Exhibit 10.1

 

THIRD AMENDMENT TO

CREDIT AGREEMENT

 

THIRD AMENDMENT TO CREDIT AGREEMENT, dated as of June 30, 2004 (this
“Amendment”), to the Credit Agreement referred to below by and among APPLIED
EXTRUSION TECHNOLOGIES, INC., a Delaware corporation (the “Borrower”); the other
Credit Parties signatory hereto; GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation (in its individual capacity, “GE Capital”), for itself, as
Lender, and as Agent for Lenders; and the other Lenders signatory hereto.

 

W I T N E S S E T H

 

WHEREAS, the Borrower, the other Credit Parties, the Agent, and the Lenders are
parties to that certain Credit Agreement, dated as of October 3, 2003 (as
amended, supplemented or otherwise modified from time to time, prior to the date
hereof, the “Credit Agreement”);

 

WHEREAS, Borrower has requested that Agent and the Lenders agree to amend the
financial covenants in the Credit Agreement; and

 

WHEREAS, the Borrower, the Agent and the Lenders have agreed to such request and
agree to amend certain provisions of the Credit Agreement in the manner, and on
the terms and conditions, provided for herein.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

 

1.             Certain Definitions.  Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Credit
Agreement.

 

2.             Amendments to Credit Agreement.  As of the Amendment Effective
Date (as defined below), Section 6.14 of the Credit Agreement shall be amended
by deleting clause (f) thereto in its entirety and inserting the following
clause (f) in lieu thereof: “(f) scheduled payments of interest on the Senior
Notes, provided, that with respect to this clause (f), (i) no Default or Event
of Default has occurred and is continuing or would result after giving effect to
any such Restricted Payment and (ii) Borrower shall have Borrowing Availability
of at least $20,000,000 after giving effect to any such Restricted Payment.”

 

3.             Amendment to Annex A to the Credit Agreement .  As of the
Amendment Effective Date (as defined below), Annex A to the Credit Agreement
shall be amended by deleting the definition of “Default” therein and inserting
the following definition in lieu thereof:

 

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“Default” means any event that, with the passage of time or notice or both,
would, unless cured or waived, become an Event of Default; provided, however,
that for purposes of (i)  Section 2.2 (c) and (ii) clause (c) of Annex C to the
Credit Agreement, the failure of the Borrower to make payment of interest on the
Senior Notes due on July 1, 2004 shall not constitute a “Default” for the period
beginning from the Amendment Effective Date (as defined in the Third Amendment
to this Agreement) through the date of expiration of the applicable grace period
provided for under the Senior Note Indenture), so long as such payment is made
on or prior to the expiration of the applicable grace period provided for under
the Senior Note Indenture and, with respect to clause (ii) above, prior to the
payment of such interest, Borrower and AET Canada transfers or cause to be
transferred prior to the end of each business day from the AET Canada Account
and/or the Disbursement Accounts of AET Canada the aggregate balance in (or held
for the benefit of) AET Canada in the AET Canada Account and such Disbursement
Accounts in excess of CDN$1,500,000 to a Blocked Account of Borrower (or, if
established, the Concentration Account).

 

4.             Amendment to Annex G to the Credit Agreement .  As of the
Amendment Effective Date (as defined below), Annex G to the Credit Agreement
shall be amended by deleting subsections (b) and (c) in their entirety and
replacing them with the following:

 

“(b)         Minimum Fixed Charge Coverage Ratio.  Borrower and its Subsidiaries
shall have on a consolidated basis at the end of each Fiscal Quarter set forth
below, a Fixed Charge Coverage Ratio for the 12-month period then ended of not
less than the following:

 

Fiscal Quarter ending

 

Minimum Fixed Charge Coverage Ratio

 

 

 

 

 

September 30, 2003

 

0.65

 

December 31, 2003

 

0.55

 

March 31, 2004

 

0.60

 

June 30, 2004

 

0.55

 

September 30, 2004

 

0.85

 

December 31, 2004

 

1.00

 

March 31, 2005

 

1.05

 

June 30, 2005

 

1.10

 

September 30, 2005 and each Fiscal Quarter ending thereafter

 

1.20

 

 

(c)           Minimum EBITDA.  Borrower and its Subsidiaries on a consolidated
basis shall have, at the end of each Fiscal Quarter set forth below, EBITDA for
the 12-month period then ended of not less than the following:

 

Fiscal Quarter ending

 

Minimum EBITDA

 

 

 

 

 

September 30, 2003

 

$

37,125,000

 

December 31, 2003

 

35,628,000

 

March 31, 2004

 

35,445,000

 

June 30, 2004

 

30,000,000

 

September 30, 2004

 

43,072,000

 

December 31, 2004

 

48,293,000

 

March 31, 2005

 

52,445,000

 

June 30, 2005

 

58,139,000

 

September 30, 2005 and each Fiscal Quarter ending thereafter

 

62,000,000

”

 

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5.             Conditions to Funding.  With respect to the provisions of Section
2.2 of the Credit Agreement, Agent and Requisite Revolving Lenders agree that
(i) the failure of any representation or warranty to be true in any Loan
Document, solely as a result of the Borrower’s failure to make payment of
interest on the Senior Notes due on July 1, 2004 shall not limit any Lender’s
obligations to fund any Advance, convert or continue any Loan as a LIBOR Loan or
incur any Letter of Credit Obligation and (ii) Borrower’s failure to make
payment of interest on the Senior Notes due on July 1, 2004 shall not alone,
without the presence of any other facts, events or circumstances (whether
arising as a result of such failure or otherwise), be deemed to create a
Material Adverse Effect for the period beginning from the Amendment Effective
Date through the date of expiration of the applicable grace period provided for
under the Senior Note Indenture), in each case, so long as such payment is made
on or prior to the expiration of the applicable grace period provided for under
the Senior Note Indenture.

