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EXHIBIT NO. 10.1
SECOND MODIFICATION OF
AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND MODIFICATION OF AMENDED AND RESTATED CREDIT AGREEMENT
(this "Modification Agreement") is entered into as of March 30, 2000, by and
among AMRESCO, INC., a Delaware corporation ("AMRESCO"), the Subsidiaries of
AMRESCO listed as Borrowers on the signature pages hereof (together with
AMRESCO, collectively referred to herein as the "Borrowers", and each such
entity referred to herein as a "Borrower"), and BANK OF AMERICA, N.A., as
Administrative Agent ("Administrative Agent"), for and on behalf of the Lenders
(defined below).
W I T N E S S E T H:
WHEREAS, reference is made to the credit facilities made pursuant to
and governed by that certain Amended and Restated Credit Agreement (as amended
and supplemented, the "Credit Agreement") dated as of January 18, 2000, among
the Borrowers, Administrative Agent, and the financial institutions, funds and
other entities from time to time designated as "Lenders" therein (the
"Lenders"), as amended by First Modification of Amended and Restated Credit
Agreement (the "First Modification") dated as of February 25, 2000 (capitalized
terms used but not otherwise defined herein shall have the meanings set forth
in the Credit Agreement, as modified hereby);
WHEREAS, the Transition Date has occurred, Term Loan B has been paid
in full, and Borrowers have requested that (i) the Revolving Lenders make an
Advance to pay off the remaining balance of Term Loan A and (ii) the Revolving
Commitment be changed to $75,000,000 (subject to the limitations on
availability set forth in Paragraph 2 hereof); and in connection therewith
Borrowers have requested certain modifications to the Credit Agreement; and
WHEREAS, the Lenders, acting through Administrative Agent pursuant to
the Credit Agreement, have agreed to the requested modifications, subject to
and upon the terms and conditions contained herein.
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that, for and in
consideration of the terms, conditions and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Administrative Agent, for and on behalf of the Lenders,
and Borrowers hereby agree as follows:
1. Termination of Term Loan Facilities. Term Loan B has been paid in
full and, accordingly, Term Loan B is no longer a part of the Credit Facilities
under the Credit Agreement. The outstanding principal balance of, and all
accrued unpaid interest on, Term Loan A shall be paid in full by Borrowers with
an Advance in such amount made as of the date of this Modification Agreement,
whereupon Term Loan A shall no longer be a part of the Credit Facilities under
the Credit Agreement. Upon such full payment of Term Loan A, except as provided
in Paragraph 8(a) hereof, references to the Term Loan Facilities, or to either
Term Loan A or Term Loan B, and terms and conditions relating thereto, in the
Credit Agreement and the
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other Loan Documents shall be disregarded or deemed no longer effective, as
appropriate, and the Credit Facilities shall mean and refer only to the
Revolving Credit Facility. Only Revolving Lenders shall be Lenders, and all
references to "Lenders" shall mean and refer to the remaining Revolving
Lenders.
2. Changes to Revolving Commitment. Effective as of the date hereof,
the Revolving Commitment shall be changed to $75,000,000. The respective
Commitment Amounts of the Revolving Lenders, which now constitute all the
Lenders, are as set forth in Parts A and B, as applicable, of the replacement
Schedule II of the Credit Agreement, which replacement Schedule II is attached
as Exhibit B hereto and incorporated herein and in the Credit Agreement by
reference for all purposes. Upon the execution and effectiveness of this
Modification Agreement, replacement Revolving Notes shall be issued, executed
and delivered by Borrowers in the respective maximum Commitment Amount of each
Lender as set forth in Schedule II. Notwithstanding the foregoing, Borrowers
shall not be entitled to obtain Advances in excess of $65,000,000 unless prior
to May 15, 2000, AMRESCO shall have delivered written notice to the Lenders
(the "Availability Increase Notice") to elect to increase the availability
under the Revolving Credit Facility by $10,000,000 (and not less than such
amount) (the "Additional Availability Amount"), from $65,000,000 to
$75,000,000. The increase in availability under the Revolving Credit Facility
due to the Additional Availability Amount (the "Availability Increase") shall
be effective one (1) Business Day after delivery of the Availability Increase
Notice to Lenders. The parties agree that any such increase in the availability
shall increase the Commitment Amount of only Farallon Debt Investors I, LLC
("Farallon") and, as a condition to such increase, Borrowers shall acknowledge
in writing the change in the Commitment Amount of Farallon. On the effective
date of the Availability Increase, the Commitment Percentages of the Revolving
Lenders shall be adjusted to reflect the increased Commitment Amount of
Farallon, and Farallon shall, if and to the extent necessary, buy from Bank of
America a portion of the outstanding balance of Bank of America's Commitment
Amount (including principal and accrued unpaid interest and any accrued unpaid
fees) so as to cause the outstanding balance of the Commitment Amounts of each
of Farallon and Bank of America to be in proportion to their new Commitment
Percentages. Administrative Agent is hereby authorized to confirm in writing to
AMRESCO and the Lenders as soon as reasonably practicable after the
Availability Increase that Part B of Schedule II reflects the applicable
Commitment Amounts and Commitment Percentages after giving effect to the
Availability Increase. The Additional Commitment Amount shall be advanced in
the same manner and subject to the same conditions as provided for Advances
under the Credit Agreement. It is understood and agreed that the Commitment Fee
required to be paid pursuant to the Credit Agreement shall be calculated based
on the full amount of the Revolving Commitment (i.e., $75,000,000), regardless
of whether or not Borrowers deliver the Availability Increase Notice. If,
pursuant to Section 2.17.2 of the Credit Agreement, Borrowers elect to reduce
the Revolving Commitment prior to electing the Availability Increase, or if
Borrowers have not elected the Availability Increase as provided in this
Paragraph 2 prior to May 15, 2000, then Borrowers shall no longer be entitled
to elect the Availability Increase.
