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Exhibit 10.38
THIRD AMENDMENT
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This Third Amendment (this "Amendment") is entered into as of
this 29th day of September, 1998 among Waterlink, Inc. (the "Company"), 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
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WHEREAS, the Company, the Agent and the Banks are party to
that certain Amended and Restated Credit Agreement, dated 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) The definition of "EBITDA" appearing in SECTION 1.01 of
the Agreement is hereby amended by deleting it in its entirety and
inserting the following in lieu thereof:
"EBITDA" means, for any period, for the Company and
its Subsidiaries on a consolidated basis, determined in
accordance with GAAP, the sum of (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
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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 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 8.16, 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
the third fiscal quarter of the Company's 1998 fiscal
year, there shall be excluded in determining EBITDA
any restructuring expense recorded in the third
fiscal quarter of the Company's 1998 fiscal year
which serves to reduce net income of the Company
and/or its Subsidiaries in such fiscal quarter,
PROVIDED, HOWEVER, that such restructuring expense
shall not be in excess of $1,493,750 ($1,400,000 of
which is hereinafter defined as the "Special Charge")
and for all purposes commencing with the fiscal
quarter ended June 30, 1998, for any period which
includes a fiscal quarter ending on or prior to June
30, 2000, EBITDA shall be reduced by an amount, if
any, equal to the amount by which (I) cumulative
EBITDA reductions with respect to the Special Charge
as described on ANNEX A to the Second Amendment
hereto exceeds (II) actual cumulative net cash flow
attributable to the Special Charge, it being
understood and agreed that the Company shall add a
line item to the Compliance Certificate for the
purpose of determining the calculations required by
this sentence;
(B) for all purposes for any period which includes
the fourth fiscal quarter of the Company's 1998
fiscal year, there shall be excluded in determining
EBITDA any restructuring expense recorded in the
fourth fiscal quarter of the Company's 1998 fiscal
year (I) relating to Bioclear Technologies, Inc., a
Canadian corporation, which serves to reduce net
income of the Company and/or its Subsidiaries in such
fiscal quarter, PROVIDED, HOWEVER, that such
restructuring expense shall not be in excess of
$17,300,000 and (II) relating to the realignment of
the Company, PROVIDED, HOWEVER, that such realignment
expense shall not be in excess of $2,700,000; and
(C) 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
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realignment expenses during such 1999 fiscal year
shall not exceed $1,300,000.
(b) SECTION 1.01 of the Agreement is hereby further
amended by inserting the following new definition in appropriate
alphabetical order:
"THIRD AMENDMENT" shall mean the Third Amendment to
this Agreement, dated as of September 29, 1998.
(c) Section 7.01 of the Agreement is hereby amended
by adding the following clause thereto:
"(c) as soon as available but no later than 30 days
after the end of each calendar month, a copy of the monthly
financial information package in the form attached as Exhibit
A to the Third Amendment.".
(d) Sub-section (d) of Section 8.04 of the Agreement
is hereby amended by deleting it in its entirety and inserting the
following in lieu thereof:
"(d) Investments, subject to SECTION 8.09, incurred
in order to consummate Acquisitions (other than the Sutcliffe
Acquisition) otherwise permitted herein, PROVIDED that (i) any
such Acquisition the aggregate consideration of which exceeds
$7,500,000 shall not be permitted without the prior written
approval of the Majority Banks, PROVIDED, HOWEVER that at any
time during which the Leverage Ratio of the Company is greater
than 4.0:1.0 for the immediately preceding 12 calendar months
(taken as one accounting period), no Acquisition shall be
permitted without prior written approval of 100% of the Banks,
(ii) no Default or Event of Default is in existence both
before and after giving effect to such Acquisition, (iii) such
Acquisition is undertaken in accordance with all applicable
Requirements of Law, and (iv) the prior, effective written
consent or approval to such Acquisition of the board of
directors or equivalent governing body of the acquiree is
obtained;".
