EXHIBIT 10.14
CONSENT AND FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This CONSENT AND FIRST AMENDMENT TO SECOND AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT (this "Agreement") is dated as of August 6, 2004, and is
entered into by and among BEACON SALES ACQUISITION, INC. ("Borrower") and the
Domestic Subsidiary Guarantors which are signatories hereto (together with
Borrower, "Obligors"); GENERAL ELECTRIC CAPITAL CORPORATION, for itself as a
Lender, as L/C Issuer and as Agent; and the Lenders which are signatories
hereto.
WHEREAS, Agent, Lenders and Obligors are parties to a certain Second
Amended and Restated Loan and Security Agreement dated as of March 12, 2004 (as
such agreement has been or may hereafter be from time to time amended,
supplemented or otherwise modified, the "Loan Agreement"); and
WHEREAS, Beacon Roofing Supply, Inc. ("Holdings") has begun the steps
necessary to consummate an initial public offering of its common stock, the
proceeds of which shall be used to (i) redeem all of the Senior Subordinated
Notes, the Best Seller Notes and the Investor Seller Notes, (ii) redeem warrants
covering 2,839,937 shares of Holdings' common stock (after giving effect to a
4,550 to 1 stock split anticipated to occur prior to such initial public
offering) and (iii) repay a portion of the outstanding Revolving Loans;
WHEREAS, Borrower has requested that the Lenders consent to the
proposed initial public offering of Holdings' common stock and use of proceeds
thereof as described herein;
WHEREAS, the parties also desire to amend the Loan Agreement as
hereinafter set forth;
NOW THEREFORE, in consideration of the mutual conditions and
agreements set forth in the Loan Agreement and this Agreement, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Loan Agreement.
2. CONSENTS. Subject to the terms and conditions set forth below,
Agent and Lenders hereby consent to:
(a) the closing of an initial public offering of Holdings' common
stock for cash proceeds (net of underwriting discounts and commissions and other
costs associated therewith) ("Net Issuance Proceeds") to Holdings of not less
than $75,000,000 (the "IPO"); and
(b) the application of the Net Issuance Proceeds of the IPO in the
following manner:
(i) to redeem all outstanding Senior Subordinated Notes,
Best Seller Notes and Investor Notes at par, plus accrued and unpaid
interest thereon;
(ii) to redeem warrants covering 2,839,937 shares of
Holdings' common stock (after giving effect to a 4,550 to 1 stock split
anticipated to occur before the IPO) at a price per share equal to 93% of
the per share price to the public in the IPO; and
(iii) to repay a portion of the outstanding Revolving Loans
in an amount equal to the greater of (1) $500,000 and (2) the balance of
the Net Issuance Proceeds of the IPO remaining after payment of the amounts
referred to in clauses (i) and (ii) above.
3. AMENDMENTS TO LOAN AGREEMENT.
3.1 The definition of "Scheduled Installment" set forth in SUBSECTION
2.1 (A)(1) of the Loan Agreement is hereby amended to read as follows:
"Scheduled Installment" of the Term Loan A means, for each date
set forth below, the amount set forth opposite such date.
DATE SCHEDULED INSTALLMENT
---- ---------------------
December 31, 2004 $ 147,500
March 31, 2005 $ 147,500
June 30, 2005 $ 147,500
September 30, 2005 $ 147,500
December 31, 2005 $ 147,500
March 31, 2006 $ 147,500
June 30, 2006 $ 147,500
September 30, 2006 $ 147,500
December 31, 2006 $ 147,500
March 31, 2007 $ 147,500
June 30, 2007 $ 147,500
September 30, 2007 $ 147,500
December 31, 2007 $ 147,500
March 31, 2008 $ 147,500
June 30, 2008 $ 147,500
September 30, 2008 $ 147,500
December 31, 2008 $ 147,500
March 31, 2009 $ 147,500
June 30, 2009 $ 147,500
September 30, 2009 $ 11,947,500
3.2 The definition of "Scheduled Installment" set forth in SUBSECTION
2.1(A)(2) of the Loan Agreement is hereby amended to read as follows:
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"Scheduled Installment" of Term Loan B means, for each date set
forth below, the amount set forth opposite such date.
DATE SCHEDULED INSTALLMENT
---- ---------------------
December 31, 2004 $ 687,500
March 31, 2005 $ 687,500
June 30, 2005 $ 687,500
September 30, 2005 $ 687,500
December 31, 2005 $ 687,500
March 31, 2006 $ 687,500
June 30, 2006 $ 687,500
September 30, 2006 $ 687,500
December 31, 2006 $ 687,500
March 31, 2007 $ 687,500
June 30, 2007 $ 687,500
September 30, 2007 $ 687,500
December 31, 2007 $ 687,500
March 31, 2008 $ 687,500
June 30, 2008 $ 687,500
September 30, 2008 $ 687,500
December 31, 2008 $ 687,500
March 31, 2009 $ 687,500
June 30, 2009 $ 687,500
September 30, 2009 $ 687,500
3.3 The second sentence of SUBSECTION 2.1(B) of the Loan Agreement is
hereby amended to read as follows:
The aggregate amount of the Revolving Loan Commitment shall not
at any time exceed $118,500,000, as such amount may be increased in
accordance with SUBSECTION 2.16.
3.4 The first sentence of SUBSECTION 2.6 of the Loan Agreement is hereby
amended to read as follows:
This Agreement shall be effective until the earliest of (a)
September 30, 2009, (b) the acceleration of all Obligations pursuant
to SUBSECTION 8.3 and (c) the date of termination of Canadian Lenders'
obligations to make the Canadian Facility Revolving Loans or permit
existing Canadian Facility Revolving Loans to remain outstanding
(other than in connection with a sale of Beacon Canada (or all or
substantially all of its assets) approved by Lenders in accordance
with the terms of this Agreement) (the "Termination Date").
