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EXHIBIT 99.1
EXECUTION COPY
THIRD AMENDMENT
TO, AND WAIVER UNDER,
AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD
AMENDMENT TO, AND WAIVER UNDER, AMENDED AND RESTATED CREDIT
AGREEMENT (this "Third Amendment") is made
and entered into as of July 8, 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 and as of May 11, 2005, and
as it may be further amended,
modified, supplemented or amended and
restated from time to time, the "Credit
Agreement");
WHEREAS,
subsequent to the issuance of Parent's consolidated financial
statements for the fiscal quarter ended
April 2, 2005, Parent determined that
its Series A Convertible Preferred Stock
should be classified outside of
permanent equity in accordance with the
guidance of Emerging Issues Task Force
Topic No. D-98 "Classification and
Measurement of Redeemable Securities",
because the redemption of the Series A
Convertible Preferred Stock in shares of
common stock is outside of Parent's control
(the "Non-GAAP Preferred Stock
Classification"); and, based upon such
determination, on June 28, 2005, Parent's
management and the Audit Committee of the
Board of Directors, in consultation
with Parent's independent registered public
accounting firm, Deloitte & Touche
LLP, concluded that Parent's financial
statements for the fiscal quarters ended
October 2, 2004, January 1, 2005 and April
2, 2005 and for the fiscal years
ended July 3, 2004, June 28, 2003 and June
29, 2002 (collectively, the
"Applicable Financial Statements") needed
to be restated to reclassify the
Series A Convertible Preferred Stock as
temporary equity (the "Financial
Statement Restatements");
WHEREAS,
as a result of the Non-GAAP Preferred Stock Classification, the
Borrower Parties have failed to comply with
the requirements set forth in
Section 5.1 of the Credit Agreement to
prepare its books, records and accounts
in accordance with GAAP with respect to the
Applicable Financial Statements (the
"Section 5.1 Default"); and
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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. AMENDMENTS TO CREDIT AGREEMENT.
The Credit Agreement is hereby
amended, effective as of the date this
Third Amendment becomes effective in
accordance with Section 7 hereof, as
follows:
2.01
AMENDMENT TO SECTION 1.1 OF THE CREDIT AGREEMENT. Section 1.1 of
the
Credit Agreement is hereby amended by
deleting "$275,000,000" therein and
inserting "$287,000,000 minus the original
principal amount of the Second Lien
Term Loan as of the Second Lien Closing
Date" in lieu thereof.
2.02
AMENDMENT TO SECTION 3.1(b) OF THE CREDIT AGREEMENT. Section
3.1(b)
of the Credit Agreement is hereby amended
by adding the words "other than
pursuant to Section 3.1(c)" after the words
"The Term Loan may not be prepaid".
2.03
AMENDMENT TO SECTION 3.1 (c) OF THE CREDIT AGREEMENT. Section
3.1(c)
of the Credit Agreement is hereby amended
by deleting it in its entirety and
inserting the following in lieu
thereof:
"(c) Mandatory Prepayments. Notwithstanding anything to the
contrary
contained
herein, upon (i) any issuance of Debt or shares of Stock by any
Subsidiary
(other than Debt permitted to be issued pursuant to Section
7.13),
(ii) any issuance of Debt in the form of additional Second Lien
Term Loans
after the Second Lien Closing Date or (iii) any sale or other
disposition of assets by any Subsidiary (other than any sale or
disposition permitted pursuant to Section 7.9) (the occurrence of
any such
event in
clause (i), (ii) or (iii) above, a "Prepayment Triggering
Event"),
Borrowers shall prepay the outstanding principal amount of the
Loans in
an amount equal to 100% of the Net Cash Proceeds received in
connection
therewith up to an aggregate amount with respect to all of the
Prepayment
Triggering Events equal to $11,000,000 and, to the extent that
the
aggregate amount of any such Net Cash Proceeds exceeds
$11,000,000,
Borrowers
shall prepay the outstanding principal amount of the Loans in
an
amount
equal to 50% of such Net Cash Proceeds received in connection
therewith
in excess of $11,000,000 and, subject to the immediately
succeeding
sentence of this Section 3.1(c), Borrowers may use all or a
portion of
the 50% of such Net Cash Proceeds not required to prepay the
Loans to
purchase, prepay or redeem all or a portion of the outstanding
principal
amount of the 2005 Senior Notes and, after the payment in full
and
retirement of all outstanding 2005 Senior Notes, the 2008 Senior
Notes
(and the
Second Lien Term Loan to the extent required by the Second Lien
Credit
Agreement to purchase 2008 Senior Notes); provided, that (x)
concurrently with each such application to the outstanding Loans,
Agent
and
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Co-Agent
shall establish and maintain a corresponding reserve against
the
Maximum Amount and the
Borrowing Base in an amount equal to the amount of
such
prepayment (but in no event to exceed an aggregate amount of
$45,410,000 (minus the amount, if any, of the Make-Whole Payment
(as
defined in
Section 4 of the Third Amendment) that the Co-Agent and the
Lenders
with Revolver Commitments are required to refund in accordance
with
Section 4 of the Third Amendment)), and (y) such reserve against
the
Maximum
Amount and the Borrowing Base shall be released only at the
sole
discretion
of the Agent and the Co-Agent; provided, however, that,
notwithstanding the foregoing, if at the time of any such
Prepayment
Triggering
Event the aggregate outstanding principal amount of the Loans
does not exceed the result of the
sum of clauses (a)(A), (a)(B) and (a)(C)
of the
definition of Borrowing Base, then Borrowers may, subject to
the
immediately succeeding sentence of this Section 3.1(c), in lieu
of
prepaying
the principal amount of the Loans, use all or a portion of such
Net Cash
Proceeds to purchase, prepay or redeem all or a portion of the
outstanding principal amount of the 2005 Senior Notes and, after
the
payment in
full and retirement of all outstanding 2005 Senior Notes, the
2008
Senior Notes (and the Second Lien Term Loan to the extent required
by
the Second
Lien Credit Agreement to purchase 2008 Senior Notes); and
provided,
further, however, that the Maximum Amount and the applicable
Commitments shall be permanently reduced, on a dollar for dollar
basis, to
the extent
that the Loans are prepaid in accordance with this Section
3.1(c)
solely as a result of the issuance of Debt in the form of
additional
Second Lien Term Loans after the Second Lien Closing Date in
accordance
with the terms of the Second Lien Credit Agreement (as in
effect on
the date hereof without any modification or amendment thereof).
Borrowers'
right to use Net Cash Proceeds to purchase, prepay or redeem
all or a
portion of the outstanding principal amount of the 2005 Senior
Notes and,
after the payment in full and retirement of all outstanding
2005
Senior Notes, 2008 Senior Notes (and the Second Lien Term Loan to
the
extent
required by the Second Lien Credit Agreement to purchase 2008
Senior
Notes) pursuant to this Section 3.1(c) is subject to (a) no
Default
or Event
of Default shall have occurred and be continuing or would
result
therefrom,
(b) in the case of the purchase, prepayment or redemption of
the 2005
Senior Notes, Availability is greater than $5,000,000 both
immediately before and immediately after giving effect to any
such
purchase,
prepayment or redemption made prior to September 15, 2005 and
(c) in the
case of the purchase, prepayment or redemption of the 2008
Senior
Notes (and the Second Lien Term Loan to the extent required by
the
Second
Lien Credit Agreement to purchase 2008 Senior Notes),
Availability
is greater
than $4,000,000 both immediately before and immediately after
giving
effect to any such purchase, prepayment or redemption. Each
prepayment
of the Loans made pursuant to this Section 3.1(c) shall be
applied:
first, to the extent that the Required Lenders have not waived
all or any
portion of such prepayment, to the outstanding principal amount
of the
Term Loan, and second, ratably to the outstanding principal
amount
of the
Revolving Loans. The provisions of this Section 3.1(c) shall not
be
deemed to
be implied consent to any issuance, incurrence, sale or other
disposition otherwise prohibited by the terms and conditions of
this
Agreement."
2.04
AMENDMENT TO SECTION 3.6 OF THE CREDIT AGREEMENT. Section 3.6 of
the
Credit Agreement is hereby amended by
adding the words "subject to the
Intercreditor Agreement," immediately after
"tenth," in the second sentence
thereof.
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2.05
AMENDMENT TO SECTION 5.2 OF THE CREDIT AGREEMENT. Section 5.2 of
the
Credit Agreement is hereby amended by
inserting the following subsections at the
end thereof:
"(v) 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.
(w) Promptly, true and complete copies of any and all
documents,
notices, reports and other information
delivered by or to any Loan Party
pursuant to the terms of the Second Lien
Loan Documents except any such
documents, notices, reports or information
otherwise required to be delivered
hereunder."
2.06
AMENDMENT TO SECTION 6.25 OF THE CREDIT AGREEMENT. Section 6.25
of
the Credit Agreement is hereby amended by
adding the words ", the Second Lien
Loan Documents" after the words "the Loan
Documents" in each of the second line
and the fifth line thereof.
2.07
AMENDMENT TO SECTION 7.9 OF THE CREDIT AGREEMENT. Section 7.9 of
the
Credit Agreement is hereby amended by
deleting clause (a) in its entirety and
inserting the following in lieu thereof:
"(a)(i) sales of Inventory in the
ordinary course of business and (ii) sales
of excess Inventory not in the
ordinary course of business in an aggregate
amount not to exceed $15,000,000
(such amount to be based on the lower of
book value and fair market value of the
subject Inventory) so long as (x) no
Default or Event of Default shall have
occurred and be continuing or would result
therefrom, (y) Borrowers deliver to
Agent and Co-Agent a written notice at the
time of each such sale that describes
the Inventory sold and the book value and
fair market value of the subject
Inventory, and (z) such sale is not part
of, does not result from and does not
arise in connection with a sale,
disposition or transfer by a Loan Party of one
or more business divisions, lines of
business or Subsidiaries of any Loan Party
except to the extent that such sale is
comprised of excess Inventory that was in
existence immediately prior to the date of
such sale, disposition or transfer by
such Loan Party of such business division,
line of business or Subsidiary;".
2.08
AMENDMENT TO SECTION 7.10 OF THE CREDIT AGREEMENT. Section 7.10
of
the Credit Agreement is hereby amended by
deleting the words "one hundred eighty
(180) days" in the third and fourth lines
thereof and inserting "ninety one (91)
days" in lieu thereof.
2.09
AMENDMENT TO SECTION 7.12 OF THE CREDIT AGREEMENT. Section 7.12
of
the Credit Agreement is hereby amended by
adding the words "or Section 7.13(k)"
at the end thereof.
2.10
AMENDMENT TO SECTION 7.13 OF THE CREDIT AGREEMENT. Section 7.13
of
the Credit Agreement is hereby amended by
deleting the words "and (j) Seller
Subordinated Debt. The Parent shall not
enter into any amendment or modification
of the documents evidencing the Debt
permitted under clauses (e), (f) or (g)
above that is in any manner adverse to the
Parent, any Subsidiary, the Agent or
any Lender" therein and inserting the
following in lieu thereof: "(j) Seller
Subordinated Debt; and (k) the Second Lien
Obligations incurred pursuant to the
Second Lien Credit Agreement.
Notwithstanding anything to the contrary contained
herein, the Parent shall not, directly or
indirectly, enter into any amendment
or modification of the documents
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evidencing the Debt permitted under clauses
(e), (f) or (g) above that is in any
manner adverse to the Parent, any
Subsidiary, the Agent, the Co-Agent or any
Lender. Notwithstanding anything to the
contrary contained herein, no Borrower
Party shall, directly or indirectly, enter
into any amendment or modification of
the Second Lien Credit Agreement, any other
documents evidencing the Debt
permitted under clause (k) above or any
other Second Lien Loan Document."
2.11
AMENDMENT TO SECTION 7.14 OF THE CREDIT AGREEMENT. Section 7.14
of
the Credit Agreement is hereby amended by
deleting it in its entirety and
inserting the following in lieu
thereof:
"7.14
Prepayment. Notwithstanding anything to the contrary contained
herein, no Borrower Party shall prepay any
Debt, except (a) the Obligations in
accordance with the terms of this
Agreement, (b) in connection with a
refinancing permitted under Section 7.13(e)
above including the application of
any proceeds received as a result of an
equity infusion to prepay the Debt
described in Section 7.13(e), (c) the
principal amount of the 2005 Senior Notes,
2008 Senior Notes (and the Second Lien Term
Loan to the extent required to
repurchase 2008 Senior Notes) solely to the
extent permitted pursuant to Section
3.1(c) or (d) the principal amount of the
2005 Senior Notes solely to the extent
permitted pursuant to Section 5 of the
Third Amendment."
2.12
AMENDMENTS TO SECTION 7.31 OF THE CREDIT AGREEMENT. Section 7.31
of
the Credit Agreement is hereby amended by
replacing each reference to "Foreign
Subsidiary" with "Subsidiary".
2.13
AMENDMENTS TO SECTION 9.1 OF THE CREDIT AGREEMENT. Section 9.1 of
the
Credit Agreement is hereby amended as
follows: (a) the word "or" is hereby
deleted at the end of clause (q) thereof;
(b) the following clause (r) is hereby
added: "(r) there occurs any Default or
Event of Default under, and as such
terms are defined in, the Second Lien Loan
Documents; and"; and (c) the current
"clause (r)" is hereby renumbered "clause
(s)".
2.14
AMENDMENT TO SECTION 9.2 OF THE CREDIT AGREEMENT. Section 9.2(a)
of
the Credit Agreement is hereby amended by
adding the words "and/or the
applicable Commitments" immediately after
the words "reduce the Maximum Amount"
in clause (i) thereof.
2.15
AMENDMENTS TO SECTION 10.1 OF THE CREDIT AGREEMENT. Section 10.1
of
the Credit Agreement is hereby amended as
follows: (a) the words "any early
termination or prepayment fees or
penalties" in the third sentence thereof is
hereby deleted and the words "the
Make-Whole Amount" is inserted in lieu
thereof; and (b) the following sentence is
hereby added immediately after the
end of the third sentence thereof: "Without
limiting the foregoing, in the event
of the termination of this Agreement and
repayment of the Obligations at any
time prior to the Stated Termination Date,
for any other reason, including (a)
termination upon the election of the
Required Lenders to terminate after the
occurrence and during the continuation of
an Event of Default, (b) foreclosure
and sale of Collateral, (c) sale of the
Collateral in any Insolvency Proceeding,
or (d) restructure, reorganization, or
compromise of the Obligations by the
confirmation of a plan of reorganization or
any other plan of compromise,
restructure, or arrangement in any
Insolvency Proceeding, then, in view of the
impracticability and extreme difficulty of
ascertaining the actual amount of
damages to the Agent, the Co-Agent and
the
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Lenders or profits lost by the Agent, the
Co-Agent and the Lenders as a result
of such early termination, and by mutual
agreement of the parties as to a
reasonable estimation and calculation of
the lost profits or damages of Agent,
the Co-Agent and the Lenders, Borrowers
shall pay to Agent (for the benefit of
the Lenders in accordance with their Pro
Rata Shares), in cash, the Make-Whole
Amount, measured as of the date of such
termination.".
2.16
AMENDMENTS TO SECTION 11.2 OF THE CREDIT AGREEMENT. Section 11.2
of
the Credit Agreement is hereby amended as
follows:
(a) Clause (b) thereof is hereby amended by (i) adding the
words "and the Intercreditor Agreement"
immediately after the words "the Loan
Documents" in the seventh line thereof; and
(ii) adding the words "and the
Intercreditor Agreement" immediately after
the words "the other Loan Documents"
in the eighth line thereof.
(b) Clause (c) thereof is hereby amended by (i) deleting the
words "or any other Loan Document" in
clause (i) thereof and inserting ", any
other Loan Document or the Intercreditor
Agreement" in lieu thereof; and (ii)
deleting the words "or any other Loan
Document" in clause (ii) thereof and
inserting ", any other Loan Document or the
Intercreditor Agreement" in lieu
thereof.
(c) Clause (e) thereof is hereby amended by (i) deleting the
words "and the other Loan Documents" in
clause (iii) thereof and inserting ",
the other Loan Documents and the
Intercreditor Agreement" in lieu thereof; and
(ii) deleting the words "or any other Loan
Document" in clause (iv) thereof and
inserting ", any other Loan Document or the
Intercreditor Agreement" in lieu
thereof.
2.17
AMENDMENT TO SECTION 12.5 OF THE CREDIT AGREEMENT. Section 12.5
of
the Credit Agreement is hereby amended by
deleting the words "Section 9" and
inserting "Section 9.2" in lieu
thereof.
2.18
AMENDMENTS TO SECTION 12.17 OF THE CREDIT AGREEMENT. Section 12.17
of
the Credit Agreement is hereby amended by
(a) adding the words "and the
Intercreditor Agreement" immediately after
the words "the other Loan Documents"
in the s
