Exhibit 10
FIRST AMENDMENT AND WAIVER TO LOAN AND SECURITY AGREEMENT
This FIRST AMENDMENT AND WAIVER TO LOAN AND SECURITY AGREEMENT
entered into as of this 18th day of November, 2003 (this "First Amendment"), is
hereby entered into among, on the one hand, the lenders identified on the
signature pages hereto (such lenders, together with their respective assigns,
are referred to hereinafter each individually as a "Lender" and collectively,
the "Lenders") and WELLS FARGO FOOTHILL, INC. (formerly known as Foothill
Capital Corporation), a California corporation, as the arranger and
administrative agent ("Agent") for all the Lenders under the Loan Agreement (as
hereinafter defined), and, on the other hand, AMTROL INC., a Rhode Island
corporation (the "Administrative Borrower"), WATER SOFT INC., a Rhode Island
corporation ("Water Soft") and AMTROL CANADA LTD., an Ontario corporation
(together with the Administrative Borrower and Water Soft, each individually a
"Borrower," and individually and collectively, jointly and severally,
"Borrowers").
RECITALS
WHEREAS, Lenders, Borrowers, Amtrol Holdings, Inc. ("Holdings"), and
Agent have executed and delivered that certain Loan and Security Agreement dated
as of December 26, 2001 (as may be amended, modified or supplemented from time
to time, the "Loan Agreement");
WHEREAS, Borrowers have requested that Ableco Finance LLC, a
Delaware limited liability company (the "Term B Lender") increase its Term Loan
B Commitment by $15,000,000 for the purpose of repurchasing and/or retiring
certain of the Senior Subordinated Notes, funding certain capital investment
programs and general working capital needs;
WHEREAS, the Term B Lender, is willing to increase its Term Loan B
Commitment but only upon certain terms and conditions set forth herein;
WHEREAS, Borrowers have requested a reduction in the Revolver
Commitments from $35,000,000 to $30,000,000, and the Lenders have agreed to such
reduction;
WHEREAS, Borrowers have also requested that the Lenders consent to
an increase of the principal amount of the Other Senior Debt (as defined in the
Loan Agreement) from the Other Senior Lenders (as defined in the Loan Agreement)
in an amount up to $6,300,000 in order to repurchase and/or retire certain of
the Senior Subordinated Notes at a price which will not be greater than 85% of
the principal amount of such Senior Subordinated Notes to be repurchased and/or
retired;
WHEREAS, in connection with the increased Term Loan B Commitment to
repurchase and/or retirement of the Senior Subordinated Notes, Borrowers have
requested that the Lenders waive Borrowers' compliance with the covenants set
forth in Sections 7.1(f)(ii), 7.8(a), 7.8(c) and 7.14 of the Loan Agreement;
WHEREAS, pursuant to the Section 14(b) of the Intercreditor
Agreement, dated as of December 26, 2001 (as hereafter modified, amended and/or
restated from time to time, the "Intercreditor Agreement"), among the Agent and
the Other Senior Lenders, Borrowers, and Amtrol Holdings, Inc. and Amtrol
International Investments, Inc., as guarantors, the Agent must
provide prior written consent to the Other Senior Lenders prior to the
effectiveness of amendment to the Other Senior Debt Loan Agreement (as defined
in the Loan Agreement) that could reasonably be expected to adversely affect the
Lenders;
WHEREAS, Borrowers and the Other Senior Lenders request that the
Lenders consent to an amendment of the Other Senior Debt Loan Agreement in the
form of the Second Amendment to Loan and Security Agreement, dated as of
November 18, 2003, attached as Annex I hereto which will permit Borrowers to
incur from time to time additional Other Senior Debt in an aggregate principal
amount of up to $6,300,000 (the "Cypress Second Amendment");
WHEREAS, Borrowers have requested, and the Lenders and Agent have
agreed to, the modifications, amendments and waivers of the Loan Agreement as
set forth herein; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and upon the terms and conditions set
forth herein Borrowers, the Guarantors and the Lenders hereby agree as follows:
SECTION 1. RELATION TO THE LOAN AGREEMENT; DEFINITIONS.
1.1 RELATION TO LOAN AGREEMENT. This First Amendment constitutes an
integral part of the Loan Agreement and shall be deemed to be a Loan Document
for all purposes. Upon the effectiveness of this First Amendment, on and after
the date hereof each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," or words of like import referring to the Loan Agreement,
and each reference in the other Loan Documents to "the Loan Agreement,"
"thereunder," "thereof" or words of like import referring to the Loan Agreement,
shall mean and be a reference to the Loan Agreement as amended hereby.
1.2 CAPITALIZED TERMS. For all purposes of this First Amendment,
capitalized terms used herein without definition shall have the meanings
specified in the Loan Agreement.
SECTION 2. AMENDMENT TO LOAN AGREEMENT.
