EXHIBIT 10.37
FIFTH AMENDMENT AND CONSENT TO CREDIT AGREEMENT
FIFTH AMENDMENT AND CONSENT TO CREDIT AGREEMENT (this
"AMENDMENT"), dated as of January 12, 2001, among SPECIAL DEVICES, INCORPORATED,
a corporation organized under the laws of the State of Delaware (the
"BORROWER"), the lenders party to the Credit Agreement referred to below
(collectively, the "BANKS") and BANKERS TRUST COMPANY, as Administrative Agent.
All capitalized terms used herein and not otherwise defined herein shall have
the respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
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WHEREAS, the Borrower, the Banks and the Administrative Agent
are parties to a Credit Agreement, dated as of December 15, 1998 (as in effect
on the date hereof, the "CREDIT AGREEMENT");
WHEREAS, the Borrower has previously delivered to the
Administrative Agent and the Banks a notice, dated August 20, 1999, a copy of
which is attached hereto as ANNEX A, relating to certain environmental matters
as described therein (the "ENVIRONMENTAL NONCOMPLIANCE");
WHEREAS, the Borrower, the Banks and the Administrative Agent
are parties to a Waiver and Modification to Credit Agreement, dated as of
September 14, 1999 (the "WAIVER"), pursuant to which, among other things, on the
terms and conditions set forth therein, (i) the Banks waived any Default or
Event of Default that may have occurred and be continuing under the Credit
Agreement solely as a result of the Borrower's failure to be in compliance with
the provisions of the Credit Agreement due to the Environmental Noncompliance
and (ii) in order to induce the Banks to grant the waiver described in
immediately preceding clause (i) and to permit certain Credit Events to occur
from time to time notwithstanding the existence of the Environmental
Noncompliance, it was agreed by and among the parties to the Waiver that, among
other things, until such time as the Required Banks otherwise agree in writing,
the Borrower may not incur or suffer to exist any Revolving Loans, Swingline
Loans or Letters of Credit if, after giving effect to the incurrence or
existence thereof, the aggregate outstanding principal amount of the Revolving
Loans, Swingline Loans and Letter of Credit Outstandings would exceed the lesser
of (x) the Total Revolving Loan Commitment as then in effect and (y)
$20,000,000;
WHEREAS, the Borrower, the Banks and the Administrative Agent
are parties to a Fourth Amendment, Consent and Waiver to Credit Agreement, dated
as of September 18, 2000 (the "▇▇▇▇ AMENDMENT"), pursuant to which, among other
things, on the terms and conditions set forth therein, (i) the Banks consented
to the sale (the "▇▇▇▇ SALE") of 100% of the capital stock of ▇▇▇▇,
Incorporated, a corporation organized under the laws of the State of Delaware
and a Wholly-Owned Domestic Subsidiary of the Borrower immediately prior to such
sale and (ii) in order to induce the Banks to grant the consent described in
immediately preceding clause (i), it was agreed by and among the parties to the
▇▇▇▇ Amendment that, among other things, until such time as when the Borrower
shall have paid its estimated tax payments with respect to both its
federal and state income tax obligations for its fiscal year ending closest to
October 31, 2000 (which date shall not be earlier than January 15, 2001), the
Borrower may not incur or suffer to exist any Revolving Loans, Swingline Loans
or Letters of Credit if, after giving effect to the incurrence or existence
thereof, the aggregate outstanding principal amount of the Revolving Loans,
Swingline Loans and Letter of Credit Outstandings would exceed the lesser of (x)
the Total Revolving Loan Commitment as then in effect and (y) $20,000,000 LESS
the Revolver Blocked Amount (as defined in the ▇▇▇▇ Amendment);