3.5 SECTION 2 of the Loan Agreement is hereby amended by inserting the
following as SUBSECTION 2.16 thereof:
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2.16 INCREASE IN REVOLVING LOAN COMMITMENT.
(a) At any time or from time to time prior to the fourth
anniversary of the First Amendment Date, on not more than three
occasions, Borrower may propose to increase the Revolving Loan
Commitment (i) in minimum increments of $10,000,000 and (ii) by up to
$40,000,000 in the aggregate, in accordance with and pursuant to this
subsection 2.16.
(b) Any such proposal (an "Increased Commitment Proposal")
shall be delivered by Borrower to Agent and shall set forth (i) the
amount of increase of the Revolving Loan Commitment (as to any
Increased Commitment Proposal, the "Additional Revolving Loan
Commitment", and as to any Revolving Loan to be advanced thereunder,
the "Additional Revolving Loan") and (ii) the proposed interest rate
and closing fee that would apply to the Additional Revolving Loan.
(c) The Increased Commitment Proposal shall be offered to
existing Lenders and/or Eligible Assignees, on such basis as shall be
determined by Agent in its sole discretion; provided that no Lender
shall be obligated to accept any portion of the Additional Revolving
Loan Commitment.
(d) To the extent that the interest rate on the Additional
Revolving Loan (exclusive of any closing fee associated therewith) is
greater than the interest rate applicable to the then existing
Revolving Loan, the interest rate on the then existing Revolving Loan
shall be increased upon the effectiveness of the increase in the
Revolving Loan Commitment such that the interest rate for the then
existing Revolving Loan shall equal the interest rate applicable to
the Additional Revolving Loan.
(e) No increase in Revolving Loan Commitment shall become
effective under this subsection 2.16 unless, at the time of any such
increase (i) no Default or Event of Default has occurred and is
continuing, and no Default or Event of Default would arise from such
increase or the making of the Additional Revolving Loan; and (ii)
Obligors and those Lenders accepting such Increased Commitment
Proposal and the Eligible Assignees accepting such Increased
Commitment Proposal shall have entered into an agreement (an
"Increased Commitment Agreement") in form and substance reasonably
satisfactory to Agent pursuant to which, among other things, (1) those
Lenders and Eligible Assignees party thereto shall have accepted the
Increased Commitment Proposal, (2) the Eligible Assignees shall have
agreed to be bound by this Agreement and shall have made the
representations and warranties required of an assignee of Loans and
Commitments under subsection 9.5, (3) the terms of the Increased
Commitment Proposal and the terms required by this Section 2.16 shall
have been incorporated into this Agreement (which incorporation shall
constitute an amendment of this Agreement and shall not (so long as
such Increased Commitment Agreement is limited to implementing the
Increased Commitment Proposal and provisions reasonably related
thereto as reasonably determined by Agent) require the consent of the
Requisite Lenders or Lenders), (4) Obligors
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shall have consented to the terms of the Increased Commitment
Agreement and (5) Borrower shall have issued to each Lender a new
Revolving Note in an amount equal to the Revolving Loan Commitment of
such Lender (after giving effect to the increase of such Lender's
Revolving Loan Commitment).
(f) From and after the effective date of any increase in the
Revolving Loan Commitments under this SECTION 2.16, (i) except as
provided in clause (ii) below, to the extent necessary to cause the
Equalization Time to occur (x) all Revolving Loans shall be made under
the Additional Revolving Loan Commitment and (y) all repayments of
Revolving Loans shall be applied to the Revolving Loans held by
Lenders whose percentage share of the Revolving Loans exceeds their
respective Pro Rata Shares of the Revolving Loan Commitment (after
giving effect to such increase in the Revolving Loan Commitment), in
each case, until the time, if any (the "EQUALIZATION TIME") that the
percentage share of the Revolving Loans held by each Lender equals its
Pro Rata Share of the Revolving Loan Commitment, (ii) the percentage
interest of each Lender in each participation in each undrawn Letter
of Credit (whether then outstanding or thereafter issued) shall equal
its percentage interest in the Revolving Loan Commitment (after giving
effect to such increase in the Revolving Loan Commitment), (iii) in
the event that the Revolving Loan Commitment terminates prior to the
Equalization Time, each Lender whose percentage interest in the
Revolving Loans shall be less than its percentage interest in the
Revolving Loan Commitment shall immediately purchase from the Lenders
whose percentage shares of the Revolving Loans are greater than their
respective Pro Rata Shares of the Revolving Loan Commitment, Revolving
Loans until the percentage share of Revolving Loans held by each
Lender equals the Pro Rata Share of such Lender of the Revolving Loan
Commitment (after giving effect to such increase in the Revolving Loan
Commitment) (in any case, in such amounts as shall be determined by
Agent and Agent may allocate repayments of Revolving Loans in a manner
required to achieve such equality in the event of the failure of any
Lender to effect any such purchase), and (iv) from and after the
Equalization Time, each Revolving Advance shall be made in accordance
with the Revolving Loan Commitment after giving effect to such
increase in the Revolving Loan Commitment, and from and after the
earlier of the Equalization Time and the termination of the Revolving
Loan Commitment, each repayment of a Revolving Loan shall be applied
in accordance with the Revolving Loan Commitment after giving effect
to such increase in the Revolving Loan Commitment.
All advances made pursuant to the Additional Revolving Loan
Commitment shall constitute Revolving Advances, shall constitute
Obligations, shall be secured by the Collateral and shall be repaid
(except as otherwise provided in PARAGRAPH (f) above) as required for
Revolving Loans.