2.1 AMENDMENT TO SECTION 1.
(a) Section 1.1 of the Loan Agreement is hereby amended by
inserting the following new definitions in appropriate alphabetical order:
"Excess Cash Flow" means, with respect to any Person for any period,
(i) Consolidated EBITDA for such period less (ii) the sum of (A) all
Consolidated Interest Expense paid in cash for such period, (B) the cash portion
of Capital Expenditures made by such Person or any of its Subsidiaries during
such period to the extent permitted to be made under this Agreement, (C) the
cash portion of income tax payments of such Person and its Subsidiaries paid
during such period, (D) all scheduled and mandatory cash principal payments on
Term Loan A made during such period, and (E) all scheduled and mandatory cash
principal payments on Term Loan B made during such period.
"First Amendment Effective Date" means November 18, 2003.
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"Fixed Charge Coverage Ratio" has the meaning set forth in Section
7.20(a)(ii).
"Senior Debt" means the sum of (a) the amount of the Revolver Usage
plus (b) the outstanding principal amount of the Term Loans.
"Senior Debt to Consolidated EBITDA Ratio" means, with respect to
the Loan Parties for any period, the ratio of (a) the aggregate amount of Senior
Debt of the Loan Parties as of the last day of such period, to (b) the TTM
Consolidated EBITDA for such period.
"Senior Debt to North American EBITDA Ratio" means, with respect to
the Loan Parties for any period, the ratio of (a) the aggregate amount of Senior
Debt of the Loan Parties as of the last day of such period, to (b) the TTM North
American EBITDA for such period.
"Term Loan B PIK Amount" means as of any date of determination, the
amount of all interest accrued with respect to the Term Loan B that has been
paid-in-kind by being added to the balance thereof in accordance with Section
2.6.
"TTM Consolidated EBITDA" means, as of any date of determination,
the Consolidated EBITDA of such Person and its Subsidiaries for the 12 month
period most recently ended.
"TTM North American EBITDA" means, as of any date of determination,
the Consolidated EBITDA of the Loan Parties for the 12 month period most
recently ended.
(b) Section 1.1 of the Loan Agreement is hereby further
amended by deleting the definition of "Base Rate" in its entirety and replacing
it with the following definition:
"Base Rate" means, (a) for all Obligations except the Term Loan B,
the rate of interest announced within Wells Fargo at its principal office in San
Francisco as its "prime rate," with the understanding that the "prime rate" is
one of Wells Fargo's base rates (not necessarily the lowest of such rates) and
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto and is evidenced by the recording thereof
after its announcement in such internal publication or publications as Wells
Fargo may designate; and (b) for Term Loan B, the greater of (i) 4% or (ii) the
rate of interest announced within Wells Fargo at its principal office in San
Francisco as its "prime rate," with the understanding that the "prime rate" is
one of Wells Fargo's base rates (not necessarily the lowest of such rates) and
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto and is evidenced by the recording thereof
after its announcement in such internal publication or publications as Wells
Fargo may designate.
(c) Section 1.1 of the Loan Agreement is hereby further
amended by deleting the definition of "Base Rate Term Loan Margin" in its
entirety and replacing it with the following definition:
"Base Rate Term Loan Margin" means, (a) with respect to Term Loan A,
0.75 percentage points and (b) with respect to Term Loan B, 3.50 percentage
points.
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(d) Section 1.1 of Loan Agreement is hereby further amended by
deleting the definition of "Consolidated EBIT" in its entirety and replacing it
with the following definition:
"Consolidated EBIT" means, for any period, (A) the sum of the
amounts for such period of (i) Consolidated Net Income, (ii)
provisions for taxes based on income, (iii) Consolidated Interest
Expense; (iv) non-cash amortization or write-off of deferred
financing costs to the extent deducted in determining Consolidated
Net Income, (v) non-cash losses on sales of assets (excluding sales
in the ordinary course of business) and other extraordinary losses,
(vi) any other non-cash charges which have been subtracted in
calculating Consolidated Net Income for such period, (vii) any
non-recurring non-cash charge or restructuring charge to the extent
deducted in determining Consolidated Net Income and (viii) the
cumulative effect of any change in accounting principles, less (B)
the sum of, (i) the amount for such period of gains on sales of
assets (excluding sales in the ordinary course of business) and
other extraordinary gains, in each case, for AMTROL and its
Subsidiaries, as determined on a consolidated basis in accordance
with GAAP, and (ii) the amount for such period of gains resulting
from or in connection with the repurchase and/or retirement of any
Indebtedness (including the Senior Subordinated Notes)."
(e) Section 1.1 of the Loan Agreement is hereby further
amended by deleting the definition of "Maximum Revolver Amount" in its entirety
and replacing it with the following definition:
"Maximum Revolver Amount" means, as of any date of determination,
the difference between (a) $30,000,000 and (b) the aggregate outstanding
principal amount of Term Loan A.
