Company as
reasonably determined by the Company's
accountants) of the capital stock of such Material
Subsidiary if it is a Foreign Subsidiary directly
owned by the Company or a Subsidiary that is not,
and is not directly or indirectly controlled by, a
Foreign Subsidiary, and (y) a Subsidiary Guaranty
Agreement from each such Material Subsidiary that
is not a Foreign Subsidiary whose stock has been
pledged to the extent and in accordance with
subparagraph (x) hereof, together with related
documents with respect to such Material Subsidiary
(or the pledgor of its stock) of the kind
described in paragraphs 3A(iii), 3C, 3D, 3G and
3H, all in form and substance satisfactory to the
Required Holder(s)."
6. Paragraph 6A(i) of the Note Agreement is hereby amended and
restated in its entirety as follows:
"[Intentionally Omitted]"
7. Paragraph 6A(ii) of the Note Agreement is hereby amended and
restated in its entirety as follows:
"the Fixed Charge Coverage Ratio, calculated for
the immediately preceding four fiscal quarters to
be less than 2.0: 1.0 as of the last day of each
fiscal quarter."
8. Paragraph 6A(iii) of the Note Agreement is hereby deleted in
its entirety.
9. Paragraph 6B(2) of the Note Agreement is hereby amended and
restated in its entirety as follows:
"6B(2). DEBT. Create, incur, assume or suffer to
exist any Funded Debt or Current Debt, except:
(i) Funded Debt represented by the Notes;
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August 21, 1995
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(ii) Debt represented by the Subsidiary
Guaranty Agreement or any guaranty agreement
issued under the Bank Agreement by a Subsidiary;
(iii) Debt of a Subsidiary owing to the
Company or any other Subsidiary;
(iv) Debt of a Subsidiary existing on the
Date of Closing and specified on Exhibit F so long
as such Debt is not increased, extended, renewed
or refunded;
(v) Debt represented by endorsement of
negotiable instruments for collection in the
ordinary course of business;
(vi) other Funded Debt of the Company
(whether Secured or Unsecured), other than Funded
Debt owing by the Company to any Subsidiary;
PROVIDED, HOWEVER, that all Funded Debt which
constitutes Bank Subordinated Debt shall also
constitute Subordinated Debt.
(vii) other Current Debt of the Company
(whether Secured or Unsecured) other than Current
Debt owning by the Company to any Subsidiary;
PROVIDED, HOWEVER, that all Current Debt which
constitutes Bank Subordinated Debt shall also
constitute Subordinated Debt.
Notwithstanding the foregoing exceptions to the prohibition
against incurring or maintaining Debt, the Company shall not permit:
(1) as of the last day of each fiscal
quarter, Funded Debt to exceed 55% of Total
Capitalization;
(2) as of the last day of each fiscal
quarter, the ratio of Funded Debt to Consolidated
EBITDA, calculated for the immediately preceding
four fiscal quarters, to exceed 3.5 to 1.0;
(3) at any time Current Debt to exceed $20,000,000;
(4) at any time the aggregate outstanding
amount of the Debt specified on Exhibit F as item
1.(b) to exceed 15,000,000 German marks;
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August 21, 1995
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(5) at any time Secured Debt of the Company
and its Subsidiaries to exceed an aggregate amount
equal to 10% of Consolidated Net Worth."
