EXHIBIT 10.3
EXECUTION COPY
FORBEARANCE AND AMENDMENT AGREEMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF FEBRUARY 2, 2000
ENTERED INTO AS OF JANUARY 29, 2002
AMONG
AAVID THERMAL TECHNOLOGIES, INC.,
HEAT HOLDINGS CORP.,
HEAT HOLDINGS II CORP.,
THE SEVERAL LENDERS FROM TIME TO TIME PARTIES THERETO,
CIBC WORLD MARKETS CORP.,
AS LEAD ARRANGER AND BOOKRUNNER
CANADIAN IMPERIAL BANK OF COMMERCE,
AS ISSUER OF LETTERS OF CREDIT
FLEET NATIONAL BANK
(FORMERLY KNOWN AS BANKBOSTON N.A.),
AS DOCUMENTATION AGENT
AND
CANADIAN IMPERIAL BANK OF COMMERCE,
AS ADMINISTRATIVE AGENT
FORBEARANCE AND AMENDMENT AGREEMENT
This Forbearance and Amendment Agreement (this "FORBEARANCE
AGREEMENT") is entered into as of this 29th day of January, 2002, among AAVID
THERMAL TECHNOLOGIES, INC., a corporation organized under the laws of Delaware
(the "BORROWER"), HEAT HOLDINGS CORP., a Delaware corporation (the "PARENT"),
HEAT HOLDINGS II CORP., a Delaware corporation ("HEAT HOLDINGS II"), the
several banks and other financial institutions (the "LENDERS") from time to
time parties to the Credit Agreement (as defined below), CIBC WORLD MARKETS
CORP., as lead arranger and bookrunner (in such capacity, the "LEAD ARRANGER"),
CANADIAN IMPERIAL BANK OF COMMERCE, as issuer of certain letters of credit (the
"ISSUER"), FLEET NATIONAL BANK (formerly known as BankBoston, N.A.) as
documentation agent (the "DOCUMENTATION AGENT") and CANADIAN IMPERIAL BANK OF
COMMERCE, as administrative agent for the Lenders thereunder (in such capacity,
the "ADMINISTRATIVE AGENT"). Capitalized terms used and not otherwise defined
herein shall have the meanings given to them in the Credit Agreement as amended
hereby.
W I T N E S S E T T H:
WHEREAS, the Parent, Heat Holding II, the Borrower, the Lenders, the
Administrative Agent and the Documentation Agent are parties to the Amended and
Restated Credit Agreement, dated as of February 2, 2000 (such agreement, as
amended by Amendment No. 1 and consent, dated as of April 30, 2001, the "CREDIT
AGREEMENT");
WHEREAS, in connection with the Credit Agreement, the Parent, Heat
Holdings II, the Borrower and the Subsidiary Guarantors entered into various
Loan Documents, including the Guarantees and the Security Documents, pursuant
to which the Guarantors have guaranteed the Borrower's indebtedness and in
connection therewith the Administrative Agent, for the benefit of the Lenders,
has been granted Liens in the Collateral to secure the payments to and
performance of the Obligations for the benefit of the Administrative Agent and
the Lenders;
WHEREAS, certain Events of Default have occurred and are continuing by
virtue of the Borrower's noncompliance with Section 6.1(a), Section 6.1(b),
Section 6.1(c) and Section 6.1(d) of the Credit Agreement for the period ending
September 30, 2001 (the Events of Default specified herein being collectively
referred to as the "SPECIFIED DEFAULTS");
WHEREAS, as a result of such Specified Defaults and pursuant to the
Credit Agreement and the other Loan Documents, the Administrative Agent and the
Lenders are entitled immediately to enforce their rights and remedies against
the Borrower, the Subsidiaries, the Guarantors and with respect to the
Collateral, including, without limitation, the right to cease making further
advances or other financial accommodations and to accelerate and immediately
demand payment in full of the Obligations;
WHEREAS, the parent, Heat Holdings II and the Borrower have
requested that the Administrative Agent and the Lenders agree and, subject to
the terms and conditions of this Forbearance Agreement, the Administrative
Agent and the Lenders have agreed to Forbear during the Forbearance Period;
NOW, THEREFORE, in consideration of the premises contained herein and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Administrative Agent, the Lenders, the Parent, Heat Holdings
II, the Borrower and the Subsidiaries hereby agree as follows:
1. INCORPORATION OF RECITALS; ACKNOWLEDGEMENT OF RIGHTS AND
REMEDIES; ACKNOWLEDGMENT OF DEBT. The recitals set forth above by this
reference hereto are hereby incorporated into this Forbearance Agreement.