WHEREAS, the Borrower has previously delivered to the
Administrative Agent and the Banks a notice, dated December 14, 2000, a copy of
which is attached hereto as ANNEX B, setting forth (i) the terms of the
settlement of the Environmental Noncompliance (without giving effect to any
amendment or modification thereof or supplement or replacement thereto, except
with the approval of the Required Banks, the "ENVIRONMENTAL NONCOMPLIANCE
SETTLEMENT") including (x) that certain Plea Agreement, dated as of December 12,
2000, by and between the Borrower and the United States Attorney's Office for
the Central District of California (the "FEDERAL SETTLEMENT") setting forth,
among other things, payment obligations on the part of the Borrower in the
aggregate amount of $1,501,200 and (y) that certain Consent Agreement and
Stipulation of Entry of Final Judgment; Order filed in the Superior Court of the
State of California, County of Los Angeles (the "STATE SETTLEMENT") setting
forth, among other things, payment obligations on the part of the Borrower in
the aggregate amount of $565,500, (ii) a request by the Borrower that the
Required Banks agree in writing that the Borrower may incur Revolving Loans and
Swingline Loans for the purpose of making payments relating to the Environmental
Noncompliance Settlement in accordance with the terms thereof and (iii) a
request by the Borrower for certain amendments to the Credit Agreement; and
WHEREAS, subject to the terms and conditions of this
Amendment, the Banks hereby agree to grant the consents and amendments under the
Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. CONSENTS UNDER CREDIT AGREEMENT.
1. The Borrower and the Banks hereby agree that,
notwithstanding anything to the contrary set forth in Section 2 of Part I of the
Waiver and Section 2 of Part I of the ▇▇▇▇ Amendment, but subject to the other
terms and conditions set forth in the Credit Agreement, at all times after the
Fifth Amendment Effective Date (as defined below), unless the Required Banks
shall have otherwise agreed in writing, (A) the Borrower may not incur any
Revolving Loans, Swingline Loans or Letters of Credit if, after giving effect to
the incurrence thereof, the aggregate outstanding principal amount of all
Revolving Loans, Swingline Loans and Letter of Credit Outstandings would exceed
the lesser of (x) the Total Revolving Loan Commitment as then in effect and (y)
the Revolver Cap (as defined below) as then in effect and (B) on any day on
which the sum of the aggregate outstanding principal amount of all Revolving
Loans, Swingline Loans and Letter of Credit Outstandings exceeds the lesser of
(x) the Total Revolving Loan
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Commitment as then in effect and (y) the Revolver Cap as then in effect, the
Borrower shall prepay on such day the principal of Swingline Loans and, after
all Swingline Loans have been repaid in full (or if no Swingline Loans are
outstanding), Revolving Loans in an amount equal to such excess and if, after
giving effect to such prepayment of all outstanding Swingline Loans and
Revolving Loans, the aggregate amount of the Letter of Credit Outstandings
exceeds the lesser of (x) the Total Revolving Loan Commitment as then in effect
and (y) the Revolver Cap as then in effect, the Borrower shall pay to the
Administrative Agent at the Payment Office on such day an amount of cash and/or
Cash Equivalents equal to the amount of such excess (up to a maximum amount
equal to the Letter of Credit Outstandings at such time), such cash and/or Cash
Equivalents to be held as security for all obligations of the Borrower to the
Issuing Bank and the Banks under the Credit Agreement in a cash collateral
account to be established by the Administrative Agent.