(f) Section 1.1 of the Loan Agreement is hereby further
amended by deleting paragraphs (d) and (e) of the definition of "Pro Rata Share"
and replacing them with the following:
"(d) with respect to a Lender's obligation to make the Term Loan B
and receive payments of interest (including the Term Loan B PIK
Amount), fees, and principal with respect thereto, (i) prior to the
making of the Term Loan B, the percentage obtained by dividing (x)
such Lender's Term Loan B Commitment, by (y) the aggregate amount of
all Lenders' Term Loan B Commitments, and (ii) from and after the
making of the Term Loan B, the percentage obtained by dividing (x)
the principal amount of such Lender's portion of the Term Loan B
Amount
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(excluding the Term Loan B PIK Amount) by (y) the Term Loan B
Amount, and
(e) with respect to all other matters as to a particular Lender
(including the indemnification obligations arising under Section
16.7), the percentage obtained by dividing (i) such Lender's
Revolver Commitment plus the unpaid amount of such Lender's portion
of the outstanding Term Loan A plus the unpaid principal amount of
such Lender's portion of the outstanding Term Loan B (excluding the
Term Loan B PIK Amount) by (ii) the aggregate amount of Revolver
Commitments of all Lenders plus the unpaid principal amount of the
outstanding Term Loan A plus the unpaid principal amount of the Term
Loan B (excluding the Term Loan B PIK Amount); provided, however,
that in the event the Revolver Commitments have been terminated or
reduced to zero, Pro Rata Share shall be the percentage obtained by
dividing (A) the principal amount of such Lender's Advances plus the
unpaid principal amount of such Lender's portion of the outstanding
Term Loan A plus the unpaid principal amount of such Lender's
portion of the outstanding Term Loan B (excluding the Term Loan B
PIK Amount) by (B) the principal amount of all outstanding Advances
plus the unpaid principal amount of the outstanding Term Loan A plus
the unpaid principal amount of the outstanding Term Loan B
(excluding the Term Loan B PIK Amount)."
(g) Section 1.1 of the Loan Agreement is hereby further
amended by deleting the definition of "Term Loan B Amount" in its entirety and
replacing it with the following definition:
"Term Loan B Amount" means $20,312,500.
(h) Schedule C-1 of the Loan Agreement hereby is deleted in
its entirety and the attached Schedule C-1 hereby is substituted in lieu
thereof.
2.2 AMENDMENT TO SECTION 2.2(B).
Section 2.2(b) of the Loan Agreement is hereby amended by deleting
it in its entirety and replacing it with the following new Section:
"(b) TERM LOAN B.
(i) Subject to the terms and conditions of this Agreement, each
Lender with a Term Loan B Commitment agrees to make certain term loans
(collectively, the "Term Loan B") to Borrowers in an amount equal to $7,500,000
on the Closing Date and in amount equal to $15,000,000 on the First Amendment
Effective Date.
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(iii) The Term Loan B made pursuant to Section 2.2(b)(i) shall be
repaid on the first day of each calendar quarter commencing April 1, 2002 in an
amount equal to $312,500.
(iv) The outstanding unpaid principal balance and all accrued and
unpaid interest under the Term Loan B made pursuant to Section 2.2(b)(i) shall
be due and payable on the earlier of (x) the date that is the fourth anniversary
of the Closing Date and (y) the date of termination of this Agreement, whether
by its terms, by prepayment, or by acceleration. All amounts outstanding under
the Term Loan B shall constitute Obligations."
2.3 AMENDMENT TO SECTION 2.4(c).
(a) Section 2.4(c) of the Loan Agreement is hereby amended by
inserting the following new clause (vi) immediately following clause (v) of said
Section:
"(vi) Within 10 days of delivery to Agent and the Lenders of audited
annual financial statements pursuant to Section 6.3(b)(i), commencing with the
delivery to the Agent and Lenders of the financial statements for fiscal year
2004 or, if such financial statements are not delivered to Agent and Lenders on
the date such statements are required to be delivered pursuant to Section
6.3(b), 10 days after the date such statements are required to be delivered
pursuant to Section 6.3(b), Borrowers shall prepay the outstanding principal
amount of the Term Loan B in an amount equal to 50% of the Excess Cash Flow of
Borrowers and their Subsidiaries for such fiscal year. Notwithstanding anything
to the contrary contained herein, to the extent Excess Availability is less than
or equal to $1,500,000 immediately after giving effect to any prepayment of the
Term Loan B pursuant to this Section 2.4(c)(vi), no such prepayment of the Term
Loan B shall be made and (A) Agent shall apply such amounts to the payment of
the Advances, to cash collateralize the Letters of Credit and, concurrently with
such payment of the Advances and cash collateralization of the Letters of
Credit, establish and maintain a corresponding reserve against Availability in
an amount equal to such amount, and (B) the amount that is applied to the
Advances and to cash collateralize the Letters of Credit pursuant to subclause
(A) above shall be applied to the prepayment of the Term Loan B, and the
corresponding reserve against the Borrowing Base and the Maximum Revolver Amount
shall be released, at such time and from time to time as Excess Availability is
greater than $1,500,000."