Without limiting the foregoing, the Parent, Heat Holdings II and the Borrower
hereby acknowledge and agree that:
(a) the Specified Defaults have occurred and are continuing under
the terms of the Credit Agreement and have not been waived or cured and that
reasonable notice of the Specified Defaults has been received by the Parent,
Heat Holdings II and the Borrower;
(b) the Administrative Agent and the Lenders have the right to
immediately enforce their rights and remedies under the Credit Agreement and the
other Loan Documents and under applicable law, including their rights: (i) to
refuse to make any further Loans and advances to the Borrower, (ii) to terminate
the Commitments and/or immediately to accelerate and enforce payment of all the
Obligations, (iii) to demand payment under the Guarantees and (iv) in
connection with items set forth in clause (ii) and (iii) above, immediately to
enforce the Liens on the Collateral provided by the Borrower and the Guarantors,
as applicable;
(c) the Administrative Agent's and the Lenders' execution of this
Forbearance Agreement shall not constitute a novation, refinancing, discharge,
extinguishment or refunding nor shall it be construed as a release, waiver or
modification of any of the terms, conditions, representations, warranties,
covenants, rights or remedies set forth in the Credit Agreement or any other
Loan Document, except as expressly provided herein;
(d) (i) the outstanding principal balance as of the date hereof of
the Revolving Credit Loan is $17,000,000;
(ii) the outstanding principal balance as of the date hereof of
the Term Loan is $38,191,709; and
(iii) the amounts set forth in this Section 1(d) and all
other amounts due to the Lenders under the Credit Agreement and the other Loan
Documents are unconditionally owing to the Lenders, without any setoff,
deduction, counterclaim, or defense of any kind or nature to the payment
thereof; and
(e) Each Guarantor, by executing this Forbearance Agreement, hereby
acknowledges, confirms and declares that the amounts owed by the Borrower to
the Lenders as set forth in Section 1(d) are owed by such Guarantor in
accordance with the terms of its Guarantee, without any setoff, deduction,
counterclaim or defense of any kind or nature to the payment thereof.
2. AGREEMENT TO FORBEAR. So long as no Forbearance Event of Default
shall have occurred and be continuing, during the Forbearance Period the
Administrative Agent and the Lenders agree to Forbear. During the Forbearance
Period, so long as no Forbearance Event
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of Default or Event of Default shall have occurred that is continuing (other
than a Specified Default), the Administrative Agent shall not issue a written
notice to the Trustee blocking the scheduled interest payment on the Permitted
High Yield Securities, which payment is due on February 1, 2002.
3. AVAILABLE REVOLVING CREDIT COMMITMENT; FURTHER ACKNOWLEDGEMENT. During
the Forbearance Period, the Borrower shall be entitled to draw any available
amount under the Revolving Credit Commitment, provided, that (i) no Forbearance
Event of Default (as defined in Section 8 below) shall have occurred and be
continuing, (ii) any such Loans shall be Alternate Base Rate Loans, (iii) each
Eurodollar Loan the Interest Period of which expires during the Forbearance
Period shall be converted into an Alternate Base Rate Loan and (iv) cash
interest on all such Loans shall be payable on the last day of each month, and
provided, further, that Section 4.2(a) shall be deemed to include exceptions for
the Specified Defaults. Each of the Parent, Heat Holdings II and the Borrower
hereby expressly acknowledges that the Lenders shall be under no obligation,
express or implied, to continue the financing of the Borrower after the
expiration of the Forbearance Period or the occurrence and continuance of a
Forbearance Event of Default.
4. AMENDMENTS TO CREDIT AGREEMENT. During the Forbearance Period, all
Loans by the Lenders to the Borrower shall be made under the terms and
conditions of the Credit Agreement, the applicable provisions of which are
modified as follows:
(a) Amendment to Section 1.1. Section 1.1 of the Credit Agreement is
hereby amended by:
(i) Adding the following definitions in alphabetical order:
"Field Auditor" shall have the meaning ascribed thereto in
Section 5.14(a).
"Forbear" shall mean the agreement of the Lenders under the
Forbearance Agreement to forbear from (i) accelerating or demanding
immediate payment of the Obligations, (ii) exercising remedies under
the Credit Agreement, the Hedging Agreements or other Loan Documents,
and (iii) terminating the Commitments or exercising the rights
afforded to the Administrative Agent and the Lenders under the Credit
Agreement or other Loan Documents to cease to make further Loans to
the Borrower (provided that the Borrower shall satisfy the conditions
to funding such Loans (as modified in the Forbearance Agreement)).
"Forbearance Agreement" shall mean the Forbearance and Amendment
Agreement dated as of January 29, 2002, among the Parent, Heat
Holdings II, the Borrower, the Lenders, the Lead Arranger, the Issuer,
the Administrative Agent and the Documentation Agent, as the same may
from time to time be amended, modified, supplemented and/or restated.
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"Forbearance Event of Default" shall have the meaning ascribed to such
term in Section 8 of the Forbearance Agreement.
"Forbearance Fee" shall have the meaning ascribed to such term in
Section 5 of the Forbearance Agreement.
"Forbearance Period" shall mean the period commencing on January 29,
2002 and expiring on May 31, 2002; or, such earlier date on which the
Lenders' agreement to Forbear shall terminate.
"Guarantors" shall mean the collective reference to the Parent, Heat
Holdings II and the Subsidiary Guarantors.
