FORM OF AMENDMENT NO. 1 TO THE FORBEARANCE AGREEMENT AND THE CREDIT AGREEMENT
Exhibit 99.1
FORM OF AMENDMENT NO. 1 TO THE
FORBEARANCE AGREEMENT AND THE CREDIT AGREEMENT
AMENDMENT NO. 1 TO THE FORBEARANCE AGREEMENT AND THE CREDIT AGREEMENT, dated as of November [ ], 2008 (this “Amendment”), with respect to the Forbearance Agreement dated as of September 15, 2008 (the “Forbearance Agreement”), among Masonite Corporation (the “U.S. Borrower”), Masonite International Corporation (the “Canadian Borrower” and, together with the U.S. Borrower, the “Borrowers”), Masonite International Inc. (“Holdings”), the Lenders party thereto and The Bank of Nova Scotia, as Administrative Agent (in such capacity, the “Administrative Agent”), relating to the Credit Agreement, dated as of April 6, 2005 (as amended or modified, the “Credit Agreement”) among the Borrowers, Holdings, the Lenders referred to therein and the Administrative Agent, and with respect to the Credit Agreement.
RECITALS
WHEREAS, as a result of the occurrence and continuation of the “Designated Events of Defaults”, the Loan Parties and certain other parties entered into the Forbearance Agreement;
WHEREAS, the Lenders party hereto have agreed to amend the Forbearance Agreement and the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Section 1.1. Definitions. Unless otherwise defined herein, capitalized terms used herein have the meanings assigned in the Forbearance Agreement.
Section 1.2. Amendments to Forbearance Agreement.
(a) The first Recital to the Forbearance Agreement is hereby deleted and the following new Recital inserted in lieu thereof:
WHEREAS, the following Events of Default (1) have occurred and are continuing under Section 11.3 of the Credit Agreement: (a) the breach by Holdings of its obligations under Section 10.9 of the Credit Agreement (Consolidated Total Debt to Consolidated EBITDA Ratio) as at June 30, 2008 and (b) the breach by Holdings of its obligations under Section 10.10 of the Credit Agreement (Consolidated EBITDA to Consolidated Interest Expense Ratio) as at June 30, 2008 and (2) may occur during the Forbearance Period (a) the breach by Holdings of its obligations under Section 10.9 of the Credit Agreement (Consolidated Total Debt to Consolidated
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EBITDA Ratio) as at September 30, 2008, (b) the breach by Holdings of its obligations under Section 10.10 of the Credit Agreement (Consolidated EBITDA to Consolidated Interest Expense Ratio) as at September 30, 2008 and (c) the failure to deliver within the time period permitted the financial statements required to be delivered pursuant to Section 9.1(b) of the Credit Agreement as required and failure to deliver the certificate related to such financials required to be delivered pursuant to Section 9.1(d) of the Credit Agreement; provided that, the Loan Parties shall deliver certain financial information consisting of revenue, operating EBITDA, Adjusted EBITDA, cash on hand, outstanding debt, working capital balance and an overview of selling, general and administrative expenses with respect to the third quarter of 2008 by November 28, 2008 and shall deliver all information required by Section 9.1(b) and the related certificate as required by Section 9.1(d) no later than January 7, 2009 (it being understood that the failure of the Loan Parties to deliver the information described in this proviso by the dates set forth in this proviso shall not be a “Designated Event of Default”). Each of the defaults described in clause (1) of the first sentence of this Recital constitutes an Event of Default and is herein referred to as an “Acknowledged Event of Default” and collectively as the “Acknowledged Events of Defaults.” If the defaults described in clause (2) of the first sentence of this Recital are determined to exist, they will constitute Events of Default and they, together with the Acknowledged Events of Default, are herein referred to as a “Designated Event of Default” and collectively as the “Designated Events of Defaults”.