3. Proceeds of Revolving Commitment. From and after the date hereof,
Advances under the Revolving Credit Facility may be used, in addition to the
uses set forth in Section 2.1.1(a) of the Credit Agreement, for payments to be
made by AMRESCO as the "Earnout Payments" or other settlement payments required
under the CLC Transaction and under the MIC Transaction pursuant to the MIC
Merger Agreement, provided that the aggregate amount of all such payments
pursuant to the CLC Transaction and the MIC Transaction shall not
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in any event exceed $65,000,000 (without regard to the amount of any Advances
used for such payments). For purposes of this Paragraph 3, and all other
purposes and references herein or in the Credit Agreement, the terms "CLC
Transaction" and the "MIC Merger Agreement" shall have the new amended meanings
set forth for each in Section 16(b) hereof. Additionally, notwithstanding the
provisions of Section 2.1.1(a) of the Credit Agreement, it is understood and
agreed that an Advance will be made to pay in full the balance of Term Loan A,
subject to all other conditions for an Advance.
4. Limitation on Letter of Credit Facility. As provided in Section
2.1.1(b) of the Credit Agreement, because the Lend Lease Closing Date has
occurred, the Facility Letter of Credit Exposure is now limited to $10,000,000.
From and after the date hereof, the maximum Facility Letter of Credit Exposure
shall be reduced to $5,000,000. Accordingly, Section 2.1.1(b) is amended to add
the following as a final sentence to that Section:
"Notwithstanding anything in the foregoing or in Section 2.16
or any other provision hereof, from and after the effective date of
the Second Modification, the Facility Letter of Credit Exposure shall
not exceed $5,000,000."
5. Facility FX Exposure. From and after the date hereof, the maximum
amount of the Facility FX Exposure shall be reduced from $10,000,000 (as
currently provided in the Credit Agreement) to $1,000,000. Accordingly, all
references to such $10,000,000 limit in the definition of Facility FX Exposure
and in Section 2.1.5 and any other provisions of the Credit Agreement are
hereby changed to $1,000,000.
6. Extension of Termination Date. The Revolving Credit Facility is
extended until the earliest of (i) August 15, 2000, (ii) the maturity date
under the Warehouse Lines financing provided by Prudential Securities Credit
Corp. and (iii) the closing of the sale of the Builder's Group (hereinafter
defined), subject to the terms and conditions of the Credit Agreement.
Accordingly, the definition of "Revolving Credit Termination Date" in Section
1.1 of the Credit Agreement is amended to read in its entirety as follows:
"Revolving Credit Termination Date" means the earliest of (i)
August 15, 2000, (ii) the earliest maturity date of the Warehouse
Lines financing provided by Prudential Securities Credit Corp. to
AMRESCO Commercial Finance, Inc., (iii) the date of the closing of the
sale of the Builder's Group; or (iv) any earlier date on which the
Revolving Commitment is reduced to zero or otherwise terminated
pursuant to the terms hereof. For purposes of the foregoing clause
(iii) "sale of the Builder's Group" shall mean a sale of all or
substantially all of the assets that comprise or relate to the
Builder's Group.
All references to the Revolving Credit Termination Date in the Credit
Agreement, the Revolving Notes, as amended and replaced effective as of the
date hereof, and the other Loan Documents, shall mean and refer to this
extended date.
7. Revised Pricing Schedule. The Pricing Schedule attached as Schedule
5 to the Credit Agreement is amended and restated in its entirety as set forth
on Exhibit C attached hereto, and such revised Pricing Schedule shall for all
purposes be the Pricing Schedule from and after the date hereof. All
definitions and other provisions in the Credit Agreement referencing the
Pricing Schedule (including without limitation the "Applicable Base Rate
Margin," the
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"Applicable Eurocurrency Rate Margin," and the "Applicable Fee Rate,") shall
all refer to and be determined in accordance with the replacement Pricing
Schedule attached as Exhibit C.
8. Required Payments. (a) Any and all payments required to have been
made on the Term Loans pursuant to Sections 2.2.1(b), (c) or (d) or Section
2.2.2 of the Credit Agreement, or in connection with any release of Collateral
as provided in Section 5.7 of the Credit Agreement or in the Specified Asset
Release Agreement, shall from and after the date hereof be applied to amounts
outstanding under the Revolving Credit Facility.
(b) Because the Term Loan Facilities are terminated, it is
acknowledged and agreed that the Borrowing Base Deficiency Payments on the Term
Loans under Section 2.2.4(c) of the Credit Agreement and any Balancing Payments
under Section 2.7(b) of the Credit Agreement are no longer effective and such
Sections are deemed deleted from the Credit Agreement.