"Specified Defaults" shall have the meaning given to such term in the
recitals to the Forbearance Agreement.
"Subsidiary Guarantors" shall mean the collective reference to each
Subsidiary that has executed a Subsidiary Guarantee.
"Trustee" shall mean Bankers Trust Company as trustee under the
Indenture (or any successor trustee).
"Valuation Expert" shall have the meaning ascribed thereto in Section
5.14(b).
(ii) Deleting the definition of "Commitments" in its entirety and replacing
it with the following:
"Commitments" shall mean, prior to the Closing Date, the collective
reference to the Term Loan Commitments (and, after the Closing Date, the
Term Loans) and the Revolving Credit Commitments.
(iii) Deleting the definition of "EBITDA" in its entirety and replacing it
with the following:
"EBITDA" shall mean, for any period of determination, an amount equal
to the sum of (without duplication)(i) Net Income for such period, after
exclusion of (x) all items which should be classified as extraordinary, all
determined in accordance with U.S. GAAP, (y) all insurance proceeds (other
than proceeds of business interruption insurance) received during such
period to the extent, if any, included in Net Income and (z) tax gains and
losses upon the disposition of capital assets, plus (ii) all amounts
deducted in computing such Net Income in respect of (1) Interest Expense
(after giving effect to all Hedging Agreements and payments and receipts
thereunder), (2) non-cash amortization expense (including amortization of
financing costs, noncurrent assets and non-cash charges), (3) depreciation,
(4) income taxes, (5) all other non-cash charges including but not limited
to write-offs of intangible assets (other than for minority interests) less
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extraordinary gains, (6) one-time non-recurring expenses associated
with facility closings and head count reductions in an amount not to
exceed $17,818,950 through December 31, 2001, (7) one-time,
non-recurring non-cash expenses associated with facility closings and
head count reductions in an amount not to exceed $2,500,000 during the
fiscal year ending December 31, 2002 and (8) to the extent not
duplicative, the amount attributable to the minority interests owned
by Heat Holdings II in AT as reflected on the books and records of
Heat Holdings II as such.
(iv) Deleting the definition of "Loan Documents" in its entirety and
replacing it with the following:
"Loan Documents" shall mean this Agreement and each other
agreement, instrument or certificate executed and delivered to the
Administrative Agent, the Issuer or any Lender pursuant hereto
including, without limitation, the Assignment and Assumption
Agreement, the Notes, the Security Documents, the Guarantees, each
Letter of Credit, the Custody Agreements, the Contribution Agreement,
each Joinder Agreement, the Landlord Waivers, the Fee Letter and the
Forbearance Agreement.
(v) Deleting the definition of "Senior Leverage Ratio" in its
entirety and replacing it with the following:
"Senior Leverage Ratio" shall mean, as of any date of
determination, the ratio of (a) Funded Debt outstanding on such date minus the
outstanding aggregate principal amount of the Permitted High Yield Securities,
or the outstanding aggregate principal amount of the Refinancing Securities, as
applicable, to (b) EBITDA for the twelve-month period then most recently ended
as of the fiscal month for which the Administrative Agent has received a
Compliance Certificate pursuant to Section 5.2(c).
(b) Amendment to Section 4.2(b). Section 4.2(b) of the Credit Agreement is
hereby deleted in its entirety and the following inserted in its place:
(b) No Default. No Default, Event of Default (other than during
the Forbearance Period, a Specified Default) or Forbearance Event of
Default shall have occurred and be continuing on such date or after
giving effect to the Loans requested to be made on such date.
(c) Amendment to Section 5.1. Section 5.1 of the Credit Agreement is
hereby amended by:
(i) Deleting the "and" following the "," on the last line of Section
5.1(c); and
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(ii) Inserting the following two new subsections (d) and (e) to read
as follows:
(d) as soon as available, but in any event not later than 30 days
after the end of each calendar month of the Borrower, the unaudited
financial statements of the Borrower and its Subsidiaries as at the
end of such month and the portion of the fiscal year through the end
of such month, setting forth in each case in comparative form the
figures for the comparable period from the budget for such fiscal year
furnished to the Lenders pursuant to Section 5.2(d) and the actual
figures for the corresponding date or period in the previous year,
certified by a Responsible Officer as being fairly stated in all
material respects (subject to normal year-end audit adjustments); and
(e) on the third Business Day of each week, during the
Forbearance Period, a forecast of cash receipts and disbursements for
the next succeeding 13 weeks together with a certificate of a
Responsible Officer of the Borrower and its Subsidiaries that such
forecast has been prepared in good faith utilizing reasonable
assumptions that are believed to be reasonable in light of current and
foreseeable conditions, and that neither the Parent nor the Borrower
has any reason to believe that such forecasts are materially incorrect
or misleading in any material respect (it being recognized by the
Lenders that such forecasts as to future events are not to be viewed
as facts and that actual results during the period or periods covered
by any such forecasts may differ from the projected results).