3.6 SUBSECTION 4.25 of the Loan Agreement is hereby amended to read as
follows:
4.25 COLLECTION OF ACCOUNTS AND PAYMENTS. As promptly as
practicable and in any event within 60 days following the First
Amendment Date, Obligors
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shall establish lockboxes and blocked accounts (collectively, "Blocked
Accounts") in Obligors' names with such banks ("Collecting Banks") as
are acceptable to Agent (subject to irrevocable instructions
acceptable to Agent as hereinafter set forth) to which all account
debtors shall directly remit all payments on Accounts of Obligors and
in which Obligors will immediately deposit all payments made for
Inventory or other payments constituting proceeds of Collateral in the
identical form in which such payment was made, whether by cash or
check. The Collecting Banks shall acknowledge and agree, in a manner
satisfactory to Agent, that the Collecting Banks have no right to
setoff against the Blocked Accounts at any time. The Collecting Banks
shall further acknowledge and agree, in a manner satisfactory to
Agent, that during the Activation Period: (i) all payments made to the
Blocked Accounts are the sole and exclusive property of Agent and
Canadian Facility Agent, for their benefit and for the benefit of
Lenders and Canadian Facility Lenders, and (ii) all such payments
received will be promptly transferred to Agent's Account. Obligors
hereby agree that (i) Agent and Canadian Facility Agent, for their
benefit and for the benefit of Lenders and Canadian Facility Lenders,
have been granted a Lien on such Blocked Accounts and all funds on
deposit therein as additional collateral security for the Obligations
and the indebtedness and obligations under the Canadian Facility
Credit Agreement and, upon execution of blocked account agreements
with such Collecting Banks, "control" will have been established with
respect to such Blocked Accounts as defined in Section 9-104 of the
UCC and (ii) during the Activation Period, all payments made to such
Blocked Accounts or otherwise received by Agent and whether on the
Accounts or as proceeds of other Collateral or otherwise will be the
sole and exclusive property of Agent and Canadian Facility Agent, for
their benefit and for the benefit of Lenders and Canadian Facility
Lenders. Obligors shall irrevocably instruct each Collecting Bank to
promptly transfer, during the Activation Period, all payments or
deposits to the Blocked Accounts into Agent's Account. If any Obligor,
or any if its Affiliates, employees, agents or other Person acting for
or in concert with any Obligor, shall during the Activation Period
receive any monies, checks, notes, drafts or any other payments
relating to and/or proceeds of Accounts or other Collateral, such
Obligor or such Person shall hold such instrument or funds in trust
for Agent, and, immediately upon receipt thereof, shall remit the same
or cause the same to be remitted, in kind, to the Blocked Accounts or
to Agent at its address set forth in SUBSECTION 10.3 below.
Notwithstanding any provision to the contrary herein or in any other
Loan Document, prior to the Activation Period: (i) the Obligors shall
have sole dominion and control over the funds in the Blocked Accounts
and the Collecting Banks shall transfer or apply funds on deposit
therein in accordance with the instructions of the Obligors, (ii) the
Obligors shall have no obligation to apply the funds in the Blocked
Accounts to reduce any Obligations, and the Lenders and Canadian
Facility Lenders shall not have any right to cause such funds to be so
applied, and (iii) neither the Agent nor the Canadian Facility Agent
shall have any right to endorse or collect any payments made to the
Blocked Accounts, or to withdraw any funds from the Blocked Accounts,
or to direct how the funds in the Blocked Accounts are applied. An
Activation Notice shall not be
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given unless and until either (i) an Event of Default occurs or (ii)
Excess Availability is less than $10,000,000 and, in the case of this
clause (ii), Requisite Lenders have directed that such Activation
Notice be given or have consented thereto.
3.7 SUBSECTION 7.1 of the Loan Agreement is hereby amended to read as
follows:
SUBSECTION 7.1 Indebtedness and Liabilities. Directly or
indirectly create, incur, assume, guaranty, or otherwise become or
remain directly or indirectly liable, on a fixed or contingent basis,
with respect to any Indebtedness except:
(A) the Obligations;
(B) intercompany Indebtedness (i) outstanding on the Closing
Date and (ii) made following the Closing Date to fund working capital
requirements of such Subsidiaries in the ordinary course of business
and to fund Permitted Acquisitions; PROVIDED, HOWEVER, that the
aggregate outstanding principal amount of intercompany loans from
Borrower to Beacon Canada Holdings and Beacon Canada shall not exceed
an amount equal to the outstanding balance of such intercompany loan
as of the Closing Date (after giving effect to the Related
Transactions on the Closing Date) plus $3,000,000 at any time;
PROVIDED, FURTHER, that upon the request of Agent at any time, such
Indebtedness shall be evidenced by promissory notes having terms
reasonably satisfactory to Agent, the sole originally executed
counterparts of which shall be delivered to Agent and shall be pledged
to (i) Agent, for the benefit of Agent and Lenders, as security for
the Obligations and (ii) Canadian Facility Agent, for the benefit of
Canadian Facility Agent and Canadian Lenders, as security for the
obligations under the Canadian Facility Loan Documents;
(C) [Intentionally Omitted];
(D) [Intentionally Omitted];
(E) [Intentionally Omitted];
(F) [Intentionally Omitted];
(G) [Intentionally Omitted];
(H) [Intentionally Omitted];
(I) [Intentionally Omitted];
(J) Indebtedness of Beacon Canada pursuant to the Canadian
Facility Loan Documents;
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(K) Indebtedness not to exceed $12,000,000 in the aggregate at
any time outstanding secured by purchase money Liens on fixed assets
or incurred with respect to Capital Leases;
(L) unsecured, subordinated Indebtedness evidenced by the
Stockholder Notes;
(M) unsecured Indebtedness not to exceed $10,000,000 in the
aggregate at any time outstanding which is subordinated to the
Obligations in a manner satisfactory to Agent and Requisite Lenders;
(N) Indebtedness existing on the Closing Date and identified on
SCHEDULE 7.1;
(O) unsecured Indebtedness of Holdings incurred in connection
with any Permitted Acquisition; provided, however, that any such
Indebtedness shall (i) have a maturity date no earlier than ninety
(90) days after the date set forth in CLAUSE (a) of the definition of
"Termination Date", (ii) shall be fully subordinated to the
Obligations in a manner satisfactory to Agent and (iii) be otherwise
issued pursuant to terms and conditions reasonably satisfactory to
Agent; and
Obligors will not, and will not permit the other Loan Parties to,
incur any Liabilities except for Indebtedness permitted herein and
trade payables and normal accruals in the ordinary course of business
not yet due and payable or with respect to which any Obligors or any
of the other Loan Parties is contesting in good faith the amount or
validity thereof by appropriate proceedings and then only to the
extent that such Obligor or such other Loan Party has established
adequate reserves therefor under GAAP.
