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Exhibit
10.2
FIRST AMENDMENT AND WAIVER
TO CREDIT AGREEMENT
THIS FIRST AMENDMENT AND
WAIVER TO CREDIT AGREEMENT dated as of October 12, 2007 (this
“ Agreement ”), is entered into among NAUTILUS,
INC. (the “ Borrower ”), the Guarantors party to
the Credit Agreement (as defined below), the Lenders party to the
Credit Agreement and BANK OF AMERICA, N.A., as Administrative Agent
(in such capacity, the “ Administrative Agent
”). Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed thereto in the Credit
Agreement.
RECITALS
A. The Borrower, the
Guarantors, the Lenders and the Administrative Agent entered into
that certain Credit Agreement, dated as of February 14, 2007
(the “ Credit Agreement ”).
B. The Borrower has informed
the Lenders that it will not be able to comply with Sections
8.11(a) and 8.11(b) of the Credit Agreement with respect to the
four fiscal quarter period ended September 30, 2007 (the
“ Acknowledged Defaults ”);
C. The Borrower is requesting
that the Lenders (i) waive the Acknowledged Defaults and
(ii) modify certain other provisions of the Credit Agreement;
and
D. The Lenders have agreed to
(i) waive the Acknowledged Defaults and (ii) amend
certain terms of the Credit Agreement, in each case, on the terms,
and subject to the conditions, set forth below.
E. In consideration of the
agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Amendments
.
(a) Existing
Definitions . The following definitions in Section 1.01 of
the Credit Agreement is hereby amended to read as
follows:
“ Applicable
Rate ” means the following percentages per annum:
(a) with respect to Eurodollar Rate Loans and Letter of Credit
Fees, 2.00%, (b) with respect to Base Rate Loans (other than
Swing Line Loans), 0.50%, (c) with respect to Swing Line
Loans, -0.50% and (d) with respect to the commitment fee
payable pursuant to Section 2.09(a) ,
0.425%.
“ Loan Documents
” means this Agreement, each Note, each Issuer Document, each
Joinder Agreement, the Collateral Documents and the Fee
Letter.
(b) Pro Forma Basis .
The parenthetical “(including for purposes of determining the
Applicable Rate)” is hereby deleted from the definition of
“Pro Forma Basis” in Section 1.01 of the Credit
Agreement.
(c) New Definitions .
The following definitions are added to Section 1.01 of the
Credit Agreement in the appropriate alphabetical order to read as
follows:
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“ Collateral
” means a collective reference to all real and personal
property with respect to which Liens in favor of the Administrative
Agent, for the benefit of itself and the Lenders, are purported to
be granted pursuant to and in accordance with the terms of the
Collateral Documents.
“ Collateral
Documents ” means a collective reference to the Security
Agreement, the Mortgages and other security documents as may be
executed and delivered by the Loan Parties pursuant to the terms of
Section 7.14 .
“ Debt Issuance
” means the issuance by any Loan Party or any Subsidiary of
any Indebtedness other than Indebtedness permitted under
Section 8.03 (other than Section 8.03(f)
).
“ Equity
Issuance ” means any issuance by any Loan Party or any
Subsidiary to any Person of its Equity Interests, other than
(a) any issuance of its Equity Interests pursuant to the
exercise of options or warrants, (b) any issuance of its
Equity Interests pursuant to the conversion of any debt securities
to equity or the conversion of any class equity securities to any
other class of equity securities, (c) any issuance of options
or warrants relating to its Equity Interests, and (d) any
issuance by the Borrower of its Equity Interests as consideration
for a Permitted Acquisition. The term “Equity Issuance”
shall not be deemed to include any Disposition.
“ Excluded
Property ” means, with respect to any Loan Party,
(a) unless requested by the Administrative Agent or the
Required Lenders, any owned real property which is located outside
of the United States, (b) unless requested by the
Administrative Agent or the Required Lenders, any leasehold
interests in real property, (c) unless requested by the
Administrative Agent or the Required Lenders, any IP Rights for
which a perfected Lien thereon is not effected either by filing of
a Uniform Commercial Code financing statement or by appropriate
evidence of such Lien being filed in either the United States
Copyright Office or the United States Patent and Trademark Office,
(d) unless requested by the Administrative Agent or the
Required Lenders, any personal property (other than personal
property described in clause (c) above) for which the
attachment or perfection of a Lien thereon is not governed by the
Uniform Commercial Code, (e) the Equity Interests of any
direct Foreign Subsidiary of a Loan Party to the extent not
required to be pledged to secure the Obligations pursuant to
Section 7.14(a) and (f) any property which,
subject to the terms of Section 8.09 , is subject to a
Lien of the type described in Section 8.01(i) pursuant
to documents which prohibit such Loan Party from granting any other
Liens in such property.