(e) Sections 8.15, 8.16, 8.17, 8.18 and 8.20 of the
Agreement are each hereby amended by deleting each said Section in its
entirety and inserting the following new Sections 8.15, 8.16, 8.17,
8.18 and 8.20 in lieu thereof:
"8.15 MINIMUM NET WORTH. The Company shall not permit
its consolidated Net Worth at any time to be less than an
amount equal to the sum of (a) $51,100,000 PLUS (b)75% of the
Company's positive Net Income, if any, for each fiscal quarter
ending after the date of the Third Amendment and prior to the
date of determination, PLUS (c) an amount equal to 100% of the
cash and non-cash
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proceeds of any equity securities issued by the Company after
the date of the Third Amendment and prior to the date of
determination.
8.16 LEVERAGE RATIO. The Company shall not permit, at
any time during a period listed below, its 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
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From and including the last day 5.10:1.0
of the fiscal quarter ended in September, 1998
to but excluding the last day of the fiscal quarter
ended in December, 1998
Thereafter, from and including the last day 5.97:1.0
of the fiscal quarter ended in December, 1998
to but excluding the last day of the fiscal quarter
ended in March, 1999
Thereafter, from and including the last day 5.80:1.0
of the fiscal quarter ended in March, 1999
to but excluding the last day of the fiscal quarter
ended in June, 1999
Thereafter, from and including the last day 5.05:1.0
of the fiscal quarter ended in June, 1999
to but excluding the last day of the fiscal quarter
ended in September, 1999
Thereafter, from and including the last day 4.10:1.0
of the fiscal quarter ended in September, 1999
to but excluding the last day of the fiscal quarter
ended in December, 1999
Thereafter, from and including the last day 4.00:1.0
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 3.75:1.0
of the fiscal quarter ended in March, 2000
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to but excluding the last day of the fiscal quarter
ended in December, 2000
Thereafter, from and including the last day 3.5:1.0
of the fiscal quarter ended in December, 2000
to but excluding the last day of the fiscal quarter
ended in December, 2001
Thereafter 3.25:1.0
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
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From and including the last day 4.55:1.0
of the fiscal quarter ended in September, 1998
to but excluding the last day of the fiscal quarter
ended in December, 1998
Thereafter, from and including the last day 5.37:1.0
of the fiscal quarter ended in December, 1998
to but excluding the last day of the fiscal quarter
ended in March, 1999
Thereafter, from and including the last day 5.20:1.0
of the fiscal quarter ended in March, 1999
to but excluding the last day of the fiscal quarter
ended in June, 1999
Thereafter, from and including the last day 4.55:1.0
of the fiscal quarter ended in June, 1999
to but excluding the last day of the fiscal quarter
ended in September, 1999
Thereafter, from and including the last day 4.0:1.0
of the fiscal quarter ended in September, 1999
to but excluding the last day of the fiscal quarter
ended in December, 1999
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Thereafter, from and including the last day 3.50:1.0
of the fiscal quarter ended in December, 1999
to but excluding the last day of the fiscal quarter
ended in March, 2000
Thereafter 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
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From and including the last day of the fiscal 2.0:1.0
quarter ended in September, 1998 but
excluding the last day of the fiscal quarter
ended March, 1999
From and including the last day of the fiscal 1.75:1.0
quarter ended in March, 1999 but
excluding the last day of the fiscal quarter
ended June, 1999
From and including the last day of the fiscal 2.0:1.0
quarter ended in June, 1999 but
excluding the last day of the fiscal quarter
ended December, 1999
From and including the last day of the fiscal 2.25:1.0
quarter ended in December, 1999 but
excluding the last day of the fiscal quarter
ended September, 2001
Thereafter 2.50:1.0
* * *
8.20 CAPITAL EXPENDITURES. The Company shall not, and
shall not permit any of its Subsidiaries to, incur Capital
Expenditures; PROVIDED, that the Company and its Subsidiaries
may make Capital Expenditures during: (i) its 1998 fiscal year
in an aggregate amount not in excess of $6,000,000; (ii) its
1999 fiscal year in an
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aggregate amount not in excess of $3,000,000; and (iii) each
fiscal year thereafter, $6,000,000.".
