EXHIBIT 99.2
FIRST AMENDMENT TO FORBEARANCE AGREEMENT
This FIRST AMENDMENT TO FORBEARANCE AGREEMENT (this "Amendment") is
dated as of June 10, 2004, and is entered into among Salton, Inc., a Delaware
corporation (the "Parent"), Toastmaster Inc., a Missouri corporation
("Toastmaster"), Salton Toastmaster Logistics LLC, a Delaware limited liability
company ("Logistics"; together with the Parent and Toastmaster, collectively,
the "Borrowers" and each, individually, a "Borrower"), Home Creations Direct,
Ltd., a Delaware corporation ("Home Creations"), Sonex International
Corporation, a Delaware corporation ("Sonex"), Icebox, LLC, an Illinois limited
liability company ("Icebox"), Family Products Inc., a Delaware corporation
("Family Products"), Salton Holdings, Inc., a Delaware corporation ("Holdings";
together with Home Creations, Sonex, Icebox and Family Products, collectively,
the "Guarantors" and each, individually, a "Guarantor"), Wachovia Bank, National
Association, as Administrative Agent for the Lenders ("Agent"), and the Lenders
signatory hereto.
WITNESSETH:
WHEREAS, the Borrowers, the Guarantors, Agent, the other agents party
thereto and the Lenders party thereto have entered into that certain Credit
Agreement dated as of May 9, 2003, as amended by that certain First Amendment to
Credit Agreement dated as of February 4, 2004, and that certain Forbearance
Agreement and Amendment dated as of May 10, 2004, among the Borrowers, the
Guarantors, the Lenders signatory thereto and Agent (as heretofore amended and
as otherwise amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"; capitalized terms used herein and not otherwise defined
shall have the meaning ascribed to such terms in the Credit Agreement);
WHEREAS, the Borrowers, the Guarantors, Agent and the Lenders signatory
thereto are parties to that that certain Forbearance Agreement and Amendment
dated as of May 10, 2004 (the "Forbearance Agreement");
WHEREAS, the Borrowers have requested that Agent and the Lenders
continue to forbear from the exercise of their rights and remedies available
under the Credit Agreement as a result of the occurrence of the Existing Default
(as defined in the Forbearance Agreement) and the Anticipated Defaults (as
defined in the Forbearance Agreement) pursuant to the Forbearance Agreement; and
WHEREAS, Agent and the Lenders are willing to grant such further
forbearance, but only upon the terms and subject to the limitations set forth
herein;
NOW THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration paid by each party to the other, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree to amend
the Forbearance Agreement as set forth below, and further agree as follows:
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1. Amendments to Section 1 of the Forbearance Agreement.
(a) Section 1 of the Forbearance Agreement, Definitions, is
hereby modified and amended by deleting the definitions of "Anticipated Default"
and "Termination Date" in their respective entirety from Section 1.1 and by
substituting the following therefor:
"Anticipated Default" means any Event of Default arising from
(a) the Borrowers' failure after the date hereof to comply
with certain Sections of the Credit Agreement as designated as
an "Anticipated Default" on Schedule A hereto for the period
specified on Schedule A, (b) the Borrowers' failure to
maintain the Consolidated Fixed Charge Coverage Ratio for the
Fiscal Month ended June 30, 2004, as required by Section 7.23
of the Credit Agreement and (c) the Borrowers' failure to
maintain the US Fixed Charge Coverage Ratio for the Fiscal
Month ended June 30, 2004, as required by Section 7.23 of the
Credit Agreement; provided, however, that in the event the
Termination Date is automatically extended as provided in the
definition thereof, "Anticipated Default" shall also include
any Event of Default arising from the Borrowers' failure to
comply with Section 7.23 of the Credit Agreement prior to the
Termination Date.
"Termination Date" means the earlier to occur of (a) five p.m.
