EXHIBIT 10.38
SECOND AMENDMENT TO CREDIT AGREEMENT
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THIS AMENDMENT is entered into effective as of March 31, 1996, between
MAGNETEK, INC., a Delaware corporation ("BORROWER"), certain Lenders,
NATIONSBANK OF TEXAS, N.A. ("AGENT"), as Agent for Lenders, and CIBC INC., THE
FIRST NATIONAL BANK OF CHICAGO, and LTCB TRUST COMPANY as Co-Agents for Lenders.
Borrower, Agent, Co-Agents, and certain Lenders are party to the Credit
Agreement (as renewed, extended, and amended, the "CREDIT AGREEMENT") dated as
of March 31, 1995, providing for a $225,000,000 revolving credit facility and a
$75,000,000 term loan, which term loan has been repaid. Borrower, Agent, and
Lenders have agreed, upon the following terms and conditions, to amend the
Credit Agreement to provide for, among other things, (a) the reduction of the
Commitments for the Revolving Facility to $200,000,000, (b) the removal of
provisions providing for the release of collateral, (c) a reduction in the
amount of Permitted-Capital Expenditures, and (d) changes to certain financial
covenants. Accordingly, for adequate and sufficient consideration, Borrower,
Agent, and Determining Lenders agree as follows:
1. TERMS AND REFERENCES. Unless otherwise stated in this amendment (a)
terms defined in the Credit Agreement have the same meanings when used in this
amendment and (b) references to "SECTIONS," "SCHEDULES," and "EXHIBITS" are to
the Credit Agreement's sections, schedules, and exhibits.
2. AMENDMENT TO CREDIT AGREEMENT. The Credit Agreement is amended as
follows effective as of EITHER (a) May 15, 1996, in respect of (i) the amendment
to SCHEDULE 2, (ii) the reduction of the Commitments, and (iii) PARAGRAPH 2(c)
and PARAGRAPH 2(d) (to the extent relating to definitions used in PARAGRAPH
2(c)) below, OR (b) for all other purposes, the date of the amendment.
(a) The recital paragraph of the Credit Agreement is entirely amended
as follows:
BORROWER ORIGINALLY REQUESTED THAT LENDERS EXTEND CREDIT TO
BORROWER NOT TO EXCEED A TOTAL OUTSTANDING PRINCIPAL AMOUNT OF
$300,000,000 (AS THAT AMOUNT MAY BE REDUCED BY CERTAIN BORROWING BASE
RESTRICTIONS) TO BE USED BY BORROWER AS PROVIDED IN SECTION 7.1 AND
ALLOCATED AS (A) A TERM LOAN OF $75,000,000 (THE "TERM LOAN") TO BE
FUNDED BY LENDERS ON THE CLOSING DATE, WHICH HAS BEEN REPAID, AND (B)
A REVOLVING-CREDIT FACILITY OF $225,000,000, WHICH HAS BEEN REDUCED TO
$200,000,000 (THE "REVOLVING FACILITY"), TO BE FUNDED BY LENDERS FROM
TIME TO TIME IN A COMBINATION OF ADVANCES AND LETTERS OF CREDIT.
LENDERS ARE WILLING TO EXTEND THE REQUESTED CREDIT ON THE TERMS AND
CONDITIONS OF THIS AGREEMENT.
(b) SECTION 1.1 is amended by deleting the terms "BORROWING-BASE
CONDITION" and "EBIT."
(c) The table in the definition of "APPLICABLE MARGIN" in SECTION 1.1
is entirely amended as follows:
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RATIO OF FUNDED DEBT TO EBITDA APPLICABLE APPLICABLE
MARGIN FOR MARGIN FOR
BASE-RATE LIBOR-RATE
BORROWINGS BORROWINGS
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GREATER THAN 4.25 TO 1.00 1.00% 2.25%
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LESS THAN OR EQUAL TO 4.25 TO 1.00,
BUT GREATER THAN 4.00 TO 1.00 0.75% 2.00%
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LESS THAN OR EQUAL TO 4.00 TO 1.00,
BUT GREATER THAN 3.50 TO 1.00 0.50% 1.75%
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LESS THAN OR EQUAL TO 3.50 TO 1.00,
BUT GREATER THAN 3.00 TO 1.00 0.25% 1.50%
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LESS THAN OR EQUAL TO 3.00 TO 1.00,
BUT GREATER THAN 2.50 TO 1.00 0.00% 1.25%
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LESS THAN OR EQUAL TO 2.50 TO 1.00,
BUT GREATER THAN 2.00 TO 1.00 0.00% 1.00%
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LESS THAN OR EQUAL TO 2.00 TO 1.00 0.00% 0.75%
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(d) SECTION 1.1 IS AMENDED BY ADDING OR ENTIRELY AMENDING THE
FOLLOWING TERMS:
BORROWING-BASE DEFICIENCY MEANS ANY AMOUNT BY WHICH THE
LIMITATION IN SECTION 2.2(c) IS EXCEEDED, WHETHER BECAUSE THE
COMMITMENTS FOR THE REVOLVING FACILITY HAVE BEEN FULLY OR PARTIALLY
TERMINATED OR CANCELLED OR FOR ANY OTHER REASON.
