Exhibit 10.6
THIRD AMENDMENT TO
CREDIT AGREEMENT AND WAIVER
THIS THIRD AMENDMENT TO CREDIT AGREEMENT AND WAIVER (this "Amendment")
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is entered into as of August 18, 2000 among PACKAGING DYNAMICS, L.L.C., a
Delaware limited liability company ("Packaging"), INTERNATIONAL CONVERTER, INC.,
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a Delaware corporation ("ICI"; together with Packaging, individually a
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"Borrower" and collectively the "Borrowers"), the Persons identified as
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"Guarantors" on the signature pages hereto (the "Guarantors"), the Persons
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identified as "Lenders" on the signature pages hereto (the "Lenders") and BANK
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OF AMERICA, N.A., a national banking association, formerly known as NationsBank,
N.A., as Agent (the "Agent") for the Lenders. Capitalized terms used herein and
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not otherwise defined herein shall have the respective meanings set forth, or
incorporated, by the Credit Agreement (defined below).
RECITALS
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WHEREAS, the Borrowers, the Guarantors, the Agent and the Lenders are
parties to that certain Credit Agreement dated as of November 20, 1998 (as
previously amended and as amended, modified, supplemented, extended or restated
from time to time, the "Credit Agreement");
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WHEREAS, the Borrowers, as of the fiscal quarter ending June 30, 2000,
violated the Leverage Ratio covenant set forth in Section 7.2(a) of the Credit
Agreement and the Interest Coverage Ratio covenant set forth in Section 7.2(b)
of the Credit Agreement (collectively, the "Acknowledged Defaults");
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WHEREAS, the Lenders and the Agent agreed to forbear exercising any
rights or remedies under the Credit Documents with respect to the Acknowledged
Defaults until August 18, 2000 pursuant to the terms and conditions set forth in
that certain Forbearance Agreement dated as of July 31, 2000 among the
Borrowers, the Guarantors, the Lenders and the Agent; and
WHEREAS, the Borrowers and the Guarantors have requested that the
Lenders agree to amend certain provisions of the Credit Agreement and waive the
Acknowledged Defaults. The Agent and the Lenders have agreed to do so, as more
fully set forth below, but only upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
PART 1
AMENDMENTS TO CREDIT AGREEMENT
The Credit Agreement is hereby amended in accordance with this Part 1.
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SUBPART 1.1 Amendments to Section 1.1. Section 1.1 of the Credit
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Agreement is hereby amended in the following respects:
(a) The definition of "Applicable Percentage" is hereby
amended in its entirety to read as follows:
"Applicable Percentage" means the appropriate applicable
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percentages corresponding to the Leverage Ratio in effect as
of the most recent Calculation Date as shown below:
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Applicable Percentage
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Eurodollar Loans Base Rate Loans
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Revolving Loans Revolving Loans Standby Commercial
Pricing Leverage and Tranche A Tranche B Term and Tranche A Tranche B Term Letter of Letter of Commitment
Level Ratio Term Loans Loans Term Loans Loans Credit Fee Credit Fee Fee
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I *2.5 to 1.0 2.25% 3.75% 1.25% 2.75% 2.25% 1.125% 0.50%
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*3.0 to 1.0
II but 2.50% 3.75% 1.50% 2.75% 2.50% 1.25% 0.50%
**2.5 to 1.0
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*3.5 to 1.0
III but 2.75% 3.75% 1.75% 2.75% 2.75% 1.375% 0.50%
**3.0 to 1.0
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IV *4.0 to 1.0
but 3.25% 4.00% 2.25% 3.00% 3.25% 1.625% 0.50%
**3.5 to 1.0
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V **4.0 to 1.0 3.50% 4.25% 2.50% 3.25% 3.50% 1.75% 0.50%
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* Less than
** Greater than or equal to
The Applicable Percentage for purposes of calculating the
applicable interest rate for any day for any Loan, the
applicable rate of the Commitment Fee for any day for purposes
of Section 3.4(a), the applicable rate of the Standby Letter
of Credit Fees for any day for purposes of Section 3.4(b)(i)
and the Commercial Letter of Credit Fees for any day for
purposes of Section 3.4(b)(ii) shall, in each case, be
determined and adjusted quarterly on the date (each a
"Calculation Date") five Business Days after the date by which
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the Borrower is required to provide the officer's certificate
in accordance with the provisions of Section 7.1(d); provided
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that the Applicable Percentages on the Third Amendment
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Effective Date shall be based on Pricing Level V (as shown
above) and shall remain at Pricing Level V until the first
Calculation Date subsequent to the Third Amendment Effective
Date, and, thereafter, the Pricing Level shall be determined
by the Leverage Ratio calculated as of the most recent
Calculation Date; and provided further that if the Borrower
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fails to provide the officer's certificate required by Section
7.1(d) on or before the
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Leverage Ratio as of the most recent Calculation Date, the
Applicable Percentages for such Calculation Date shall be
based on Pricing Level V from such Calculation Date until
such time that an appropriate officer's certificate is
provided whereupon the Pricing Level shall be determined by
the then current Leverage Ratio. Each Applicable Percentage
shall be effective from one Calculation Date until the next
Calculation Date. Any adjustment in the Applicable
Percentages shall be applicable to all existing Loans and
Letters of Credit as well as any new Loans made or Letters
of Credit issued.
