FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
Exhibit 10.5
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (“Fourth Amendment”) made as of the
7th day of January, 2009, by and between PRIMO WATER CORPORATION, a Delaware corporation
(together with its successors and assigns, the “Existing Borrower”), PRIMO TO GO, LLC, a North
Carolina limited liability company, PRIMO PRODUCTS, LLC, a North Carolina limited liability
company, and PRIMO DIRECT, LLC, a North Carolina limited liability company (each a “New Borrower”
and together, the “New Borrowers”), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking
association (together with its successors and assigns, the “Bank”).
BACKGROUND
The Existing Borrower and the Bank entered into a Loan and Security Agreement dated as of June
23, 2005, as amended by that certain First Amendment to Loan and Security Agreement, dated as of
April 26, 2006, by that certain Second Amendment to Loan and Security Agreement, dated as of April
30, 2007, and by that certain Third Amendment to Loan and Security Agreement, dated as of June
24, 2008 (“Third Amendment”) (as amended, the “Loan Agreement”). Terms used herein and not
herein defined shall have the meanings given to them in the Loan Agreement.
The New Borrowers are Subsidiaries of the Existing Borrower. The New Borrowers become
Borrowers under the Loan Agreement, in accordance with Section 10.12 of the Loan Agreement,
pursuant to the Third Amendment. The Existing Borrower and the New Borrowers are referred to
herein collectively as the “Borrowers”. The Borrowers have now requested certain additional
amendments to the provisions of the Loan Agreement, which the Bank is willing to accommodate,
subject to the terms and conditions of this Fourth Amendment.
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Borrowers and the Bank hereby
agree as follows:
1. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows:
(a) The definition of “Applicable Margin” in Section 1.1 of the Loan Agreement is amended and
restated to read as follows:
“Applicable Margin” means as to any Revolver Loan, or portion
thereof, that is: (i) a LMIR Loan, 5% until the Reversion Date and 3.25%
from and after the Reversion Date; and (ii) a Base Rate Loan, 2.5% until the
Reversion Date and 0.75% thereafter. The Revolver Loans, at any time, shall
either be all LMIR Loans or all Base Rate Loans.”
(b) The definition of “Revolver Commitment” in Section 1.1 of the Loan Agreement is hereby
amended and restated to read as follows:
“Revolver Commitment” means the commitment of Bank, subject to the
terms and conditions herein, to make Revolver Loans and issue Letters of
Credit in accordance with the provisions of Section 2 hereof in an aggregate
amount not to exceed $10,000,000.00 at any one time.
(c) The Loan Agreement is hereby amended:
(i) By adding the following definitions thereto immediately following the definition of
“Joinder Agreement”:
“Junior Indebtedness” means the Debt and other obligations of
Borrowers to Bank pursuant to the Junior Loan Agreement.
“Junior Loan Agreement” means that certain Loan and Security
Agreement, dated as of January ___, 2009, among Borrowers and Bank.
(ii) By adding the following definition thereto immediately following the definition of
“Placed Inventory”:
“Prime To Go” means Prime To Go, LLC, a North Carolina limited
liability company.
(iii) By adding the following definition thereto immediately following the definition
of “Reserves”:
“Reversion Date” means that date as of which the Junior Indebtedness
has been paid and satisfied in full.
(d) Section 2.11 of the Loan Agreement is hereby amended and restated to read as
follows:
2.11 Automatic Debit of Checking Account for Loan Payments.
Borrower authorizes Bank to debit demand deposit account number
2000026543086, or any other account with Bank (routing number 000000000)
designated in writing by Borrower, for any payments due under the Note,
provided, that Bank shall provide written notice to Borrower at least one
(1) business day prior to debiting any such account. Borrower further
certifies that Borrower holds legitimate ownership of this account and
preauthorizes this periodic debit as part of its right under said ownership.
(e) Section 5.6(b) of the Loan Agreement is hereby amended and restated to read as
follows:
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(b) Annual Statements. Within one hundred twenty (120) days
after the end of each Fiscal Year, a detailed audited financial report of
Borrower and its Subsidiaries containing a consolidated and consolidating
balance sheet at the end of that period and a consolidated and consolidating
income statement and statement of cash flows for that period, setting forth
in comparative form the figures for the preceding Fiscal Year, together with
all supporting schedules and footnotes, and containing an unqualified audit
opinion of independent certified public accountants acceptable to Bank that
the financial statements were prepared in accordance with GAAP. Borrower
shall obtain such written acknowledgments from Borrower’s independent
certified public accountants as Bank may require permitting Bank to rely on
such annual financial statements.