It is understood and agreed that, for purposes of this Section
1 of Part I:
(A) "REVOLVER CAP" shall mean an amount initially equal to
$20,000,000 LESS the Revolver Blocked Amount, which Revolver Cap shall
be:
(x) increased (but not in the aggregate by more than
$2,500,000 pursuant to this sub-clause (x)) on each date that
the Borrower shall incur Revolving Loans and/or Swingline
Loans for the purpose of promptly satisfying its payment
obligations expressly in accordance with the terms of the
Environmental Noncompliance Settlement (including the payment
of related fees and expenses), PROVIDED that (i) the Borrower
shall in fact promptly utilize such proceeds for the purpose
of promptly satisfying its payment obligations expressly in
accordance with the terms of the Environmental Noncompliance
Settlement and (ii) no Default or Event of Default under
Section 10.01, 10.05, 10.10 or 10.11 of the Credit Agreement
shall then exist, PROVIDED, HOWEVER, in no event shall (1) the
Borrower be permitted to incur Revolving Loans and/or
Swingline Loans for the purpose of satisfying any payment
obligation with respect to the Federal Settlement until such
time as when any and all required governmental consents and
other third party consents with respect to such Federal
Settlement shall have been obtained and all such consents
shall be final, (2) the Borrower be permitted to incur
Revolving Loans and/or Swingline Loans for the purpose of
satisfying any payment obligation with respect to the State
Settlement until such time as when any and all required
governmental consents and other third party consents with
respect to such State Settlement shall have been obtained and
all such consents shall be final and (3) the Borrower be
permitted to incur Revolving Loans and/or Swingline Loans for
the purpose of satisfying any obligation to pay fees and
expenses (including, without limitation, legal fees and
expenses) (other than to the extent expressly required by the
terms of the Federal Settlement or the State Settlement, as
the case may be) until such time as when any and all required
governmental consents and other third party consents with
respect to both the Federal Settlement and the State
Settlement shall have been obtained and all such consents
shall be final; (PROVIDED that the aggregate amount of
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Revolving Loans and/or Swingline Loans incurred by the
Borrower pursuant to this subclause (3) shall in no event
exceed $433.300), and
(y) increased (but not in the aggregate by more than
the Revolver Blocked Amount pursuant to this sub-clause (y))
on each date on or after the Tax Payment Date that the
Borrower shall incur Revolving Loans and/or Swingline Loans
for the purpose of promptly making its estimated tax payments
with respect to its federal and state income tax obligations
for its fiscal year ended closest to October 31, 2000,
PROVIDED that (i) the Borrower shall in fact promptly utilize
such proceeds for the purpose of promptly making its estimated
tax payments with respect to its federal and state income tax
obligations for its fiscal year ended closest to October 31,
2000 and (ii) no Default or Event of Default under Section
10.01, 10.05, 10.10 or 10.11 of the Credit Agreement shall
then exist; and
(B) "TAX PAYMENT DATE" shall mean the date that the Borrower
shall make its estimated tax payments with respect to its federal and
state income tax obligations for its fiscal year ended closest to
October 31, 2000 (which date shall be no earlier than January 15,
2001).
II. AMENDMENTS TO CREDIT AGREEMENT.
1. Section 9.09 of the Credit Agreement is hereby amended by
deleting said Section 9.09 in its entirety and inserting the following new
Section 9.09 in lieu thereof:
"9.09 MAXIMUM LEVERAGE RATIO. The Borrower will not permit the
Leverage Ratio at any time during a period set forth below to be
greater than the ratio set forth opposite such period below:
PERIOD RATIO
The last day of the
Borrower's fiscal quarter
ending closest to January
31, 2001 through and
including the date
immediately preceding the
last day of the Borrower's
fiscal quarter ending
closest to April 30, 2001 7.15:1.00
The last day of the
Borrower's fiscal quarter
ending closet to April 30,
2001 through and including
the date immediately
preceding the last day of
the Borrower's fiscal
quarter ending closest to
July 31, 2001 7.25:1.00
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The last day of the
Borrower's fiscal quarter
ending closest to July 31,
2001 through and including
the date immediately
preceding the last day of
the Borrower's fiscal
quarter ending closest to
October 31, 2001 6.80:1.00
The last day of the
Borrower's fiscal quarter
ending closest to October
31, 2001 through and
including the date
immediately preceding the
last day of the Borrower's
fiscal quarter ending
closest to January 31, 2002 6.00:1.00
Thereafter 3.00:1.00."