(d) Amendment to Section 5.2. Section 5.2 of the Credit Agreement is
hereby amended by
(i) deleting Section 5.2(a), Section 5.2(b) and Section 5.2(c) and
inserting the following in their place:
(a) concurrently with the delivery of the financial statements
referred to in Section 5.1(a) and Section 5.1(c), a certificate of
the independent certified public accountants reporting on such
financial statements stating that in making the examination
necessary therefor no knowledge was obtained of any Default or
Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in Section 5.1(a), Section 5.1(b) and Section 5.1(d) a
certificate of a Responsible Officer of the Borrower, stating
that, during the period covered by such financial statements, the
Borrower and each of its Subsidiaries, during such period has
observed or performed all its covenants and other agreements, and
satisfied every condition, contained in this Agreement and in each
other Loan Document to which it is a party
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to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event
of Default except as specified in such certificate;
(c) concurrently with the delivery of the financial statements
referred to in Section 5.1(a) through (d), a certificate of a
Responsible Officer of the Borrower, substantially in the form of
Exhibit R hereto (the "COMPLIANCE CERTIFICATE"), showing compliance by
the Borrower and its Subsidiaries with the covenants contained in
Section 6.1 and Section 6.8;
(ii) deleting the "and" at the end of subsection (g) thereof;
(iii) inserting a new subsection (h) to read as follows:
(h) on the 15th day of each month, management of the Borrower
and WSP shall meet or participate in a telephone conference call with
representatives of the Administrative Agent and the Lenders and shall
report on the Borrower's efforts (i) to refinance the Loans and the
Commitments and (ii) to sell certain of its business units;
; and
(iv) renumbering subsection (h) thereof as subsection (i).
(e) Amendments to Article 5. The Credit Agreement is hereby amended by
inserting the following new Section 5.14 and Section 5.15;
5.14 Cooperation. (a) Within 15 days after the execution of the
Forbearance Agreement, the Borrower shall retain a field auditor
acceptable to the Administrative Agent and the Required Lenders (the
"FIELD AUDITOR") to perform a field audit of the operations of the
Borrower and its Subsidiaries. All reasonable fees and expenses of the
Field Auditor shall be for the account of the Borrower and shall be
timely paid. The Parent, Heat Holdings II and the Borrower shall
cooperate with such Field Auditor and shall provide such reasonable
assistance as such Field Auditor or the Administrative Agent may
request. The Borrower shall take all steps as may reasonably be
required to ensure that such field audit is completed on or before
March 31, 2002.
(b) Within 15 days after the execution of the Forbearance
Agreement, a valuation expert acceptable to the Administrative Agent
and the Required Lenders (the "VALUATION EXPERT") shall be retained to
determine the value of the Borrower and certain Subsidiaries. All
reasonable fees and expenses of the Valuation Expert shall be for the
account of the Borrower and shall be timely paid. The Parent, Heat
Holdings II and the Borrower shall cooperate with such Valuation
Expert and shall provide such reasonable assistance as such Valuation
Expert or the Administrative Agent may request. The Borrower shall
take all steps
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as may reasonably be required to ensure that such Valuation
Expert completes its report with respect to the Borrower and such
subsidiaries on or before March 31, 2002.
5.15 Cash Management. Within 30 days after the execution of
the Forbearance Agreement, the Borrower and its Domestic
Subsidiaries shall have entered into a cash management
arrangement acceptable to the Administrative Agent granting the
Administrative Agent, for the benefit of the Lenders, a perfected
security interest in all deposit accounts of the Borrower and
such Domestic Subsidiaries. The Borrower will retain control of
the funds deposited in such deposit accounts so long as (a) no
Event of Default specified in Section 7.1(a) shall have occurred
or (b) the Administrative Agent shall not have taken any of the
actions specified in clauses (A) and (B)(ii) of Section 7.1.
(f) Amendment to Section 6.2. Section 6.2 of the Credit Agreement is
hereby deleted in its entirety and the following inserted in its place:
6.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or
suffer to exist any Indebtedness, except;
(a) Indebtedness under this Agreement or under any Hedging
Agreement;
(b) Indebtedness of the Parent, the Borrower or any
Subsidiary (including Financing Leases) incurred to finance the
purchase price of equipment, fixtures and other similar property
of the Parent, the Borrower or such Subsidiary in an amount not
to exceed the Dollar Equivalent of $2,000,000 at any one time
outstanding;
(c) Unsecured Indebtedness of (i) any Subsidiary owed to
the Borrower or any other Subsidiary or (ii) the Borrower owed to
any Subsidiary; provided that the sum of loans, advances and
other investments under Section 6.9(g) (to the extent not
duplicative) and the aggregate principal amount of all such
unsecured Indebtedness shall not exceed the Dollar Equivalent of
(A) in respect of any Subsidiary that is not an Approved
Subsidiary, the lesser of (x) $5,000,000 and (y) the sum of such
investments in and loans, advances and unsecured Indebtedness to
such Subsidiary as in effect on January 26, 2002, in each case,
at any one time outstanding, and (B) in respect of all
Subsidiaries that are not Approved Subsidiaries, the lesser of
(x) $10,000,000 in the aggregate and (y) the sum of such
investments in and loans, advances and unsecured Indebtedness to
all such Subsidiaries as in effect on January 26, 2002, in each
case, at any one time outstanding;
(d) Existing Indebtedness in an aggregate principal amount
not to exceed the principal amount outstanding on January 26,
2002;
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(e) Permitted High Yield Securities or Refinancing Securities;
(f) Subordinated Guarantees;
(g) unsecured Indebtedness in a principal amount not to exceed
$100,000; and
(h) Indebtedness of Fluent UK Holdings, Ltd. owed to the
Borrower in an aggregate amount not to exceed the Dollar Equivalent of
$8,000,000; provided that, subject to Section 956 of the Code, any
security for such Indebtedness shall be assigned to the Administrative
Agent, for the benefit of the Lenders.