(f) Section 5.12(e) of the Loan Agreement is hereby amended and restated to read as follows:
(e) except for sales of Inventory in the ordinary course of business,
sales of assets permitted by Section 6.13 hereof and the grant to Bank of
Liens securing the Junior Indebtedness, will not sell, assign, lease,
transfer, pledge, hypothecate or otherwise dispose of or encumber any
Collateral or any interest therein;
(g) Section 6.1(a) of the Loan Agreement is hereby amended and restated to read as follows:
“(a) The Obligations and the Junior Indebtedness;”
(h) Section 6.2(a) of the Loan Agreement is hereby amended and restated to read as follows:
| “(a) | Liens securing the Obligations and Liens securing the Junior Indebtedness; provided, however, the Liens securing the Junior Indebtedness shall at all times while any Obligations (excluding the Junior Indebtedness) are unpaid or otherwise outstanding shall be junior and subordinate to the Liens securing the Obligations (excluding the Junior Indebtedness).” |
(i) Section 6.3(d) of the Loan Agreement is hereby amended and restated to read as follows:
(d) Borrower may pay with respect to its Series B Preferred Equity,
dividends aggregating not more than ten percent (10%) of such Series B
Preferred Equity annually (or, in lieu of paying such dividends for any
year, Borrower may accrue dividends aggregating up to fifteen percent (15%)
of such Series B Preferred Equity annually); provided that at the
time of such payment, and after giving effect thereto, each of the
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following conditions is met: (A) no Event of Default exists, (B)
Borrower is Solvent, and (C) such payment is permitted under applicable law.
(j) Section 6.12 of the Loan Agreement is hereby amended and restated to read as follows:
6.12 Subsidiaries. Shall not acquire, form or dispose of any
Subsidiaries or permit any Subsidiary to issue capital stock except to its
parent; provided, however, that Borrower may sell Prime To Go, so long as
the sale proceeds thereof are applied as set forth in the Junior Loan
Agreement, and may, without the consent of Bank, form a Subsidiary to act as
an equipment leasing or finance company.
(k) Section 6.13 of the Loan Agreement is hereby amended and restated to read as follows:
6.13 Liquidation, Mergers, Consolidations and Dispositions of
Substantial Assets, Name and Good Standing. Shall not merge,
reorganize, consolidate or amalgamate with any Person, liquidate, wind up
its affairs or dissolve itself, acquire by purchase, lease or otherwise any
of the assets of any Person, or sell, transfer, lease or otherwise dispose
of any of its property or assets, except for the sale of Prime To Go, so
long as the sale proceeds thereof are applied as set forth in the Junior
Loan Agreement, the sale of Inventory in the ordinary course of business,
the disposition of obsolete or worn out equipment in the ordinary course of
business, the disposition of equipment if the proceeds of such disposition
are credited or applied to the purchase price of replacement equipment, and
the voluntary termination of Swap Agreements to which Borrower or such
Subsidiary is a party, or sell or dispose of any equity ownership interests
in any Subsidiary, in each case whether in a single transaction or in a
series of related transactions; or change its name or jurisdiction of
organization or conduct business under any new fictitious name; change its
Federal Employer Identification Number; or fail to remain in good standing
and qualified to transact business as a foreign entity in any state or other
jurisdiction in which it is required to be qualified to transact business as
a foreign entity and in which the failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.
(l) Section 9.1 of the Loan Agreement is hereby amended by adding the following at the end
thereof:
“Notwithstanding any contrary provision herein or in any other agreement among
Borrowers and Bank, the Bank’s interest in and Lien on any of the Collateral
securing the Obligations (excluding the Junior Indebtedness) shall
in all respects and at all times be deemed senior and prior to any interest in the
Collateral which secures the Junior Indebtedness.”
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(m) Article 7 of the Loan Agreement is amended and restated in its entirety to read as
follows:
“7.1 Minimum EBITDA. EBITDA as of the end of each of the following
Fiscal Quarters shall be not less than the amount applicable to such Fiscal Quarter
set forth in the table below:
| FISCAL QUARTER ENDING | AMOUNT | |||
Q4-2008 (for one Fiscal Quarter only) |
$ | (2,100,000 | ) | |
Q1-2009 (for one Fiscal Quarter only) |
$ | (775,000 | ) | |
Q2-2009 (for two Fiscal Quarters only) |
$ | (400,000 | ) | |
Q-3-2009 (for three Fiscal Quarters only) |
$ | 1,300,000 | ||
Q4-2009 (on a rolling four quarter basis) |
$ | 3,200,000 | ||
Q1-2010 (on a rolling four quarter basis) |
$ | 3,600,000 | ||
As used herein, “EBITDA” means for any period the sum of the following,
without duplication: (A) consolidated net income of Borrower and its Subsidiaries
from continuing operations (computed without regard to any extraordinary items of
gain or loss) plus (B) to the extent deducted from revenue in computing
consolidated net income for such period, the sum of (1) interest expense, (2) income
and franchise taxes, tax expense, and (3) depreciation, amortization and other
non-cash charges (except to the extent that such non-cash charges are reserved for
cash charges to be taken in the future), less interest income and any
extraordinary gains.