Eastern time on July 12, 2004, or (b) the date upon which an
Event of Termination occurs; provided, however, that the
Termination Date shall be automatically extended to September
30, 2004, upon (x) no later than June 25, 2004, delivery by
the Borrowers to Agent of a signed commitment letter for
additional funding (i) in the form of a revolving credit
facility providing at least $25,000,000 in gross availability
on the date of the closing of such facility or a term loan
facility in a gross amount of not less than $25,000,000 and
(ii) on terms acceptable to Required Lenders, and (y) payment
by the Borrowers to Agent, for the benefit of the Lenders
signatory to the First Amendment to Forbearance Agreement
according to their Pro Rata Shares, of a non-refundable fee in
an amount to be agreed to by the Borrowers and Agent.
(b) Section 1 of the Forbearance Agreement, Definitions, is
hereby further modified and amended by adding the following definition in the
appropriate alphabetical order:
"First Amendment to Forbearance Agreement" means that certain
First Amendment to Forbearance Agreement dated as of June 10,
2004, among the Borrowers, the Guarantors, Agent and the
Lenders signatory thereto.
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2. Amendment to Section 2 of the Forbearance Agreement. Section 2 of
the Forbearance Agreement, Agreement to Forbear and Authorization, is hereby
modified and amended by adding the following Section 2.3 to the end of Section
2:
2.3. Lenders agree that they will not elect to impose the
Default Rate on the Obligations in connection with the Existing
Default and the Anticipated Defaults prior to the Termination Date.
3. Amendments to Section 4 of the Forbearance Agreement.
(a) Section 4 of the Forbearance Agreement, Covenants and
Agreements, is hereby modified and amended by deleting Section 4.4 in its
entirety and by substituting the following therefor:
4.4. No Borrower Party shall deposit into escrow with or
otherwise transfer funds to any trustee for the holders of the
Senior Notes prior to the Termination Date for the purpose of making
any interest payment when due on the Senior Notes, except that the
Parent may make the payment of interest on the Senior Notes which is
due and payable on June 15, 2004, so long as (a) no Default or Event
of Default (other than the Existing Default and the Anticipated
Defaults) has occurred and is continuing, (b) the Borrowers shall
have Availability of at least $10,000,000 after making such payment,
and (c) on or before the date of such payment, the Borrowers shall
have delivered to Agent, in form and substance satisfactory to
Agent, a cash flow projection of the Parent relative to the Parent's
operations for the succeeding thirteen (13) week period, prepared on
a day by day basis and comparing actual results with the cash flow
projection for the immediately preceding week, showing that
Availability shall remain within margin through July 31, 2004.
(b) Section 4 of the Forbearance Agreement, Covenants and
Agreements, is hereby further modified and amended by deleting Section 4.13 in
its entirety and by substituting the following therefor:
4.13. The Borrowers hereby acknowledge that Agent has
established a Reserve (in addition to those Reserves established by
Agent prior to April 30, 2004) against Availability in the amount of
$10,000,000 in accordance with the terms of the Credit Agreement and
that Lenders will remove such Reserve, effective June 11, 2004,
subsequent to adjustments to the Borrowing Base as a result of the
inventory appraisal and field examination most recently completed at
the request of Agent.
(c) Section 4 of the Forbearance Agreement, Covenants and
Agreements, is hereby further modified and amended by adding the following
Sections to the end of Section 4:
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4.16. (a) No later than June 25, 2004, the Borrowers shall
obtain a signed commitment letter for additional funding (i) in the
form of a revolving credit facility providing at least $25,000,000
in gross availability on the date of the closing of such facility or
a term loan facility in a gross amount of not less than $25,000,000
and (ii) on terms acceptable to Required Lenders and (b) no later
than July 12, 2004, the Borrowers shall have received such
additional funding.
4.17. No later than June 14, 2004, the Borrowers shall deliver
to Agent, in form and substance satisfactory to Agent, a plan to
expeditiously liquidate the inventory of the Borrower Parties that
is deemed to be excess or obsolete or that is related to
discontinued stock keeping units.
4.18. No later than June 21, 2004, the Borrowers shall deliver
to Agent, in form and substance satisfactory to Agent, a list and
summary of the credit facilities of each of the Borrower Parties,
their Subsidiaries and Amalgamated Appliance Holding Limited.