(b) Article I of the Forbearance Agreement is hereby amended by amending and restating the definition of “Forbearance Termination Date” to read as follows:
“Forbearance Termination Date” means the earlier of: (a) 11:59 p.m. New York City time on December 19, 2008; provided, however, that if, on or before such time, the Loan Parties shall have complied with the covenant set forth in Section 2.6(a), such date shall be January 15, 2009, (b) the occurrence of a Termination Event pursuant to and as defined in that certain Forbearance Agreement (the “Bondholder Forbearance Agreement”), dated as of November 17, 2008, by and among Holdings, the Canadian Borrower, the U.S. Borrower, the indirect and direct subsidiaries identified on the signature pages thereof, as guarantors, and the holders of the Senior Subordinated Notes due 2015 (the “Notes”) that were issued pursuant to (i) that certain Exchange Note Indenture, dated as of October 6, 2006 (as amended or modified, the “U.S. Indenture”), among the U.S. Borrower, Holdings, the Canadian Borrower, as guarantor and certain subsidiaries of
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Holdings, as guarantors, and (ii) that certain Exchange Note Indenture, dated as of October 6, 2006 (as amended or modified, the “Canadian Indenture,” together with the U.S. Indenture, the “Indentures”), among the Canadian Borrower, Holdings, the U.S. Borrower, as guarantor, and certain subsidiaries of Holdings, as guarantors; provided that if (X) a Termination Event pursuant to the Bondholder Forbearance Agreement occurs and (Y) the Loan Parties are diligently pursuing a waiver of such Termination Event from or an extension of the forbearance by the holders of the Notes, then the applicable Forbearance Termination Event shall be the date that is three days from the occurrence of the Termination Event pursuant to the Bondholder Forbearance Agreement, (c) the failure of the Loan Parties to deliver certain financial information consisting of revenue, operating EBITDA, Adjusted EBITDA, cash on hand, outstanding debt, working capital balance and an overview of selling, general and administrative expenses with respect to the third quarter of 2008 by November 28, 2008 and (d) the failure of the Loan Parties to deliver all information required by Section 9.1(b) and the related certificate as required by Section 9.1(d) no later than January 7, 2009.
(c) Article II of the Forbearance Agreement is hereby amended by inserting at the end thereof the following new Section 2.6:
Section 2.6 Covenants.
(a) The Loan Parties agree to:
(i) Deliver to the Administrative Agreement a preliminary draft business plan in form consistent with the business plans previously prepared by the Borrowers and presented to the Lenders, on or before December 19, 2008;
(ii) Deliver to the Administrative Agreement a final business plan on or before January 15, 2009;
(iii) Make members of senior management of the U.S. Borrower available for a meeting with the Administrative Agent and members of the steering committee of lenders to discuss the business plan delivered to the Administrative Agent pursuant to clause (a), above, no later than December 22, 2008;
(iv) Make members of senior management of the U.S. Borrower available for a meeting with the Administrative Agent and members of steering committee of lenders to discuss such committee’s restructuring proposal (which proposal shall be based on the preliminary draft business plan described in Section 2.6(a) hereof), within five (5) Business Days from receipt by the U.S. Borrower of such proposal;
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(v) Negotiate in good faith the terms of a potential restructuring with the Administrative Agent and members of the steering committee of lenders; and
(vi) Provide the Administrative Agent and its advisors with periodic updates (no less frequently than weekly) on developments relating to the Loan Parties’ restructuring, on cash levels of the Loan Parties, on all other material developments in the business of the Loan Parties and on the business planning process.
(vii) deliver to the Administrative Agent, no later than 1:00 p.m. Eastern Time on the Thursday of each week during the Forbearance Period, in a form reasonably acceptable to the Administrative Agent, a rolling 13-week cash flow forecast (a “Cash Flow Projection”), and deliver, no later than 1:00 p.m. Eastern Time on the eleventh Business Day following the close of each fiscal month during the Forbearance Period, a comparison of the prior month of actual results of all items contained in each of the Cash Flow Projections delivered during such month to the amounts with respect to each week during such month contained in the Cash Flow Projections delivered to the Administrative Agent during the immediately preceding month.
(b) The Loan Parties will not, and will not permit any of the Restricted Subsidiaries, to declare or pay any management fees, sponsor fees, consulting fee, dividends or make any other distribution to any shareholder of Masonite Holdings Corp., any of such shareholders’ Affiliates or any Affiliate of the Loan Parties other than (a) the Loan Parties or their Restricted Subsidiaries or (b) compensation paid in the ordinary course of business, consistent with past practice, to any person who is an employee of any Loan Party or any of their Restricted Subsidiaries and a shareholder of Masonite Holdings Corp. as of the date hereof.
Section 1.3. Amendments to Credit Agreement. (a) Section 1.1 of the Credit Agreement is hereby amended by adding the following definition in alphabetical order:
“Additional Margin” shall mean 2.00% per annum.
(b) The definition of “Applicable ABR Margin” in Section 1.1 of the Credit Agreement is hereby amended and restated as follows:
“Applicable ABR Margin” shall mean at any date, the Additional Margin plus (a) with respect to each ABR Loan and Cdn ABR Loan that is a Term Loan, 1.00% per annum and (b) with respect to each ABR Loan, Cdn ABR Loan and Canadian Prime Loan that is a Revolving Credit Loan or Swingline Loan, 1.50% per annum.
(c) Section 2.8 of the Credit Agreement is hereby amended by adding the following as a new clause (g) immediately following Section 2.8(f):
(g) Notwithstanding anything to the contrary provided herein, Additional Margin shall be paid on the applicable interest payment date therefor by
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increasing outstanding principal amount of the Loans by the amount of interest accrued in respect of Additional Margin through the applicable interest payment date, and all other interest shall be paid in cash at the times prescribed herein.
(d) For the avoidance of doubt, and notwithstanding anything to the contrary provided in the Credit Agreement, (i) Section 2.2 of the Forbearance Agreement shall continue to apply and shall not be affected by this Amendment, and (ii) on the first Business Day following the date hereof, interest on all Loans shall begin accruing at the rates in effect as a result of this Amendment.
ARTICLE II
CONDITIONS PRECEDENT
Section 2.1. Conditions Precedent. This Amendment shall not be effective unless and until each of the following conditions shall have been satisfied in the Administrative Agent’s sole discretion or waived in accordance with the terms hereof:
(a) The Administrative Agent shall have received:
(i) counterparts of this Amendment executed by Holdings, the Borrowers, the Guarantors, the Lenders constituting the Required Lenders, and the Administrative Agent; and
(ii) payment in full in cash of its invoiced and unpaid Costs and Expenses to the extent due in accordance with the terms of the Forbearance Agreement; and
(b) Each of the representations and warranties contained in this Amendment shall be true and correct as of the date hereof; and
(c) The Bondholder Forbearance Agreement shall have become effective.
ARTICLE III
REPRESENTATIONS AND WARRANTIES; ACKNOWLEDGMENTS
Section 3.1. Incorporation of Recitals. Each Loan Party hereby acknowledges and agrees that (i) the matters set forth in the Recitals are true and correct, (ii) the Acknowledged Events of Default have occurred and are continuing, (iii) the Lenders have no obligation to make additional Revolving Credit Loans, and the Letter of Credit Issuers have no obligation to issue any additional Letters of Credit or to renew or extend any outstanding Letters of Credit, under the Credit Agreement, and (iv) absent the continued effectiveness of the Forbearance Agreement (as amended hereby), the Administrative Agent and the Lenders are entitled to exercise immediately their rights and remedies under the Credit Documents.
Section 3.2. Validity of the Agreements. Each Loan Party expressly acknowledges and agrees that the Credit Documents are valid and enforceable by the Administrative Agent and the Lenders against such Loan Party (except, in any case, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights
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generally and by principles of equity) and expressly reaffirms each of its obligations under the Credit Documents.
Section 3.3. No Conflicts. Each Loan Party represents and warrants to the Administrative Agent and the Lenders, as of the date hereof, such representation and warranty surviving the execution and implementation of this Amendment and the transactions contemplated herein, that it has the power and authority to execute, deliver and perform its obligations under this Amendment, and that the execution, delivery and performance by each Loan Party of this Amendment have been duly authorized by all necessary corporate, stockholder or other equivalent action, and do not (A) contravene the certificate of incorporation, by-laws or other constitutive documents of each Loan Party; (B) contravene any contractual restriction, any court or administrative decree or order binding on or affecting such Loan Party; or (C) result in, or require the creation or imposition of, any Lien on any of the properties of such Loan Party.
Section 3.4. Validity. Each Loan Party represents and warrants to the Administrative Agent and the Lenders, as of the date hereof, such representation and warranty surviving the execution and implementation of this Amendment and the transactions contemplated herein, that this Amendment constitutes the legal, valid and binding obligation of each Loan Party, enforceable in accordance with its terms.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Amendments; Interpretation. No amendment or modification of any provision of this Amendment shall be effective without the written agreement of each Loan Party, the Administrative Agent and the Required Lenders, and no waiver of any provision of this Amendment, or consent to any departure by any Loan Party therefrom, shall in any event be effective without the written concurrence of the Required Lenders. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand upon any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances. No prior drafts of this Amendment, or any negotiations regarding the terms contained in those drafts, shall be admissible in any court to vary or interpret the terms of this Amendment, the parties hereto agreeing that this Amendment constitutes the final expression of the parties’ agreement and supersedes all prior written and oral understandings regarding the terms of this Amendment. The parties hereto have had the opportunity to be represented by counsel in their negotiations of the terms of this Amendment, and therefore no provision of this Amendment shall be construed against any party hereto on the theory that such party drafted such provision.