7.2 Minimum Gross Revenues. Gross revenues from sales achieved by
Borrower and its Subsidiaries from continuing operations as of the end of each of
the following Fiscal Quarters, determined on a rolling four quarter basis, shall be
not less than the amounts applicable to such Fiscal Quarter set forth in the table
below:
| XXXXXX XXXXXXX XXXXXX | XXXXXX | |||
X0-0000 |
$ | 28,000,000 | ||
Q1-2009 |
$ | 31,000,000 | ||
Q2-2009 |
$ | 32,500,000 | ||
Q3-2009 |
$ | 37,000,000 | ||
Q4-2009 |
$ | 44,000,000 | ||
Q1-2010 |
$ | 45,000,000 | ||
7.3 Leases. Borrower shall not incur, create, or assume any direct or
indirect liability for the payment of rent or otherwise, under any lease or rental
arrangement (excluding capitalized leases) during any Fiscal Year if immediately
thereafter the sum of such lease or rental payments made by Borrower is greater
than $2,000,000.00 in the aggregate.
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7.4 Net Worth. Borrower shall at all times maintain a Net Worth of at
least $12,000,000.00. “Net Worth” means the shareholders’ equity of
Borrower, plus the sum of Debt subordinated to the Obligations by subordination
agreements satisfactory in all respects to the Bank in its sole discretion, less
Total Liabilities. “Total Liabilities” means all liabilities of Borrower,
including capitalized leases and all reserves for deferred taxes and other deferred
sums appearing on the liabilities side of a balance sheet of Borrower.”
(n) The address for the Borrower set forth in Section 10.4 of the Loan Agreement is hereby
changed to the following:
| Borrower: | Primo Water Corporation | |||
| 000 Xxxxxxxxx Xxxxx Xxxxx | ||||
| Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000 | ||||
| Fax No. | ||||
| Attn: |
2. Further Assurances. The Borrowers will execute such confirmatory instruments with
respect to the Loan Agreement and this Fourth Amendment as the Bank may reasonably request.
3. Modification. The Borrowers and the Bank agree that this Fourth Amendment shall
not be construed as an agreement to extinguish the Borrowers’ obligations under the Loan Agreement
and shall not constitute a novation as to the obligations of the Borrowers under the Loan
Agreement. The Bank hereby expressly reserves all rights and remedies it may have against all
parties who may be or may hereafter become secondarily liable for the repayment of the obligations
under the Loan Agreement.
4. Amendments. This Fourth Amendment may not be amended, changed, modified, altered,
or terminated without in each instance the prior written consent of the Bank. This Fourth
Amendment shall be construed in accordance with and governed by the laws of the State of North
Carolina.
5. Counterparts. This Fourth Amendment may be executed in any number of counterparts,
all of which when taken together shall constitute one agreement.
[signature pages follow]
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IN WITNESS WHEREOF, this Fourth Amendment has been executed as of the date first above
written.
| BORROWERS: | |||||
|
PRIMO WATER CORPORATION (SEAL) |
|||||
| By | /s/ Xxxx Xxxxxxxxx | ||||
| Name: | Xxxx Xxxxxxxxx | ||||
| Its: | CFO | ||||
| PRIMO TO GO, LLC (SEAL) |
|||||
| By | Primo Water Corporation, Its Manager | ||||
| By | /s/ Xxxxx X. Xxxx | ||||
| Name: | Xxxxx X. Xxxx | ||||
| Its: | President | ||||
| PRIMO PRODUCTS, LLC (SEAL) |
|||||
| By | Primo Water Corporation, Its Manager | ||||
| By | /s/ Xxxxx X. Xxxx | ||||
| Name: | Xxxxx X. Xxxx | ||||
| Its: | President | ||||
| PRIMO DIRECT, LLC (SEAL) |
|||||
| By | /s/ Xxxxx X. Xxxx | ||||
| Name: Xxxxx X. Xxxx | |||||
| Its: Manager | |||||
BANK: |
|||||
| WACHOVIA BANK, NATIONAL ASSOCIATION (SEAL) | |||||
| By | /s/ Xxxxxxx X. Xxxxxx | ||||
| Xxxxxxx X. Xxxxxx, Senior Vice President | |||||
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