(g) Amendments to Article 6. The Credit Agreement is hereby amended by
inserting the following new Section 6.17:
6.17 Limitation on Management Fees. Neither the Borrower nor any
Subsidiary shall pay any management, administrative or other similar
fees to any Affiliate other than any such fees paid by any Subsidiary
either to the Borrower or to any Domestic Subsidiary.
(h) Amendment to Section 7.1. Section 7.1 of the Credit Agreement is
hereby amended by deleting subsection (l) and inserting the following in its
place:
(l) An event shall exist or occur which has a Material Adverse
Effect; or
(m) Any Forbearance Event of Default shall have occurred and be
continuing;
(i) Modifications to Credit Agreement Schedules and Exhibits. Exhibit R
to the Credit Agreement is hereby deleted in its entirety and Exhibit R
attached hereto inserted in its place.
5. FORBEARANCE FEE. For and in consideration of the Administrative
Agent's and the Lenders' entering into this Forbearance Agreement, each of the
Parent, Heat Holdings II and the Borrower jointly and severally agree to pay a
fee (the "FORBEARANCE FEE") to the Administrative Agent for the ratable account
of the consenting Lender of 25 basis points on each such Lender's respective
loan and commitment (based on the outstanding Commitments as of the first day
of the Forbearance Period (after giving effect to the prepayment pursuant to
Section 12(c) hereof)).
6. DEFAULT INTEREST. During the Forbearance Period, additional interest
under Section 2.12(c) of the Credit Agreement shall accrue and shall be paid
on the last day of the Forbearance Period, unless waived by all the Lenders.
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7. FINANCIAL COVENANT. (a) Each of the Parent, Heat Holdings II and the
Borrower hereby agrees that, during the Forbearance Period the Parent, Heat
Holdings II and the Borrower shall not permit and shall not permit any of their
respective Subsidiaries to permit:
(i) Senior Leverage Ratio. Senior Leverage Ratio as of the last
day of any month during any period and at the time of any borrowing to
exceed the ratio set forth opposite the period below:
<Table>
<Caption>
Period Senior Leverage Ratio
------ ---------------------
1/1/02 - 1/31/02 7.40 to 1.0
2/1/02 - 2/28/02 8.75 to 1.0
3/1/02 - 3/31/02 7.40 to 1.0
4/1/02 - 4/30/02 7.25 to 1.0
5/1/02 - 5/31/02 6.75 to 1.0
</Table>
(b) During the Forbearance Period, the financial covenant set forth in
this Section 7 shall be substituted in lieu of the covenants set forth in
Section 6.1 of the Credit Agreement, and the Compliance Certificate attached
hereto as Exhibit R shall be substituted in lieu of the Compliance Certificate
attached as Exhibit R to the Credit Agreement.
8. FORBEARANCE EVENTS OF DEFAULT. The following events shall constitute
"FORBEARANCE EVENTS OF DEFAULT":
(i) The Parent, Heat Holdings II or the Borrower fails to timely
perform or observe any term, covenant or provision of this Forbearance
Agreement;
(ii) A Default or Event of Default under the Credit Agreement, other
than the Specified Defaults, occurs and is continuing:
(iii) The Parent, Heat Holdings II, the Borrower, or any other entity
shall bring any action in any judicial, administrative or other proceeding
against the Administrative Agent or any Lender, based upon or arising out
of facts or circumstances that have occurred or exist (known or unknown)
at or before the date of this Forbearance Agreement: (a) disputing the
nature, validity, priority, enforceability or nonavoidability of the
Obligations or Liens of the Administrative Agent on behalf of the Lenders,
of the Credit Agreement or any of the other Loan Documents or this
Forbearance Agreement; (b) disputing the existence, priority,
nonavoidability or amount of the outstanding Obligations as acknowledged
in this Forbearance Agreement; or (c) alleging any of the claims released
pursuant to Section 10 below.