The Borrower shall promptly deliver to the Agent, at the
address set forth on Schedule 11.1 and at the Agency Services
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Address, at the time the officer's certificate is required to
be delivered by Section 7.1(d), information regarding any
change in the Leverage Ratio that would change the existing
Pricing Level pursuant to the preceding paragraph.
(b) The definition of "EBITDA" is hereby amended in its
entirety to read as follows:
"EBITDA" means, for any period, with respect to the
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Borrower and its Subsidiaries on a consolidated basis, the sum
of (a) Net Income for such period (excluding the effect of any
extraordinary or other non-recurring gains or losses
(including any gain or loss from the sale of Property) or
non-cash losses (including any non-cash charges resulting from
the Stock Option Plan)) plus (b) an amount which, in the
determination of Net Income for such period, has been deducted
for (i) Interest Expense for such period, (ii) total Federal,
state, foreign or other income or franchise taxes and
Restricted Payments for Taxes for such period and (iii) all
depreciation and amortization for such period, all as
determined in accordance with GAAP; provided, however, that
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(1) EBITDA for the fiscal quarter of the Borrower ending
September 30, 1999 shall be determined without giving effect
to non-cash purchase price accounting adjustments relating to
the Alupac Acquisition, (2) EBITDA for the fiscal quarter of
the Borrower ending December 31, 1999 shall be determined
without giving effect to a charge of up to $750,000 relating
to the Ameriserv accounts receivable, and (3) EBITDA for the
fiscal quarter of the Borrower ending June 30, 2000 shall be
determined without giving effect to (A) a charge of up to
$3,450,000 relating to the Ameriserve accounts receivable and
(B) restructuring charges of up to $1,250,000; provided
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further, however, any gain resulting from any recovery of
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amounts with respect to the Ameriserv accounts receivable
shall not be included in the calculation of EBITDA
(c) Clause (iv) of the definition of "Permitted Acquisition"
is hereby amended in its entirety to read as follows:
(iv) the Borrower shall have delivered to the Agent a Pro
Forma Compliance Certificate demonstrating that, upon giving
effect to such Acquisition on a Pro Forma Basis, (a) the
Credit Parties shall be in compliance with all of
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the covenants set forth in Section 7.2 and (b) the Leverage
Ratio shall be equal to or less than 3.25 to 1.0.
(d) The definition of "Revolving Committed Amount" is hereby
amended in its entirety to read as follows:
"Revolving Committed Amount" means (a) until the
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Leverage Ratio as of the last day of any fiscal quarter after
the Third Amendment Effective Date is equal to or less than
3.25 to 1.0, TWENTY-FIVE MILLION DOLLARS ($25,000,000) or such
lesser amount as the Revolving Committed Amount may be reduced
pursuant to Section 2.1(d) or 3.3(c), and (b) thereafter,
FORTY-FIVE MILLION DOLLARS ($45,000,000) or such lesser amount
as the Revolving Committed Amount may be reduced pursuant to
Section 2.1(d) or 3.3(c).
(e) The definition of "Third Amendment Effective Date" is
hereby added to read as follows:
"Third Amendment Effective Date" means August 18, 2000.
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SUBPART 1.2 Amendments to Section 7.2. Sections 7.2(a), (b) and (d)
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of the Credit Agreement are hereby amended in their entirety to read as follows:
7.2 Financial Covenants.
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(a) Leverage Ratio. The Credit Parties shall cause the
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Leverage Ratio, measured as of the last day of each fiscal
quarter, to be less than or equal to the ratio shown below for
the period corresponding thereto:
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Period Ratio
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June 30, 2000 through December 31, 2000 4.25 to 1.00
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January 1, 2001 through March 31, 2001 4.00 to 1.00
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April 1, 2001 through June 30, 2001 3.75 to 1.00
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July 1, 2001 through September 30, 2001 3.50 to 1.00
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October 1, 2001 through December 31, 2001 3.25 to 1.00
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January 1, 2002 through March 31, 2002 3.00 to 1.00
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April 1, 2002 through March 31, 2003 2.75 to 1.00
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April 1, 2003 through March 31, 2004 2.50 to 1.00
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April 1, 2004 and thereafter 2.00 to 1.00
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(b) Interest Coverage Ratio. The Credit Parties shall
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cause the Interest Coverage Ratio, measured as of the last day
of each fiscal quarter, to be greater than or equal to the
ratio shown below for the period corresponding thereto:
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Period Ratio
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June 30, 2000 through March 31, 2001 2.25 to 1.00
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April 1, 2001 through June 30, 2001 2.50 to 1.00
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July 1, 2001 through June 30, 2002 2.75 to 1.00
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July 1, 2002 through December 31, 2002 3.00 to 1.00
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January 1, 2003 through June 30, 2003 3.25 to 1.00
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July 1, 2003 through December 31, 2003 3.50 to 1.00
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January 1, 2004 through June 30, 2004 3.75 to 1.00
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July 1, 2004 and thereafter 4.00 to 1.00
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(d) Fixed Charge Coverage Ratio. The Credit Parties
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shall cause the Fixed Charge Coverage Ratio, for the twelve
month period ending on the last day of each fiscal quarter of
the Borrower, to be greater than or equal to the ratio shown
below for the period corresponding thereto:
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Period Ratio
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June 30, 2000 through June 30, 2001 1.20 to 1.00
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July 1, 2001 through December 31, 2001 1.15 to 1.00
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January 1, 2002 through March 31, 2002 1.20 to 1.00
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April 1, 2002 through September 30, 2002 1.25 to 1.00
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October 1, 2002 and thereafter 1.30 to 1.00
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SUBPART 1.3 Deletion of Schedule 1.1(d). Schedule 1.1(d) to the Credit
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Agreement is hereby deleted in its entirety.
PART 2
WAIVER OF ACKNOWLEDGED EVENTS OF DEFAULT
SUBPART 2.1 Waiver. The Lenders and the Agent hereby agree to waive
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their rights, to the extent and only to the extent such rights arise exclusively
as a result of the Acknowledged Defaults, to stop making Revolving Loans and
issuing Letters of Credit, to accelerate the full outstanding balance of the
Credit Party Obligations and to exercise such other remedies as may be afforded
the Lenders and the Agent under the Credit Documents or by applicable law;
provided, however, that the Lenders and Agent shall be free to exercise any or
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all of their rights and remedies at any time after the occurrence of an Event of
Default (other than the Acknowledged Defaults) under the Credit Agreement or any
other Credit Document (including a
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breach of any term of this Amendment). Nothing set forth herein or contemplated
hereby is intended to constitute an agreement by the Lenders or the Agent to
waive the exercise of any rights and remedies available to the Lenders or the
Agent under the Credit Agreement and the other Credit Documents (all of which
rights and remedies are hereby expressly reserved by the Lenders and the Agent)
upon and after the occurrence of an Event of Default other than the Acknowledged
Defaults.
PART 3
CONDITIONS PRECEDENT TO EFFECTIVENESS
SUBPART 3.1 Conditions Precedent. This Amendment shall become effective
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as of the date hereof upon the satisfaction (or waiver in writing by each of the
Lenders) of each of the following conditions precedent:
(a) Executed Amendment. Receipt by the Agent of counterparts of this
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Amendment, which collectively shall have been duly executed on behalf of
(i) the Borrowers, (ii) the Guarantors and (iii) the Required Lenders.
(b) Resolutions. Receipt by the Agent of copies of resolutions of
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the Board of Directors or their equivalent for the Credit Parties, each
approving and adopting this Amendment, the transactions contemplated herein
and authorizing execution and delivery hereof, certified by a secretary or
assistant secretary of such party to be true and correct.
(c) Opinion of Counsel. The Agent shall have received a legal
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opinion of Xxxxxxx Xxxx Slate Xxxxxxx & Xxxx in form and substance
reasonably satisfactory to the Agent.
(d) Fees. The Agent shall have received (i) on behalf of each Lender
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that approves this Amendment by delivery to the Agent of an executed
signature page on or before 12:00 noon, Monday, August 21, 2000, a fee
equal to 0.25% of the Commitments of such Lender (before giving effect to
this Amendment) and (ii) such fees due and payable pursuant to that certain
fee letter agreement dated as of August 18, 2000 among the Borrowers and
Bank of America, N.A.
PART 4
MISCELLANEOUS
SUBPART 4.1 Representations and Warranties. Each of the Credit Parties
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hereby represents and warrants to the Agent and the Lenders that, after giving
effect to this Amendment, (a) no Default or Event of Default exists under the
Credit Agreement or any of the other Credit Documents and (b) the
representations and warranties set forth in Section 6 of the Credit
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Agreement are, subject to the limitations set forth therein, true and correct in
all material respects as of the date hereof (except for those which expressly
relate to an earlier date).