“ First Amendment
Effective Date ” means October 12, 2007.
“ Interim
Availability Amount ” means the lesser of
(a) $75,000,000 and (b) the Aggregate Revolving
Commitments; provided that if Consolidated EBITDA is at
least $32,500,000 for each of the two most recently ended four
fiscal quarter periods, then the “Interim Availability
Amount” shall mean the Aggregate Revolving
Commitments.
“ Mortgaged
Property ” means, with respect to any Loan Party, any
owned real property or any leasehold interest in real property
that, in either case, is subject to a Mortgage.
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“ Mortgages
” means the mortgages, deeds of trust, assignments of leases
for security or deeds to secure debt that purport to grant to the
Administrative Agent a security interest in the fee interests
and/or leasehold interests of any Loan Party in any real
property.
“ Net Cash
Proceeds ” means the aggregate cash or Cash Equivalents
proceeds received by any Loan Party or any Subsidiary in respect of
any Disposition, Equity Issuance, Debt Issuance or Involuntary
Disposition, net of (a) direct costs incurred in connection
therewith (including, without limitation, legal, accounting and
investment banking fees, and sales commissions), (b) taxes
paid or payable as a result thereof and (c) in the case of any
Disposition or any Involuntary Disposition, the amount necessary to
retire any Indebtedness secured by a Permitted Lien (ranking senior
to any Lien of the Administrative Agent) on the related property;
it being understood that “Net Cash Proceeds” shall
include, without limitation, any cash or Cash Equivalents received
upon the sale or other disposition of any non-cash consideration
received by any Loan Party or any Subsidiary in any Disposition,
Equity Issuance, Debt Issuance or Involuntary
Disposition.
“ Security
Agreement ” means the security and pledge agreement dated
as of October 5, 2007 executed in favor of the Administrative
Agent by each of the Loan Parties.
(d) Section 1.03
. The parenthetical “(including for purposes of determining
the Applicable Rate)” is hereby deleted from
Section 1.03(c) of the Credit Agreement.
(e)
Section 2.01(a) . The following sentence is added to
the end of Section 2.01(a) of the Credit Agreement:
Notwithstanding anything to
the contrary herein, commencing on January 1, 2008 and until
such time as the Required Lenders agree otherwise, the Total
Revolving Outstandings shall not exceed the Interim Availability
Amount.
(f)
Section 2.03(a)(i) . The following sentence is added to
the end of Section 2.03(a)(i) of the Credit
Agreement:
Notwithstanding anything to
the contrary herein, commencing on January 1, 2008 and until
such time as the Required Lenders agree otherwise, the Total
Revolving Outstandings shall not exceed the Interim Availability
Amount.
(g)
Section 2.04(a) . The following sentence is added to
the end of Section 2.04(a) of the Credit Agreement:
Notwithstanding anything to
the contrary herein, commencing on January 1, 2008 and until
such time as the Required Lenders agree otherwise, the Total
Revolving Outstandings shall not exceed the Interim Availability
Amount.
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(h) Section 2.05
. (i) Section 2.05(b) of the Credit Agreement is amended
and restated in its entirety and (ii) a new
Section 2.05(c) is added to the Credit Agreement, each to read
as follows:
(b) Mandatory Prepayments
of Loans .
(i) Revolving
Commitments . If for any reason the Total Revolving
Outstandings at any time exceed the Aggregate Revolving Commitments
then in effect, the Borrower shall immediately prepay Revolving
Loans and/or the Swing Line Loans and/or Cash Collateralize the L/C
Obligations in an aggregate amount equal to such excess;
provided , however , that the Borrower shall not be
required to Cash Collateralize the L/C Obligations pursuant to this
Section 2.05(b) unless after the prepayment in full of
the Revolving Loans and Swing Line Loans the Total Revolving
Outstandings exceed the Aggregate Revolving Commitments then in
effect.