3.8 SUBSECTION 7.5 of the Loan Agreement is hereby amended to read as
follows:
7.5 RESTRICTED JUNIOR PAYMENTS. Directly or indirectly declare,
order, pay, make or set apart any sum for any Restricted Junior
Payment, except that:
(A) Borrower may make payments and distributions to Holdings
that are used by Holdings to pay federal and state income taxes then
due and owing, franchise taxes and other similar licensing expenses
incurred in the ordinary course of business; provided that Borrower's
aggregate contribution to taxes as a result of the filing of a
consolidated or combined return by Holdings shall not be greater, nor
the aggregate receipt of tax benefits less, than they would have been
had Borrower and its Subsidiaries not filed a consolidated or combined
return with Holdings;
(B) Subsidiaries of Borrower may make Restricted Junior
Payments to Borrower;
(C) [Intentionally Omitted];
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(D) [Intentionally Omitted];
(E) [Intentionally Omitted];
(F) Borrower may make distributions to Holdings to permit
Holdings to redeem (and Holdings may redeem) shares of its capital
stock (or warrants or options to acquire any such shares) from
employees of Borrower and its Subsidiaries upon the death or other
termination of employment of such employees, or to permit Holdings to
pay interest or principal in respect of any Stockholder Notes issued
by Holdings to any such employee or their executors or administrators
in payment of all or any portion of such redemption price, provided
all of the following conditions are satisfied:
(1) no Default or Event of Default shall have occurred and be
continuing or would arise as a result of such distribution or payment;
(2) after giving effect to such distribution and payment,
Obligors shall be in compliance on a pro forma basis with all
financial covenants set forth in the Financial Covenants Rider
(excluding PARAGRAPH A thereof) recomputed for the twelve-month period
ending on the last day of the most recent fiscal quarter for which
Agent has received the monthly financial statements required to be
delivered pursuant to paragraph (A) of the Reporting Rider;
(3) the aggregate amount of such distributions permitted in
any fiscal year of the Borrower shall not exceed $500,000; and
(4) after giving effect to such distribution and payment and
the making of any Revolving Loan to fund such distribution, Excess
Availability is at least $7,500,000;
(G) [Intentionally Omitted];
(H) [Intentionally Omitted];
(I) [Intentionally Omitted];
(J) [Intentionally Omitted]; and
(K) The Loan Parties may pay to CHS the management fees set
forth on Schedule 7.8 to the extent accrued prior to the closing of
the IPO and permitted under SUBSECTION 7.8.
3.9 SUBSECTION 7.6 of the Loan Agreement is hereby amended to read as
follows:
7.6 Restriction on Fundamental Changes.
(A) Enter into any transaction of merger or consolidation; (B)
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution); (C)
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convey, sell, lease, sublease, transfer or otherwise dispose of, in
one transaction or a series of transactions, all or any substantial
part of its business or assets, or the capital stock of any of its
Subsidiaries, whether now owned or hereafter acquired; or (D) acquire
by purchase or otherwise all or any substantial part of the business
or assets of, or stock or other beneficial ownership of, any Person.
Notwithstanding the foregoing, Borrower may acquire all or
substantially all of the assets or equity securities of any Person
(the "Target") (in each case, a "Permitted Acquisition") subject to
the satisfaction of each of the following conditions:
(1) Agent shall receive at least 10 Business Days' prior
written notice of such proposed Permitted Acquisition, which
notice shall include a reasonably detailed description of such
proposed Permitted Acquisition;
(2) such Permitted Acquisition shall only involve assets
located in the United States and comprising a business, or those
assets of a business, of a similar type engaged in by Obligors as
of the Closing Date, and which business would not subject Agent
or any Lender to regulatory or third party approvals in
connection with the exercise of its rights and remedies under
this Agreement or any other Loan Documents other than approvals
applicable to the exercise of such rights and remedies with
respect to Obligors prior to such Permitted Acquisition;
(3) such Permitted Acquisition shall be consensual and
shall have been approved by the Target's board of directors;
(4) no additional Indebtedness, Contingent Obligations or
other liabilities shall be incurred, assumed or otherwise be
reflected on a consolidated balance sheet of Obligor and Target
after giving effect to such Permitted Acquisition, except (A)
Loans made hereunder, (B) ordinary course trade payables, accrued
expenses and unsecured Indebtedness of the Target to the extent
no Default or Event of Default has occurred and is continuing or
would result after giving effect to such Permitted Acquisition
and (C) Indebtedness permitted under Section 7.1(o);
(5) [Intentionally Omitted];
(6) [Intentionally Omitted];
(7) the business and assets acquired in such Permitted
Acquisition shall be free and clear of all Liens (other than
Permitted Encumbrances);
(8) at or prior to the closing of any Permitted
Acquisition, Agent will be granted a first priority perfected
Lien (subject to Permitted Encumbrances) in all assets acquired
pursuant thereto or in the assets and
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equity securities of the Target, and Holdings and Obligor and the
Target shall have executed such documents and taken such actions
as may be required by Agent in connection therewith;
(9) at the time of such Permitted Acquisition (before and
after given effect to such Permitted Acquisition and all Loans
funded in connection therewith), Excess Availability shall exceed
$10,000,000;
(10) Within five (5) Business Days following delivery of
the notice referred to in clause (1) above, Borrower shall have
delivered to Agent, in form and substance reasonably satisfactory
to Agent:
(a) a pro forma consolidated balance sheet,
income statement and cash flow statement of Holdings and its
Subsidiaries (the "Acquisition Pro Forma"), based on recent
financial statements, which shall be complete and shall
fairly present in all material respects the assets,
liabilities, financial condition and results of operations
of Holdings and its Subsidiaries in accordance with GAAP
consistently applied, but taking into account such Permitted
Acquisition and the funding of all Loans in connection
therewith, and such Acquisition Pro Forma shall reflect that