9. RIGHTS UPON FORBEARANCE EVENT OF DEFAULT OR AT CONCLUSION OF
FORBEARANCE PERIOD. Upon the occurrence and continuation of a Forbearance
Event of Default or the conclusion of the Forbearance Period, the Lenders'
agreement to Forbear shall terminate and, if all the Obligations then due and
owing have not been paid in full, the Administrative
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Agent and the Lenders shall have the right to immediately commence enforcement
of any or all of their rights and remedies under the Credit Agreement, this
Forbearance Agreement, the other Loan Documents and applicable law. The Parent,
Heat Holdings II and the Borrower understand and agree that the forbearance
agreements of the Lenders and the Administrative Agent set forth herein shall
not in any way establish a course of dealing by the Administrative Agent or any
Lender and shall not affect or impair the rights of the Administrative Agent or
the Lenders to require strict compliance by the Parent, Heat Holdings II and
the Borrower with the terms of the Credit Agreement, this Forbearance Agreement
and the other Loan Documents, as modified hereby and, except to the limited
extent expressly set forth in this Forbearance Agreement, shall not affect or
impair any of the rights and remedies of the Administrative Agent and the
Lenders under the Credit Agreement, this Forbearance Agreement and the other
applicable Loan Documents or under applicable law.
10. RELEASE. To the fullest extent permitted by applicable law, in
consideration of the Administrative Agent's and the Lender's execution of this
Forbearance Agreement each of the Parent, Heat Holdings II and the Borrower, in
each case on behalf of itself and each of their successors and assigns
(collectively, the "RELEASORS"), does hereby forever release, discharge and
acquit the Administrative Agent, each Lender and each of their respective
parents, subsidiaries and affiliate corporations or partnerships, and their
respective officers, directors, partners, trustees, shareholders, agents,
attorneys and employees, and their respective successors, heirs and assigns
(collectively, the "RELEASEES") of and from any and all claims, demands,
liabilities, responsibilities, disputes, causes of action (whether at law or
equity), indebtedness and obligations (collectively, "CLAIMS"), of every type,
kind, nature, description or character, including, without limitation, any
so-called "lender liability" claims or defenses, and irrespective of how, why or
by reason of what facts, whether such Claims have heretofore arisen, are now
existing or hereafter arise, or which could, might, or may be claimed to exist,
of whatever kind or name, whether known or unknown, suspected or unsuspected,
liquidated or unliquidated, each as though fully set forth herein at length,
which in each case in any way arise out of, are connected with or in any way
relate to actions or omissions which occurred on or prior to the date hereof
with respect to the Parent, Heat Holdings II and the Borrower, the Obligations,
this Forbearance Agreement, the Credit Agreement, any Loan Document or any third
parties liable in whole or in part for the Obligations; provided that so long as
the representation contained in Section 11(f) hereof is true and correct on the
date hereof, such release shall not apply to any Claim against any Releasee
arising from the gross negligence or willful misconduct of such Releasee. Each
of the Parent, Heat Holdings II and the Borrower further agrees, jointly and
severally, to indemnify the Releasees and hold each of the Releasees harmless
from and against any and all such Claims which might be brought against any of
the Releasees on behalf of any person or entity, including, without limitation,
officers, directors, agents, trustees, creditors or shareholders of any of the
Parent, Heat Holdings II and the Borrower; provided that so long as the
representation contained in Section 11(f) hereof is true and correct on the date
hereof, such indemnity shall not apply to any act of gross negligence or willful
misconduct of any Releasee. For purposes of the release contained in this
paragraph, any reference to any Releasor shall mean and include, as applicable,
such Person's or Persons' successors and assigns, including, without limitation,
any receiver, trustee or debtor-in-possession, acting on behalf of such parties.
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11. REPRESENTATIONS AND WARRANTIES. Each of the Parent, Heat Holdings II,
the Borrower and their respective Subsidiaries represents and warrants as
follows:
(a) Each of the Parent, Heat Holdings II and the Borrower, and each of
their respective Subsidiaries, is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization.
(b) Each of the Parent, Heat Holdings II and the Borrower, and each of
their respective Subsidiaries, has the legal power and authority to execute ad
deliver this Forbearance Agreement and the officers of the Parent, Heat Holdings
II and the Borrower, and of each of their respective Subsidiaries, executing
this Forbearance Agreement have been duly authorized to execute and deliver the
same and bind the Parent, Heat Holdings II and the Borrower, and each of their
respective Subsidiaries, with respect to the provisions hereof.
(c) This Forbearance Agreement and each of the Credit Agreement and the
other Loan Documents as previously executed and as amended hereby constitute
legal, valid and binding obligations of the Loan Party thereto, respectively,
enforceable against such Loan Party in accordance with their respective terms
(except as enforceability may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditor's rights generally).
(d) Each of the Parent, Heat Holdings II, the Borrower, and each of their
respective Subsidiaries, hereby reaffirms all covenants, representations and
warranties made in the Credit Agreement and other Loan Documents and agrees that
all such representations and warranties shall be deemed to have been remade as
of the effective date of this Forbearance Agreement, other than any such
representations and warranties that, by their terms, refer to a specific date,
in which case as of such specific date.