4.19. No later than June 21, 2004, and on the third Business
Day of each week thereafter, the Borrowers shall deliver to Agent,
in form and substance acceptable to Agent, an update of the
consolidated liquidity of the Borrower Parties, their Subsidiaries
and Amalgamated Appliance Holding Limited for the immediately
preceding week, including, without limitation, foreign cash and
availability under the foreign credit facilities of the Borrower
Parties, their Subsidiaries and Amalgamated Appliance Holding
Limited, designated by location.
4.20. No later than June 21, 2004, and on the 21st day of each
month thereafter, the Borrowers shall deliver to Agent, in form and
substance satisfactory to Agent, an update of expense savings
results achieved by the Borrower Parties in the immediately
preceding month compared to the budgeted expense reductions of the
Borrower Parties for such month.
4.21 No later than June 21, 2004, the Borrowers shall deliver
to Agent, in form and substance satisfactory to Agent, financial
forecasts (to include forecasted consolidated and consolidating
balance sheets, income statements and cash flow statements) for the
Parent and for the Borrowers as at the end of and for each Fiscal
Month for the period from June 1, 2004 through June 30, 2005,
including, without limitation, the projected Consolidated Fixed
Charge Coverage Ratio and US Fixed Charge Coverage Ratio as of the
end of each Fiscal Month during such period.
4.22. On the earlier of the Termination Date and the date of
receipt by the Borrowers of the additional funding described in
Section 4.16 hereof, the Borrowers shall pay to Agent, for the
benefit of the
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Lenders signatory to the First Amendment to Forbearance Agreement
according to their Pro Rata Shares, a non-refundable fee in the
amount of $343,750. Such fee shall be fully earned on the date of
the effectiveness of the First Amendment to Forbearance Agreement.
4. No other Amendments. Except as otherwise expressed herein, the
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of Agent and the Lenders under the Credit
Agreement, the Forbearance Agreement or any of the other Loan Documents, nor
constitute a waiver of any provision of the Credit Agreement, the Forbearance
Agreement or any of the other Loan Documents, including, without limitation, the
Existing Default or any Anticipated Default. Agent and the Lenders expressly
reserve all rights with respect to the Existing Default or any Anticipated
Default, subject only to the terms in the Credit Agreement, the Forbearance
Agreement, the other Loan Documents and this Amendment. Except for the
amendments set forth above, the text of the Forbearance Agreement and all other
Loan Documents shall remain unchanged and in full force and effect and each
Borrower Party hereby ratifies and confirms its obligations thereunder. This
Amendment shall not constitute a modification of the Forbearance Agreement or a
course of dealing with Agent and the Lenders at variance with the Forbearance
Agreement such as to require further notice by Agent or the Lenders to require
strict compliance with the terms of the Forbearance Agreement and the other Loan
Documents in the future, except as expressly set forth herein. Each Borrower
Party acknowledges and expressly agrees that Agent and the Lenders reserve the
right to, and do in fact, require strict compliance with all terms and
provisions of the Forbearance Agreement and the other Loan Documents. No
Borrower Party has knowledge of any challenge to Agent's or any Lender's claims
arising under the Loan Documents or the effectiveness of the Loan Documents.
5. Conditions Precedent to Effectiveness. This Amendment shall become
effective and be deemed effective as of the date hereof, upon the occurrence of
each of the following, to the satisfaction of Agent:
(a) Agent shall have received counterparts of this Amendment, duly
executed and delivered by the Borrower Parties, Agent and Required Lenders, by
3:00 p.m., Eastern time, on June 10, 2004;
(b) The Borrowers shall have paid all outstanding fees and expenses
of Paul, Hastings, Xxxxxxxx & Xxxxxx LLP, as counsel to Agent, and Capstone
Corporate Recovery, LLC, as advisor to Agent's counsel, and any other fees,
costs and expenses invoiced to the Borrowers and payable in accordance with the
Credit Agreement; and
(c) Agent shall have received such other documents as Agent may
request.