(c) Section 2.2.3(b) of the Credit Agreement is hereby
deleted, it being understood and agreed that the net proceeds of the sale of
the Builder's Group will be applied to outstanding Advances under the Revolving
Credit Facility in accordance with Paragraph 8(a) hereof.
9. Reductions to Revolving Commitment. Section 2.17.1 of the Credit
Agreement is amended to require a mandatory reduction to the Revolving Credit
Facility in any event by May 31, 2000. Accordingly, Section 2.17.1 of the
Credit Agreement is amended to read in its entirety as follows:
"SECTION 2.17.1 Mandatory Reductions. The Revolving
Commitment shall be automatically reduced on May 31, 2000, by an
amount equal to (a) $10,000,000 if the Availability Increase has not
occurred or (b) $20,000,000 if the Availability Increase has occurred.
10. Representations, Warranties and Covenants.
(a) Borrowers represent and warrant to the Lenders that
Borrowers have delivered to Administrative Agent true and correct copies of the
documents evidencing the CLC Transaction and the MIC Merger Agreement,
including all amendments thereto in effect on the date hereof, and Borrowers
covenant and agree that Borrowers shall not further modify or amend the
financial terms under such documents in any manner adverse to Borrowers or in
any manner materially altering the structure of such agreements and the
transactions contemplated thereunder, without the prior written consent of
Lenders.
(b) AMRESCO is diligently attempting to negotiate a sale of
the assets of, or the stock of, its Subsidiaries conducting the business
comprising AMRESCO's "Builder's Group" operations (the "Builder's Group").
Borrowers covenant and agree that any such purchase and sale agreement and
purchaser thereunder shall be satisfactory to the Lenders and will not be
executed without the Lenders' prior consent; provided, however, that at
AMRESCO's request the Lenders agree to review and, if acceptable, pre-approve a
list of potential purchasers for the Builder's Group line of business. The
Lenders' approval of such purchase and sale agreement (herein referred to as
the "Builder's Group Purchase Agreement") shall be evidenced
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by, and effective only upon delivery of, a written approval of such Builder's
Group Purchase Agreement delivered by Administrative Agent to AMRESCO.
Borrowers covenant and agree that from and after approval by the Lenders of the
Builder's Group Purchase Agreement, the financial terms under the Builder's
Group Purchase Agreement shall not be modified or amended in any manner adverse
to the sellers thereunder, without the prior written consent of the Required
Lenders. Borrowers shall promptly deliver to Administrative Agent any and all
amendments, modifications or supplements to the approved Builder's Group
Purchase Agreement, and any notices of default received or sent by sellers
thereunder. AMRESCO and each other Borrower that is a party to the approved
Builder's Group Purchase Agreement shall comply with the terms and provisions
thereof and will take all reasonable actions, and will use its good faith
diligent efforts, to close the transactions contemplated thereby as soon as is
reasonably practicable, but in any event by the closing date specified therein.
(c) Borrowers' covenant and agree that upon, and after giving
effect to, the payment to be made by AMRESCO to the stockholders in the MIC
Transaction, the amount available for Advances under the Revolving Credit
Facility shall not be less than $20,000,000.
(d) Section 7.1 of the Credit Agreement is amended to add the
following as additional reporting requirements from and after the date hereof:
"(xviii) Within five (5) Business Days after the last day of
each calendar month, a report detailing, with respect to each
of the Assigned Loans owned by AMRESCO Commercial Finance,
Inc. and comprising the Builder's Group Loans that are
included in the Borrowing Base, the amount and status of each
such Assigned Loan, including whether any such loan is
delinquent, has been determined uncollectible and charged off
or is involved in a bankruptcy.
(xix) On a weekly basis AMRESCO's Liquidity Projection report
in the form that has been previously delivered to
Administrative Agent."
(e) The Certificate of Compliance attached as Exhibit B to
the Credit Agreement is amended and restated in its entirety as provided in the
form thereof attached hereto as Exhibit E.
11. Indebtedness. Section 7.11 of the Credit Agreement is hereby
amended as follows:
(a) Section 7.11(d) is modified to read as follows:
"(d) Warehouse Lines with an aggregate committed
amount thereunder not to exceed $250,000,000."
(b) A new Section 7.11(g) shall be added to the Credit
Agreement, which shall read as follows:
"(g) Indebtedness of AMRESCO to the CLC Earnout
Recipients in an aggregate principal amount not to exceed
$37,500,000, as provided for in the
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amendment documentation for the CLC Transaction that has been
delivered to and approved by the Lenders."
(c) A new Section 7.11(h) shall be added to the Credit
Agreement, which shall read as follows:
"(h) Contingent Obligations in the form of customary
and typical indemnity and/or repurchase obligations related
to the sale of assets by AMRESCO and any applicable
Subsidiaries, which sale and the terms thereof (including the
indemnities to be provided in connection therewith) have been
consented to in writing by the Lenders."
12. Liens. Section 7.15(a) of the Credit Agreement is amended to add
the following as clause (xii) at the end of such Section:
"(xii) Liens on those specified Commercial Finance
Residuals owned by AMRESCO Commercial Finance, Inc. ("ACFI")
listed on Schedule 1 hereto, granted by ACFI in favor of the
CLC Earnout Recipients to secure the permitted indebtedness
of AMRESCO to the CLC Recipients described in Section 7.11(g)
of the Credit Agreement (as amended by the Second
Modification); provided that the Lenders' Liens on such
assets shall not be released, but just subordinated to such
liens, and shall continue as valid second liens on such
Collateral."