(e) The Parent, Heat Holdings II and the Borrower have caused to be
conducted a thorough review of the terms of the Credit Agreement and other Loan
Documents and the Parent, Heat Holdings II and the Borrower and their
Subsidiaries operations since the Closing Date and there are no defaults,
Defaults or Events of Default thereunder other than the Specified Defaults.
(f) On the date hereof, each of the Parent, Heat Holdings II and the
Borrower to its knowledge does not have any Claim (including any so-called
"lender liability" claim) against the Administrative Agent or any Lender.
12. CONDITIONS TO EFFECTIVENESS. This Forbearance Agreement shall become
effective and be deemed effective as of the date hereof, if and only if on or
prior to its execution and delivery by the Administrative Agent, the
Documentation Agent and the Lenders:
(a) the Administrative Agent and the Lenders shall have received:
(i) this Forbearance Agreement executed by each of the Parent, Heat
Holdings II, the Borrower, the Subsidiary Guarantors, the Administrative
Agent and the Lenders;
12
(ii) an executed legal opinion of counsel to the Parent and the
Borrower, substantially in the form attached hereto as Exhibit A; and
(iii) such other documents, instruments or agreements as the
Administrative Agent or any Lender may reasonably request;
(b) the Forbearance Fee shall have been paid to the Administrative
Agent, for the ratable benefit of the consenting Lenders;
(c) The Administrative Agent shall have received from the Borrower for
the benefit of the Lenders $1,984,961.41, which funds shall be applied as a
prepayment of the principal amount of the Term Loans which is due on March 31,
2002;
(d) all amounts owed by the Borrower to the Administrative Agent and
the Lenders (including (i) reasonable fees in respect of counsel to the
Administrative Agent, (ii) reasonable fees in respect of special German counsel
to the Administrative Agent, (iii) reasonable fees in respect of special Italian
counsel to the Administrative Agent (iv) reasonable fees in respect of special
litigation counsel to the Administrative Agent and (v) reasonable fees in
respect of any counsel to the Lenders in respect of this Forbearance Agreement)
shall have been paid in full;
(e) the Borrower shall have received $12,000,000 in cash equity from
the Parent and Heat Holdings II, which will have received such funds from WSP,
pursuant to agreements that are acceptable to the Administrative Agent and the
Required Lenders;
(f) the Parent, Heat Holdings II and the Borrower shall have delivered
a duly executed Officer's Certificate stating that:
(i) All the representations and warranties of the Parent, Heat
Holdings II and the Borrower contained in this Forbearance Agreement
and, except as otherwise acknowledged herein, in the Credit Agreement
and the other Loan Documents, are true and correct; and
(ii) Other than the Specified Defaults, no Default or Event of
Default shall have occurred and be continuing or shall result from the
execution of this Forbearance Agreement.
; and
(g) the Administrative Agent shall have received an updated original
incumbency certificate (containing original specimen signatures) and certified
resolutions of the Parent and the Borrower's board of director's in connection
with the execution and delivery of this Forbearance Agreement.
13. MISCELLANEOUS.
(a) Governing Law. THIS FORBEARANCE AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS FORBEARANCE.
13
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
(b) Jurisdictional and Jury Trial Provisions Incorporated By Reference. THE
PROVISIONS OF SECTION 10.14 AND SECTION 10.17 OF THE CREDIT AGREEMENT SHALL BE
APPLICABLE TO THIS FORBEARANCE AGREEMENT AND THE PARTIES HERETO AS IF SET FORTH
ENTIRELY HEREIN AND MADE APPLICABLE TO THIS FORBEARANCE AGREEMENT.
(c) Effects of Forbearance Agreement. Except as specifically set forth in
this Forbearance Agreement, the Credit Agreement and the other Loan
Documents, shall remain in full force and effect and are hereby ratified and
confirmed. Nothing herein shall constitute a waiver by the Administrative
Agent or any Lender of the Specified Defaults or any existing or hereafter
arising default, Default or Event of Default nor shall the Administrative
Agent's or any Lender's execution and delivery of this Forbearance Agreement
establish a course of dealing among the Administrative Agent or any Lender and
any of the Parent, Heat Holdings II and the Borrower, Heat Holdings II or in
any other way obligate the Administrative Agent or any Lender to hereafter
provide any further extensions to the due dates of any Obligations, to provide
any further time for payment prior to the enforcement of their security or to
provide any other financial accommodations to or on behalf of the Parent, Heat
Holdings II or the Borrower. Each of the Parent, Heat Holdings II and the
Borrower reaffirms each of the documents, instruments and agreements executed
by any one or more of the Parent, Heat Holdings II and the Borrower in
connection with the Credit Agreement, including the Guarantees and the
Security Documents, all of which documents, instruments and agreements remain
in full force and effect.