6. Representations and Warranties of Borrowers. Each Borrower Party
represents and warrants to Agent and the Lenders as follows:
(a) the execution, delivery and performance of this Amendment by
such Borrower Party are within its corporate or limited liability company power
and have been duly
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authorized by all necessary corporate or limited liability company action, and
this Amendment constitutes a valid and legally binding agreement enforceable
against such Borrower Party in accordance with its terms;
(b) no authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by such Borrower Party of this
Amendment or any of the Loan Documents, as amended hereby, to which such
Borrower Party is or will be a party;
(c) this Amendment and each of the other Loan Documents to which
such Borrower Party is a party, including, without limitation, the Credit
Agreement, constitute legal, valid and binding obligations of such Borrower
Party, enforceable against such Borrower Party in accordance with the terms
thereof; and
(d) no Default or Event of Default, except for the Existing Default
or any Anticipated Default, is existing.
7. Release. As further consideration to induce Agent and the Lenders to
execute, deliver and perform the Forbearance Agreement and this Amendment, and
acknowledging that Agent and the Lenders will be specifically relying on the
following provisions as a material inducement in entering into this Amendment,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, each Borrower Party, on behalf of itself and its
shareholders and subsidiaries, hereby releases, remises and forever discharges
Agent, the Lenders and their agents, servants, employees, directors, officers,
attorneys, accountants, consultants, affiliates, representatives, receivers,
trustees, subsidiaries, predecessors, successors and assigns (collectively, the
"Released Parties") from any and all claims, damages, losses, demands,
liabilities, obligations, actions and causes of action whatsoever (whether
arising in contract or in tort, and whether at law or in equity), whether known
or unknown, matured or contingent, liquidated or unliquidated, in any way
arising from, in connection with, or in any way concerning or relating to the
Credit Agreement, the other Loan Documents, and/or any dealings with any of the
Released Parties in connection with the transactions contemplated by such
documents or this Amendment prior to the execution of this Amendment. This
release shall be and remain in full force and effect notwithstanding the
discovery by any Borrower Party after the date hereof (i) of any new or
additional claim against any Released Party, (ii) of any new or additional facts
in any way relating to the subject matter of this release, (iii) that any fact
relied upon by it was incorrect or (iv) that any representation made by any
Released Party was untrue or that any Released Party concealed any fact,
circumstance or claim relevant to such Borrower Party's execution of this
release; provided, however, this release shall not extend to any claims arising
after the execution of this Amendment in connection with the Credit Agreement
and the other Loan Documents. Each Borrower Party acknowledges and agrees that
this release is intended to, and does, fully, finally and forever release all
matters described in this Section 8, notwithstanding the existence or discovery
of any such new or additional claims or facts, incorrect facts, misunderstanding
of law, misrepresentation or concealment.
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8. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same agreement. In proving this
Amendment in any judicial proceedings, it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom such
enforcement is sought. Any signatures delivered by a party by facsimile
transmission or by e-mail transmission of an adobe file format document (also
known as a PDF file) shall be deemed an original signature hereto.
9. Reference to and Effect on the Loan Documents. Upon the
effectiveness of this Amendment, on and after the date hereof each reference in
the Forbearance Agreement to "this Agreement", "hereunder", "hereof" or words of
like import referring to the Forbearance Agreement, and each reference in the
other Loan Documents to "the Forbearance Agreement" "thereunder", "thereof" or
words of like import referring to the Forbearance Agreement, shall mean and be a
reference to the Forbearance Agreement as amended hereby.
10. Costs, Expenses and Taxes. The Borrowers shall reimburse Agent and
the Lenders, upon demand, for all fees, costs and expenses (including, but not
limited to, attorneys' fees and expenses) incurred by Agent and the Lenders, or
otherwise due and payable, in connection with this Amendment and the
transactions contemplated thereby, including, but not limited to, such fees,
costs and expenses incurred in connection with the negotiation, drafting,
implementation, administration and enforcement of this Amendment and the other
Loan Documents, and the costs and expenses paid or incurred by any Lender Party
(as defined in the Forbearance Agreement) (including airfare, hotel, and other
travel expenses) to (a) attend any meeting with any Borrower Party, or the
agents or representatives of such Borrower Party, (b) obtain any information in
connection with, or examine, any of the Collateral or any Borrower Party's
operations, affairs or financial condition or (c) otherwise fulfill its
obligations with respect to its engagement. Each Borrower hereby acknowledges
and agrees that Agent may charge such costs and fees to Borrowers' Loan Account
pursuant to the Credit Agreement, which amounts shall constitute Revolving Loans
under the Credit Agreement and shall accrue interest at the rate then applicable
to Revolving Loans thereunder.