13. Financial Covenants. Section 7.24 of the Credit Agreement is
hereby amended to read in its entirety as follows:
"SECTION 7.24.1. Minimum Consolidated Tangible Net Worth.
INTENTIONALLY DELETED."
"SECTION 7.24.2. Leverage Ratio. INTENTIONALLY DELETED."
"SECTION 7.24.3. Interest/Dividend Coverage Ratio. Borrowers
shall not permit the Interest/Dividend Coverage Ratio to be less than
(a) .80 to 1.00 through December 31, 1999, (b) .85 to 1.00 from
January 1, 2000, through March 30, 2000, (c) 1.15 to 1.00 on Xxxxx 00,
0000, (x) .85 to 1.00 from April 1, 2000, though June 30, 2000, and
(e) 1.25 to 1.00 from and after July 1, 2000."
"SECTION 7.24.4. Borrowing Base Requirement. Borrower shall
not permit the Borrowing Base Coverage Ratio (as indicated on Schedule
11, which is modified by and attached as Exhibit D to the Second
Modification) to be less than 1.10 to 1.00."
"SECTION 7.24.5. Capital Adequacy. Borrowers shall not permit
an amount equal to Total Consolidated Indebtedness less (a) 20% of
Subordinated Indebtedness for the period from the effective date of
the Second Xxxxxxxxxxxx xxxxxxx Xxxxx 00, 0000, (x) 15% of
Subordinated Indebtedness for the period from April 1, 2000 through
June 30, 2000, and (c) 10% of Subordinated Indebtedness from and after
July 1, 2000, as of the last day of any calendar month, to exceed the
Adjusted Asset Amount at such time."
14. Additional Event of Default. It shall be an Event of Default if a
definitive purchase and sale agreement constituting the Builder's Group
Purchase Agreement is not
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executed, effective and accepted by the Lenders on or before June 15, 2000.
Accordingly, a new Section 8.1.19 is added to the Credit Agreement that reads
as follows:
"8.1.19. A definitive purchase and sale agreement of the
Builder's Group which constitutes the Builder's Group Purchase
Agreement (as defined in the Second Modification) shall not have been
executed, effective and accepted by the Lenders on or before June 15,
2000."
15. Limitation on Assignments. Section 10.3.1(b)(i) of the Credit
Agreement is amended to change the amount of "$5,000,000" set forth therein to
"$10,000,000". In addition, Section 10.3.1 is amended to prohibit any
assignment that would result in there being more than six Lenders at any time
prior to the Availability Increase or after May 31, 2000, or more than seven
Lenders after the Availability Increase and prior to May 31, 2000.
Additionally, Administrative Agent's consent shall not be required in the case
of an assignment by Farallon after and during the existence of an Event of
Default.
16. Definitions. (a) The following definitions shall be inserted in
alphabetical order in Section 1.1 of the Credit Agreement:
(i) Additional Availability Amount is defined in Paragraph 2
of the Second Modification Agreement.
(ii) Adjusted Asset Amount at any time of determination means
the sum of the value of Borrowers' assets on a consolidated basis as
shown on a consolidated balance sheet for Borrowers prepared in
accordance with Agreement Accounting Principles adjusted by the
leverage advance rates therefor as shown on Exhibit F attached to the
Second Modification, as such schedule may be changed from time to time
by Borrowers and the Required Lenders
(iii) Availability Increase is defined in Paragraph 2 of the
Second Modification.
(iv) Availability Increase Notice is defined in Paragraph 2
of the Second Modification.
(v) Builder's Group is defined in Paragraph 10(b) of the
Second Modification.
(vi) Builder's Group Purchase Agreement is defined in
Paragraph 10(b) of the Second Modification.
(vii) Farallon means Farallon Debt Investors I, LLC.
(viii) New Consolidated EBITDA means, for the period
commencing from and after April 1, 2000, determined in accordance with
Agreement Accounting Principles on a consolidated basis for AMRESCO
and its Subsidiaries, an amount equal to (a) the sum of consolidated
net income before taxes and extraordinary gains or losses (as
determined in accordance with
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Agreement Accounting Principles), plus depreciation, plus
amortization, plus interest expense, each as deducted in determining
such consolidated net income before taxes, and less (b) non-cash
income (created by gain on sale accounting) included in consolidated
net income before taxes and extraordinary gains or losses as used in
clause (a) of this calculation of New Consolidated EBITDA; provided,
however, that for all purposes hereunder, the following amounts shall
be adjusted or added back in the calculation of New Consolidated
EBITDA (but without duplication), provided that no matter how such
adjustments are made they shall be subject to the following stated
limitations: (A) write-downs of retained interests in home equity
securitizations up to a maximum amount of $70,000,000; (B) the
write-down of goodwill associated with the CLC Transaction up to a
maximum amount of $38,000,000; and (C) other non-cash write-downs
and/or non-recurring losses in an aggregate amount not to exceed
$20,000,000; provided, further, that the aggregate amount added back
in the calculation of New Consolidated EBITDA under clauses (A), (B)
and (C) shall not exceed $120,000,000.