average daily Excess Availability for the 30-day period
preceding the consummation of such Permitted Acquisition
would have exceeded $10,000,000 on a pro forma basis (after
giving effect to such Permitted Acquisition and all Loans
funded in connection therewith as if made on the first day
of such period) and the Acquisition Projections (as
hereinafter defined) shall reflect that such Excess
Availability of $10,000,000 shall continue for at least 30
days after the consummation of such Permitted Acquisition
and on a pro forma basis, no Event of Default has occurred
and is continuing or would result after giving effect to
such Permitted Acquisition and Borrower would have been in
compliance with the financial covenants set forth in the
Financial Covenants Rider recomputed for the twelve month
period ending on the last day of the most recent fiscal
quarter for which Agent has received the monthly financial
statements required to be delivered pursuant to PARAGRAPH A
of the Reporting Rider (after giving effect to such
Permitted Acquisition and all Loans funded in connection
therewith as if made on the first day of such period);
(b) updated versions of the most recently
delivered Projections covering the 1 year period commencing
on the date of such Permitted Acquisition and otherwise
prepared in accordance with the Projections (the
"Acquisition Projections") and based upon historical
financial data of a recent date reasonably satisfactory to
Agent, taking into account such Permitted Acquisition; and
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(c) a certificate of the chief financial
officer of Borrower on behalf of Borrower to the effect
that: (w) the Parties will be Solvent upon the consummation
of the Permitted Acquisition; (x) the Acquisition Pro Forma
fairly presents the financial condition of Holdings and its
Subsidiaries (on a consolidated basis) as of the date
thereof after giving effect to the Permitted Acquisition;
(y) the Acquisition Projections are reasonable estimates of
the future financial performance of Holdings and its
Subsidiaries subsequent to the date thereof based upon the
historical performance of Holdings and its Subsidiaries and
the Target and show that Holdings and its Subsidiaries shall
continue to be in compliance with the financial covenants
set forth in the Financial Covenants Rider for the 1 year
period thereafter; and (z) Holdings and its Subsidiaries
have completed their due diligence investigation with
respect to the Target and such Permitted Acquisition, which
investigation was conducted in a manner similar to that
which would have been conducted by a prudent purchaser of a
comparable business and the results of which investigation
were delivered to Agent and Lenders;
(11) on or prior to the date of such Permitted
Acquisition, Agent shall have received, in form and substance
reasonably satisfactory to Agent, environmental assessments
satisfactory to Agent, copies of the acquisition agreement and
related agreements and instruments, and all opinions,
certificates, lien search results and other documents reasonably
requested by Agent, including any landlord waivers requested by
Agent; and
(12) at the time of such Permitted Acquisition and after
giving effect thereto, no Default or Event of Default has
occurred and is continuing.
Notwithstanding the foregoing, the Accounts and Inventory of
Target shall not be included in Eligible Accounts and Eligible
Inventory unless Agent shall have received the reports, listings and
agings set forth in CLAUSE (G) of the Reporting Rider with respect to
Target.
3.10 CLAUSE (d) of SUBSECTION 7.8 of the Loan Agreement is hereby amended
to read as follows:
(d) for payment of reasonable fees to independent directors.
3.11 SUBSECTION 7.11 of the Loan Agreement is hereby amended to read as
follows:
7.11 SUBSIDIARIES. Other than the Subsidiaries set forth on
SCHEDULE 7.11, establish, create or acquire any new Subsidiaries other
than in connection with a Permitted Acquisition.
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3.12 The first sentence of SUBSECTION 7.13 of the Credit Agreement is
hereby amended to read as follows:
Issue any press releases or other public disclosure (including
any prospectus, proxy statement or other materials filed with any
governmental authority relating to a public offering of the capital
stock or other equity securities of any Loan Party) using the name of
GE Capital or its affiliates or specifically referring to this
Agreement, the other Loan Documents or the Related Transactions
Documents without at least two (2) Business Days' prior notice to GE
Capital and without the prior written consent of GE Capital except
that, to the extent (and only to the extent) such disclosure is
required under applicable law or under the applicable rules of any
national securities exchange, national securities association,
national market system or other-self-regulatory organization, the Loan
Parties may make such disclosure without the consent of GE Capital
and, except in the case of any material disclosure, without giving
prior notice to GE Capital, provided that the Loan Parties must in all
events use reasonable efforts to consult with GE Capital before making
such disclosure.
3.13 SUBSECTION 8.1(F) of the Loan Agreement is hereby amended to read as
follows:
(F) CHANGE IN CONTROL. (1) Any person or group of persons
(within the meaning of the Securities Exchange Act of 1934) other than
the underwriters in a public offering or CHS shall acquire beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act
of 1934) of 25% or more of the issued and outstanding shares of
capital stock of Holdings having the right to vote for the election of
directors of Holdings under ordinary circumstances; or (2) Holdings
ceases to beneficially and of record own and control all of the issued
and outstanding capital stock or other equity securities of Borrower
free and clear of all Liens other than Liens in favor of Agent and
Canadian Facility Agent; or (3) Borrower ceases to beneficially own
and control, directly or indirectly, free and clear of all Liens other
than Liens in favor of Agent and Canadian Facility Agent, 100% of the
issued and outstanding shares of each class of capital stock or other
equity securities entitled (without regard to the occurrence of any
contingency) to vote for the election of a majority of the members of
the boards of directors of any Loan Party other than Borrower and
Holdings; or
3.14 SUBSECTION 9.4(A) of the Loan Agreement is hereby amended by inserting
the following sentence at the end of such subsection:
Notwithstanding the foregoing, the amendments contemplated by
SUBSECTION 2.16 and the effects thereof shall not require the consent
of any Lender, except as provided in SUBSECTION 2.16.