CAPITALIZATION MEANS -- FOR ANY PERSON, AT ANY TIME, AND WITHOUT
DUPLICATION-- THE SUM OF (a) ITS STOCKHOLDERS' EQUITY PLUS (b) ITS
FUNDED DEBT. HOWEVER, SOLELY FOR PURPOSES OF SECTION 10.3, THE EFFECT
OF EXCLUDED CHARGES SHALL NOT BE INCLUDED IN THE CALCULATION OF
CAPITALIZATION UNLESS THE TOTAL OF EXCLUDED CHARGES EXCEEDS
$33,000,000, IN WHICH CASE THAT EXCESS AMOUNT SHALL BE INCLUDED IN
THAT CALCULATION.
EBITDA MEANS -- FOR ANY PERSON, FOR ANY PERIOD, AND WITHOUT
DUPLICATION -- THE SUM OF (a) NET INCOME (WITHOUT REGARD TO
EXTRAORDINARY ITEMS), PLUS (b) TO THE EXTENT ACTUALLY DEDUCTED IN
CALCULATING NET INCOME, INTEREST
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EXPENSE, INCOME TAXES, AND DEPRECIATION AND AMORTIZATION FROM
CONTINUING OPERATIONS, AND (c) MINUS OR PLUS, RESPECTIVELY, ANY NET
GAINS OR LOSSES FROM DISCONTINUED OPERATIONS THAT ARE NOT
EXTRAORDINARY ITEMS. HOWEVER, SOLELY FOR PURPOSES OF SECTIONS 10.4
AND 10.5, EXCLUDED CHARGES SHALL NOT BE INCLUDED IN THE CALCULATION OF
EBITDA UNLESS THE TOTAL OF EXCLUDED CHARGES EXCEEDS $42,000,000, IN
WHICH CASE THAT EXCESS AMOUNT SHALL BE INCLUDED IN THAT CALCULATION.
EXCLUDED CHARGES MEANS, WITH RESPECT TO THE DETERMINATION OF
CAPITALIZATION, EBITDA, OR TANGIBLE-NET WORTH, AS THE CASE MAY BE, THE
PRE-TAX CHARGES TAKEN IN THE FISCAL QUARTERS OF BORROWER ENDING ON
JUNE 30, 1996, OR SEPTEMBER 30, 1996, AND INCURRED IN CONNECTION WITH
THE DIVESTITURE OF MAGNETEK MAY AND CHRISTE GMBH, A GERMAN
CORPORATION, THE REMAINING DISCONTINUED OPERATIONS, FAS 121 CHARGES,
AND THE WRITE-DOWN OF THE DEFERRED TAX ASSET.
LC SUBFACILITY MEANS A SUBFACILITY OF THE REVOLVING FACILITY FOR
THE ISSUANCE OF LCS, AS DESCRIBED IN SECTION 2.4, UNDER WHICH THE LC
EXPOSURE MAY NEVER (a) EXCEED $30,000,000 AND (b) TOGETHER WITH
PRINCIPAL DEBT UNDER THE REVOLVING FACILITY MAY NEVER EXCEED THE
LESSER OF EITHER (i) THE TOTAL COMMITMENTS FOR THE REVOLVING FACILITY
OR (ii) THE BORROWING BASE .
PERMITTED-CAPITAL EXPENDITURES MEANS -- FOR ANY FISCAL YEAR OF
BORROWER BEGINNING AFTER JUNE 30, 1994 -- A TOTAL AMOUNT THAT DOES NOT
EXCEED THE SUM OF (a) $54,000,000 FOR ALL RESTRICTED COMPANIES , PLUS
(b) 50% OF AMOUNTS FOR THE IMMEDIATELY PRECEDING FISCAL YEAR UNDER
CLAUSE (a) ABOVE THAT WERE NOT UTILIZED FOR "PERMITTED-CAPITAL
EXPENDITURES."