(ix) Second Modification means the Second Modification of the
Amended and Restated Credit Agreement, dated as of March 30, 2000,
executed by Borrowers and Administrative Agent, for and on behalf of
the Lenders.
(b) The following definitions set forth in Section 1.1 of the
Credit Agreement are amended to read in their entirety as follows:
(i) "Agreement Accounting Principles" means generally
accepted accounting principles as in effect from time to time, applied
in a manner consistent with that used in preparing the financial
statements referred to in Section 6.4; provided, however, that
wherever in this Agreement principles of consolidation different from
those required by generally accepted accounting principles are
specified, the principles of consolidation specified in this Agreement
shall govern. "Notwithstanding the foregoing, for all financial
covenants and definitions used herein, Borrowers will prepare pro
forma financial statements to present discontinued operations as if
such operations had not been reflected as discontinued during all
applicable periods.
(ii) "Borrowing Base" means an amount calculated as provided
in Schedule 11.
(iii) "Change in Control" means (a) the acquisition, in one
or a series of transactions, by any Person, or two or more Persons
acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 25% or more of the outstanding shares of
voting stock of AMRESCO, provided that the booking of the issuance of
stock to former shareholders of MIC or the CLC Earnout Recipients in
connection with the MIC Transaction or the CLC Transaction,
respectively, shall not constitute a Change in Control hereunder so
long as such stock is not issued and the recipients thereof do not, as
a result of such booking, obtain any voting or other control rights
with respect to such stock;
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or (b) individuals who are directors of AMRESCO on the date hereof
shall cease to constitute 80% in number of the Board of Directors of
AMRESCO; or (c) the positions of Chief Executive Officer, Chief Credit
Officer - Commercial Finance Group, and Chief Financial Officer of
AMRESCO are not filled by the persons serving in those capacities on
April 1, 2000, provided that if any such positions change due to the
death or disability of a person serving in any such capacity on the
date hereof, then such occurrence shall not be deemed a Change in
Control until the expiration of 30 days after the date of such death
or disability without the position left unoccupied by such death or
disability being filled by a person acceptable to Administrative
Agent.
(iv) "CLC Transaction" means the transaction providing for
"Earnout Payments" to the CLC Earnout Recipients described in that
certain Stock and Asset Purchase Agreement dated March 21, 1997,
between (among others) AMRESCO and the CLC Earnout Recipients, as
amended (subject to the approval of the Lenders if and to the extent
required under Section 10(a) of the Second Modification).
(v) "Consolidated EBITDA" means, for any period, determined
in accordance with Agreement Accounting Principles on a consolidated
basis for AMRESCO and its Subsidiaries, an amount equal to (a) the sum
of consolidated net income before taxes and extraordinary gains or
losses (as determined in accordance with Agreement Accounting
Principles), plus depreciation, plus amortization, plus interest
expense, each as deducted in determining such consolidated net income
before taxes, less (b) write downs of retained interests in
securitizations (which includes, without limitation, interest only
strips, servicing rights and other similar assets) for prior years to
the extent prior year financial statements are restated in the period
of determination to reflect such write downs and such write downs are
not included in calculating net income for the period of
determination, and less (c) non-cash income (created by gain on sale
accounting) included in consolidated net income before taxes and
extraordinary gains or losses as used in clause (a) of this
calculation of Consolidated EBITDA; provided, however, that for all
purposes hereunder, (i) the losses related to the commercial mortgage
banking and home equity lending activities of AMRESCO and its
Subsidiaries (in an aggregate amount not to exceed $220,500,000) that
were reported in year-end 1998 financial statements of AMRESCO shall
not be included in calculating Consolidated EBITDA, and (ii) the
following amounts shall be adjusted or added back in the calculation
of Consolidated EBITDA (but without duplication), provided that no
matter how such adjustments are made they shall be subject to the
following stated limitations: (A) write-downs of retained interests in
home equity securitizations up to a maximum amount of $146,000,000;
(B) the write-down of goodwill associated with the acquisitions of the
businesses that now consist of AMRESCO'S Subsidiary Xxxxxxxx Xxxxxxxx
Xxxxxx, X.X. up to a maximum amount of $20,000,000; (C) the write-down
of goodwill associated with MIC up to a maximum amount of
$104,000,000; (D) the write-down of goodwill associated with AMRESCO's
home equity lending division up to a maximum amount of $10,000,000;
and (E) severance and one-time restructuring charges taken by AMRESCO
and its Subsidiaries in an
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aggregate amount not to exceed $35,000,000; provided, further, that
the aggregate amount added back in the calculation of Consolidated
EBITDA under clauses (A) through (D) shall not exceed $280,000,000.
(vi) "Corporate Base Rate" means, on any date of
determination, the greater of (a) the rate of interest per annum most
recently announced by Administrative Agent as its prime rate in effect
at its principal office automatically fluctuating upward and downward
until and at the time specified in each such announcement without
special notice to AMRESCO, any other Borrower or any other Person,
which prime rate may not necessarily represent the lowest or best rate
actually charged to a customer, it being understood and agreed that
such rate is set by Administrative Agent as a general reference rate
of interest, taking into account such factors as Administrative Agent
may deem appropriate, that it may not correspond with future increases
or decreases in interest rates charged by other lenders or market
rates in general, and that Administrative Agent may make various
business or other loans at rates of interest having no relationship to
such rate, and (b) the sum of the Federal Funds Effective Rate plus 50
basis points.