3.15 SECTION 11 of the Loan Agreement is hereby amended by inserting the
following new definitions in their proper alphabetical order:
13
"ACTIVATION NOTICE" means written notice from Agent or Canadian
Facility Agent that gives notice that Agent or Canadian Facility Agent
is exercising control of a Blocked Account and that instructs the
Collecting Bank to transfer funds in such Blocked Account to Agent or
Canadian Facility Agent.
"ACTIVATION PERIOD" means, with respect to a Blocked Account at a
Collecting Bank, the period which commences as soon as possible but in
any event within a reasonable period of time (not to exceed two
Business Days) after such Collecting Bank's receipt of an Activation
Notice with respect to such Blocked Account.
"FIRST AMENDMENT" means the Consent and First Amendment to
Loan
and Security Agreement dated as of the First Amendment Date by and
among Obligors, Agent and Lenders.
"FIRST AMENDMENT DATE" means August 6, 2004.
"PRO FORMA EBITDA" means, with respect to any Target, EBITDA of
such Target for the trailing twelve-month period preceding the date of
the Permitted Acquisition of such Target, as determined based upon the
Target's financial statements for its most recently completed fiscal
year and its most recent interim financial period completed within
sixty (60) days prior to the date of consummation of such Permitted
Acquisition, taking into account verifiable cost add backs approved by
Agent.
"TOTAL INDEBTEDNESS" means the aggregate outstanding principal
balance of all Indebtedness of Holdings and its Subsidiaries on a
consolidated basis.
3.16 The definitions of "EBITDA" and "Equity Documents" set forth in
SUBSECTION 11.1 of the Loan Agreement are hereby amended to read as follows:
"EBITDA" means, for any period, without duplication, the total of
the following for Holdings and its Subsidiaries on a consolidated
basis, each calculated for such period: (1) net income determined in
accordance with GAAP; PLUS, to the extent included in the calculation
of net income, (2) the sum of (a) income, capital and franchise taxes
paid or accrued; (b) interest expenses, net of interest income, paid
or accrued; (c) amortization and depreciation, (d) other non-cash
charges (excluding accruals for cash expenses made in the ordinary
course of business) and (e) out-of-pocket expenses incurred in
connection with the consummation of the IPO (as such term is defined
in the First Amendment), including without limitation the amendment
fee required to be paid pursuant to Section 4.6 of the First
Amendment; LESS, to the extent included in the calculation of net
income, (3) the sum of (a) the income of any Person (other than
Borrower and wholly-owned Subsidiaries of Borrower) in which Holdings
or a wholly-owned Subsidiary of Holdings has an ownership interest
except to the extent such income is received by Borrower or a
wholly-owned Subsidiary of Borrower in a cash distribution during such
period; (b) gains or losses from sales or other
14
dispositions of assets (other than Inventory in the normal course of
business); and (c) extraordinary or non-recurring gains, but not net of
extraordinary or nonrecurring "cash" losses.
"Equity Documents" means (i) the Chief Executive Securities
Agreement dated as of August 21, 1997 by and among Holdings, CHS and
ββββββ βββββ� and (ii) the Executive Securities Agreements among
Holdings, CHS and certain managers of the Loan Parties.
3.17 EXHIBIT D (COMPLIANCE CERTIFICATE) to the Loan Agreement is hereby
replaced with EXHIBIT D attached hereto.
3.18 PARAGRAPH (B) of the Reporting Rider to the Loan Agreement is hereby
amended to read as follows:
(B) SEC FILINGS AND PRESS RELEASES. Promptly upon their
becoming available, Borrower will deliver to Agent copies of (1) all
financial statements, reports, notices and proxy statements sent or
made available by Holdings to its stockholders, (2) all regular and
periodic reports and all registration statements and prospectuses, if
any, filed by Holdings with any securities exchange or with the
Securities and Exchange Commission or any private regulatory
authority, and (3) all press releases and other statements made
available by Holdings to the public concerning developments in the
business of any Loan Party.
3.19 PARAGRAPH H of the Reporting Rider is hereby amended to read as
follows:
(H) [Intentionally Omitted.]
3.20 The Financial Covenants Rider to the Loan Agreement is hereby replaced
with the Financial Covenant to Rider attached hereto.
4. CONDITIONS. The effectiveness of this Agreement is subject to
the following conditions precedent (unless specifically waived in writing by
Agent and Lenders):
4.1 Obligors, Agent and Lenders shall have executed and delivered this
Agreement.
4.2 Holdings shall have completed the IPO and the Net Issuance Proceeds
thereof shall have been applied in accordance with SECTION 2 of this Agreement
and, in each case, Agent shall have been provided with satisfactory evidence
thereof.
4.3 Agent shall have received a written opinion of ββββββ ββββββ LLP,
counsel for Obligors, in form and substance reasonably satisfactory to Agent and
its counsel.
4.4 Borrower shall have delivered such other documents as Agent may
have reasonably requested.
15
4.5 All proceedings taken in connection with the transactions contemplated
by this Agreement and all documents, instruments and other legal matters
incident thereto shall be satisfactory to Agent and Lenders and their respective
legal counsel;
4.6 Borrower shall have paid to Agent, for the ratable benefit of Lenders,
an amendment fee in the amount of $237,750;
4.7 No Default or Event of Default shall have occurred and be continuing;
and
4.8 Wachovia Bank, National Association shall have assigned all of its
Loans and Commitments to one or more other Lenders.
