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Exhibit 10.26
SIXTH AMENDMENT
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This Sixth Amendment (this "Amendment") is entered into as of
this 30th day of September, 1999 among Waterlink, Inc. (the "Company"), Bank of
America, N.A. (f/k/a Bank of America National Trust and Savings Association), as
Agent (the "Agent"), and the financial institutions from time to time party
thereto (the "Banks"). Unless otherwise specified herein, capitalized terms used
in this Amendment shall have the meanings ascribed to them by the Agreement (as
defined below).
RECITALS
WHEREAS, the Company, the Agent and the Banks are party to
that certain Amended and Restated Credit Agreement, dated as of June 27, 1997
and as amended and restated as of May 19, 1998 (as amended, supplemented,
restated or otherwise modified from time to time, the "Agreement");
WHEREAS, the Company, the Agent and the Banks wish to enter
into certain amendments to the Agreement, each as more fully set forth herein;
NOW THEREFORE, in consideration of the mutual execution hereof
and other good and valuable consideration, the parties hereto agree as follows:
SECTION 1. AMENDMENTS.
(a) Section 1.01 of the Agreement is hereby amended by
inserting the following definitions in appropriate alphabetical order:
"Sixth Amendment" shall mean the Sixth Amendment to this
Agreement, dated as of September 30, 1999.
"Sixth Amendment Effectiveness Date" shall mean the date upon
which the Agent advises the Company that the Sixth Amendment has become
effective.
(b) The definition of "Applicable Margin" in Section 1.01 of
the Agreement is hereby amended by deleting it in its entirety and inserting the
following in lieu thereof:
""APPLICABLE MARGIN" shall mean on any date the applicable
percentage set forth below based upon the Level as shown in the
Compliance Certificate then most recently delivered to the Banks:
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Loans Letters of Credit
----- -----------------
Offshore Base Commitment
Level Rate Rate Non-financial Financial Fee
----- -------- ------- ------------- --------- -------------
I 1.50% -0-% 0.750% 1.50% 0.300%
II 1.75% -0-% 0.875% 1.75% 0.300%
III 2.00% -0-% 1.000% 2.00% 0.375%
IV 2.25% -0-% 1.125% 2.25% 0.500%
V 2.50% 0.25% 1.250% 2.50% 0.500%
VI 2.75% 0.50% 1.375% 2.75% 0.500%
; PROVIDED, HOWEVER that, if the Company shall have failed to deliver
to the Banks by the date required hereunder any Compliance Certificate
pursuant to Section 7.02(b), then from the date such Compliance
Certificate was required to be delivered until the date of such
delivery the Applicable Margin shall be deemed to be Level VI. Each
change in the Applicable Margin shall take effect with respect to all
outstanding Loans on the third Business Day immediately succeeding the
day on which such Compliance Certificate is received by the Agent.
Notwithstanding the foregoing, no reduction in the Applicable Margin
shall be effected if a Default or an Event of Default shall have
occurred and be continuing on the date when such change would otherwise
occur, it being understood that on the third Business Day immediately
succeeding the day on which such Default or Event of Default is either
waived or cured (assuming no other Default or Event of Default shall be
then pending), the Applicable Margin shall be reduced (on a prospective
basis) in accordance with the then most recently delivered Compliance
Certificate."
(c) The definitions of "Blocked Amount", "EBIT" and "EBITDA"
appearing in SECTION 1.01 of the Agreement are hereby amended by deleting each
definition it in its entirety and inserting the following in lieu thereof:
"EBIT" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, determined in accordance
with GAAP, the sum of (a) net income (or net loss) for such
period PLUS (b) all amounts treated as expenses for interest
to the extent included in the determination of such net income
(or loss), PLUS (c) all accrued taxes on or measured by income
to the extent included in the determination of such net income
(or loss); PROVIDED, HOWEVER, that net income (or loss) shall
be computed for these purposes without giving effect to
extraordinary losses or extraordinary gains, PLUS (d) with
respect to any business acquired during the period of
determination, an amount equal to the sum of (x) the total
compensation paid to each management equity holder of such
acquired business during the twelve month period immediately
preceding the date such business was acquired LESS the base
compensation paid to each such Person during such twelve month
period PLUS (y) the aggregate amount of management fees paid
to management equity holders or Affiliates thereof during such
twelve month period to the extent that such management fee is
no longer required to be paid after the date of such
acquisition PLUS (z) the net income of such acquired business
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during such period (plus, to the extent deducted in
determining such net income, interest expense and income tax
expense of such acquired business) in accordance with Article
11 of Regulation S-X of the SEC; and PROVIDED FURTHER, that
for the purpose of computations under SECTIONS 8.17 and 8.18
for any business acquired during the period of determination
(including the Sutcliffe Acquisition), EBIT for such period
shall be determined on a pro forma basis as if such
acquisition had occurred as of the beginning of such period;
AND PROVIDED FURTHER, that:
(A) for all purposes for any period which includes a
fiscal quarter of the Company's 1999 fiscal year,
there shall be excluded in determining EBIT any
realignment expense recorded in such fiscal quarter,
which serves to reduce net income of the Company
and/or its Subsidiaries in such fiscal quarter,
PROVIDED, HOWEVER, that the aggregate amount of such
realignment expenses during such 1999 fiscal year
shall not exceed $1,593,000;
(B) for all purposes for any period which includes
the third fiscal quarter of the Company's 1999 fiscal
year, there shall be excluded in determining EBIT any
expense related to the completion of the Company's
1999 Strategic Operating Plan, which serves to reduce
net income of the Company and/or its Subsidiaries in
such fiscal quarter, PROVIDED, HOWEVER, that such
expenses shall not exceed $4,092,000; and
(C) for all purposes for any period which includes
the fourth fiscal quarter of the Company's 1999
fiscal year, there shall be excluded in determining
EBIT any expense related to guaranty warrants and
changes in the Company's board of directors recorded
in such fiscal quarter, which serves to reduce net
income of the Company and/or its Subsidiaries in such
fiscal quarter, PROVIDED, HOWEVER, that such expenses
shall not exceed $1,450,000.
