Exhibit 4.2
AMERICAN BILTRITE, INC.
Amendment No. 1
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This Amendment No. 1, dated as of December 31, 2002 (this
"Agreement"), is among American Biltrite, Inc., a Delaware corporation (the
"Company"); K&M Associates, L.P., a Rhode Island limited partnership (the
"Guarantor"); and The Prudential Insurance Company of America. The parties
hereto agree as follows:
1. Note Agreement; Definitions. This Agreement amends the Note
Purchase and Private Shelf Agreement and Facility Guarantee dated as of August
28, 2001 among the parties hereto (as in effect prior to giving effect to this
Agreement, the "Note Agreement"). Terms defined in the Note Agreement as
amended hereby (the "Amended Note Agreement") and not otherwise defined herein
are used with the meaning so defined.
2. Amendment of Note Agreement. Effective upon the date all the
conditions set forth in Section 4 hereof are satisfied (the "Amendment Date"),
which conditions must be satisfied no later than the date provided therein,
the Note Agreement is amended as follows:
2.1. Amendment of Section 6A(ii). Section 6A(ii) of the Note
Agreement is amended and restated to read in its entirety as follows:
"(ii) Fixed Charge Coverage Ratio. The ratio of Consolidated
Adjusted EBITDA for the period of four consecutive fiscal quarters to
Consolidated Fixed Charges for such period to be less than the following
ratios during the following respective periods:
Quarter(s) Ending Ratio
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December 31, 2001 2.00 to 1.00
March 31, 2002 1.50 to 1.00
June 30, 2002, September 30, 2002 1.75 to 1.00
December 31, 2002, March 31, 2003 1.25 to 1.00
June 30, 2003 1.50 to 1.00
September 30, 2003 and 2.00 to 1.00"
each fiscal quarter ending thereafter
2.2 Amendment of Section 6A(v). Section 6A(v) of the Note
Agreement is amended and restated to read in its entirety as follows:
"(v) Leverage Ratio. The Leverage Ratio to exceed the
following ratios as of the end of the following respective periods:
Quarter(s) Ending Percentage
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September 30, 2001 3.25 to 1.00
December 31, 2001 2.75 to 1.00
March 31, 2002, June 30, 2002 3.25 to 1.00
September 30, 2002 2.75 to 1.00
December 31, 2002, March 31, 2003 3.25 to 1.00
June 30, 2003 3.00 to 1.00
September 30, 2003 and 2.50 to 1.00"
each fiscal quarter ending thereafter
2.3 Amendment of Section 6B. Section 6B of the Note Agreement
is amended and restated to read in its entirety as follows:
"6B. Net Worth. The Company will not permit, as at the end of
each fiscal quarter, Consolidated Tangible Net Worth to be less than
the sum of (i) $48,000,000, plus (ii) 50% of Consolidated Net Income
Available for Tangible Net Worth for the period from December 31, 2002
to and including the most recent quarter ended prior to the measurement
date."
2.4 Amendment to Section 6D. Section 6D(vi) is hereby amended
by inserting the words ", Synthetic Lease Obligations" immediately after
the reference to "Capitalized Leases".
2.5 Amendment to Section 6E. Sections 6E(ii) and (iii) are
hereby amended by inserting the words "wholly owned" immediately before
each reference to "Restricted Subsidiary".
2.6 Amendment to Section 6F. Sections 6F(i) and (ii) are hereby
amended by inserting the words "wholly owned" immediately before each
reference to "Restricted Subsidiary".
2.7 Amendment to Section 6G. Section 6G is hereby amended as
follows:
(a) By inserting the words "wholly owned" immediately before
the reference to "Restricted Subsidiary" appearing immediately before the
proviso in clause (i); and
(b) By inserting the worlds "wholly owned" immediately before
the reference to "Restricted Subsidiary" appearing in clause (ii)(b).