(vii) "Interest/Dividend Coverage Ratio" means, (a) as of any
date of determination prior to April 1, 2000, the ratio of (i)
Consolidated EBITDA for the immediately preceding twelve month period
to (ii) the sum of (x) Consolidated Interest Expense, plus (y) the
amount of any dividends or distributions paid on any preferred stock
of AMRESCO or any of its Subsidiaries to Persons who are not
Affiliates of AMRESCO and its Subsidiaries, other than in kind
dividends on Permitted Preferred Stock, less (z) the amount of prior
fees paid related to financings and capital events of AMRESCO and its
Subsidiaries that are expensed in such period, all for the same
immediately preceding twelve calendar month period, and (b) as of any
date of determination from and after April 1, 2000, the ratio of (i)
New Consolidated EBITDA for the period commencing on April 1, 2000
through the end of the period for which the calculation is being made,
to (ii) the sum of (x) Consolidated Interest Expense for such period,
plus (y) the amount of any dividends or distributions paid during such
period on any preferred stock of AMRESCO or any of its Subsidiaries to
Persons who are not Affiliates of AMRESCO and it Subsidiaries, other
than in kind dividends on Permitted Preferred Stock, less (z) the
amount of prior fees paid during such period related to financings and
capital events of AMRESCO and its Subsidiaries that are expensed in
such period.
(viii) "MIC Merger Agreement" means the Agreement and Plan of
Merger, dated July 14, 1998 by and among AMRESCO, MIC Acquisition,
Inc., MIC, Xxxxxxx Xxxxxxx and certain other stockholders, as amended
(subject the approval of the Lenders if and to the extent required
under Paragraph 10(a) of the Second Modification).
(ix) "Required Lenders" means Lenders in the aggregate having
at least 51% of the Aggregate Commitment; provided that if the
Revolving Commitment has been terminated, then "Required Lenders"
shall mean Lenders whose
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Aggregate Loan Percentages, in the aggregate, equal or exceed 51%.
Further, if at any time during the term of the Credit Facilities,
there are just two (2) Lenders, then "Required Lenders" shall mean
both such Lenders.
17. Definition of Loan Documents. The definition of "Loan Documents",
as defined in the Credit Agreement and as used in the Credit Agreement, the
other Loan Documents and herein, shall be, and is hereby, modified to include
this Modification Agreement and any and all documents executed in connection
herewith.
18. Conditions Precedent to this Modification Agreement. As conditions
precedent to this Modification Agreement and the modifications to the Credit
Agreement pursuant hereto and the consents granted hereunder, all of the
following shall have been satisfied:
(a) The Borrowers and Guarantors shall have executed and
delivered to Administrative Agent this Modification Agreement;
(b) The Borrowers shall have delivered to Administrative
Agent all corporate resolutions, consents, powers of attorney, certificates,
documents and legal opinions as Administrative Agent may request relating to
(i) the existence and good standing of AMRESCO and any other Borrowers
requested by the Administrative Agent, (ii) the corporate and partnership
authority for the execution and validity of this Modification Agreement, and
(iii) the enforceability of this Modification Agreement and the other Loan
Documents upon execution hereof, together with all other documents,
instruments, opinions, and agreements and any other matters relevant hereto or
thereto, all in form and content satisfactory to Administrative Agent;
(c) The Borrowers shall have executed and delivered to
Administrative Agent for filing all UCC financing statements and UCC amendments
as may be requested by Administrative Agent or its counsel.
(d) The Borrowers shall have paid all applicable commitment,
amendment, administration, legal and other fees as agreed in connection with
this Modification Agreement;
(e) The Borrowers shall have obtained and delivered to
Administrative Agent evidence that the Warehouse Lines financing provided by
Prudential Securities Credit Corp. to AMRESCO Commercial Finance, Inc. for its
franchise lending and small business lending operations, shall have been
renewed and extended on terms satisfactory to Administrative Agent, in its
reasonable discretion; and
(f) If applicable, Borrowers shall have caused to be executed
and delivered to Administrative Agent a Supplement to the Loan Documents to add
any additional Subsidiaries of AMRESCO required pursuant to Section 5.13 of the
Credit Agreement as Borrowers or Guarantors, as the case may be, and as
assigning or pledging parties under the Collateral Assignment, the Security
Agreement and the Pledge Agreement, and Administrative Agent shall have
received all such corporate existence and authority documentation, resolutions
and other agreements, stock certificates and other equity ownership
certificates, stock powers, financing statements, instruments and certificates
as Administrative Agent shall reasonably require with respect to such
additional Borrowers and/or Guarantors. Borrowers shall also have caused to be
executed and/or delivered to Administrative Agent such modifications to the
Stock Pledge Agreement and such stock certificates of, or other evidences of
equity interests in, the Excluded
12
Subsidiaries (with stock powers as applicable) to effectively evidence and
perfect the Lenders' security interests therein.
19. Reaffirmation of Debt and Liens. This Modification Agreement is
not intended to and shall not constitute a novation of the Obligations of the
Borrowers under the Credit Agreement. Each Borrower acknowledges, confirms and
agrees, and Administrative Agent and the Lenders acknowledge, that (a) each
Borrower is well and truly indebted to the Lenders pursuant to the terms of the
Notes, the Credit Agreement and the other Loan Documents, as modified hereby,
and (b) all liens and security interests securing the Obligations under the
Credit Agreement, the Security Documents and all the other Loan Documents are
and remain in full force and effect, as security for new Notes pursuant hereto
and all the Obligations under the Credit Agreement, as modified and amended
hereby.