"EBITDA" means, for any period, for the Company and
its Subsidiaries on a consolidated basis, determined in
accordance with GAAP, the sum of, without duplication, (a) the
net income (or net loss) for such period, PLUS (b) all amounts
treated as expenses for depreciation and interest and the
amortization of intangibles of any kind to the extent included
in the determination of such net income (or loss), PLUS (c)
all accrued taxes on or measured by income to the extent
included in the determination of such net income (or loss);
PROVIDED, HOWEVER, that net income (or loss) shall be computed
for these purposes without giving effect to extraordinary
losses or extraordinary gains, PLUS (d) with respect to any
business acquired during the period of determination, an
amount equal to the sum of (x) the total compensation paid to
each management equity holder of such acquired business during
the twelve month period immediately preceding the date such
business was acquired LESS the base compensation paid to each
such Person during such twelve month period PLUS (y) the
aggregate amount of management fees paid to management equity
holders or Affiliates thereof during such twelve month period
to the extent that such management fee is no longer required
to be paid after the date of such acquisition PLUS (z) the net
income of such acquired
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business during such period (plus, to the extent deducted in
determining such net income, interest expense, income tax
expense, depreciation and amortization of such acquired
business) in accordance with Article 11 of Regulation S-X of
the SEC; and PROVIDED FURTHER, that for the purpose of
computations under SECTIONS 8.17 and 8.18 for any business
acquired during the period of determination (including the
Sutcliffe Acquisition), EBITDA for such period shall be
determined on a pro forma basis as if such acquisition had
occurred as of the beginning of such period; AND PROVIDED
FURTHER, that:
(A) for all purposes for any period which includes a
fiscal quarter of the Company's 1999 fiscal year,
there shall be excluded in determining EBITDA any
realignment expense recorded in such fiscal quarter,
which serves to reduce net income of the Company
and/or its Subsidiaries in such fiscal quarter,
PROVIDED, HOWEVER, that the aggregate amount of such
realignment expenses during such 1999 fiscal year
shall not exceed $1,593,000;
(B) for all purposes for any period which includes
the third fiscal quarter of the Company's 1999 fiscal
year, there shall be excluded in determining EBITDA
any expense related to the completion of the
Company's 1999 Strategic Operating Plan, which serves
to reduce net income of the Company and/or its
Subsidiaries in such fiscal quarter, PROVIDED,
HOWEVER, that such expenses shall not exceed
$4,092,000; and
(C) for all purposes for any period which includes
the fourth fiscal quarter of the Company's 1999
fiscal year, there shall be excluded in determining
EBITDA any expense related to guaranty warrants and
changes in the Company's board of directors recorded
in such fiscal quarter, which serves to reduce net
income of the Company and/or its Subsidiaries in such
fiscal quarter, PROVIDED, HOWEVER, that such expenses
shall not exceed $1,450,000.