2. The definition of "Consolidated EBITDA" appearing in
Section 11.01 of the Credit Agreement is hereby deleted and the following new
definition is inserted in lieu thereof:
"Consolidated EBITDA" shall mean, for any period, Consolidated
EBIT for such period, adjusted by (x) adding thereto (without
duplication) (i) the amount of all amortization, depreciation and other
non-cash expenses or non-cash charges that were deducted in arriving at
Consolidated EBIT for such period (including amortization of goodwill,
the non-cash costs of agreements evidencing Interest Rate Protection
Agreements, Other Hedging Agreements, license agreements and
non-competition agreements, and the non-cash amortization of
Capitalized Lease Obligations, managements fees and organization
costs), but excluding, however, any non-cash expenses or non-cash
charges associated with any asset write-downs, (ii) unrealized non-cash
gains and losses from hedging, foreign currency or commodities
translations and transactions that were deducted in arriving at
Consolidated EBIT for such period, (iii) up to (I) $1,700,000 of
inventory write-downs, (II) $11,300,000 of legal, consulting and other
expenses relating to the environmental investigations at the Borrower's
facilities and (III) $638,700 relating to the write-off of a
receivable, in each case (in the case of this clause (iii)) to the
extent that such charges were incurred in the Borrower's fiscal quarter
ended October 31, 1999 and were deducted in arriving at Consolidated
EBIT for such period and (iv) up to $2,066,700 in the aggregate of
payments, fines, penalties and legal, consulting and other expenses
relating to the settlement of the environmental investigations at the
Borrower's facilities to the extent that such charges were deducted in
arriving at Consolidated EBIT for such period and (y) subtracting
therefrom any cash expenses, cash charges or cash payments arising from
any non-cash expenses, non-cash charges or unrealized non-cash gains or
losses that were deducted in arriving at Consolidated EBIT in a
previous period.
3. From and after the Fifth Amendment Effective Date, the
Borrower and the Banks hereby agree that the provisions of the Credit Agreement
(including, without limitation, the
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representations and warranties of the Borrower set forth therein) shall no
longer be modified by the Waiver.
III. MISCELLANEOUS.
1. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that (i) all representations,
warranties and agreements contained in Section 7 of the Credit Agreement are
true and correct in all material respects on and as of the Fifth Amendment
Effective Date (unless such representations and warranties relate to a specific
earlier date, in which case such representations and warranties shall be true
and correct as of such earlier date), (ii) there exists no Default or Event of
Default on the Fifth Amendment Effective Date, in each case after giving effect
to this Amendment and (iii) the payments required to be made by the Borrower
pursuant to the Environmental Noncompliance Settlement could not reasonably be
expected to have a material adverse effect on the business, operations,
property, assets, liabilities or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole. Without limiting the foregoing,
the Borrower hereby represents and warrants that, other than for the
Environmental Noncompliance Settlement, to the best of its knowledge after due
inquiry, there are no liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, suits, costs, expenses and disbursements (including
attorneys' and consultants' fees and disbursements) that are likely to be
assessed against the Borrower or any of its Subsidiaries from time to time
related to the Environmental Noncompliance that either individually or in the
aggregate could reasonably be expected to have a material adverse effect on the
business, operations, property, assets, liabilities or condition (financial or
otherwise) of the Borrower and its Subsidiaries taken as a whole.
2. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
3. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrower and the Administrative Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the
"FIFTH AMENDMENT EFFECTIVE DATE") when each Credit Party and the Required Banks
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including, without limitation, by way of
facsimile transmission) the same to the Administrative Agent at the Notice
Office. This Amendment and the agreements contained herein shall be binding on
the successors and assigns of the parties hereto.
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6. From and after the Fifth Amendment Effective Date, all
references in the Credit Agreement and in the other Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement as
modified hereby.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
SPECIAL DEVICES, INCORPORATED
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
and Chief Financial Officer
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By: /s/ ▇▇▇▇▇▇▇▇▇▇ Suttton
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Name: ▇▇▇▇▇▇▇▇▇▇ Suttton
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
CITY NATIONAL BANK
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
NATIONAL CITY BANK
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
PARIBAS
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director
By: /s/ ▇▇ ▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇ ▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
