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EXECUTION COPY
SIXTH AMENDMENT
TO, AND WAIVER UNDER,
AMENDED AND RESTATED CREDIT AGREEMENT AND SECURITY AGREEMENT
THIS SIXTH AMENDMENT TO, AND WAIVER UNDER, AMENDED AND RESTATED
CREDIT
AGREEMENT AND SECURITY AGREEMENT (this
"Sixth Amendment") is made and entered
into as of November 9, 2005, by and among
the financial institutions identified
on the signature pages hereof (such
financial institutions, together with their
respective successors and assigns, are
referred to hereinafter each individually
as a "Lender" and collectively as the
"Lenders"), WELLS FARGO FOOTHILL, INC., a
California corporation, as administrative
agent and collateral agent for the
Lenders (in such capacities, together with
any successor administrative agent
and collateral agent, the "Agent"), SILVER
POINT FINANCE, LLC, as the co-agent,
syndication agent, documentation agent (in
such capacities, together with any
successor co-agent, syndication agent, and
documentation agent, the "Co-Agent"),
arranger and book runner, SALTON, INC., a
Delaware corporation (the "Parent"),
each of the Parent's Subsidiaries
identified on the signature pages hereof as
Borrowers (collectively with the Parent,
the "Borrowers") and each of the
Parent's Subsidiaries identified on the
signature pages hereof as Guarantors
(collectively, the "Guarantors" and,
together with the Borrowers, the "Borrower
Parties").
WITNESSETH:
WHEREAS, the Lenders, the Agent, the Co-Agent, and the Borrower
Parties
are parties to that certain Amended and
Restated Credit Agreement, dated as of
May 9, 2003 and amended and restated as of
June 15, 2004 (as amended as of
August 30, 2004, as of May 11, 2005, as of
July 8, 2005, as of September 22,
2005, and as of October 7, 2005, and as it
may be further amended, modified,
supplemented or amended and restated from
time to time, the "Credit Agreement");
WHEREAS, Section 5.2(v) of the Credit Agreement requires that
the
Administrative Borrower furnish to each
Lender, in such detail as the Agent or
the Co-Agent shall reasonably request,
monthly, in any event no later than the
tenth (10th) day of each month, a 13-week
rolling cash flow report, which report
shall show, among other things, the actual
versus the budgeted cash flow for the
prior month (the "Section 5.2(v) Reporting
Requirement");
WHEREAS, the Administrative Borrower has failed to comply with
the
Section 5.2(v) Reporting Requirement for
the months ended July 31, 2005, August
31, 2005 and September 30, 2005 (the
"Section 5.2(v) Defaults");
WHEREAS, the Borrowers have requested, and the Agent, the Co-Agent
and
the Lenders have agreed, to waive the
Section 5.2(v) Defaults subject to the
terms and conditions set forth herein;
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WHEREAS, Section 7.22 of the Credit Agreement required that the
Borrowers not fail to maintain or achieve
EBITDA for the 12-month period ending
September 30, 2005 of at least $4,481,000
(the "September 2005 EBITDA
Threshold");
WHEREAS, the Borrowers' actual EBITDA for the 12-month period
ending
September 30, 2005 was less than the
September 2005 EBITDA Threshold (the
"Section 7.22 Default");
WHEREAS, the Borrowers have requested, and the Agent, the Co-Agent
and
the Lenders have agreed, to waive the
Section 7.22 Default subject to the terms
and conditions set forth herein;
WHEREAS, Section 7.24 of the Credit Agreement required that the
Borrowers not fail to maintain or achieve a
Consolidated Fixed Charge Coverage
Ratio for the 12-month period ending
September 30, 2005 of at least 0.25:1.00
(the "September 2005 CFCC Threshold");
WHEREAS, the Borrowers' actual Consolidated Fixed Charge Coverage
Ratio
for the 12-month period ending September
30, 2005 was less than the September
2005 CFCC Threshold (the "Section 7.24
Default");
WHEREAS, the Borrowers have requested, and the Agent, the Co-Agent
and
the Lenders have agreed, to waive the
Section 7.24 Default subject to the terms
and conditions set forth herein;
WHEREAS, the Borrowers have advised the Agent that they may have
failed
to (a) maintain or achieve EBITDA for the
12-month period ending October 31,
2005 of at least $1,287,000, as required
under Section 7.22 of the Credit
Agreement (the "October 2005 EBITDA
Default") and (b) maintain or achieve a
Consolidated Fixed Charge Coverage Ratio
for the 12-month period ending October
31, 2005 of at least 0.16:1.00, as required
under Section 7.24 of the Credit
Agreement (the "October 2005 CFCC Default"
and, together with the October 2005
EBITDA Default, the "October 2005
Defaults");
WHEREAS, the Borrowers have requested, and the Agent, the Co-Agent
and
the Lenders have agreed, to waive the
October 2005 Defaults subject to the terms
and conditions set forth herein;
WHEREAS, Section 4 of the Security Agreement (as defined in the
Credit
Agreement) provides that the Inventory of
each Grantor (as defined in the
Security Agreement) be located either (a)
on premises owned by such Grantor, (b)
on premises leased by such Grantor,
provided that the Agent has received an
executed landlord waiver of such premises
in form and substance satisfactory to
the Agent or (c) in a warehouse or with a
bailee, provided that the Agent has
received an executed bailee letter from the
applicable Person in form and
substance satisfactory to the Agent (the
requirements for executed landlord
waivers and bailee letters described in
clauses (b) and (c) above, the "Section
4 Requirements");
WHEREAS, Inventory of the Grantors is located on premises leased by
the
Grantors or in warehouses or with bailees,
but the Agent has not received
executed landlord waivers and/or bailee
letters with respect to such premises as
required by Section 4 of the Security
Agreement (the "Section 4 Default");
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WHEREAS, the Borrowers have requested, and the Agent, the Co-Agent
and
the Lenders have agreed, to waive the
Section 4 Default and the Section 4
Requirements subject to the terms and
conditions set forth herein; and
WHEREAS, the Borrower Parties, the Lenders, the Agent and the
Co-Agent
wish to amend the Credit Agreement as
herein provided;
NOW, THEREFORE, in consideration of the agreements and
provisions
herein contained, the parties hereto do
hereby agree as follows:
SECTION 1. DEFINITIONS. Any capitalized terms used but not
otherwise
defined herein shall have the meanings
ascribed to such terms in the Credit
Agreement.