2.4 AMENDMENT TO SECTION 2.6(a).
(a) Section 2.6(a) of the Loan Agreement is hereby amended by
deleting it in its entirety and replacing it with the following new Section:
"(a) INTEREST RATES. Except as provided in clause (c) below, all Obligations
(except for undrawn Letters of Credit and except for Bank Product Obligations)
that have been charged to the Loan Account pursuant to the terms hereof shall
bear interest on the Daily Balance thereof as follows (i) if the relevant
Obligation is an Advance that is a LIBOR Rate Loan, at a per annum rate equal to
the LIBOR Rate plus the LIBOR Rate Margin, (ii) if the relevant Obligation is a
portion of the Term Loan A that is a LIBOR Rate Loan, at a per annum rate equal
to the LIBOR Rate plus the LIBOR Rate Term Loan A Margin, (iii) if the relevant
Obligation is a portion of Term Loan A that is a Base Rate Loan, at a per annum
rate equal to the applicable Base Rate plus the applicable Base Rate Term Loan
Margin, (iv) if the relevant Obligation is Term Loan B,
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at a per annum rate equal to applicable the Base Rate plus the applicable Base
Rate Term Loan Margin and (v) otherwise, at a per annum rate equal to the Base
Rate plus the Base Rate Margin.
In addition to any other interest provided for in this Agreement, the Term Loan
B (inclusive of any Term Loan B PIK Amount) shall bear additional interest on
the amount thereof outstanding from time to time at a per annum rate of 3.50% to
be paid-in-kind (in the absence of an election by Borrower to pay all or part of
such interest in cash) by being added to the principal balance of the Term Loan
B (inclusive of any Term Loan B PIK Amount theretofore so added); provided,
however, that Borrower shall pay in cash all accrued and unpaid interest on the
Term Loan B (including the Term B Loan PIK Amount) on the earlier of (i) the
date that is the fourth anniversary of the Closing Date and (ii) the date of the
termination of this Agreement, whether by its terms, prepayment or by
acceleration."
2.5 AMENDMENT TO SECTION 7.8(a).
Section 7.8(a) of the Loan Agreement is hereby amended by restating
said Section in its entirety as follows:
"(a) except in connection with a refinancing permitted by
Section 7.1(f), prepay, redeem, defease, purchase or otherwise acquire any
Indebtedness other than (i) the Obligations in accordance with this Agreement,
(ii) the Indebtedness described in Section 7.1(c) and (h), and (iii) the
purchase of the Senior Subordinated Notes so long as (1) no Default or Event of
Default has occurred and is continuing or would result therefrom, (2) the price
paid to repurchase and/or retire such Senior Subordinated Notes is not greater
than 85% of the principal amount of such Senior Subordinated Notes, and (3) the
aggregate amount paid for all such Senior Subordinated Notes does not exceed
$5,000,000."
2.6 AMENDMENT TO SECTION 7.17.
Section 7.17 of the Loan Agreement is hereby amended by inserting
the following new text immediately following the text "(b) thereafter,":
"(i) the purchase of the Senior Subordinated Notes in accordance
with Section 7.8 and (ii)".
2.7 AMENDMENT TO SECTION 7.20.
Section 7.20 of the Loan Agreement is hereby amended by deleting
Section 7.20 in its entirety and replacing it with the following:
"7.20 Financial Covenants.
(a) Borrowers will maintain:
(i) Minimum EBITDA.
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A. North American EBITDA, measured on a fiscal month-end
or quarterly basis (as the case may be), of not less than the required amount
set forth in the following table for the applicable period set forth opposite
thereto:
APPLICABLE AMOUNT APPLICABLE PERIOD
$2,500,000 Four months ended on or near January 31, 2002
$3,360,000 Five months ended on or near February 28, 2002
$5,110,000 Six months ended on or near March 31, 2002
$5,740,000 Seven months ended on or near April 30, 2002
$7,540,000 Eight months ended on or near May 31, 2002
$9,780,000 Nine months ended on or near June 30, 2002
$10,590,000 Ten months ended on or near July 31, 2002
$11,550,000 Eleven months ended on or near August 31, 2002
$13,990,000 Twelve months ended on or near September 30, 2002
$14,480,000 Twelve months ended on or near October 31, 2002
$14,700,000 Twelve months ended on or near November 30, 2002
$14,900,000 Twelve months ended on or near December 31, 2002
$13,300,000 Twelve months ended on or near December 31, 2003
$13,700,000 Twelve months ended on or near March 31, 2004
$12,500,000 Twelve months ended on or near June 30, 2004
$13,100,000 Twelve months ended on or near September 30, 2004
$12,600,000 Twelve months ended on or near December 31, 2004
$12,600,000 Twelve months ended on or near March 31, 2005