TANGIBLE-NET WORTH MEANS -- AT ANY TIME AND FOR ANY PERSON -- THE
SUM OF (i)ITS STOCKHOLDERS' EQUITY, PLUS (ii) AMOUNTS EXCLUDED FROM
STOCKHOLDERS' EQUITY UNDER GAAP RELATING TO THE ESTABLISHMENT OF AN
EMPLOYEE STOCK OWNERSHIP PLAN, MINUS (iii) THE TOTAL (WITHOUT
DUPLICATION OF DEDUCTIONS ALREADY MADE IN ARRIVING AT STOCKHOLDERS'
EQUITY) OF THE BOOK VALUE OF ALL ASSETS ACQUIRED AFTER THE CLOSING
DATE THAT WOULD BE TREATED AS INTANGIBLE ASSETS UNDER GAAP, INCLUDING,
WITHOUT LIMITATION, GOODWILL, TRADEMARKS, TRADE NAMES, COPYRIGHTS,
PATENTS, AND UNAMORTIZED DEBT DISCOUNT AND EXPENSE. HOWEVER, SOLELY
FOR PURPOSES OF SECTION 10.1, THE EFFECT OF THE EXCLUDED CHARGES SHALL
NOT BE INCLUDED IN THE CALCULATION OF TANGIBLE-NET WORTH UNLESS THE
TOTAL OF EXCLUDED CHARGES EXCEEDS $33,000,000, IN WHICH CASE THAT
EXCESS AMOUNT SHALL BE INCLUDED IN THAT CALCULATION.
(e) CLAUSE (d) IN THE DEFINITION OF "PERMITTED ACQUISITION" IN
SECTION 1.1 IS ENTIRELY AMENDED AS FOLLOWS:
(d) THE TOTAL OF ALL INVESTMENTS AND PURCHASE PRICE INVOLVED IN
ALL OF THOSE FORMATIONS AND ACQUISITIONS -- INCLUDING, WITHOUT
LIMITATION OR DUPLICATION, ANY FUNDED DEBT TO BE GUARANTEED, ASSUMED,
OR PAID BY ANY RESTRICTED COMPANY
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OTHER THAN DEBT OWED BY THE RESTRICTED COMPANY BEING FORMED FOR WHICH
NO OTHER RESTRICTED COMPANY HAS ANY OBLIGATION WHATSOEVER BUT
EXCLUDING ANY PORTION OF ANY PURCHASE PRICE PAID THROUGH the issuance
of Borrower's equity that is not mandatorily redeemable -- during any
fiscal year of Borrower does not exceed the SUM of (i) $12,500,000, or
if the ratio calculated under SECTION 10.4 as of the end of the
immediately preceding fiscal quarter is equal to or less than 4.25 to
1.00, then $25,000,000, PLUS (ii) the net cash proceeds received
during that fiscal year for the issuance of equity or Subordinated
Debt, PLUS (iii) the SUM of (A) 25% of the cumulative Net Income of
the Companies after the date of this agreement MINUS (B) any amount
under CLAUSE (A) preceding utilized during any prior fiscal year for
purposes of the calculation under this CLAUSE (d);
(f) SECTION 2.2(c) IS ENTIRELY AMENDED AS FOLLOWS:
(c) THE COMMITMENT USAGE MAY NEVER EXCEED THE LESSER OF EITHER
THE TOTAL COMMITMENTS FOR THE REVOLVING FACILITY OR THE BORROWING
BASE; AND
(g) SECTION 5.5 IS AMENDED BY DELETING SECTIONS 5.5(c) AND (d) AND BY
ENTIRELY AMENDING SECTION 5.5(b) AS FOLLOWS:
(b) IN CONNECTION WITH ANY SALE OR OTHER DISPOSITION OF STOCK
OR ASSETS PERMITTED BY SECTION 9.11 (OTHER THAN SECTION 9.11(d)),
AGENT SHALL, UPON BORROWER'S REQUEST AND AT BORROWER'S COST AND
EXPENSE, RELEASE THE LENDER LIENS ON THE ASSETS SOLD OR DISPOSED OF,
AND, IN THE CASE OF A SALE OF ALL OF THE STOCK OF any Subsidiary party
to a Guaranty, release such Subsidiary from that Guaranty.