4.9 Beacon Canada, Canadian Facility Agent and Canadian Facility Lenders
shall have entered into an amendment to the Canadian Facility Credit Agreement
in form and substance satisfactory to Agent, together with a reaffirmation by
Beacon Canada of its obligations under the Loan Documents to which it is a
party.
This Agreement shall be terminated and of no further force or effect
(i) if the IPO shall not have closed on or prior to October 15, 2004 or (ii) at
the election of Requisite Lenders, if an Event of Default shall have occurred
and be continuing prior to the closing of the IPO.
5. REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders to
enter into this Agreement, Obligors represent and warrant to Agent and Lenders:
(a) that the Loan Parties have all requisite organizational power
and authority to enter into, and carry out the transactions contemplated by,
this Agreement and all other agreement and documents executed in connection
therewith to which such Loan Parties are parties.
(b) that the execution, delivery and performance of this Agreement
and all other agreements and documents executed in connection therewith have
been duly authorized by all requisite action on the part of the Loan Parties
which are parties there to and that this Agreement has been duly executed and
delivered by Borrower;
(c) that each of the representations and warranties set forth in
SECTION 4 of the Loan Agreement (other than those which, by their terms,
specifically are made as of certain date prior to the date hereof) are true and
correct in all material respects as of the date hereof; and
(d) that, after giving effect to this Agreement, no Default or Event
of Default has occurred and is continuing.
6. SEVERABILITY. Any provision of this Agreement held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
16
7. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original, but all of which
taken together shall be one and the same instrument.
8. RATIFICATION. Except as expressly set forth herein, the terms
and provisions set forth in this Agreement shall not be deemed to be a
modification or waiver of any term or condition of the Loan Agreement. The terms
and provisions of the Loan Agreement, as amended hereby, and the other Loan
Documents are ratified and confirmed and shall continue in full force and effect
and all Collateral encumbered by any of the Loan Documents will continue to
secure, to the fullest extent possible, the payment and performance of all
Obligations under or in respect of the Loan Agreement or any of the other Loan
Documents.
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
BEACON SALES ACQUISITION, INC.
By: /s/ ββββββ β� βββββββ�
------------------------
Title: Vice President
---------------------
QUALITY ROOFING SUPPLY
COMPANY, INC.
By: /s/ ββββββ β� βββββββ�
------------------------
Title: Vice President
---------------------
BEACON CANADA, INC.
By: /s/ ββββββ β� βββββββ�
------------------------
Title: Vice President
---------------------
BEST DISTRIBUTING CO.
By: /s/ ββββββ β� βββββββ�
------------------------
Title: Vice President
---------------------
THE ROOF CENTER, INC.
By: /s/ ββββββ β� βββββββ�
------------------------
Title: Vice President
---------------------
WEST END LUMBER COMPANY, INC.
By: /s/ ββββββ β� βββββββ�
------------------------
Title: Vice President
---------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent, an L/C Issuer and a
Lender
By: /s/ ββββ ββββββ
------------------------
Its Authorized
Signatory: ββββ ββββββ
-----------------
WASHINGTON MUTUAL BANK, as a Lender
By: /s/ βββββββ� ββββββ
------------------------
Title: Vice President
---------------------
FLEET CAPITAL CORPORATION,
as Syndication Agent, and as a Lender
By: /s/ βββββ� ββββββ
------------------------
Title: Vice President
---------------------
THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender
By: /s/ βββββ� βββββ�
------------------------
Title: Vice President
---------------------
LASALLE BANK NATIONAL
ASSOCIATION, a national banking
association, as a Lender
By: /s/ ββββββ β�. βββββ�
------------------------
Title: Vice President
---------------------
CONSENT AND REAFFIRMATION (HOLDINGS)
The undersigned hereby (i) acknowledges receipt of a copy of the
foregoing Consent and First Amendment to
Loan and Security Agreement; (ii)
consents to Obligors' execution and delivery thereof; and (iii) affirms that
nothing contained therein shall modify in any respect whatsoever its guaranty of
the obligations of Borrower to Agent and Lenders pursuant to the terms of that
certain Guaranty dated as of March 12, 2004 (the "Holdings Guaranty") and
reaffirms that the Holdings Guaranty is and shall continue to remain in full
force and effect and that each Loan Document to which it is a party or otherwise
bound and all Collateral encumbered thereby will continue to guaranty or secure,
as the case may be, to the fullest extent possible, the payment and performance
of all obligations under or in respect of the Holdings Guaranty and such other
Loan Documents. Although the undersigned has been informed of the matters set
forth herein and has acknowledged and consented to same, the undersigned
understands that Agent and Lenders have no obligation to inform it of such
matters in the future or to seek its acknowledgment or consent to future
agreements or waivers, and nothing herein shall create such a duty.
IN WITNESS WHEREOF, the undersigned has executed this Consent and
Reaffirmation on and as of the date of such Agreement.
BEACON ROOFING SUPPLY, INC.
By: /s/ ββββββ β�. βββββββ�
---------------------------
Name: ββββββ β�. βββββββ�
-------------------------
Title: Vice President
------------------------
FINANCIAL COVENANTS RIDER
This Financial Covenants Rider is attached and made a part of that
certain Second Amended and Restated
Loan and Security Agreement, dated as of
March 12, 2004 and entered into among Beacon Sales Acquisition, Inc., the
Domestic Subsidiary Guarantors, Agent and Lenders.
A. EXCESS AVAILABILITY. Borrower shall at all times maintain Excess
Availability of at least $5,000,000.