$12,800,000 Twelve months ended on or near June 30, 2005
$13,000,000 Twelve months ended on or near September 30, 2005
$13,200,000 Twelve months ended on or near December 31, 2005
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An amount equal to the Amount equal to the amount set forth opposite
greater of (a) hereto for each twelve month period on or near
$13,200,000 and (b) an March 31, June 30, September 30 and December 31
amount equal to 80% of of 2006
the North American
EBITDA reflected in the
Projections in form and
substance satisfactory
to Agent to be delivered
to Agent on or before
the date that is thirty
days before the first
day of the 2006 fiscal
year and utilizing
criteria similar to the
criteria that Agent used
to establish the
covenant levels above
B. Consolidated EBITDA, measured on a fiscal month-end
or quarterly basis (as the case may be), of not less than the required amount
set forth in the following table for the applicable period set forth opposite
thereto:
APPLICABLE AMOUNT APPLICABLE PERIOD
$4,020,000 Four months ended on or near January 31, 2002
$5,440,000 Five months ended on or near February 28, 2002
$7,840,000 Six months ended on or near March 31, 2002
$9,040,000 Seven months ended on or near April 30, 2002
$11,600,000 Eight months ended on or near May 31, 2002
$14,630,000 Nine months ended on or near June 30, 2002
$16,150,000 Ten months ended on or near July 31, 2002
$17,370,000 Eleven months ended on or near August 31, 2002
$20,630,000 Twelve months ended on or near September 30, 2002
$21,340,000 Twelve months ended on or near October 31, 2002
$21,750,000 Twelve months ended on or near November 30, 2002
$22,180,000 Twelve months ended on or near December 31, 2002
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$19,500,000 Twelve months ended on or near December 31, 2003
$19,000,000 Twelve months ended on or near March 31, 2004
$18,000,000 Twelve months ended on or near June 30, 2004
$18,600,000 Twelve months ended on or near September 30, 2004
$18,600,000 Twelve months ended on or near December 31, 2004
$19,000,000 Twelve months ended on or near March 31, 2005
$19,300,000 Twelve months ended on or near June 30, 2005
$19,500,000 Twelve months ended on or near September 30, 2005
$19,700,000 Twelve months ended on or near December 31, 2005
An amount equal to the Amount equal to the amount set forth opposite
greater of (a) hereto for each twelve month period on or near
$19,700,000 and (b) an March 31, June 30, September 30 and December 31
amount equal to 80% of of 2006
the Consolidated EBITDA
based upon Projections
in form and substance
satisfactory to Agent to
be delivered to Agent on
or before the date that
is thirty days before
the first day of the
2006 fiscal year
utilizing criteria
similar to the criteria
that Agent used to
establish the covenant
levels above
(ii) Fixed Charge Coverage Ratio. Permit the ratio of (x)
Consolidated Fixed Charges for any period commencing and ending on or near the
dates set forth below for such period to (y) Consolidated EBITDA for such period
(the "Fixed Charge Coverage Ratio") to be less than the amount set forth in the
following table for such period set forth opposite thereto:
APPLICABLE RATIO APPLICABLE PERIOD
1.0 to .73 January 1, 2002 to March 31, 2002
1.0 to .88 January 1, 2002 to June 30, 2002
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1.0 to .93 January 1, 2002 to September 30, 2002
1.0 to .92 January 1, 2002 to December 31, 2002
1.0 to .92 4 fiscal quarters ended March 31, 2003
1.0 to .94 4 fiscal quarters ended June 30, 2003
1.0 to .91 4 fiscal quarters ended September 30, 2003
1.0 to .88 4 fiscal quarters ended December 31, 2003
1.0 to .85 4 fiscal quarters ended March 31, 2004
1.0 to .76 4 fiscal quarters ended June 30, 2004
1.0 to .78 4 fiscal quarters ended September 30, 2004
1.0 to .77 4 fiscal quarters ended December 31, 2004
1.0 to .85 4 fiscal quarters ended March 31, 2005
1.0 to .92 4 fiscal quarters ended June 30, 2005
1.0 to .97 4 fiscal quarters ended September 30, 2005
1.0 to .54 4 fiscal quarters ended December 31, 2005
1.0 to .97 For each 4 fiscal quarter period ended March 31,
2006, June 30, 2006 and September 30, 2006
(iii) Maximum Senior Debt to EBITDA Ratio. (x) A Senior Debt
to Consolidated EBITDA Ratio, measured on a quarter-end basis of no more than
2.0:1.0 or (y) a Senior Debt to North American EBITDA Ratio, measured on a
quarter-end basis of no more than 3:0:1.0.
(b) Capital Expenditures. Holdings will not, and will not
permit any of its Subsidiaries that is not a Foreign Subsidiary to, make or
incur Capital Expenditures in any fiscal year set forth below in excess of the
amount set forth in the following table for the applicable fiscal year.