(ii) Dispositions and
Involuntary Dispositions . The Borrower shall prepay the Loans
and/or Cash Collateralize the L/C Obligations as hereafter provided
in an aggregate amount equal to 100% of the Net Cash Proceeds of
all (A) Dispositions (other than Permitted Transfers) in
excess of $1,000,000 in the aggregate after the First Amendment
Effective Date and (B) Involuntary Dispositions.
(iii) Debt Issuances .
Immediately upon receipt by any Loan Party or any Subsidiary of the
Net Cash Proceeds of any Debt Issuance, the Borrower shall prepay
the Loans and/or Cash Collateralize the L/C Obligations as
hereafter provided in an aggregate amount equal to 100% of such Net
Cash Proceeds in excess of $1,000,000 in the aggregate after the
First Amendment Effective Date.
(iv) Equity Issuances
. Immediately upon the receipt by any Loan Party or any Subsidiary
of the Net Cash Proceeds of any Equity Issuance, the Borrower shall
prepay the Loans and/or Cash Collateralize the L/C Obligations in
an aggregate amount equal to 100% of such Net Cash
Proceeds.
(v) Application of
Mandatory Prepayments . All amounts required to be paid
pursuant to this Section 2.05(b) shall be applied
first ratably to the L/C Borrowings and the Swing Line
Loans, second , to the outstanding Revolving Loans, and,
third , to Cash Collateralize the remaining L/C Obligations.
Within the parameters of the applications set forth above,
prepayments shall be applied first to Base Rate Loans and then to
Eurodollar Rate Loans in direct order of Interest Period
maturities. All prepayments under this Section 2.05(b)
shall be subject to Section 3.05 , but otherwise
without premium or penalty, and shall be accompanied by interest on
the principal amount prepaid through the date of
prepayment.
(c) Interim Availability
Amount . Commencing on January 1, 2008 and until such time
as the Required Lenders agree otherwise, if for any reason the
Total Revolving Outstandings exceed the Interim Availability
Amount, the Borrower shall immediately prepay Revolving Loans
and/or the Swing Line Loans and/or Cash Collateralize the L/C
Obligations in an aggregate amount equal to such excess;
provided , however , that the Borrower shall not be
required to Cash Collateralize the L/C Obligations pursuant to this
Section 2.05(c) unless after the prepayment in full of
the Revolving Loans and Swing Line Loans the Total Revolving
Outstandings exceed the Interim Availability Amount.
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(i) Section 2.06
. Section 2.06 of the Credit Agreement is amended and restated
in its entirety to read as follows:
(a) Optional
Reductions . The Borrower may, upon notice to the
Administrative Agent, terminate the Aggregate Revolving
Commitments, or from time to time permanently reduce the Aggregate
Revolving Commitments to an amount not less than the Outstanding
Amount of Revolving Loans, Swing Line Loans and L/C Obligations;
provided that (i) any such notice shall be received by
the Administrative Agent not later than 12:00 noon five
(5) Business Days prior to the date of termination or
reduction, (ii) any such partial reduction shall be in an
aggregate amount of $5,000,000 or any whole multiple of $1,000,000
in excess thereof and (iii) if, after giving effect to any
reduction of the Aggregate Revolving Commitments, the Letter of
Credit Sublimit or the Swing Line Sublimit exceeds the amount of
the Aggregate Revolving Commitments, such sublimit shall be
automatically reduced by the amount of such excess. The
Administrative Agent will promptly notify the Lenders of any such
notice of termination or reduction of the Aggregate Revolving
Commitments. Any reduction of the Aggregate Revolving Commitments
shall be applied to the Revolving Commitment of each Lender
according to its Applicable Percentage. All fees accrued with
respect thereto until the effective date of any termination of the
Aggregate Revolving Commitments shall be paid on the effective date
of such termination.
(b) Mandatory
Reductions . Within three Business Days after any Loan Party or
Subsidiary receives Net Cash Proceeds, the Aggregate Revolving
Commitments shall be permanently reduced in an amount equal to
(i) with respect to Sections 2.05(b)(ii), 80%, (ii) with
respect to Section 2.05(b)(iii), 100% and (iii) with
respect to 2.05(b)(iv), 50%, of the amount of Net Cash Proceeds
that is available to be applied to the prepayment of Revolving
Loans, Swing Line Loans and L/C Obligations pursuant to
Section 2.05(b)(ii) , (iii) , and (iv) ,
irrespective of the Total Revolving Outstandings at such
time.