2.8 Amendment to Certain Definitions. The following definitions
appearing in Section 10B of the Note Agreement are hereby amended and
restated in their entirety to read as follows:
"Consolidated Adjusted EBITDA" shall mean, for any period, the
total of:
(a) Consolidated EBITDA; minus
(b) $4,500,000 in respect of capital expenditures made during
such period (whether or not actual capital expenditures are greater or
less than $4,500,000); minus
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(c) any dividends paid or payable in cash by the Company or
any of its Restricted Subsidiaries to third parties; minus
(d) the aggregate amount paid by the Company and its
Restricted Subsidiaries to repurchase shares of capital stock and
options to purchase shares of capital stock, in each case excluding any
such payments made prior to June 30, 2001; minus
(e) any income taxes paid or payable in cash by the Company or
any of its Restricted Subsidiaries.
"Consolidated EBITDA" shall mean, for any period, the total of:
(a) Consolidated Net Income; plus
(b) all amounts deducted in computing such Consolidated Net
Income in respect of:
(i) depreciation, amortization and unusual noncash charges
(other than the write-down of current assets),
(ii) interest expense, and
(iii) income tax expense, minus
(c) all cash payments made during such period on account of
reserves, restructuring charges and other noncash charges added back to
Consolidated EBITDA in a previous period, minus
(d) all amounts included in Consolidated Net Income in respect
of deferred income tax benefits and other noncash income items, except
such amounts that have been deducted from Consolidated EBITDA in a
previous period.
"Consolidated Fixed Charges" shall mean, for any period,
the sum of:
(a) Consolidated Interest Expense, plus
(b) the aggregate amount of all mandatory scheduled payments,
mandatory scheduled prepayments, sinking fund payments and mandatory
reductions in revolving loans as a result of mandatory reductions in
revolving credit availability, all with respect to Debt of the Company
and its Restricted Subsidiaries reporting Congoleum on the equity
method, including payments in the nature of principal under Capitalized
Leases.
"Consolidated Interest Expense" shall mean, for any period, the
total of:
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(a) the aggregate amount of interest, including commitment
fees, payments in the nature of interest under Capitalized Leases and
net payments under hedge agreements, accrued by the Company and its
Restricted Subsidiaries reporting Congoleum on the equity method
(whether such interest is reflected as an item of expense or
capitalized), minus
(b) to the extent otherwise included in clause (a) above, the
amortization of deferred financing fees and costs, original issue
discount relating to Indebtedness and accrued interest on Indebtedness
not paid in cash to the extent permitted by the terms, including
subordination terms, of such Indebtedness (including PIK Interest),
plus
(c) actual cash payments with respect to accrued and unpaid
interest (including PIK Interest) that has previously reduced
Consolidated Interest Expense pursuant to clause (b) above.
"Current Assets" shall mean, at any date, all amounts carried
as current assets on the balance sheet of the Company and its
Restricted Subsidiaries determined in accordance with generally
accepted accounting principles on a consolidated basis, excluding cash
and cash equivalents.
"Current Liabilities" means, at any date, all amounts that are
or should be carried as current liabilities on the balance sheet of the
Company and its Restricted Subsidiaries determined in accordance with
generally accepted accounting principles on a consolidated basis,
excluding the current portion of long-term Debt and the Revolving Loan
(as defined under the Bank Agreement), each to the extent they are
included in Consolidated Fixed Charges.
"Debt" shall mean each of the items described in clauses (a)
through (f) of the definition of the term "Indebtedness" and, without
duplication, any Guarantees of such items.