SUBPART 4.2 Reaffirmation of Credit Party Obligations. Each Credit Party
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hereby ratifies the Credit Agreement and acknowledges and reaffirms (a) that it
is bound by all terms of the Credit Agreement applicable to it and (b) that it
is responsible for the observance and full performance of its respective Credit
Party Obligations.
SUBPART 4.3 Cross-References. References in this Amendment to any Part or
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Subpart are, unless otherwise specified, to such Part or Subpart of this
Amendment.
SUBPART 4.4 Instrument Pursuant to Credit Agreement. This Amendment is a
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Credit Document executed pursuant to the Credit Agreement and shall (unless
otherwise expressly indicated therein) be construed, administered and applied in
accordance with the terms and provisions of the Credit Agreement.
SUBPART 4.5 References in Other Credit Documents. At such time as this
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Amendment shall become effective pursuant to the terms of Part 3, all references
in the Credit Documents to the "Credit Agreement" shall be deemed to refer to
the Credit Agreement as amended by this Amendment.
SUBPART 4.6 Counterparts/Telecopy. This Amendment may be executed by the
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parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. Delivery of executed counterparts of the Amendment by telecopy shall
be effective as an original and shall constitute a representation that an
original shall be delivered.
SUBPART 4.7 Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
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CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SUBPART 4.8 Successors and Assigns. This Amendment shall be binding upon
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and inure to the benefit of the parties hereto and their respective successors
and assigns.
SUBPART 4.9 General. Except as amended hereby, the Credit Agreement and
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all other Credit Documents shall continue in full force and effect.
[The remainder of this page has been left blank intentionally.]
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Each of the parties hereto has caused a counterpart of this Amendment to be
duly executed and delivered as of the date first above written.
BORROWERS: PACKAGING DYNAMICS, L.L.C.
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By: /s/ X.X. Xxxx
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Name:
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Title:
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INTERNATIONAL CONVERTER, INC.,
as a Borrower and a Guarantor
By: /s/ X.X. Xxxx
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Name:
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Title:
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GUARANTORS: PACKAGING HOLDINGS, L.L.C.
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By: /s/ X.X. Xxxx
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Name:
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Title:
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BAGCRAFT PACKAGING, L.L.C.
(f/k/a Bagcraft Acquisition, L.L.C.)
By: /s/ X.X. Xxxx
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Name:
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Title:
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IPMC ACQUISITION, L.L.C.
By: /s/ X.X. Xxxx
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Name:
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Title:
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Signature Page to Packaging Dynamics
Third Amendment and Waiver
LENDERS: BANK OF AMERICA, N.A., a national banking
------- association, formerly known as NationsBank, N.A.,
in its individual capacity and as Agent
By: /s/ Xxxx X. Xxxxxxx
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Name: Xxxx X. Xxxxxxx
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Title: Managing Director
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Signature Page to Packaging Dynamics
Third Amendment and Waiver
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
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Title: Authorized Signatory
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By: /s/ Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
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Title: Authorized Signatory
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Signature Page to Packaging Dynamics
Third Amendment and Waiver
ABN AMRO BANK N.V.
By: /s/ Xxxxxxxxx X. Xxxxx
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Name: Xxxxxxxxx X. Xxxxx
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Title: Group Vice President
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By: /s/ C. Xxxxx Xxxxxx
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Name: C. Xxxxx Xxxxxx
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Title: Assistant Vice President
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Signature Page to Packaging Dynamics
Third Amendment and Waiver
FIRST UNION NATIONAL BANK
By: /s/ J. Xxxxxx Xxxxxx
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Name: J. Xxxxxx Xxxxxx
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Title: Vice President
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Signature Page to Packaging Dynamics
Third Amendment and Waiver
SOCIETE GENERALE
By: /s/ Xxxxx Xxxxxx
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Name: Xxxxx Xxxxxx
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Title: Managing Director
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Signature Page to Packaging Dynamics
Third Amendment and Waiver
FLOATING RATE PORTFOLIO
By: INVESCO Senior Secured Management, Inc.,
as attorney in fact
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
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Title: Authorized Signatory
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Signature Page to Packaging Dynamics
Third Amendment and Waiver
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: /s/ Xxxxx Xxxx
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Name:____________________________________
Title:___________________________________
Signature Page to Packaging Dynamics
Third Amendment and Waiver
COMERICA BANK
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Name: Xxxxxxxx X. Xxxxxxxx
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Title: Assistant Vice President
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Signature Page to Packaging Dynamics
Third Amendment and Waiver
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By: /s/ Payson X. Xxxxxxxxx
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Name: Payson X. Xxxxxxxxx
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Title: Vice President
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Signature Page to Packaging Dynamics
Third Amendment and Waiver
TYLER TRADING, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
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Title: President
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Signature Page to Packaging Dynamics
Third Amendment and Waiver