11. APPLICABLE LAW. THIS AMENDMENT AND THE TRANSACTIONS EVIDENCED
HEREBY SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF
LAWS PROVISIONS) OF THE STATE OF NEW YORK; PROVIDED THAT AGENT AND THE LENDERS
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
12. CONSULTATION WITH COUNSEL. EACH BORROWER PARTY ACKNOWLEDGES THAT IT
HAS BEEN REPRESENTED BY ITS OWN LEGAL COUNSEL IN CONNECTION ITS EXECUTION OF
THIS AMENDMENT AND THE LOAN DOCUMENTS, THAT IT HAS EXERCISED INDEPENDENT
JUDGMENT WITH RESPECT TO THIS AMENDMENT AND THE LOAN DOCUMENTS, AND THAT IT HAS
NOT RELIED ON AGENT OR ANY LENDER OR ON AGENT'S OR ANY LENDER'S COUNSEL FOR ANY
ADVICE WITH RESPECT TO THIS AMENDMENT OR THE LOAN DOCUMENTS.
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13. Loan Document. This Amendment shall be deemed to be a Loan Document
for all purposes.
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of the date first set forth above, by their
respective duly authorized officers.
AGENT AND LENDERS:
WACHOVIA BANK, NATIONAL ASSOCIATION
as Agent and a Lender
By:
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Its:
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BANK OF AMERICA, N.A., as a Lender
By:
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Its:
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BANK ONE, NA, as a Lender
By:
Its:
FLEET CAPITAL CORPORATION, as a
Lender
By:
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Its:
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THE CIT GROUP/COMMERCIAL SERVICES,
INC., as a Lender
By:
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Its:
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FIRST AMENDMENT TO FORBEARANCE AGREEMENT
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PNC BANK, NATIONAL ASSOCIATION,
as a Lender
By:
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Its:
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U.S. BANK NATIONAL ASSOCIATION, as
a Lender
By:
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Its:
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COMERICA BANK, as a Lender
By:
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Its:
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XXXXXX COMMERCIAL PAPER INC., as
a Lender
By:
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Its:
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BANKNORTH, N.A., as a Lender
By:
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Its:
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FIRST AMENDMENT TO FORBEARANCE AGREEMENT
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CREDIT SUISSE FIRST BOSTON,
ACTING THROUGH ITS CAYMAN
ISLANDS BRANCH, as a Lender
By:
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Its:
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By:
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Its:
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HSBC BANK USA, as a Lender
By:
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Its:
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FIRST NATIONAL BANK AND TRUST
COMPANY, as a Lender
By:
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Its:
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RZB FINANCE LLC, as a Lender
By:
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Its:
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By:
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Its:
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FIRST AMENDMENT TO FORBEARANCE AGREEMENT
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BORROWERS:
SALTON, INC., a Delaware
corporation
By:
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Its:
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TOASTMASTER INC., a Missouri
corporation
By:
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Its:
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SALTON TOASTMASTER LOGISTICS LLC,
a Delaware limited liability
company
By:
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Its:
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GUARANTORS:
HOME CREATIONS DIRECT, LTD.,
a Delaware corporation
By:
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Its:
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FIRST AMENDMENT TO FORBEARANCE AGREEMENT
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SONEX INTERNATIONAL CORPORATION,
a Delaware corporation
By:
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Its:
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ICEBOX, LLC, an Illinois limited
liability company
By:
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Its:
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FAMILY PRODUCTS INC., a Delaware
corporation
By:
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Its:
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SALTON HOLDINGS, INC., a
Delaware corporation
By:
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Its:
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FIRST AMENDMENT TO FORBEARANCE AGREEMENT