SECTION 2. WAIVERS UNDER CREDIT AGREEMENT. Subject to the
satisfaction
of the terms and conditions set forth
herein, the Agent, the Co-Agent and the
Required Lenders hereby agree to waive (a)
the Section 5.2(v) Defaults solely
with respect to the months ended July 31,
2005, August 31, 2005 and September
30, 2005, (b) the Section 7.22 Default
solely with respect to the 12-month
period ending September 30, 2005, (c) the
Section 7.24 Default solely with
respect to the 12-month period ending
September 30, 2005 and (d) the October
2005 Defaults solely with respect to the
12-month period ending October 31,
2005; provided, that each of the foregoing
waivers shall be rescinded and no
longer effective if Borrowers fail to
comply with Section 6 hereof.
SECTION 3. WAIVERS UNDER SECURITY AGREEMENT. Subject to the
satisfaction of the terms and conditions
set forth herein, the Agent, the
Co-Agent and the Required Lenders hereby
agree to waive (a) the Section 4
Default and (b) the Section 4 Requirements
from and after the date hereof
(except with respect to the Redlands,
California facility described in Section 7
hereof); provided, that (i) each of the
Agent and the Co-Agent shall have the
right, in its sole discretion, to
subsequently require the Grantors to deliver
an executed landlord waiver or bailee
letter, in form and substance satisfactory
to the Agent and the Co-Agent, with respect
to any Inventory located on a leased
premises or in a warehouse or with a bailee
(whether or not any such Inventory
is currently located on such premises or in
such warehouse or with such bailee),
(ii) to the extent not already implemented,
each of the Agent and the Co-Agent
shall have the right to implement reserves
for three months rent in respect of
Inventory located on a leased premises or
in a warehouse or with a bailee but
for which an executed landlord waiver or
bailee letter, in form and substance
satisfactory to the Agent and the Co-Agent,
has not been delivered to the Agent
and the Co-Agent, and (iii) the foregoing
waivers shall be rescinded and no
longer effective if Borrowers fail to
comply with Section 7 hereof.
SECTION 4. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement
is
hereby amended, effective as of the date
this Sixth Amendment becomes effective
in accordance with Section 9 hereof, as
follows:
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4.01 AMENDMENT TO SECTION 5.2(L) OF THE CREDIT AGREEMENT.
Section
5.2(l) of the Credit Agreement is hereby
amended by deleting it in its entirety
and inserting the following in lieu
thereof:
"(l) As soon as available, but in any event not later than Tuesday
each
week for the prior week, a Borrowing Base Certificate
supporting
information in accordance with Section 9 of the Security
Agreement;
provided, that at all times during the period from October 1st
through
and including December 31st of each year, the Administrative
Borrower
shall have the right to deliver up to three (3) Borrowing Base
Certificates each week supporting information in accordance
with
Section 9 of the Security Agreement."
4.02 AMENDMENTS TO ANNEX A: CREDIT AGREEMENT DEFINITIONS.
(a) The definition of "Applicable Margin" is hereby amended by
deleting it in its entirety and inserting
the following in lieu thereof:
""Applicable Margin" means
(a) at all times on or prior to March 31, 2006 (and, if
Borrowers have failed to comply with Section 3.1(c)(iv), at all
times thereafter),
(i) with respect to Base Rate Loans and all other
Obligations
(other than LIBOR Rate Loans), (A) if Borrowers
have complied with Section 4 of the Sixth Amendment, 4.00%,
and (B) if Borrowers have not complie