(j) Section 4.05
. The following sentence is added to the end of Section 4.05
of the Credit Agreement:
The Guarantors acknowledge
and agree that their obligations hereunder are secured in
accordance with the terms of the Collateral Documents and that the
Lenders may exercise their remedies thereunder in accordance with
the terms thereof.
(k) Section 6.02
. Subclause (b)(i) of Section 6.02 of the Credit Agreement is
amended by inserting the word “material” immediately
prior to the word “Contractual”.
(l) Section 6.03
. Section 6.03 of the Credit Agreement is amended and restated
in its entirety to read all follows:
No approval, consent,
exemption, authorization, or other action by, or notice to, or
filing with, any Governmental Authority or any other Person is
necessary or required in connection with the execution, delivery or
performance by, or enforcement against, any Loan Party of this
Agreement or any other Loan Document other than (i) those that
have already been obtained and are in full force and effect and
(ii) filings to perfect the Liens created by the Collateral
Documents.
(m) Section 6.13
. Section 6.13 of the Credit Agreement is amended by deleting
“(i)” from such Section.
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(n) Section 6.17
. Section 6.17 of the Credit Agreement is amended and restated
in its entirety to read all follows:
Except for the effect of
matters disclosed in Schedule 6.06 (none of which could reasonably
be expected to have a Material Adverse Effect), the Borrower and
its Subsidiaries own, or possess the legal right to use, all of the
trademarks, service marks, trade names, copyrights, patents, patent
rights, franchises, licenses and other intellectual property rights
(collectively, “ IP Rights ”) that are
reasonably necessary for the operation of their respective
businesses. Set forth on Schedule 6.17 is a list of all IP
Rights registered or pending registration with the United States
Copyright Office or the United States Patent and Trademark Office
and owned by each Loan Party as of the date of delivery of such
Schedule to the Administrative Agent. Except for such claims
and infringements that could not reasonably be expected to have a
Material Adverse Effect: (a) no claim has been asserted and is
pending by any Person challenging or questioning the use of any IP
Rights or the validity or effectiveness of any IP Rights, nor does
any Loan Party know of any such claim, and (b) to the
knowledge of the Responsible Officers of the Loan Parties, the use
of any IP Rights by the Borrower or any Subsidiary or the granting
of a right or a license in respect of any IP Rights from the
Borrower or any Subsidiary does not infringe on the rights of any
Person. As of the date of delivery of such Schedule to the
Administrative Agent, none of the IP Rights owned by any of the
Loan Parties is subject to any licensing agreement or similar
arrangement except as set forth on Schedule 6.17 . The
parties hereto acknowledge that Schedule 6.17 as delivered
on the First Amendment Effective Date is in draft form and that the
Loan Parties shall deliver a final Schedule 6.17 to the
Administrative Agent on or before November 10, 2007 (such
final Schedule shall replace and supersede such prior
draft).
(o) Section 6.19
. Section 6.19 of the Credit Agreement is amended and restated
in its entirety to read as follows:
6.19 Business Locations;
Taxpayer Identification Number .
Set forth on Schedule
6.19(a) is a list of all real property located in the United
States that is owned or leased by the Loan Parties as of the First
Amendment Effective Date. Set forth on Schedule 6.19(b) is
the chief executive office, U.S. tax payer identification number,
organizational identification number and exact legal name and state
of organization of each Loan Party as of the First Amendment
Effective Date. Except as set forth on Schedule 6.19(c) , no
Loan Party has during the five years preceding the First Amendment
Effective Date (i) changed its legal name, (ii) changed
its state of formation, or (iii) been party to a merger,
consolidation or other change in structure.
(p)
Section 7.02(d) . Section 7.02(d) of the Credit
Agreement is amended and restated in its entirety to read all
follows:
(d) concurrently with the
delivery of the financial statements referred to in
Sections 7.01(a) and (b) , a report signed by a
Responsible Officer of the Borrower that supplements
Schedules 6.13 , 6.17 and 6.19(a) ,
6.19(b) and 6.19(c) , such that, as supplemented,
such Schedules would be to be accurate and complete as of such
date;
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(q) Section 7.07
. Section 7.07 of the Credit Agreement is amended and restated
in its entirety to read as follows:
(a) Maintain in full force
and effect insurance (including worker’s compensation
insurance, liability insurance, casualty insurance and business
interruption insurance) with financially sound and reputable
insurance companies not Affiliates of the Borrower, in such
amounts, with such deductibles and covering s
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