(d) Clause (b) of SECTION 2.01 of the Agreement is hereby
amended by deleting the following phrases contained therein:
"less the Blocked Amount" and "less such Bank's Pro Rata Share
of the Blocked Amount"
(e) SECTION 2.09 of the Agreement is hereby amended by
deleting the period at the end of clause (c) and adding the following thereto:
"; PROVIDED HOWEVER, that not withstanding the
requirements of this SECTION 2.09(C), with respect to the
offering by the Company of up to 6,300,000 shares of its
common stock pursuant to Form S-1 under registration number
333-84985 (the"1999 Offering"), the Company shall apply an
amount equal to (i) 60% of such Net Issuance Proceeds of the
1999 Offering to prepay Term Loans, applied to pay (x) the
September 30, 1999 Scheduled Repayment in full, (y) in the
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amount of $500,000 with respect to the December 31, 1999
Scheduled Repayment and (z) to the remainder Scheduled
Repayments in inverse order of maturity and (ii) 40% of such
Net Issuance Proceeds of the 1999 Offering to prepay Revolving
Loans (without a Commitment reduction)."
(f) Clause (a) of SECTION 2.10 of the Agreement is hereby
amended by deleting it in its entirety and replacing it with the following in
lieu thereof:
"(a) TERM LOANS. On each date set forth below, the Company
shall be required to repay the principal amount (or such other amount
after giving effect to any prepayments permitted or required pursuant
to this Agreement) of the Term Loans as is set forth opposite such date
(each, a "Scheduled Repayment"):
Date Amount
---- ------
September 30, 1999 $ 1,000,000
December 31, 1999 1,000,000
March 31, 2000 1,000,000
June 30, 2000 1,000,000
September 29, 2000 1,000,000
December 29, 2000 2,000,000
March 30, 2001 2,000,000
June 29, 2001 2,000,000
September 28, 2001 2,000,000
December 31, 2001 2,500,000
March 29, 2002 2,500,000
June 28, 2002 2,500,000
September 30, 2002 2,500,000
December 31, 2002 2,500,000
March 31, 2003 2,500,000
Term Maturity Date 20,835,816.30"
(g) Clause (d) of SECTION 7.03 is hereby amended by deleting
it in its entirety and inserting the following in lieu thereof:
"(d) of (i) the opening by the Company or any Subsidiary of
any new bank account or (ii) any material change in accounting policies
or financial reporting practices by the Company or any of its
consolidated Subsidiaries; and"
(h) Clause (a) of Section 8.04 of the Agreement is hereby
amended by deleting it in its entirety and inserting the following in lieu
thereof:
"(a) Investments held by the Company or Subsidiary in the form
of Cash Equivalents; PROVIDED, however, that bank deposits in the
ordinary course of business (excluding amounts in payroll accounts or
for accounts payable, in each case to the extent that checks have been
issued to third parties) held with any bank or financial institution
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not a Bank shall not at any time exceed (x) in the case of such
deposits with any single bank, $100,000 for three consecutive Business
Days and (y) in the case of all such deposits, $1,000,000 for three
consecutive Business Days;"
(i) Clauses (i) and (j) of SECTION 8.04 and clauses (g), (i)
and (j) of SECTION 8.05 of the Agreement are hereby amended by inserting the
following phrase at the end of each such clause:
"to the extent such Indebtedness is incurred or the obligation
to pay such Indebtedness, if earned, was made on or prior to the Sixth
Amendment Effectiveness Date"
(j) SECTIONS 8.16, 8.17 and 8.18 of the Agreement are each
hereby amended by deleting each said Section in its entirety and inserting the
following new SECTIONS 8.16, 8.17 and 8.18 in lieu thereof:
"8.16 [Reserved]
8.17 SENIOR LEVERAGE RATIO. The Company shall not permit, at
any time during a period listed below, its Senior Leverage Ratio at such time
for the twelve month period (taken as one accounting period) last ended prior to
the date of determination, to be greater than the ratio set forth below opposite
the respective period in which the determination is being made:
Period Ratio
From and including the last day 5.00:1.0
of the fiscal quarter ended in December, 1999 to but
excluding the last day of the fiscal quarter ended in March,
2000
Thereafter, from and including the last day 4.90:1.0
of the fiscal quarter ended in March, 2000 to but excluding
the last day of the fiscal quarter ended in June, 2000
Thereafter, from and including the last day 4.40:1.0
of the fiscal quarter ended in June, 2000 to but excluding the
last day of the fiscal quarter ended in September, 2000
Thereafter, from and including the last day 4.00:1.0
of the fiscal quarter ended in September, 2000 to but
excluding the last day of the fiscal quarter ended in
December, 2000
Thereafter, from and including the last day 3.75:1.0
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of the fiscal quarter ended in December, 2000 to but excluding
the last day of the fiscal quarter ended in March, 2001
Thereafter, from and including the last day 3.50:1.0
of the fiscal quarter ended in March, 2001 to but excluding
the last day of the fiscal quarter ended in June 2001
Thereafter 3.25:1.0
8.18 INTEREST COVERAGE RATIO. The Company shall not permit, at
any time during a period listed below, its Interest Coverage Ratio at such time
for the twelve month period (taken as one accounting period) last ended prior to
the date of determination, to be less than the ratio set forth below opposite
the respective period in which the determination is being made:
Period Ratio
------ -----
From and including the last day of the fiscal 1.50:1.0
quarter ended in December, 1999 but
excluding the last day of the fiscal quarter
ended March, 2000
From and including the last day of the fiscal 1.60:1.0
quarter ended in March, 2000
excluding the last day of the fiscal quarter
ended June, 2000
From and including the last day of the fiscal 2.00:1.0
quarter ended in June, 2000 but
excluding the last day of the fiscal quarter
ended September, 2000
From and including the last day of the fiscal 2.25:1.0
quarter ended in September, 2000 but
excluding the last day of the fiscal quarter
ended December, 2000
Thereafter 2.50:1.0"
SECTION 2. CONSENT. Notwithstanding SECTIONS 2.09(C), 8.04,
8.05, 8.06 and 8.11(B) of the Agreement, the Company shall be permitted to
prepay in full the outstanding principal amount under the Subordinated Debt held
by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇; PROVIDED, HOWEVER, that the cash portion of such prepayment
shall not exceed $250,000.