FISCAL YEAR AMOUNT
Fiscal Year 2002 $4,200,000
Fiscal Year 2003 $5,400,000
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Fiscal Year 2004 $8,500,000
Fiscal Year 2005 $4,000,000
Fiscal Year 2006 $5,000,000
In addition to the foregoing, in the event that the
amount of capital Expenditures permitted to be made hereby in any fiscal year of
Borrowers (before giving effect to any increase in permitted Capital
Expenditures amount pursuant to this paragraph) is greater than the amount of
such Capital Expenditures actually made by Borrowers during such fiscal year, an
amount equal to the lesser of (x) such excess and (y) (i) $1,500,000, with
respect to the amount not utilized during the fiscal year 2004, or (ii) for any
other fiscal year, $750,000, of the applicable Capital Expenditures amount set
forth above may be carried forward and utilized to make additional Capital
Expenditures in the immediately succeeding fiscal year; provided, that (A)
Capital Expenditures made in any fiscal year shall be deemed made first in
respect of amounts permitted for such fiscal year as provided above and second
in respect of amounts carried forward from the prior fiscal year pursuant to
this paragraph and (B) no amounts carried forward pursuant to this paragraph may
be carried forward to any fiscal year thereafter."
SECTION 3. WAIVERS
3.1 WAIVERS AND CONSENTS.
(a) Effective as of the Effective Date (as defined below), and
in reliance upon the representations and warranties of Borrowers set forth in
the Loan Agreement, this First Amendment and the other Loan Documents:
(i) the Lenders hereby: (A) waive any Event of Default
that would arise under Section 8.2 of the Loan Agreement resulting from the
noncompliance by Borrowers with the provisions of Sections 7.1(f)(ii), 7.8(a),
7.8(c) and 7.14 of the Loan Agreement by reason of Borrowers (x) incurring
additional Other Senior Debt in the aggregate principal amount not to exceed
$6,300,000 pursuant to the Cypress Second Amendment, (y) executing and agreeing
to the Cypress Second Amendment and (z) repurchasing and/or retiring the Senior
Subordinated Notes purchased by the Other Senior Lenders and (B) consent to (x)
the incurrence by Borrowers of additional Indebtedness in an amount not to
exceed $6,300,000 constituting Other Senior Debt pursuant to the Cypress Second
Amendment, (y) the execution of and agreement to the Cypress Second Amendment
and (z) the repurchase and/or the retirement of the Senior Subordinated Notes
purchased by the Other Senior Lenders; and
(ii) in accordance with Section 14(b) of the
Intercreditor Agreement, the Agent hereby consents to the Cypress Second
Amendment, provided that the Other Senior Lenders acknowledge that such
Indebtedness shall constitute Cypress Indebtedness (as defined in the
Intercreditor Agreement) and shall be subject to the terms of the Intercreditor
Agreement.
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(b) Notwithstanding the foregoing, the waivers and consents
set forth in clause (a) of this Section 3.1 shall only be effective for each
incurrence by Borrowers of additional Other Senior Debt if: (i) both immediately
before and immediately after the incurrence of such additional Other Senior
Debt, there does not exists and is not continuing any Event of Default, (ii)
Borrowers incur such Other Senior Debt on or prior to December 31, 2003, (iii)
the aggregate principal amount of Other Senior Debt incurred by Borrowers
pursuant to this First Amendment does not exceed $6,300,000, (iv) the proceeds
of such additional Other Senior Debt is used to repurchase and/or retire the
Senior Subordinated Notes, (v) the price paid to repurchase and/or retire each
such Senior Subordinated Note is not greater than 85% of the principal amount of
such Senior Subordinated Note, (vi) the repurchase and/or retirement will be
made in compliance with all applicable laws and will not breach or otherwise
result in a default under the Indenture and (vii) immediately prior to the
incurrence by Borrowers of such additional Other Senior Debt, the chief
financial officer of the Administrative Borrower provides to the Agent a
certificate that will certify that Borrowers are in compliance with the
requirements set forth in clauses (ii) through (v) above, providing reasonable
detailed calculations (if necessary) and attaching such documentation as may be
required by the Agent.
(c) The waivers and consents set forth above shall be
specifically limited and subject to the matters set forth therein and the
Lenders' and the Agent's granting of such waivers and consents shall not be
construed as an indication that any future waiver or consent of covenants or any
other provision of the Loan Agreement or Intercreditor Agreement will be agreed
to, it being understood that the granting or denying of any waiver or consent
which may hereafter be requested by Borrowers or the Other Senior Lenders
remains in the sole and absolute discretion of the Lenders and the Agent.
SECTION 4. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS.