20. No Implied Waivers. None of the amendments or modifications
provided for herein shall be deemed a consent to or waiver of any breach of the
same or any other covenant, condition or duty. The Borrowers and the Guarantors
acknowledge and understand that Administrative Agent and the Lenders have no
obligation to further amend or modify the Credit Agreement, any of the other
Loan Documents or any of the terms, provisions or covenants thereof, and that
Administrative Agent and the Lenders have made no representations regarding any
such amendments or modifications. No failure or delay on the part of
Administrative Agent or any Lender in exercising, and no course of dealing with
respect to, any right, power or privilege under this Modification Agreement,
the Credit Agreement or any other Loan Document shall operate as a waiver
thereof or of the exercise of any other right, power or privilege.
21. Representations and Warranties. Each of the Borrowers and
Guarantors hereby represent and warrant to Administrative Agent and the Lenders
that (a) the execution, delivery, and performance by the Borrowers and the
Guarantors of this Modification Agreement and compliance with the terms and
provisions hereof (i) have been duly authorized by all requisite action on the
part of each such Person and (ii) do not, and will not, violate or conflict
with, or result in a breach of, or require any consent under (A) the articles
of incorporation, certificate of incorporation, bylaws, partnership agreement
or other organizational documents of any such Person, (B) any applicable law,
rule, or regulation or any order, writ, injunction, or decree of any
Governmental Authority or arbitrator, or (C) any material agreement or
instrument to which any such Person is a party or by which any of them or any
of their property is bound or subject, (b) the representations and warranties
contained in the Agreement, as amended hereby, and any other Loan Document are
true and correct in all material respects on and as of the date hereof as
though made on and as of the date hereof, and (c) no Default has occurred and
is continuing.
22. Release of Claims. Each of the Borrowers and the Guarantors hereby
acknowledge and agree that none of them has any, and there are no, claims or
offsets against or defenses or counterclaims to the terms and provisions of or
the obligations of any Borrower, any Guarantor or any Subsidiary created or
evidenced by the Credit Agreement or any of the other Loan Documents, and to
the extent any such claims, offsets, defenses or counterclaims exist, each
Borrower and each Guarantor hereby waives (to the fullest extent permitted by
applicable law), and hereby releases each of Administrative Agent and each of
the Lenders from, any and all claims, offsets, defenses and counterclaims,
whether known or unknown, such waiver and release being with full knowledge and
understanding of the circumstances and effects of such waiver and release and
after having consulted legal counsel with respect thereto.
13
23. Ratification. Except as otherwise expressly modified by this
Modification Agreement, all terms and provisions of the Credit Agreement, the
Notes, and the other Loan Documents shall remain unchanged and hereby are
ratified and confirmed and shall be and shall remain in full force and effect,
enforceable in accordance with their terms.
24. Payment of Expenses. Borrowers shall pay to Administrative Agent,
for and on behalf of the Lenders, upon demand, the reasonable attorneys' fees
and expenses of Administrative Agent's counsel and all filing and recording
fees and other reasonable expenses incurred by Administrative Agent in
connection with this Modification Agreement.
25. Current Borrowers, Guarantors and Excluded Subsidiaries. Borrowers
represent that the Subsidiaries of AMRESCO that are required to be a "Borrower"
or a "Guarantor", respectively, under the Credit Agreement and related Loan
Documents as of the date hereof, have all executed the Credit Agreement, and
that there are no additional Borrowers or Guarantors to be added by a
Supplement to the Loan Documents.
26. Further Assurances. AMRESCO and the other Borrowers shall execute
and deliver to Administrative Agent such other documents as may be necessary or
as may be required, in the opinion of Administrative Agent and/or counsel to
Administrative Agent, to effect the transactions contemplated hereby and to
create, evidence, perfect and protect the Lenders' Liens and security
interests, and the rights and remedies of Administrative Agent and/or the
Lenders under the Loan Documents.
27. Binding Agreement. This Modification Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto, and the Lenders,
and their respective legal representatives, successors and assigns.
28. Enforceability. In the event the enforceability or validity of any
portion of this Modification Agreement, the Credit Agreement, the Notes, or any
of the other Loan Documents is challenged or questioned, such provision shall
be construed in accordance with, and shall be governed by, whichever applicable
federal or Texas law would uphold or would enforce such challenged or
questioned provision.
29. Choice of Law. THIS MODIFICATION AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS, EXCEPT TO THE EXTENT FEDERAL LAWS PREEMPT THE LAWS OF THE
STATE OF TEXAS.
30. Counterparts. This Modification Agreement may be executed in
multiple counterparts, all of which are identical, each of which shall be
deemed an original, and all of which counterparts together shall constitute one
and the same instrument.
31. Entire Agreement. This Modification Agreement, the Credit
Agreement and the Notes, together with the other Loan Documents, contain the
entire agreements between the parties relating to the subject matter hereof and
thereof and all prior agreements relative thereto which are not contained
herein or therein are terminated.