"Indebtedness" shall mean all obligations, contingent or
otherwise, which in accordance with generally accepted accounting
principles are required to be classified upon the balance sheet of the
Company (or other specified Person) as liabilities, but in any event
including (without duplication):
(a) indebtedness for borrowed money;
(b) indebtedness evidenced by notes, debentures or similar
instruments;
(c) Capitalized Lease Obligations and Synthetic Lease
Obligations;
(d) the deferred purchase price of assets, services or
securities, including related noncompetition, consulting and stock
repurchase obligations (other than ordinary trade accounts payable on
customary terms in the ordinary course of business);
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(e) mandatory redemption, repurchase or dividend rights on
capital stock (or other equity), including provisions that require the
exchange of such capital stock (or other equity) for Indebtedness from
the issuer;
(f) reimbursement obligations, whether contingent or matured,
with respect to letters of credit, bankers acceptances, surety bonds,
other financial guarantees and hedge agreements (without duplication of
other Indebtedness supported or guaranteed thereby);
(g) unfunded pension liabilities;
(h) obligations that are immediately and directly due and
payable out of the proceeds of or production from property;
(i) liabilities secured by any Lien existing on property owned
or acquired by the Company (or such specified Person), whether or not
the liability secured thereby shall have been assumed; and
(j) all Guarantees in respect of Indebtedness of others.
"Leverage Ratio" shall mean, as of any date of determination,
the ratio of Debt of the Company and its Restricted Subsidiaries, on a
consolidated basis, to Consolidated EBITDA for the four consecutive
fiscal quarters most recently ended.
"Restricted Subsidiary" shall mean (a) K&M and (b) any Person
of which the Company (or other specified Person) shall at the time,
directly or indirectly, through one or more of its Restricted
Subsidiaries, (i) own at least 50% of the outstanding capital stock (or
other shares of beneficial interest) entitled to vote generally, (ii)
hold at least 50% of the partnership, joint venture or similar
interests, or (iii) be a general partner or joint venturer; provided
that, at no time shall Congoleum be considered a Restricted Subsidiary.
2.9 Additional Definitions. Section 10B of the Note Agreement
is hereby amended to include the following definitions to the appropriate
alphabetic location:
"PIK Interest" shall mean any accrued interest payments on
Debt that are postponed or made through the issuance of
"payment-in-kind" notes or other similar securities (including
book-entry accrual with respect to such postponed interest payments),
all in accordance with the terms of such Debt; provided, however, that
in no event shall PIK Interest include payments made with cash or cash
equivalents.
"Synthetic Lease Obligations" shall mean the aggregate
discounted amount of future rental payments under all leases by the
Company and its Restricted Subsidiaries that are treated as operating
leases under generally accepted accounting principles and as loans or
other financings for federal income tax purposes.
3. Representations and Warranties. Each of the Company and the
Guarantor jointly and severally represents and warrants as follows:
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3.1 Legal Existence, Organization. Each of the Company and the
Guarantor is duly organized and validly existing and in good standing under
the laws of the jurisdiction of its organization, with all power and
authority, corporate, limited liability company, partnership or otherwise,
necessary (a) to enter into and perform this Agreement and the Amended Note
Agreement, and (b) to own its properties and carry on the business now
conducted or proposed to be conducted by it. Each of the Company and the
Guarantor has taken all corporate, limited liability company, partnership or
other action required to make the provisions of this Agreement and the Amended
Note Agreement the valid and enforceable obligations they purport to be.
3.2 Enforceability. Each of the Company and the Guarantor has duly
authorized, executed and delivered this Agreement. Each of this Agreement and
the Amended Note Agreement is the legal, valid and binding obligation of each
of the Company and the Guarantor and is enforceable against the Company and
the Guarantor in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors rights generally and by general equitable principles (regardless of
whether enforcement is sought in equity or at law).
3.3 No Legal Obstacle to Agreements. Neither the execution,
delivery or performance of this Agreement, nor the performance of the Amended
Note Agreement, nor the consummation of any other transaction referred to or
contemplated by this Agreement, nor the fulfillment of the terms hereof or
thereof, has constituted or resulted in or will constitute or result in:
(a) any breach or termination of any agreement, instrument,
deed or lease to which the Company or any of its Restricted Subsidiaries
is a party or by which it is bound, or of the charter or by-laws of the
Company or any of its Restricted Subsidiaries;
(b) the violation of any law, judgment, decree or governmental
order, rule or regulation applicable to the Company or any of its
Restricted Subsidiaries;
(c) the creation under any agreement, instrument, deed or lease
of any Lien upon any of the assets of the Company or any of its
Restricted Subsidiaries; or
(d) any redemption, retirement or other repurchase obligation
of the Company or any of its Restricted Subsidiaries under any charter,
by-law, agreement, instrument, deed or lease.