(f) Section 9.01 of the Agreement is hereby amended by (i)
deleting the "or" contained at the end of 9.01(m), and (ii) deleting
the period at the end of clause 9.01(n) and adding the following:
"; or
(o) SUBORDINATED DEBT. The Company shall make any payment
of principal on any Subordinated Debt where after giving
effect to such payment the Leverage Ratio for the twelve month
period (taken as one accounting period) then last ended would
be greater than 4.25:1.0 and/or the Senior Leverage Ratio for
the twelve month period (taken as one accounting period) then
last ended would be greater than 3.75:1.0.".
(g) Schedule 8.01 of the Agreement is hereby amended by
deleting the text contained therein in its entirety and inserting in
lieu thereof the word "None".
SECTION 2. CONSENT
(a) The Banks hereby consent to the formation of Bioclear
Technology, ULC, a Nova Scotia unlimited liability company (the "New Foreign
Subsidiary"), for the purpose of effecting an amalgamation between Bioclear
Technology, Inc., a Canadian corporation, and New Foreign Subsidiary with New
Foreign Subsidiary being the surviving corporation of such amalgamation;
PROVIDED, HOWEVER that the Company shall cause New Foreign Subsidiary to take
the actions required pursuant to Section 8.03 (c) of the Agreement.
(b) Notwithstanding Section 8.02 (c) of the Agreement, the
Company shall be permitted to sell all of the assets of Bioclear Technology,
Inc., a Canadian corporation (the "Bioclear Disposition"); PROVIDED, HOWEVER,
that in the event that the Majority Banks determine that the distribution of the
Net Proceeds from such Bioclear Dispositions requires an application other than
as provided in Section 2.09 (b) of the Agreement, then the Majority Banks will
inform the Company of such alternative application on the earlier of (i) the
date of the first Bioclear Disposition and (ii) January 8, 1999.
SECTION 3. REFERENCE TO AND EFFECT UPON THE AGREEMENT.
(a) Except as specifically amended above, the Agreement shall
remain in full force and effect and are 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
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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 4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
SECTION 5. 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 6. COUNTERPARTS. This Amendment may be executed in any
number of counterparts, each of which when so executed shall be deemed an
original but all such counterparts shall constitute one and the same instrument.
SECTION 7. EFFECTIVENESS. This Amendment shall become
effective as of the date first written above upon (i) the delivery of executed
signature pages for this Amendment signed by the Company and the Majority Banks
and (ii) the payment by the Company to the Agent, for the pro rata distribution
to those Banks executing this Amendment, of an amendment fee in an aggregate
amount equal to .075% of the Revolving Loan Commitments, such fee to be due and
payable upon the satisfaction of Section 7(i) hereof.
[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/ Xxxxxxx X. Vartusko
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Title: Chief Financial Officer
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BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: /s/ Xxx XxXxxxx
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Title: Assistant Vice President
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BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, Individually as a Bank
By: /s/ Xxxxxxx X. Xxxxxxxx
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Title: Senior Vice President
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COMERICA BANK
By: /s/ Xxxxxx Xxxxxxx
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Title: Account Representative
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[TO THIRD AMENDMENT]
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THE FIFTH THIRD BANK OF COLUMBUS
By: /s/ Xxxxxxx X. Xxxxxx
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Title: Vice President
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XXXXXX TRUST AND SAVINGS BANK
By: /s/ Xxxxxxx X. XxXxxxxxx
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Title: Vice President
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PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxx X. Xxxxx
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Title: Vice President
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UNION BANK OF CALIFORNIA, N.A.
By: /s/ Xxxxxxx X. Xxxxxxx
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Title: Vice President
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[TO THIRD AMENDMENT]