14
THIS MODIFICATION AGREEMENT AND THE OTHER WRITTEN INSTRUMENTS,
AGREEMENTS AND DOCUMENTS EXECUTED IN CONNECTION WITH THIS MODIFICATION
AGREEMENT, AND THE CREDIT AGREEMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS,
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND 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.
15
IN WITNESS WHEREOF, this Modification Agreement is executed effective
as of the date first written above.
BORROWERS:
AMRESCO, INC., a Delaware corporation
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AFC EQUITIES INVESTORS, INC.
AFC EQUITIES, L.P.
AFC EQUITIES MANAGEMENT, INC.
AMREIT HOLDINGS, INC.
AMREIT MANAGERS G.P., INC.
AMREIT MANAGERS, L.P.
AMRESCO 1994-N2, INC.
AMRESCO ATLANTA INDUSTRIAL, INC.
AMRESCO BUILDERS GROUP, INC.
AMRESCO CAPITAL CONDUIT CORPORATION
AMRESCO CAPITAL LIMITED, INC.
AMRESCO CAPITAL, L.P.
AMRESCO CMF, INC.
AMRESCO COMMERCIAL FINANCE, INC.
AMRESCO CONSOLIDATION CORP.
AMRESCO CONSUMER ACQUISITIONS CORP.
AMRESCO CONSUMER INVESTMENTS, L.P.
AMRESCO CONSUMER RECEIVABLES
CORPORATION
AMRESCO EQUITY INVESTMENTS, INC.
AMRESCO EQUITY INVESTMENTS II, INC.
AMRESCO FINANCE AMERICA CORPORATION
AMRESCO FINANCIAL I, INC.
AMRESCO FINANCIAL I, L.P.
AMRESCO FUNDING CORPORATION
AMRESCO-INSTITUTIONAL, INC.
AMRESCO INSURANCE SERVICES, INC.
AMRESCO INVESTMENTS, INC.
AMRESCO MANAGEMENT, INC.
AMRESCO-MBS I, INC.
AMRESCO MBS-II, INC.
AMRESCO MORTGAGE CAPITAL, INC.
AMRESCO MORTGAGE CAPITAL LIMITED-I, INC.
AMRESCO MORTGAGE SERVICES LIMITED, INC.
AMRESCO NEW ENGLAND, INC.
AMRESCO NEW ENGLAND II, INC.
00
XXXXXXX XXX XXXXXXX, X.X.
XXXXXXX XXX XXXXXXX II, L.P.
AMRESCO NEW HAMPSHIRE, INC.
AMRESCO NEW HAMPSHIRE, L.P.
AMRESCO OVERSEAS, INC.
AMRESCO PORTFOLIO INVESTMENTS, INC.
AMRESCO PRINCIPAL MANAGERS I, INC.
AMRESCO PRINCIPAL MANAGERS II, INC.
AMRESCO RECEIVABLES MANAGEMENT CORP.
AMRESCO RESIDENTIAL CAPITAL MARKETS, INC.
AMRESCO RESIDENTIAL CREDIT CORPORATION
AMRESCO RESIDENTIAL MORTGAGE CORPORATION
AMRESCO RESIDENTIAL PROPERTIES, INC.
AMRESCO S-END, L.P. f/k/a AMRESCO SERVICES,
L.P.
AMRESCO VENTURES, INC.
ASSET MANAGEMENT RESOLUTION COMPANY
BEI 1992 - N1, INC.
BEI 1993 - N3, INC.
BEI 1994 - N1, INC.
BEI MULTI-POOL, INC.
BEI PORTFOLIO INVESTMENTS, INC.
BEI PORTFOLIO MANAGERS, INC.
BEI REAL ESTATE SERVICES, INC.
COMMONWEALTH TRUST DEED SERVICES, INC.
ENT MIDWEST, INC.
ENT NEW JERSEY, INC.
ENT SOUTHERN CALIFORNIA, INC.
EXPRESS FUNDING, INC.
FINANCE AMERICA CORPORATION
HF ACQUISITION SUB, INC.
AMRESCO H-END, L.P., f/k/a XXXXXXXX XXXXXXXX
XXXXXX, X.X.
LIFETIME HOMES, INC.
MORTGAGE INVESTORS CORPORATION
MSPI, INC.
OAK CLIFF FINANCIAL, INC.
PRESTON HOLLOW ASSET HOLDINGS, INC.
QUALITY FUNDING, INC.
By: AMRESCO, INC., a Delaware corporation,
as agent and attorney-in-fact
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
17
ADMINISTRATIVE AGENT:
BANK OF AMERICA, N.A., a national banking
association,
as Administrative Agent for and on behalf
of the Lenders
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
18
ACKNOWLEDGED AND AGREED TO AS OF THE DATE
HEREOF BY:
GUARANTORS:
AMRESCO INDEPENDENCE FUNDING, INC.
By: AMRESCO, INC., a Delaware corporation,
as agent and attorney-in-fact
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
AMRESCO JERSEY VENTURES LIMITED
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
AMRESCO EQUITIES CANADA INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
AMRESCO FUNDING CANADA INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
19
ACKNOWLEDGED AND AGREED TO AS OF THE DATE
HEREOF BY:
LENDERS:
BANK OF AMERICA, N.A.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
FARALLON DEBT INVESTORS I, LLC
By: FARALLON CAPITAL MANAGEMENT, LLC
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