No approval, authorization or other action by, or declaration to or
filing with, any governmental or administrative authority or any other
Person is required to be obtained or made by the Company or any of its
Restricted Subsidiaries in connection with the execution, delivery and
performance of this Agreement or the performance of the Amended Note
Agreement, or the consummation of the transactions contemplated hereby
or thereby, except for any filings which may be required pursuant to
the federal securities laws and regulations.
3.4 Defaults. Immediately before and after giving effect to the
amendments set forth in Section 2 hereof, no Default will exist.
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3.5 Incorporation of Representations and Warranties. The
representations and warranties set forth in paragraph 8 of the Amended Note
Agreement are true and correct on the date hereof as if originally made on and
as of the date hereof, except (a) to the extent that any such representations
or warranties speak as of an earlier date, in which case they shall be true
and correct as of such earlier date, and (b) for any exhibits or schedules to
the Note Agreement, which exhibits and schedules shall be true and correct as
of the date of the Note Agreement.
4. Conditions. The effectiveness of this Agreement shall be subject
to the satisfaction of the following conditions, which conditions must be
satisfied no later than March 31, 2003 or this Agreement shall terminate:
4.1. Officer's Certificate. The representations and warranties of
the Company and the Guarantor set forth or incorporated by reference herein
shall be true and correct as of the Amendment Date as if originally made on
and as of the Amendment Date, except (a) to the extent that any such
representations or warranties speak as of an earlier date, in which case they
shall be true and correct as of such earlier date, and (b) for any exhibits or
schedules to the Note Agreement, which exhibits and schedules shall be true
and correct as of the date of the Note Agreement; no Default shall have
occurred on or prior to the Amendment Date; and Prudential shall have received
a certificate to these effects signed by a Responsible Officer in the event
the Amendment Date occurs after the date hereof.
4.2. Payment of Fees and Expenses. The Company shall have paid to
Prudential an amendment fee in an amount equal to $20,000 (the "Amendment
Fee"). As soon as practicable after the execution and delivery of this
Agreement Prudential will pay to the holders of the Notes the apportion of the
Amendment Fee that such holders may be entitled to receive.
4.3. Proper Proceedings. This Agreement and the transactions
contemplated hereby and thereby shall have been authorized by all necessary
proceedings of the Company and the Guarantor. All necessary consents,
approvals and authorizations of any governmental or administrative agency or
any other Person with respect to any of the transactions contemplated hereby
shall have been obtained and shall be in full force and effect. Prudential
shall have received copies of all documents, including certificates, records
of corporate, limited liability company, partnership or other proceedings and
opinions of counsel, which Prudential may have reasonably requested in
connection therewith, such documents where appropriate to be certified by
proper corporate, limited liability company, partnership or governmental
authorities.
5. General. The Amended Note Agreement and the Notes are each
confirmed as being in full force and effect. This Agreement, the Amended Note
Agreement, the Notes and the documents referred to therein constitute the
entire understanding of the parties with respect to the subject matter hereof
and thereof and supersede all prior and current understandings and agreements,
whether written or oral. This Agreement may be executed in any number of
counterparts, which together shall constitute one instrument, and shall bind
and inure to the benefit of the parties and their respective successors and
assigns. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to conflicts of law
principles.
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Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first above written.
AMERICAN BILTRITE, INC.
By /s/ Xxxxxx X. Xxxxx III
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Name: Xxxxxx X. Xxxxx III
Title: Vice President
K&M Associates, L.P.
By: AIMPAR, INC., its General Partner
By /s/ Xxxxxx X. Xxxxx III
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Name: Xxxxxx X. Xxxxx III
Title: Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Vice President
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