4.1 REPRESENTATIONS.
Borrowers and Guarantors hereby represent and warrant to Agent
and Lenders and that:
(a) Borrowers and Guarantors are duly organized and existing
and in good standing under the laws of its respective jurisdiction of formation
and is duly qualified to do business in every jurisdiction where the failure to
be so qualified reasonably could be expected to have a Material Adverse Change;
(b) Borrowers and Guarantors each have all requisite power and
authority necessary to enter into this First Amendment, to amend the Mortgages
("Mortgage Amendments"), to enter into the Cypress Second Amendment, to amend
the mortgages securing the obligations of Borrowers to the Other Senior Lenders
under the Other Senior Debt Loan Agreement (collectively, the "Related Cypress
Amendments) and to perform its respective obligations under this First
Amendment, the Mortgage Amendments, the Cypress Second Amendment and the Related
Cypress Amendments;
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(c) Borrowers and Guarantors each have taken all corporate
action necessary to be taken by it to authorize the execution and delivery of
this First Amendment, the Mortgage Amendments, the Cypress Second Amendment and
the Related Cypress Amendments. This First Amendment, the Mortgage Amendments,
the Cypress Second Amendment and the Related Cypress Amendments have been duly
executed and delivered by Borrowers and Guarantors and constitute legal, valid
and binding obligations of Borrowers and Guarantors, enforceable against
Borrowers and Guarantors in accordance with their respective terms;
(d) After giving effect to the amendments and waivers herein,
no event has occurred and no condition exists which constitutes a Default or an
Event of Default under the Loan Agreement or the other Loan Documents; and
(e) The Loan Agreement and all other Loan Documents and all
representations, warranties, terms and conditions therein remain in full force
and effect, each Borrower and Guarantor hereby (i) confirms and agrees that each
Loan Document to which it is a party is, and shall continue to be, in full force
and effect and is hereby ratified and confirmed in all respects, and (ii)
confirms and agrees that to the extent that any such Loan Document purports to
assign or pledge to the Agent for the benefit of the Lenders, or to grant a
security interest in or Lien on, any collateral as security for the obligations
of the Borrowers or the Guarantors from time to time existing in respect of the
Loan Agreement and the other Loan Documents, such pledge, assignment and/or
grant of the security interest or Lien is hereby ratified and confirmed in all
respects.
SECTION 5. MISCELLANEOUS.
5.1 CONDITIONS TO EFFECTIVENESS. The amendments and waivers
contained in Sections 2 and 3 above shall become effective as of the date when,
and only when, the following conditions have been satisfied as determined in
Agent's and Term B Lender's sole and absolute discretion (the first date upon
which all such conditions have been satisfied being herein referred to as the
"Effective Date"):
(a) duly executed counterparts of this First Amendment have
been executed and delivered by Agent, Lenders, Borrowers, and Guarantors on or
before the 18th day of November, 2003;
(b) Borrowers shall have delivered to Agent and Term B Lender
opinions of Borrowers' counsel in form and substance satisfactory to Agent and
Term B Lender;
(c) Borrowers shall have delivered to Agent and Term B Lender
a certificate in form and substance satisfactory to Term B Lender from the Chief
Financial Officer of the Administrative Borrower certifying that (i) the
increase in Term Loan B as evidenced by this First Amendment is permitted under
the terms and conditions of the Indenture and (ii) Borrowers have the ability to
incur at least $2,500,000 of additional indebtedness under the terms and
conditions of the Indenture after giving effect to the Term Loan B as increased
by this First Amendment and the increase in the Other Senior Debt;
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(d) Borrowers shall have executed and delivered the Mortgage
Amendments in the form attached hereto as Annex II and otherwise in form and
substance satisfactory to Agent and Term B Lender;
(e) the Agent and the Term B Lender shall have received (i) a copy
of the Cypress Second Amendment and any other agreement, document or instrument
related thereto, each certified by the Chief Executive Officer or Chief
Financial Officer of the Administrative Borrower as true, complete and correct
and in full force and effect on the Effective Date and (ii) a form of the
Related Cypress Amendments to be filed by Borrowers and the Other Senior
Lenders;
(f) the Agent and the Term B Lender shall have received an
acknowledgment, duly executed by each Other Senior Lender acknowledging and
agreeing that (i) the additional Other Senior Debt to be incurred by Borrowers
as permitted pursuant to this First Amendment shall constitute Cypress
Indebtedness and be subject to the terms of the Intercreditor Agreement and (ii)
the additional Term Loan B amounts to be incurred by Borrowers as permitted
pursuant to this First Amendment shall constitute Foothill Indebtedness;
(g) Borrowers shall have paid to Term B Lender an amendment fee in
the amount of $300,000 in immediately available funds;
(h) Borrowers shall have paid to Agent, for the account of the
Lenders, an amendment fee in the amount of $60,000 in immediately available
funds; and
(i) Borrowers have paid all fees, costs and expenses incurred in
connection with this First Amendment as of the date of this First Amendment,
including, without limitation, legal fees and expenses of Paul, Hastings,
Janofsky & Walker LLP, counsel to the Term B Lender, and Schulte Roth & Zabel
LLP, counsel to Agent, as have been billed as of the date of this First
Amendment.
5.2 CONDITIONS SUBSEQUENT. The obligations of the Lender Group hereunder
and the waivers contained in Section 3 above are subject to the fulfillment of
Borrowers delivering endorsements to the title insurance policies for the Real
Property Collateral in amounts and in form and substance satisfactory to Agent
and Term B Lender on or before December 1, 2003 (the failure by Borrowers to so
perform or cause to be performed constituting an Event of Default).