(h) SECTION 8.1(c) IS ENTIRELY AMENDED AS FOLLOWS:
(c) BORROWING-BASE REPORT. PROMPTLY AFTER PREPARATION BUT NO
LATER THAN 30 DAYS AFTER THE LAST DAY OF EACH CALENDAR MONTH, A
BORROWING-BASE REPORT.
(i) SECTION 10.3 IS ENTIRELY AMENDED AS FOLLOWS:
10.3 FUNDED DEBT/CAPITALIZATION. THE RATIO -- DETERMINED AS OF
THE LAST DAY OF EACH FISCAL QUARTER OF BORROWER -- OF THE COMPANIES'
FUNDED DEBT TO CAPITALIZATION TO EXCEED:
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QUARTERS ENDING RATIO
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3/31/95 THROUGH 3/31/96 0.80 TO 1.00
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6/30/96 THROUGH 6/30/97 0.78 TO 1.00
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9/30/97 AND EACH FISCAL QUARTER AFTER THAT 0.75 TO 1.00
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(j) SECTION 10.4(a) IS ENTIRELY AMENDED AS FOLLOWS:
(a) THE RATIO OF THE COMPANIES' FUNDED DEBT AS OF THE LAST DAY
OF EACH FISCAL QUARTER (COMMENCING WITH THE QUARTER OF BORROWER ENDING
JUNE 30, 1995) TO EBITDA (CALCULATED ONLY IN RESPECT OF ASSETS OWNED
BY THE COMPANIES AT THE END OF THE APPLICABLE PERIOD) FOR THE 12-MONTH
PERIOD ENDING ON THAT LAST DAY TO EXCEED:
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QUARTERS ENDING RATIO
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6/30/95 THROUGH 3/31/96 4.60 TO 1.00
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6/30/96 5.10 TO 1.00
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9/30/96 4.70 TO 1.00
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12/31/96 4.50 TO 1.00
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3/31/97 4.40 TO 1.00
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6/30/97 THROUGH 9/30/97 4.30 TO 1.00
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12/31/97 AND EACH FISCAL QUARTER AFTER THAT 4.25 TO 1.00
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(k) SECTION 10.5(a) IS ENTIRELY AMENDED AS FOLLOWS, AND SECTION
10.5(b) IS ENTIRELY DELETED:
10.5 INTEREST COVERAGE.
(a) THE RATIO -- DETERMINED AS OF THE LAST DAY OF EACH
FISCAL QUARTER (COMMENCING JUNE 30, 1995) OF BORROWER FOR THE
FOUR QUARTERS THEN ENDED -- OF THE COMPANIES' EBITDA TO INTEREST
EXPENSE TO BE LESS THAN:
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QUARTER(S) ENDING RATIO
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6/30/95 THROUGH 3/31/96 2.25 TO 1.00
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6/30/96 2.00 TO 1.00
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9/30/96 2.25 TO 1.00
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12/31/96 THROUGH 3/31/97 2.40 TO 1.00
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6/30/97 THROUGH 12/31/97 2.50 TO 1.00
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3/31/98 AND EACH FISCAL QUARTER AFTER THAT 2.75 TO 1.00
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(l) SCHEDULE 2 AND EXHIBITS A-2 AND D-5 ARE ENTIRELY AMENDED IN THE
RESPECTIVE FORMS OF -- AND ALL REFERENCES IN THE CREDIT AGREEMENT TO
SCHEDULE 2 AND EXHIBITS A-2 AND D-5 ARE RESPECTIVELY CHANGED TO -- THE
ATTACHED AMENDED SCHEDULE 2 AND AMENDED EXHIBITS A-2 AND D-5.
3. CONDITIONS PRECEDENT. PARAGRAPH 2 above is not effective until Agent
receives (a) counterparts of this amendment executed by Borrower, each
Restricted Company, and Determining Lenders, (b) each document and other item
listed on the attached ANNEX A, each in form and substance satisfactory to Agent
and its special counsel, (c) a prepayment of the Principal Debt of the Revolving
Facility equal to the amount, if any, by which the outstanding Principal Debt
exceeds the lesser of EITHER (i) the Borrowing Base, OR (ii) $200,000,000, and
(d) an amendment fee for Lenders according to each Lender's Commitment
Percentage in an amount equal to 0.10% of the total Commitments described on the
attached AMENDED SCHEDULE 2. Each Lender hereby severally agrees to return to
Borrower the Revolving Note and Term Note issued to it prior to the date hereof
promptly upon receipt by it of the Revolving Note referred to on ANNEX A.