(d) Costs and Expenses. Section 10.5 of the Credit Agreement shall apply
to all fees, costs and expenses incurred by the Administrative Agent and each
Lender in connection with this Forbearance Agreement and each of the other
documents, instruments and agreements executed in connection herewith,
including, but not limited to, such fees, costs and expenses incurred in
connection with the negotiation, drafting, implementation and enforcement of
this Forbearance Agreement.
(e) Counterparts. This Forbearance Agreement may be executed in one or
more counterparts, each of which shall be considered an original counterpart,
and shall become a binding agreement when the Administrative Agent, each of the
Lenders and each of the Parent, Heat Holdings II and the Borrower, and each of
their respective Subsidiaries who is a Guarantor, shall have executed a
counterpart of the Forbearance Agreement. Each of the parties hereto agrees
that a signature transmitted to the Administrative Agent or its counsel by
facsimile transmission shall be effective to bind the party so transmitting its
signature.
(f) Entire Agreement. This Forbearance Agreement contains the entire
understanding of the parties hereto with regard to the subject matter contained
herein. This Forbearance Agreement supersedes all prior or contemporaneous
negotiations, promises, covenants, agreements and representations of every
nature whatsoever with respect to the matters referred to in this Forbearance
Agreement, all of which have become merged and finally integrated into this
Forbearance Agreement. Any single or partial exercise of any right under this
Forbearance Agreement shall not preclude other or further exercise thereof or
the exercise of
14
any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of this Forbearance Agreement whatsoever shall be
valid unless in writing signed by the Administrative Agent and the Required
Lenders (other than a waiver of Section 2.12(c) (Default Interest) of the
Credit Agreement which shall require the signature of all the Lenders, and then
only to the extent in such writing specifically set forth). All remedies
contained in this Forbearance Agreement or by law afforded shall be cumulative
and all shall be available to the Administrative Agent and the Lenders until
the Obligations have been paid in full. The failure of any party to enforce at
any time any provision of this Forbearance Agreement shall not be construed to
be a waiver of such provisions, nor in any way to affect the validity of this
Forbearance Agreement or any part hereof or the right of such party thereafter
to enforce each and every such provision. No waiver of any breach of this
Forbearance Agreement shall be held to constitute a waiver of any other or
subsequent breach.
(g) No Third Party Beneficiaries. This Forbearance Agreement is solely
for the benefit of the parties hereto and is not intended to confer upon any
other third party any rights or benefits.
[NO ADDITIONAL TEXT ON THIS PAGE; SIGNATURE PAGE FOLLOWS]
15
IN WITNESS WHEREOF, this Forbearance Agreement has been duly executed as of
29th day of January, 2002.
HEAT HOLDINGS CORP.
By: /s/ Bharatan R. Patel
-------------------------------
Name: Bharatan R. Patel
Title: Vice President
HEAT HOLDINGS II CORP.
By: /s/ Bharatan R. Patel
-------------------------------
Name: Bharatan R. Patel
Title: Vice President
AAVID THERMAL TECHNOLOGIES, INC.
By: /s/ Bharatan R. Patel
-------------------------------
Name: Bharatan R. Patel
Title: President, Chief
Executive Officer
S-1
CANADIAN IMPERIAL BANK OF
COMMERCE, as Issuer and Administrative Agent
By: /s/ Keith Labbate
------------------------------------------
Name: Keith Labbate
Title: Executive Director
FLEET NATIONAL BANK, as Documentation Agent
By: /s/ James J. Shaw
------------------------------------------
Name: James J. Shaw
Title: Senior Vice President
S-2
LENDERS:
CIBC INC.
By: /s/ Keith Labbate
--------------------------------
Name: Keith Labbate
Title: Executive Director
LASALLE BANK NATIONAL ASSOCIATION
By: /s/ Mark T. Ostrowski
--------------------------------
Name: Mark T. Ostrowski
Title: Vice President
FLEET NATIONAL BANK
By: /s/ James J. Shaw
--------------------------------
Name: James J. Shaw
Title: Senior Vice President
CITIZENS BANK
By: /s/ Lawrence E. Jacobs
--------------------------------
Name: Lawrence E. Jacobs
Title: Vice President
S-3
HEAT HOLDINGS II CORP.
HEAT HOLDINGS CORP.
AAVID THERMAL PRODUCTS, INC.
AAVID THERMALLOY LLC
THERMALLOY INVESTMENT CO., INC.
THERMALLOY, INC.
AAVID THERMALLOY OF TEXAS LLC
APPLIED THERMAL TECHNOLOGIES LLC
AAVID THERMALLOY SW, LLC
FLUENT HOLDINGS, INC.
FLUENT INC.
ENDUCTIVE SOLUTIONS, INC.
Each By: /s/ Bharatan R. Patel
--------------------------
Name: Bharatan R. Patel
S-4
EXHIBIT A
FORM OF LEGAL OPINION OF COUNSEL
[SEE ATTACHED]
EXHIBIT R
FORM OF COMPLIANCE CERTIFICATE (MONTHLY)
[SEE ATTACHED]
Exhibit A, Page 1