10. Paragraph 6B(4) of the Note Agreement is hereby amended and
restated in its entirety as follows:
"6B(4). MERGER AND SALE OF ASSETS. Merge,
consolidate or exchange shares with any other
corporation, or sell, lease or transfer or
otherwise dispose of any assets of the Company
and/or of its Subsidiaries (in the ordinary course
of business or otherwise) to any Person for a
consideration which is materially less than the
fair value (as valued in good faith by the Company
as market value) of such assets at the time of the
disposition; or sell, lease or transfer or
otherwise dispose of (whether for fair value or
otherwise) assets of the Company and/or any of its
Subsidiaries (other than equipment or other
personal property being replaced by other
equipment or other personal property purchased as
a capital expenditure item and inventory in the
ordinary course of business) except that:
(i) any Subsidiary may merge or consolidate
with the Company (provided that the Company shall
be the continuing or surviving corporation) or
with any one or more other Domestic Subsidiaries
or if such Subsidiary is a Foreign Subsidiary,
another Foreign Subsidiary organized under the
laws of the jurisdiction of such Subsidiary's
organizational jurisdiction;
(ii) any Subsidiary of the Company may sell,
lease, transfer or otherwise dispose of any of its
assets to the Company or another Domestic
Subsidiary or if such Subsidiary is a Foreign
Subsidiary, another Foreign Subsidiary organized
under the laws of the jurisdiction of such
Subsidiary's organizational jurisdiction;
(iii) the Company may merge or consolidate
with, or sell, lease, transfer, or otherwise
dispose of substantially all of its assets in a
single transaction or series of transactions to,
any other corporation organized under the laws of
the United States thereof or the District of
Columbia and conducting substantially all of its
business and making substantially all of its sales
in the United States or Canada so long as (x) the
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August 21, 1995
Page -5-
successor formed by such consolidation or the
survivor of the merger or the Person acquiring
such assets (the "Successor"), is the Company or
if the Company is not the Successor such
corporation shall have assumed all of the
obligations under this Agreement and the Notes in
a writing satisfactory to the Required Holder(s)
and (y) immediately after giving effect to such
transaction, no Default or Event of Default would
exist; and
(iv) the Company or any Subsidiary may sell,
lease, abandon or otherwise dispose of any of its
assets if immediately after giving effect to such
proposed disposition, the assets so disposed of
(whether or not leased back) by the Company and
its Subsidiaries during the twelve months
preceding the date of such disposition (x) shall
not have an aggregate net book value (determined
as to particular assets as of the respective dates
of disposition of such assets), in excess of 10%
of consolidated assets determined as of the end of
the most recently completed fiscal quarter of the
Company and (y) shall not have produced during the
12 months prior to such disposition in excess of
10% of Consolidated EBITDA at the end of the most
recently completed 12 months and (z) no Default or
Event of Default would exist;
PROVIDED, HOWEVER, that the prohibitions of this paragraph 6B(4) shall
not apply to the sale or other disposition of all or substantially all
the capital stock or assets of PBM Industries, Inc.
11. Paragraph 6B(8) of the Note Agreement is hereby amended and
restated in its entirety as follows:
"6B(8). DIVIDENDS, ETC. Declare or pay any
dividend on any class of its stock, or make any
payment to purchase, redeem, retire or acquire any
Subordinated Debt or any class of its stock, or
any option, warrant or other right to acquire any
class of its stock or Subordinated Debt, or make
any other distribution on account of any class of
its stock or Subordinated Debt (each a "Restricted
Payment") unless:
(i) such Restricted Payment
consists of dividends payable solely in
shares of its capital stock; or
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August 21, 1995
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(ii) (a) the aggregate amount of
cash dividends declared and paid and all
other Restricted Payments made during
the period from December 31, 1994 to the
date on which such Restricted Payment is
made or declared (such period, the
"Determination Period") does not exceed
40% of Consolidated Net Income (or minus
100% of Consolidated Net Income for any
fiscal year included in the
Determination Period if Consolidated Net
Income for any such fiscal year is a
loss) and (b) no Default or Event of
Default exists at the time such
Restricted Payment is declared or made
or would occur as a result of the making
or declaration of such Restricted
Payment."
12. Paragraph 6B(9) of the Note Agreement is hereby amended and
restated in its entirety as follows:
"6B(9). PREPAYMENTS OF SUBORDINATED DEBT.
Directly or indirectly, prepay, purchase, redeem,
retire, defease or otherwise acquire, or make any
optional payment on account of any principal of,
interest on, or premium payable in connection with
any of its Subordinated Debt, in each case, which
is in violation of the subordination provisions of
such Subordinated Debt."
13. Paragraph 6B(10)of the Note Agreement is hereby amended and
restated in its entirety as follows:
"6B(10). CHANGES IN BUSINESS. Enter into any
business if, as a result, the general nature of
the business in which the Consolidated Companies
taken as a whole would then be engaged would be
substantially different from the general nature of
the business in which the Consolidated Companies
taken as a whole engage as of August 15, 1995
(which includes iron and aluminum foundry
operations, design and machinery)."
14. Paragraph 6G of the Note Agreement is hereby amended and
restated in its entirety as follows:
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August 21, 1995
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"6G. NO AMENDMENT. The Company will not amend,
modify, or supplement (i) Sections 2.04 or 3.04 or
the repayment or prepayment provisions or make any
more onerous any other provision of the Bank
Agreement without the prior written consent of the
Required Holder(s); or (ii) any agreement
governing Subordinated Debt to (a) increase the
principal amount thereunder, (b) increase the
interest rate thereunder, (c) modify any
requirement of prepayment or repayment thereunder
which would shorten the final maturity or make the
requirement of prepayment more onerous, (d) make
any more onerous any other provision thereof, or
(e) amend or modify the subordination provisions
thereof."