5.3 CROSS-REFERENCES. References in this First Amendment to any Section
(or "Section") are, unless otherwise specified, to such Section (or "Section")
of this First Amendment.
5.4 SUCCESSORS AND ASSIGNS. This First Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
5.5 COUNTERPARTS. This First Amendment may be executed by one or more of
the parties hereto on any number of separate counterparts, each of which shall
be deemed an original and all of which, taken together, shall be deemed to
constitute one and the same instrument. Delivery of an executed counterpart of
this First Amendment by facsimile transmission shall be as effective as delivery
of an originally executed counterpart hereof.
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5.6 GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
5.7 RATIFICATION. The amendments set forth herein shall be limited
precisely as provided for herein to the provisions expressly amended herein and
shall not be deemed to be a waiver of, amendment of, consent to or modification
of any other term or provision of any other document or of any transaction or
further action on the part of Borrowers or the Guarantors which would require
the consent of the Lenders under the Loan Agreement.
5.8 CONSENT OF GUARANTORS. Without limiting any waivers or any other
provisions contained in its Guaranty, each Guarantor hereby consents to the
terms of this First Amendment and hereby confirms and agrees that its Guaranty
is and shall continue to be in full force and effect and is hereby ratified and
confirmed in all respects.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed and delivered as of the date first above written.
AMTROL INC.,
a Rhode Island corporation
By: /s/ Larry T. Guillemette
--------------------------------
Name: Larry T. Guillemette
Title: Executive Vice President and
Chief Financial Officer
WATER SOFT, INC.,
a Rhode Island corporation
By: /s/ Larry T. Guillemette
--------------------------------
Name: Larry T. Guillemette
Title: Chief Executive Officer and
President
AMTROL CANADA LTD.,
an Ontario corporation
By: /s/ Larry T. Guillemette
--------------------------------
Name: Larry T. Guillemette
Title: President
WELLS FARGO FOOTHILL, INC.
(formerly known as Foothill Capital
Corporation), a California
corporation, as Agent and as a
Lender
By: /s/ Andrew T. Furlong III
--------------------------------
Name: Andrew T. Furlong III
Title: Vice President
ABLECO FINANCE LLC,
a Delaware limited liability
company, on behalf of itself and its
Affiliate assigns, as Lender and
Term B Lender
By: /s/ Kevin Genda
--------------------------------
Name: Kevin Genda
Title: Senior Vice President
THE FOREGOING FIRST AMENDMENT IS AGREED TO,
CONSENTED TO AND ACCEPTED BY THE GUARANTORS:
AMTROL HOLDINGS, INC.,
a Delaware corporation, as Guarantor
By: /s/ Larry T. Guillemette
_________________________
Name: Larry T. Guillemette
Title: Treasurer
AMTROL INTERNATIONAL INVESTMENTS, INC.,
a Rhode Island corporation, as Guarantor
By: /s/ Larry T. Guillemette
_________________________
Name: Larry T. Guillemette
Title: Chief Executive Officer and President
SCHEDULE C-1
COMMITMENTS
TERM LOAN B
LENDER REVOLVER COMMITMENT* TERM LOAN A COMMITMENT COMMITMENT TOTAL COMMITMENT
------ -------------------- ---------------------- ---------- ----------------
Wells Fargo Foothill, Inc. $30,000,000 $10,500,000 -0- $30,000,000
Ableco Finance LLC -0- -0- $20,312,500 $20,312,500
All Lenders $30,000,000 $10,500,000 $20,312,500 $50,312,500
- ----------
* The Revolver Commitment is reduced by the amount of the outstanding
principal of Term Loan A.
ACKNOWLEDGMENT AND CONSENT
Without limiting any waivers of other provisions contained in the
Intercreditor Agreement, each of the Other Senior Lenders hereby (1)
acknowledges and consents to the terms of this First Amendment; (2) confirms and
agrees that all amounts owed to Term B Lender constitute "Foothill Indebtedness"
(as defined in the Intercreditor Agreement) and (3) confirms and agrees that all
amounts owed to the Other Senior Lenders constitute "Cypress Indebtedness" (as
defined in the Intercreditor Agreement) and shall be subject to the terms of the
Intercreditor Agreement.
CYPRESS MERCHANT BANKING
PARTNERS L.P.
By: CYPRESS ASSOCIATES, L.P.,
its General Partner
By: CYPRESS GROUP, L.L.C.,
its General Partner
By: /s/ David Spalding
_______________________
Name:
Title:
CYPRESS OFFSHORE PARTNERS L.P.
By: CYPRESS ASSOCIATES, L.P.,
its General Partner
By: CYPRESS GROUP, L.L.C.,
its General Partner
By: /s/ David Spalding
_____________________
Name:
Title:
ANNEX I
[Form of Cypress Second Amendment]
ANNEX II
[Form of Mortgage Amendments]