SECTION 3. WAIVER. Notwithstanding the requirements of
SECTIONS 8.15, 8.17, 8.18 and 8.19 of the Agreement, the Banks hereby waive
compliance by the Company with
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the requirements of said SECTIONS 8.15, 8.17, 8.18 and 8.19 of the Agreement for
the fiscal quarter ending in September 1999 and for the period until, but not
including, the last day of the fiscal quarter ending in December 1999; PROVIDED,
HOWEVER, that such waiver contained in this Section 3 shall be immediately
withdrawn on the date upon which the operating income of the Company, as
reported in the monthly financial information package delivered to the Banks no
later than the 20th day of each calendar month relating to the immediately
preceding calendar month, is less than (i) $750,000 for the period from October
1, 1999 to and including October 31, 1999, (ii) $1,500,000 for the period from
October 1, 1999 to and including November 30, 1999 and (iii) $2,250,000 for the
period from October 1, 1999 to and including December 31, 1999; PROVIDED,
FURTHER, that the waivers contained in this Section 3 shall be terminated on the
date the Company receives cash proceeds from the 1999 Offering in the event that
the gross cash proceeds of the 1999 Offering are less than $13,500,000.
SECTION 4. REVOLVING LOAN CONVERSION.
(a) On the Sixth Amendment Effectiveness Date, $16,000,000 of
Revolving Loans shall be converted into Term Loans (the "New Term Loans"), such
New Term Loans to be allocated to the Banks on the basis of their Pro Rata Share
so that the outstanding principal amount of the Term Loan shall be
$48,835,816.30, with each Bank's Pro Rata Share thereof as indicated on Annex I
hereto.
(b) On the Sixth Amendment Effectiveness Date, the Total
Revolving Commitment shall be reduced to $36,000,000, and each Bank's Pro Rata
Share of the Total Revolving Commitment shall be as specified on Annex II
hereto.
SECTION 5. REFERENCE TO AND EFFECT UPON THE AGREEMENT.
(a) Except as specifically amended above, the Agreement shall
remain in full force and effect and is hereby ratified and confirmed.
(b) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Bank under the Agreement, nor constitute a waiver of any provision of the
Agreement, except as specifically set forth herein. Upon the effectiveness of
this Amendment, each reference in the Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of similar import shall mean and be a
reference to the Agreement as amended hereby.
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
SECTION 7. HEADINGS. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purposes.
SECTION 8. COUNTERPARTS. This Amendment may be executed in any
number of counterparts (including by facsimile transmission), each of which when
so executed shall be deemed an original but all such counterparts shall
constitute one and the same instrument.
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SECTION 9. EFFECTIVENESS. This Amendment shall become
effective as of the date first written above upon the delivery of (i) an
amendment fee to the Agent (for distribution to the Banks on the basis of each
such Bank's Pro Rata Share) in an amount of $50,000 and (ii) executed signature
pages (including by facsimile transmission) to this Amendment signed by the
Company and the Majority Banks.
[signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment by
its duly authorized officer as of the date first written above.
WATERLINK, INC.
By: /s/
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Title:
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BANK OF AMERICA, N.A., as Agent
By: /s/
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Title:
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BANK OF AMERICA, N.A., Individually as a Bank
By: /s/
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Title:
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COMERICA BANK
By: /s/
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Title:
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S-1
[TO SIXTH AMENDMENT]
▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇
By: /s/
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Title:
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▇▇▇▇▇▇ TRUST AND SAVINGS BANK
By: /s/
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Title:
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PNC BANK, NATIONAL ASSOCIATION
By: /s/
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Title:
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UNION BANK OF CALIFORNIA, N.A.
By: /s/
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Title:
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S-2
[TO SIXTH AMENDMENT]