15. Paragraph 10B is hereby amended by (i) deleting the
definitions of "Asset Sale," "Net Proceeds," "Consolidated EBITDAR,"
"Adjusted Cash Flow," "Adjusted Fixed Charge Coverage Ratio," "FAS
106" and "Senior Funded Debt," and (ii) amending and restating the
following definitions:
"BANK AGREEMENT" shall mean the Amended and
Restated Credit Agreement dated as of August 21,
1995 among the Company, the financial institutions
party thereto and Trust Company Bank, as agent, as
amended, restated, supplemented or modified from
time to time.
"CONSOLIDATED EBIT shall mean, for any fiscal
period of the Company, an amount equal to (A) the
sum for such fiscal period of Consolidated Net
Income (Loss) and, to the extent subtracted in
determining such Consolidated Net Income (Loss),
provisions for (i) taxes based on income and (ii)
Consolidated Interest Expense, MINUS (B) any items
of gain (or PLUS any items of loss) which were
included in determining such Consolidated Net
Income (Loss) and were (x) not realized in the
ordinary course of business (whether or not
classified as "ordinary or GAAP), (y) the result
of any sale of assets, or (z) resulting from
minority investments, together in the case of (x),
(y) or (z), any related provision for taxes
included in Consolidated Net Income (Loss) with
respect thereto.
"CONSOLIDATED INTEREST EXPENSE" shall mean,
for any fiscal period of Company, total interest
expense of the Consolidated Companies (including
without limitation, interest expense attributable
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August 21, 1995
Page -8-
to capitalized leases in accordance with GAAP, all
commissions, discounts and other fees and charges
owed with respect to bankers acceptance
financings, and total interest expense whether
shown as interest expense or as loss and expenses
on sale of receivables) under a receivables
purchase facility) determined on a consolidated
basis in accordance with GAAP but specifically
excluding Consolidated Capitalized Interest for
such period.
"CONSOLIDATED NET INCOME (LOSS) shall mean,
for any fiscal period of the Company, the net
income (or loss) of the Consolidated Companies on
a consolidated basis for such period (taken as a
single accounting period) determined in conformity
with GAAP, but excluding therefrom to the extent
otherwise included therein) (i) any income or loss
of any Person accrued prior to the date such
person becomes a Subsidiary of the Company or is
merged into or consolidated with any Consolidated
Company or all or substantially all of such
Person's assets are required by any Consolidated
Company and (ii) the income of any Consolidated
Company to the extent that the declaration or
payment of dividends or similar distributions by
such Consolidated Company of that income is not at
the time permitted by operation of the terms of
its charter or any agreement, instrument,
judgment, decree, order, statute, rule or
governmental regulation.
"CONSOLIDATED RENTAL EXPENSE" shall mean, for
any fiscal period of Company, the operating lease
expense of the Consolidated Companies determined
in accordance with GAAP for leases with a term
greater than one year, as disclosed in the notes
to the "Company's consolidated financial
statements of the Consolidated Companies,
determined on a consolidated basis in accordance
with GAAP.
"CURRENT DEBT" shall mean, with respect to
any Person, all Indebtedness of such Person for
borrowed money which by its terms or by the terms
of any instrument or agreement relating thereto
matures on demand or within one year from the date
of the creation thereof and is not directly or
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August 21, 1995
Page -9-
indirectly renewable or extendible at the option
of the debtor to a date more than one year from
the date or calculation, other than, with respect
to the Consolidated Companies, the indebtedness
pursuant to German lines of credit described as
item 1(b) on EXHIBIT F.
"FIXED CHARGE COVERAGE RATIO" shall mean, as
of the last day of any fiscal quarter of Intermet,
the ratio of (A) the sum of Consolidated EBIT plus
Consolidated Rental Expense to (B) the sum of the
amounts of (i) Consolidated Interest Expense, (ii)
Consolidated Rental Expense, and (iii)
Consolidated Capitalized Interest .
"FUNDED DEBT" shall mean all Indebtedness for
money borrowed, Indebtedness evidenced or secured
by purchase money Liens, capitalized leases,
conditional sales contracts and similar title
retention debt instruments, including any current
maturities of such Indebtedness, which by its
terms matures more than one year form the date of
creation thereof or which is renewable or
extendible at the option of the obligor to a date
beyond one year from the date of determination.