B. CAPITAL EXPENDITURE LIMITS. The aggregate amount of all Capital
Expenditures, Capital Leases with respect to fixed assets of Borrower and its
Subsidiaries (which shall be considered to be expended in full on the date such
Capital Lease is entered into) and other contracts with respect to fixed assets
initially capitalized on Borrower's or any Subsidiary's balance sheet prepared
in accordance with GAAP (which shall be considered to be expended in full on the
date such contract is entered into) (excluding, in each case, expenditures for
trade-ins and replacement of assets to the extent funded with casualty insurance
proceeds and excluding the purchase price allocated to fixed assets acquired in
connection with a Permitted Acquisition) will not exceed $8,500,000 in any
Fiscal Year. Fifty percent (50%) of the amount set forth above not made in any
Fiscal Year may be carried over for one year only to the next Fiscal Year;
PROVIDED, HOWEVER, any carried-over amount will be deemed used only after all
otherwise permitted amounts for that Fiscal Year have been used.
C. FIXED CHARGE COVERAGE. Borrower shall not permit Fixed Charge
Coverage for any twelve (12) month period ending as of any date set forth below
to be less than the ratio set forth below for such date:
DATE RATIO
---- -----
September 30, 2004 and the last
day of each fiscal quarter thereafter 1.35
D. SENIOR INDEBTEDNESS TO EBITDA. Borrower shall not permit the
ratio of Senior Indebtedness calculated as of any date set forth below to EBITDA
for the twelve (12) month period ending on such date to be greater than the
ratio set forth below for such date:
DATE RATIO
---- -----
September 30, 2004 and the last
day of each fiscal quarter thereafter 3.00
The aggregate balance of the Revolving Loan included in Senior Indebtedness as
of any date of determination shall be equal to the average balance of the
Revolving Loan for such date and the last day of the two immediately preceding
months.
With respect to each Target acquired by Borrower during any such twelve month
period, EBITDA shall be adjusted by an amount equal to the Pro Forma EBITDA of
such Target for the portion of such twelve month period which precedes the
acquisition of such Target.
E. TOTAL INDEBTEDNESS TO EBITDA. Borrower shall not permit the ratio
of Total Indebtedness calculated as of any date set forth below to EBITDA for
the twelve (12) month period ending on such date to be greater than the ratio
set forth below for such date:
DATE RATIO
---- ------
September 30, 2004 and the last
day of each fiscal quarter thereafter 4.25
The aggregate balance of the Revolving Loan included in Total Indebtedness as of
any date of determination shall be equal to the average balance of the Revolving
Loan for such date and the last day of the two immediately preceding months.
With respect to each Target acquired by Borrower during any such twelve month
period, EBITDA shall be adjusted by an amount equal to the Pro Forma EBITDA of
such Target for the portion of such twelve month period which precedes the
acquisition of such Target.
F. LEASE LIMITS. Borrower will not and will not permit any of
its Subsidiaries directly or indirectly to become or remain liable in any way,
whether directly or by assignment or as a guarantor or other surety, for the
obligations of the lessee under any operating lease, synthetic lease or similar
off-balance sheet financing, if the aggregate amount of all rents (or
substantially equivalent payments) paid by Borrower and its Subsidiaries under
all such leases would exceed $11,000,000 in any fiscal year of Borrower.
CONSENT AND REAFFIRMATION (BEACON CANADA)
Beacon Canada hereby (i) acknowledges receipt of a copy of the
foregoing Consent and First Amendment to
Loan and Security Agreement (the
"CONSENT AND AMENDMENT"); (ii) consents to the terms and conditions of the
Consent and Amendment and the execution and delivery of the Consent and
Amendment by Borrower and each other Loan Party; and (iii) confirms and ratifies
the terms of the Amended and Restated Guarantee dated as of June 8, 2001 given
by Beacon Canada in favour of Agent, as acknowledged, confirmed and amended
pursuant to the Acknowledgement and Confirmation dated March 12, ββββ βββββββ�
ββββββ ββββββ, ββββββ ββββββ, Inc. and Agent (as further amended, restated,
supplemented or otherwise modified from time to time, the "BEACON CANADA
GUARANTEE") and acknowledges and agrees that the Beacon Canada Guarantee (A) is
not released or discharged by the execution and delivery of the Consent and
Amendment and (B) shall remain in full force and effect without abrogation,
impairment or limitation following the execution and delivery of the Consent and
Amendment. Beacon Canada further acknowledges and confirms that each Loan
Document to which it is a party, including, without limitation:
(a) the Amended and Restated Security Agreement dated as of June 8, 2001,
between Beacon Canada and Agent;
(b) the Debenture dated as of August 30, 2000, issued by Beacon Canada to
Agent;
(c) the Pledge of Debenture dated August 30, 2000, granted by Beacon
Canada in favour of Agent; and
(d) the Deed of Hypothec dated August 30, 2000, granted by Beacon Canada
in favour of Agent, as agent and fonde de pouvoir for the
Debentureholders (as defined herein)
(in each case as acknowledged, confirmed and amended by the Acknowledgement and
Confirmation dated March 12, ββββ βββββββ� ββββββ ββββββ, ββββββ ββββββ, Inc. and
Agent and as further amended, restated, supplemented or otherwise modified from
time to time) shall continue to guarantee or secure, as the case may be, to the
fullest extent possible, the payment and performance of all obligations under or
in respect of the Beacon Canada Guarantee and such other Loan Documents and all
Collateral encumbered thereby will continue to guarantee or secure, as the case
may be, to the fullest extent possible, the payment and performance of all
obligations under or in respect of the Beacon Canada Guarantee.
Although the undersigned has been informed of the matters set forth herein
and has acknowledged and consent to same, the undersigned understands that Agent
and Lenders have no obligation to inform it of such matters in the future or it
seek its acknowledgment or consent to future agreements or waivers, and nothing
herein shall create such a duty.
IN WITNESS WHEREOF, the undersigned has executed this Consent and
Reaffirmation (Beacon Canada) as of this 6th day of August, 2004.
BEACON ROOFING SUPPLY CANADA
COMPANY
By: /s/ βββββ� β�. ββββββ
-----------------------------
Name: βββββ� β�. ββββββ
Title: Vice President