4. RATIFICATIONS. Borrower (a) ratifies and confirms all provisions of
the Loan Documents as amended by this amendment, (b) ratifies and confirms that
all guaranties, assurances, and Liens granted, conveyed, or assigned to Agent
under the Loan Documents are not released, reduced, or otherwise adversely
affected by this amendment and continue to guarantee, assure, and secure full
payment and performance of the present and future Obligation, and (c) agrees to
perform such acts and duly authorize, execute, acknowledge, deliver, file, and
record such additional documents and certificates as Agent may request in order
to create, perfect, preserve, and protect those guaranties, assurances, and
Liens.
5. REPRESENTATIONS. Borrower represents and warrants to Agent and
Lenders that as of the date of this amendment (a) all representations and
warranties in the Loan Documents are true and correct in all material respects
EXCEPT to the extent that (i) any of them speak to a different specific date or
(ii) the facts on which any of them were based have been changed by transactions
contemplated or permitted by the Credit Agreement, and (b) no Material Adverse
Event, Default or Potential Default exists.
6. MISCELLANEOUS. All references in the Loan Documents to the "CREDIT
AGREEMENT" refer to the Credit Agreement as amended by this amendment. This
amendment is a "LOAN DOCUMENT" referred to in the Credit Agreement, and the
provisions relating to Loan Documents in SECTIONS 1 and 14 of the Credit
Agreement are incorporated in this amendment by reference. Except as
specifically amended and modified in this amendment, the Credit Agreement is
unchanged and continues in full force and effect. This amendment may be
executed in any number of counterparts with the same effect as if all
signatories had signed the same document. All counterparts must be construed
together to constitute one and the same instrument. This amendment binds and
inures to each of the undersigned and their respective successors and permitted
assigns, subject to the terms of the Credit Agreement. THIS AMENDMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
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MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.
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EXECUTED as of the date first stated above.
MAGNETEK, INC., NATIONSBANK OF TEXAS, N.A.,
as BORROWER as AGENT and a LENDER
By By
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John P. Colling, Jr. Vice President Michele M. Shafroth, Senior
Vice President and Treasurer
THE FIRST NATIONAL BANK OF CIBC INC.,
CHICAGO, as a CO-AGENT and a LENDER
as a CO-AGENT and a LENDER
By By
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Name: Name:
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Title: Title:
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LTCB TRUST COMPANY, FIRST UNION NATIONAL BANK OF
as a CO-AGENT and a LENDER TENNESSEE, as a LENDER
By By
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Name: Name:
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Title: Title:
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CREDIT LYONNAIS - CAYMAN ISLAND FLEET BANK OF MASSACHUSETTS, N.A.,
BRANCH, as a LENDER as a LENDER
By By
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Name: Name:
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Title: Title:
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SOCIETE GENERALE, SOUTHWEST UNION BANK OF CALIFORNIA, N.A.
AGENCY, as a LENDER successor from the merger of Union
Bank and The Bank of California,
By N.A., as a LENDER
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Name: By
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Title: Name:
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Title:
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ARAB BANKING CORPORATION
as a LENDER
By
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Name:
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Title:
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Second Amendment Signature Page One of Two Pages
BANQUE FRANCAISE DU COMMERCE THE BOATMEN'S NATIONAL BANK OF ST.
EXTERIEUR, as a LENDER LOUIS, as a LENDER
By By
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Name: Name:
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Title: Title:
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By
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Name:
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Title:
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COMMERZBANK AG, ATLANTA AGENCY, CREDITANSTALT CORPORATE FINANCE
as a LENDER INC., as a LENDER
By By
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Name: Name:
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Title: Title:
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By By
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Name: Name:
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Title: Title:
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FIRST AMERICAN NATIONAL BANK,
as a LENDER
By
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Name:
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Title:
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To induce Agent to enter into this amendment, the undersigned consent and
agree (a) to its execution and delivery, (b) that this amendment in no way
releases, diminishes, impairs, reduces, or otherwise adversely affects any
Liens, guaranties, assurances, or other obligations or undertakings of any of
the undersigned under any Loan Documents, and (c) waive notice of acceptance of
this consent and agreement, which consent and agreement binds the undersigned
and their successors and permitted assigns and inures to Agent and their
respective successors and permitted assigns.
MAGNETEK CENTURY ELECTRIC, INC.,
MAGNETEK NATIONAL ELECTRIC COIL, INC.,
AND MAGNETEK OHIO TRANSFORMER, INC.,
as GUARANTORS
By
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John Colling, Jr., Vice President and
Treasurer of all of the foregoing companies
Second Amendment Signature Page Two of Two Pages