The calculation of Funded Debt shall include (i)
all Funded Debt of the Consolidated Companies,
PLUS (ii) all Funded Debt of other Persons to the
extent guaranteed by a Consolidated Company, to
the extent supported by a letter of credit issued
for the account of a Consolidated Company, or as
to which and to the extent which a Consolidated
Company or its assets otherwise have become liable
for payment thereof, PLUS (iii) the redemption
amount with respect to the stock of any
Consolidated Company required to be redeemed
during the next succeeding twelve months, PLUS
(iv) the lowest average amount of Current Debt
outstanding for any period of sixty (60)
consecutive days during the preceding twelve month
period ending on any date of determination PLUS
(v) the amount outstanding pursuant to the German
lines of credit described as item 1(b) on Exhibit
F on the date of determination.
"GUARANTORS" shall mean, collectively,
Intermet Foundries, Inc., Columbus Foundries,
Inc., Lynchburg Foundry Company, Ironton Iron,
Inc., Northern Castings Corporation, Intermet
International, Inc., Intermet Machining, Inc.,
Commercial and Precision Machining, Inc., New
River Castings Company, PBM Industries, Inc.,
Intermotive Technologies, Inc. and all other
Material Subsidiaries that are not Foreign
Subsidiaries, and their respective successors and
permitted assigns.
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August 21, 1995
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"MATERIAL SUBSIDIARY" shall mean (i) each
Guarantor under the Subsidiary Guaranty Agreement
(ii) Columbus Neunkirchen, and (iii) each other
Subsidiary of the Company, now existing or
hereinafter established or acquired, that at any
time prior to the maturity of the Notes has or
acquires gross assets equal to or in excess of 5%
of total assets of the Consolidated Companies, or
that accounted for or produced more than 5% of the
Consolidated EBIT of the Company on a consolidated
basis during any of the three most recently
competed fiscal years of the Company, or that (x)
holds any fixed assets material to the operations
or business of the Company or another Material
Subsidiary, or (y) is otherwise material to the
operations or business of Company or another
Material Subsidiary.
16. Paragraph 10B of the Note Agreement is hereby amended by
inserting the following definitions in alphabetical order:
"BANK SUBORDINATED DEBT" shall mean
"Subordinated Debt" as defined in the Bank
Agreement.
"CONSOLIDATED CAPITALIZED INTEREST" shall
mean, for any period of the Company, the
capitalized interest of the Consolidated
Companies, determined on a consolidated basis in
accordance with GAAP.
17. Exhibit D and F to the Note Agreement are hereby replaced by
Exhibits D and F attached hereto.
18. CONDITIONS TO EFFECTIVENESS. This letter agreement shall be
effective upon (a) execution and delivery of this letter agreement by
Prudential and the Company; (b) receipt by Prudential of all fees and
expenses payable in connection herewith; and (c) receipt by the
Prudential of the following:
(i) a duly executed consent by the parties to the Bank Agreement
to the execution and delivery of this letter agreement; and
(ii) the Bank Agreement amended and restated in form and
substance satisfactory to Prudential.
19. OTHER AGREEMENTS. Prudential hereby: (i) consents and
agrees pursuant to Section 6 of the Subsidiary Guaranty Agreement,
that Intermet Aluminum, Inc., I.C. Venture, Inc. and Pennsylvania
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August 21, 1995
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Casting Corporation are hereby released and discharged from their
respective obligations under the Subsidiary Guaranty Agreement; and
(ii) consents to the execution and delivery by the Company of the Bank
Agreement in the form attached as Exhibit A to the First Amendment to
the Intercreditor Agreement; and (iii) agrees that upon delivery to
the undersigned of a written notice from the Company that a definitive
agreement for the sale of all or substantially all of the assets or
stock of PBM Industries, Inc. ("PBM") has been executed by the
Company, will execute and deliver a release of PBM from its
obligations under the Subsidiary Guaranty Agreement.
20. This letter agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns.
21. This letter agreement may be executed in any number of
counterparts each of which shall be deemed an original and all of
which taken together shall constitute one and the same instrument.
22. Except as modified hereby, all terms and conditions of the
Note Agreement and the Subsidiary Guaranty Agreement remain in full
force and effect.
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August 21, 1995
Page -12-
If you agree to the foregoing, please sign each enclosed copy of
this letter and return two to Prudential and upon satisfaction of the
conditions set forth in paragraph 18 above, this letter will become a
binding agreement between the Company and Prudential.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: ___________________________________
Vice President
Agreed to and Accepted
this ___ day of August 1995
INTERMET CORPORATION
By: __________________________
Title:
