EXHIBIT 10.1 EIGHTH AMENDMENT
EIGHTH AMENDMENT TO CREDIT AGREEMENT
THIS EIGHTH AMENDMENT (this "AMENDMENT"), to the Credit
Agreement dated as of October 23, 1996, among CENTRAL PRODUCTS COMPANY, a
Delaware corporation ("CENTRAL"), SPINNAKER COATING, INC., a Delaware
corporation formerly known as Xxxxx-Bridge Industries, Inc. ("COATING"),
SPINNAKER COATING-MAINE, INC., a Delaware corporation ("SCM"), ENTOLETER,
INC., a Delaware corporation ("ENTOLETER" and, together with Central, Coating
and SCM, the "BORROWERS"), SPINNAKER INDUSTRIES, INC., a Delaware corporation
(the "GUARANTOR" and, together with the Borrowers, the "Credit Parties"),
each of the financial institutions from time to time parties thereto, as
lenders (the "LENDERS"), BT COMMERCIAL CORPORATION, as agent (in such
capacity, the "AGENT") for the Lenders, TRANSAMERICA BUSINESS CREDIT
CORPORATION, as collateral agent (in such capacity, the "COLLATERAL AGENT"),
and BANKERS TRUST COMPANY, as issuing bank (the "ISSUING BANK"), is made as
of December 31, 1998 among the Credit Parties, the Agent, the Collateral
Agent, the Issuing Bank and the Lenders.
W I T N E S S E T H :
WHEREAS, the Credit Parties, the Lenders, the Agent, the
Collateral Agent and the Issuing Bank are parties to the Credit Agreement,
dated as of October 23, 1996 (as amended by the First Amendment dated as of
December 31, 1996, the Second Amendment dated as of March 31, 1997, the Third
Amendment dated as of September 30, 1997, the Fourth Amendment dated as of
December 31, 1997, the Fifth Amendment dated as of March 17, 1998, the Sixth
Amendment dated as of March 17, 1998 and the Seventh Amendment and Consent
dated as of June 30, 1998 and as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT";
capitalized terms used herein shall have the meanings assigned to them in the
Credit Agreement unless otherwise defined herein);
WHEREAS, the Borrowers have requested that the Lenders agree to
amend certain provisions of the Credit Agreement as set forth herein; and
WHEREAS, the Lenders are agreeable to such amendments, but only on
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the
date hereof, but subject to the satisfaction of the conditions precedent set
forth in Section 2, the Credit Agreement is hereby amended as follows:
(a) Section 1.1 of the Credit Agreement is amended by inserting
the following definitions in their proper alphabetical order:
"'EQUIPMENT' is defined in the Security Agreement."
"'INDENTURE' means the Indenture dated as of October 23,
1996 among the Credit Parties and The Chase Manhattan Bank, as
Trustee, as amended, supplemented or otherwise modified from time
to time."
"'INDENTURE BORROWING BASE' means, on any day, the
outstanding principal amount of Indebtedness permitted under
Section 4.09(b)(i) of the Indenture on such day."
"'INDENTURE BORROWING BASE CERTIFICATE' is defined in
Section 7.1(b)(iv)."
(b) The definition of "Borrowing Base" in Section 1.1 of the
Credit Agreement is amended and restated as follows:
"'BORROWING BASE' means, on any day, the lesser of (a)
the sum of the Xxxxx Borrowing Base, the Central Borrowing Base,
the Entoleter Borrowing Base and the SCM Borrowing Base on such
day and (b) the Indenture Borrowing Base on any such day."
(c) The definition of "Xxxxx Borrowing Base" in Section 1.1 of
the Credit Agreement is amended by adding the following immediately before
the period at the end thereof: "and (c) $3,000,000"
(d) The definition of "Collateral" in Section 1.1 of the Credit
Agreement is amended by adding ", Equipment" after "Inventory."
(e) The definition of "Consolidated Fixed Charge Coverage
Ratio" in Section 1.1 of the Credit Agreement is amended and restated as
follows:
-2-
"'CONSOLIDATED FIXED CHARGE COVERAGE RATIO' means with respect to
the Guarantor and its Restricted Subsidiaries for any period, the
ratio of (X) EBITDA for such period to (Y) (i) scheduled principal
amounts of all Indebtedness paid or payable by such Person in such
period, whether or not such payments are actually made (other than
(A) payments on the Line of Credit which do not permanently reduce
the Commitments, (B) payments under the SDW Subordinated Note and
(C) payments made under the Tesa Note solely in shares of common
stock of the Guarantor), PLUS (ii) all interest and fees for the
use of money or the availability of money, including commitment,
facility and like fees and charges upon Indebtedness (including
Indebtedness to the Lenders) payable by such Persons during such
period whether or not such interest or fees are actually paid, but
excluding (A) the amortization of deferred financing fees incurred
or paid between October 1996 and July 28, 1998 and (B) the
amendment fee payable to the Lenders pursuant to Section 2(b)(i)
of the Eighth Amendment to this Credit Agreement, PLUS (iii) all
loans and Investments made by such Persons in or to any other
Person made during such period (other than (A) Investments
financed with the Equity Proceeds Amount and (B) Investments made
with shares of common stock of the Guarantor), PLUS (iv) all cash
dividends paid or declared by the Guarantor during such period,
regardless of whether or when such dividends are actually paid,
PLUS (v) all cash taxes paid or payable by such Persons during
such period, PLUS (vi) all Capital Expenditures paid or payable by
such Persons during such period (other than Capital Expenditures
financed with (A) the proceeds of Indebtedness permitted hereunder
and (B) the Equity Proceeds Amount)."
(f) Section 7.1(b) of the Credit Agreement is amended by adding
at the end thereof the following:
"(iv) WEEKLY AND MONTHLY INDENTURE BORROWING BASE
CERTIFICATES. Weekly, before 12:00 noon on the second Business Day
of each week (except the last week of each month), monthly, within
two (2) Business Days after the last Business Day of each month,
and at any other time requested by the Agent or the Collateral
Agent in its reasonable discretion, a borrowing base certificate
(an "INDENTURE BORROWING BASE CERTIFICATE"), which shall be: (A)
completed substantially in the form of Exhibit O, detailing the
Indenture Borrowing Base as of each Friday of the immediately
preceding week and as of the last day of each month, as applicable
(or as of such other date as the Agent or the Collateral Agent may
request); (B) prepared by or under the supervision of an
Authorized Officer of the Guarantor and certified by such officer
subject only to adjustment upon completion of the normal year-end
audit of physical inventory; and (C) attached to such additional
schedules and other information as the Agent or the Collateral
Agent may reasonably request."
(g) Section 7.2(r) of the Credit Agreement is amended and restated
as follows:
"(r) CAPITAL EXPENDITURES. The Credit Parties and their
Restricted Subsidiaries will not at any time make or commit to
make any payments for Capital Expenditures other than Capital
Expenditures which are directly related to the business conducted
by the Borrowers and their Restricted Subsidiaries on the Closing
Date
(i) in the aggregate not exceeding the
amount (the "Base Amount") for each six month period (or
portion thereof) set forth below:
-3-
PERIOD AMOUNT
------ ------
July 1, 1998 through December 31, 1998 $5,000,000
January 1, 1999 through June 30, 1999 $2,300,000
July 1, 1999 through December 31, 1999 $2,200,000
January 1, 2000 through June 30, 2000 $2,500,000
July 1, 2000 through December 31, 2000 $2,500,000
Each six month period ended each June 30
and December 31 thereafter $3,000,000
PROVIDED, HOWEVER, that for any six month period commencing with
the six month period ending June 30, 1999, the Base Amount set
forth above may be increased by carrying over to any such six
month period any portion of the Base Amount not spent in the
immediately preceding six month period (but not in any period
prior thereto); and
(ii) at any time in an aggregate amount
equal to the Equity Proceeds Amount at such time (which
Capital Expenditures will not be included in any
determination under clause (i) above)."
(h) Section 7.2(s) of the Credit Agreement is amended and
restated as follows:
"(s) [Intentionally Omitted]"
(i) Section 7.2(u) of the Credit Agreement is amended and restated
as follows:
"(u) MINIMUM CONSOLIDATED INTEREST COVERAGE RATIO; MINIMUM
CONSOLIDATED FIXED CHARGE COVERAGE RATIO. (i) The Credit Parties
will not permit the Consolidated Interest Coverage Ratio, for each
fiscal period set forth below, to be less than the ratio set forth
below opposite such period:
-4-
PERIOD RATIO
------ -----
January 1, 1998 through December 31, 1998 1.00:1.00
January 1, 1999 through March 31, 1999 0.62:1.00
January 1, 1999 through June 30, 1999 0.89:1.00
January 1, 1999 through September 30, 1999 1.05:1.00
January 1, 1999 through December 31, 1999 1.18:1.00
April 1, 1999 through March 31, 2000 1.20:1.00
July 1, 1999 through June 30, 2000 1.30:1.00
October 1, 1999 through September 30, 2000 1.40:1.00
Four fiscal quarters ended each December 31, March 31, June 30 and 1.50:1.00
September 30 thereafter
(ii) The Credit Parties will not permit Consolidated
Fixed Charge Coverage Ratio, for each fiscal period set forth
below, to be less than the ratio set forth below opposite such
period:
PERIOD RATIO
------ -----
July 1, 1998 through December 31, 1998 0.75:1.00
January 1, 1999 through March 31, 1999 0.48:1.00
January 1, 1999 through June 30, 1999 0.69:1.00
January 1, 1999 through September 30, 1999 0.81:1.00
January 1, 1999 through December 31, 1999 0.91:1.00
April 1, 1999 through March 31, 2000 1.00:1.00
July 1, 1999 through June 30, 2000 1.00:1.00
Four fiscal quarters ended each September 30, 1.10:1.00"
December 31 March 31 and June 30 thereafter
(j) Schedule 6.1(k) to the Credit Agreement is amended and
restated in the form of Annex I.
(k) The Credit Agreement is amended by adding thereto a new
Exhibit O in the form of Annex II.
SECTION 2. EFFECTIVENESS. This Amendment shall become effective
upon the Agent's receipt of (a) this Amendment, duly executed by the Credit
Parties, the Collateral Agent, the Issuing Bank and the Lenders, (b) payment (i)
of an amendment fee of $200,000 for the ratable benefit of the Lenders and (ii)
of all costs and expenses incurred by the Agent and the Collateral Agent in
connection with the preparation, execution and delivery of this Amendment and
the documents contemplated hereby, including, without limitation, the reasonable
fees and expenses of counsel to the Agent and (c) the following documents, each
of which shall be in form and substance satisfactory to the Agent and the
Collateral Agent (collectively, the "AGENTS"):
-5-
(i) Certified copies of the resolutions of
the Board of Directors of each Credit Party approving this
Amendment, the documents delivered and to be delivered in
connection herewith and the matters contemplated hereby.
(ii) A certificate of the Secretary or an
Assistant Secretary of each Credit Party certifying the names
and true signatures of the officers of such Credit Party who
are authorized to sign this Amendment and the documents
delivered and to be delivered in connection herewith to which
such Credit Party is or will be a party.
(iii) A certificate executed by an Authorized
Officer of the Guarantor certifying that (A) the
representations and warranties contained in Section 5 hereof
are true and correct on and as of the date of such certificate
as though made on and as of such date, (B) the representations
and warranties contained in Section 6.1 of the Credit
Agreement are true and correct on and as of the date of such
certificate as though made on and as of such date, except to
the extent that such representations and warranties expressly
relate solely to an earlier date (in which case such
representations and warranties shall have been true and
correct on and as of such earlier date) and (C) no Default or
Event of Default has occurred and is continuing.
(iv) An opinion of Xxxxxx and Xxxxx covering
such matters relating to this Amendment and the transactions
contemplated hereby as the Agent shall reasonably request
(including, without limitation, an opinion that the
transactions contemplated hereby do not conflict with or
constitute a default under the SDW Subordinated Note or the
indenture relating to the Senior Notes).
(v) An amendment to the Security Agreement,
substantially in the form of Exhibit A (as so amended, the
"AMENDED SECURITY AGREEMENT"), duly executed by the Credit
Parties.
(vi) Uniform Commercial Code financing
statements and fixture filings, naming each Credit Party as
debtor and the Agent as secured party, duly executed by the
applicable Credit Party, to be filed in all jurisdictions that
the Agent deems necessary or desirable to perfect the liens
created under the Amended Security Agreement; PROVIDED, that
fixture filings will be recorded solely with respect to the
properties owned by the Credit Parties (other than the
warehouse located at 000 Xxxx 00xx Xxxxxx, Xxxxxx, Xxxxxxxx).
(vii) An Indenture Borrowing Base Certificate,
substantially in the form of Annex II, duly executed by an
Authorized Officer of the Guarantor.
(viii) A certificate of insurance naming the
Agent as loss payee and additional insured.
(ix) A certificate executed by an Authorized
Officer of each Credit Party to the effect that such Credit
Party is solvent after giving effect to the transactions
contemplated by this Amendment.
(x) Such other documents, agreements,
opinions and instruments as the Agents deem necessary or
desirable in connection with the transactions contemplated
hereby.
-6-
SECTION 3. CONDITIONS SUBSEQUENT.
(a) Not later than May 31, 1999, the Credit Parties shall
deliver to the Agents a copy of an appraisal conducted in accordance with
sound appraisal standards by independent appraisers acceptable to, and in
form satisfactory to, the Agents of the Credit Parties' Equipment, showing
the auction value of such Equipment (the "Auction Value") as of a recent date.
(b) If the Auction Value is less than $17,500,000, then not
later than July 31, 1999 (or such later date as the Agents may determine),
the Credit Parties shall deliver or cause to be delivered to the Agents the
following:
(i) a mortgage or deed of trust, in form and
substance satisfactory to the Agents (each, a "Mortgage"),
encumbering each MORTGAGED Property (as defined below), duly
executed by the Borrower that owns such Mortgaged Property;
(ii) a mortgagee's title policy for each
Mortgage (A) dated on or about the date of such Mortgage in an
amount satisfactory to the Agents; (B) insuring that such
Mortgage creates a valid first Lien on the Mortgaged Property,
free and clear of all Liens except Liens permitted under the
Credit Agreement; (C) naming the Agents as the insured
thereunder; (D) in the form of ALTA Loan Policy-1992 or such
other form as is acceptable to the Agents; and (E) containing
such endorsements and affirmative coverages as the Agents may
reasonably request, together with evidence that all premiums
in respect of each such policy have been paid by or on behalf
of the Borrowers;
(iii) a survey of each Mortgaged Property, in
form and substance satisfactory to the Agents and certified
within 45 days prior to the date of the related Mortgage by an
independent public surveyor reasonably satisfactory to the
Agents, meeting the minimum standard detail requirements for
ALTA/ACSM surveys, and showing (A) the exact location and
dimensions of such Mortgaged Property and the improvements
thereon, (B) the exact location of all lot and street lines,
required height and setback lines, all means of access to and
all easements relating to such Mortgaged Property, (C) the
names of all streets and alleys abutting such Mortgaged
Property and (D) the absence of any encroachments,
rights-of-way or easements on such Mortgaged Property or any
encroachments by the improvements thereon on adjoining
property, or any other defects except Liens permitted under
the Credit Agreement, together with a surveyor's certificate
reasonably satisfactory to the Agents; and
(iv) a copy of an appraisal of each Mortgaged
Property conducted in accordance with sound appraisal
standards by independent appraisers acceptable to, and in form
and substance satisfactory to, the Agents, showing the fair
market value of such Mortgaged Property as of a recent date.
(c) If the Auction Value is less than $17,500,000, then not
later than July 31, 1999 (or such later date as the Agents may determine),
the Credit Parties shall, at their own expense, execute and deliver all such
documents, agreements, opinions and instruments, and take all such actions
(including, without limitation, the payment of applicable mortgage recording
taxes), relating to the Mortgages and the Mortgaged Properties as the Agents
may reasonably request.
As used herein, "MORTGAGED PROPERTIES" means the properties selected by the
Agents from the properties listed on Annex III with an aggregate appraised
fair market value approximately equal to $17,500,000 less the Auction Value.
-7-
SECTION 4. CONDITIONAL RELEASE OF LIENS ON NEW COLLATERAL. Upon
the request, and at the expense, of the Credit Parties, the Agent shall
release its Lien on the Mortgaged Properties (if any) and the Equipment of
each Credit Party other than SCM (the "NEW COLLATERAL ") after June 30, 2000
if (a) no Default or Event of Default has occurred and is continuing, (b)
Unused Availability is equal to or greater than the sum of $12,500,000 and
the amount of accrued and unpaid interest on the Senior Notes, (c) the
accounts payable of the Credit Parties have been paid in accordance with
their terms and (d) the Agent has received evidence reasonably satisfactory
to it that the Consolidated Fixed Charge Coverage Ratio for any period of
four consecutive fiscal quarters, commencing with the period ended June 30,
2000, is equal to or greater than the 1.40:1.00. The Lenders hereby consent
to the release of the Agent's Lien on the New Collateral in accordance with
the terms of this Section 4.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE CREDIT
PARTIES. Each of the Credit Parties represents and warrants as follows:
(a) The execution, delivery and performance by such Credit
Party of this Amendment, the Credit Agreement as amended hereby and the
documents delivered in connection herewith to which such Credit Party is a
party (i) are within such Credit Party's corporate powers and authority, have
been duly authorized by all necessary corporate action and do not contravene
(A) such Credit Party's Governing Documents, (B) any Requirement of Law
applicable to it or any of its properties or (C) any franchise, license,
permit, indenture, contract, lease, agreement, instrument or other commitment
to which it is a party or by which it or any of its properties are bound
(including, without limitation, the SDW Subordinated Note or the indenture
relating to the Senior Notes), (ii) will not result in a Default or an Event
of Default and (iii) will not result in or require the creation or imposition
of any Lien upon or with respect to any property now owned or hereafter
acquired by such Credit Party, other than Liens in favor of the Agent.
(b) This Amendment, the Credit Agreement as amended hereby and
the documents delivered in connection herewith to which such Credit Party is
a party constitute the legal, valid and binding obligations of such Credit
Party enforceable against such Credit Party in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency or similar laws affecting creditor's rights generally and general
principles of equity.
(c) There is no pending or, to the best of its knowledge,
threatened litigation, proceeding, inquiry or other action seeking an
injunction or other restraining order, damages or other relief with respect
to the transactions contemplated by this Amendment, the Credit Agreement as
amended hereby or the documents delivered in connection herewith.
(d) Since December 31, 1998, there has occurred no change,
occurrence, development or event which has had or could be reasonably
expected to have a Material Adverse Effect.
(e) All consents, filings and approvals required in connection
with the execution, delivery and performance by such Credit Party of this
Amendment, the Credit Agreement as amended hereby and the documents delivered
in connection herewith have been obtained or made and are in full force and
effect.
(f) Upon the proper filing of the Uniform Commercial Code
financing statements, the Liens granted pursuant to the Amended Security
Agreement constitute valid and enforceable first priority and perfected Liens
on the Collateral described therein, to the extent such Liens can be
perfected by the filing of such financing statements.
-8-
(g) Set forth on Annex III is a complete and correct list of
each parcel of real property owned by any of the Borrowers, together with the
current book value of such parcel determined in accordance with GAAP.
SECTION 6. REFERENCE TO AND EFFECT ON THE CREDIT DOCUMENTS.
(a) Upon the effectiveness of this Amendment, on and after the
date hereof, each reference in the Credit Agreement to (i) "this Agreement,"
"hereunder," "hereof," "herein" and words of like import, and such words or
words of like import in each reference in the Credit Documents, shall mean
and be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended hereby, all of the terms and
provisions of the Credit Agreement shall remain in full force and effect and
are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as an amendment to or
a waiver of any right, power or remedy of the Agent or the Lenders under any
of the Credit Documents, or constitute an amendment to or a waiver of any
provision of any of the Credit Documents.
(d) This Amendment shall be deemed to be a Credit Document for
all purposes. Without limiting the generality of the foregoing, the parties
hereto agree that the failure by the Credit Parties to comply with any of the
provisions of this Amendment shall constitute an Event of Default.
SECTION 7. EXECUTION IN COUNTERPARTS; ETC. This Amendment may
be executed in counterparts each of which when so executed and delivered
shall be deemed to be an original and all of which taken together shall
constitute one and the same instrument. This Amendment and each of the other
documents delivered in connection herewith may be executed and delivered by
telecopier with the same force and effect as if the same was a fully executed
and delivered original manual counterpart.
SECTION 8. EXPENSES. The Credit Parties shall, jointly and
severally, pay for all of the reasonable costs and expenses incurred by the
Agent and the Collateral Agent in connection with the transactions
contemplated by this Amendment, including, without limitation, the reasonable
fees and expenses of counsel to the Agent and local counsels to the Agent and
the costs and expenses of the appraisal, the title insurance policies and the
surveys required to be delivered pursuant to Section 3.
SECTION 9. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF
(OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
-9-
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized as of the date first above written.
BORROWERS
CENTRAL PRODUCTS COMPANY
By: /s/ Xxxx Xxxxxxxx
-------------------------------------------
Name: Xxxx Xxxxxxxx
Title: Vice President
SPINNAKER COATING, INC.,
formerly known as
Xxxxx-Bridge Industries, Inc.
By: /s/ Xxxx Xxxxxxxx
-------------------------------------------
Name: Xxxx Xxxxxxxx
Title: Vice President
ENTOLETER, INC.
By: /s/ Xxxx Xxxxxxxx
-------------------------------------------
Name: Xxxx Xxxxxxxx
Title: Vice President
SPINNAKER COATING-MAINE, INC.
By: /s/ Xxxx Xxxxxxxx
-------------------------------------------
Name: Xxxx Xxxxxxxx
Title: Vice President
GUARANTOR
SPINNAKER INDUSTRIES, INC.
By: /s/ Xxxx Xxxxxxxx
-------------------------------------------
Name: Xxxx Xxxxxxxx
Title: Vice President, Corporate Development
AGENT
BT COMMERCIAL CORPORATION, as Agent
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
COLLATERAL AGENT
TRANSAMERICA BUSINESS CREDIT CORPORATION, as
Collateral Agent
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
ISSUING BANK
BANKERS TRUST COMPANY, as Issuing Bank
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
LENDERS
BT COMMERCIAL CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