Section 4.2. No Waiver. The Administrative Agent’s or any Lender’s failure, at any time or times, to require strict performance by any Loan Party of any provision or term of this Amendment or of any of the Credit Documents shall not waive, affect or diminish any right of the Administrative Agent or the Lenders thereafter to demand strict compliance and performance therewith. Any suspension or waiver by the Administrative Agent or the Lenders of a Forbearance Default shall not suspend, waive or affect any other Forbearance Default or any Event of Default, whether the same is prior or subsequent thereto and whether of the same or of a different kind or character. Without limiting the generality of the foregoing, nothing herein
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constitutes a waiver of any Event of Default (whether or not such Event of Default constitutes a Designated Event of Default).
Section 4.3. Submission to Jurisdiction. The Administrative Agent, the Lenders and each Loan Party each agree that all disputes among them arising out of, connected with, related to, or incidental to the relationship established between them in this Amendment, and whether arising in contract, tort, equity, or otherwise, shall be resolved only by the courts of the State of New York sitting in the Borough of Manhattan in the City of New York or the United States District Court for the Southern District of New York, and appellate court from any thereof. The Administrative Agent, the Lenders and each Loan Party each waives in all disputes any objection that any of them may have to the location of the court considering the dispute which court shall have been chosen in accordance with the foregoing.
Section 4.4. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE ADMINISTRATIVE AGENT AND THE LENDERS AND ANY LOAN PARTY OR ANY OF THEIR RESPECTIVE AFFILIATES ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN THIS AMENDMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 4.5. Section Titles. The section and subsection titles contained in this Amendment are included for the sake of convenience only, shall be without substantive meaning or content of any kind whatsoever, and are not a part of the agreement between each Loan Party, the Administrative Agent and the Lenders. Any reference in this Amendment to any “Section” refers, unless the context otherwise indicates, to a section of this Amendment.
Section 4.6. CHOICE OF LAW. EACH OF THE LENDERS, THE ADMINISTRATIVE AGENT AND EACH LOAN PARTY HEREBY AGREES THAT ALL DISPUTES AMONG OR BETWEEN THEM, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN THIS AMENDMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK.
Section 4.7. Notices. All notices, requests and demands to or upon the respective parties hereto shall be given in accordance with the Credit Agreement.
Section 4.8. Counterparts. This Amendment may be executed in any number of separate counterparts (which may include counterparts delivered by facsimile or electronic mail), each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and delivered by their duly authorized officers as of the day and year first written above.
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MASONITE CORPORATION |
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By: |
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MASONITE INTERNATIONAL CORPORATION |
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By: |
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MASONITE INTERNATIONAL, INC. |
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By: |
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[Signature Page to Amendment No. 1 to the Forbearance Agreement and the Credit Agreement]
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CUTTING EDGE TOOLING, INC. |
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DOOR INSTALLATION SPECIALIST CORPORATION |
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XXXX PROPERTIES |
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FLORIDA MADE DOOR CO. |
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MASONITE CORPORATION |
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MASONITE HOLDINGS, INC. |
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XXXXX ACQUISITION COMPANY, INC. |
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PREMDOR FINANCE, LLC |
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WMW, INC. |
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WOODLANDS MILLWORK I, LTD. |
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CASTLEGATE ENTRY SYSTEMS, INC. |
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CROWN DOOR CORPORATION |
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3061275 NOVA SCOTIA COMPANY |
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BONLEA LIMITED |
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PREMDOR XXXXXX LIMITED |
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PREMDOR U.K. HOLDINGS LIMITED |
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MASONITE EUROPE LIMITED |
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MASONITE COMPONENTS |
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MASONITE EUROPE |
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MASONITE IRELAND |
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MASONITE MEXICO, S.A. de C.V. |
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MASONITE CHILE HOLDINGS S.A. |
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By: |
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[Signature Page to Amendment No. 1 to the Forbearance Agreement and the Credit Agreement]
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THE BANK OF NOVA SCOTIA, |
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as Administrative Agent and Lender |
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By: |
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[Signature Page to Amendment No. 1 to the Forbearance Agreement and the Credit Agreement]
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[INSERT NAME OF LENDER] |
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By: |
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[Signature Page to Amendment No. 1 to the Forbearance Agreement and the Credit Agreement]