 

6.             Ratification of Credit Agreement; Remedies.

 

(a)           Except as expressly provided for, and on the terms and conditions
set forth, herein, the Credit Agreement and the other Loan Documents shall
continue to be in full force and effect in accordance with their respective
terms and shall be unmodified.  In addition, this Amendment shall not be deemed
a waiver of any term or condition of any Loan Document by the Agent or the
Lenders with respect to any right or remedy which the Agent or the Lenders may
now or in the future have under the Loan Documents, at law or in equity or
otherwise or be deemed to prejudice any rights or remedies which the Agent or
the Lenders may now have or may have in the future under or in connection with
any Loan Document or under or in connection with any Default or Event of Default
which may now exist or which may occur after the date hereof.  The Credit
Agreement and all other Loan Documents are hereby in all respects ratified and
confirmed.

 

(b)           This Amendment shall constitute a Loan Document.  The breach by
any Credit Party of any representation, warranty, covenant or agreement in this
Amendment shall constitute an immediate Event of Default hereunder and under the
other Loan Documents.

 

7.             Representations and Warranties.  The Borrower and the Credit
Parties hereby represent and warrant to the Agent and Lenders that:

 

(a)           The execution, delivery and performance of this Amendment and the
performance of the Credit Agreement as amended by this Amendment (the “Amended
Credit Agreement”) by the Borrower and the other Credit Parties:  (i) are within
their respective organizational powers; (ii) have been duly authorized by all
necessary corporate and shareholder action; (iii) are not in contravention of
any provision of their respective certificates or articles of incorporation or
by-laws or other organizational documents; (iv) do not violate any law or
regulation, or any order or decree of any court or Governmental Authority; (v)
do not conflict

 

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with or result in the breach or termination of, constitute a default under or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which the Borrower or any Credit Party is a party or by which the Borrower or
any Credit Party or any of its property is bound; (vi) do not result in the
creation or imposition of any Lien upon any of the property of the Borrower or
any Credit Party other than those in favor of Agent pursuant to the Loan
Documents; and (vii) do not require the consent or approval of any Governmental
Authority or any other Person.

 

(b)           This Amendment has been duly executed and delivered by or on
behalf of the Borrower and the other Credit Parties.

 

(c)           Each of this Amendment and the Amended Credit Agreement
constitutes a legal, valid and binding obligation of the Borrower and the other
Credit Parties enforceable against each of them in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditor’s rights generally
and general equitable principles (whether enforcement is sought by proceedings
in equity or at law).

 

(d)           No Default or Event of Default has occurred and is continuing both
before and after giving effect to this Amendment.

 

(e)           No action, claim or proceeding is now pending or, to the knowledge
of the Borrower and the other Credit Parties, threatened against the Borrower or
the other Credit Parties, at law, in equity or otherwise, before any court,
board, commission, agency or instrumentality of any federal, state, or local
government or of any agency or subdivision thereof, or before any arbitrator or
panel of arbitrators, (i) which challenges the Borrower’s or the other Credit
Parties’ right, power, or competence to enter into this Amendment or, to the
extent applicable, perform any of its obligations under this Amendment, the
Amended Credit Agreement or any other Loan Document, or the validity or
enforceability of this Amendment, the Amended Credit Agreement or any other Loan
Document or any action taken under this Amendment, the Amended Credit Agreement
or any other Loan Document or (ii) which, if determined adversely, is reasonably
likely to have or result in a Material Adverse Effect.  To the knowledge of the
Borrower and each Credit Party, there does not exist a state of facts which is
reasonably likely to give rise to such proceedings.

 

(f)            The representations and warranties of the Borrower and the other
Credit Parties contained in the Amended Credit Agreement and each other Loan
Document shall be true and correct on and as of the date hereof and the
Amendment Effective Date with the same effect as if such representations and
warranties had been made on and as of such date, except that any such
representation or warranty which is expressly made only as of a specified date
need be true only as of such date.

 

8.             Outstanding Indebtedness.  The Borrower and the other Credit
Parties hereby acknowledge and agree that as of June 29, 2004, (i) the aggregate
outstanding amount of

 

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the Revolving Credit Advances is $39,585,285.37, (ii) the aggregate outstanding
amount of Letter of Credit Obligations is $125,000.00, and (iii) the aggregate
outstanding principal amount of the Term Loan is $46,875,000, and that such
principal amounts are payable pursuant to the Credit Agreement without defense,
offset, withholding, counterclaim or deduction of any kind.

 

9.             Fees and Expenses

 

(a)           Amendment Fees.  To induce Agent and the Lenders to enter into
this Amendment, Borrower hereby agrees to pay Agent, for the ratable benefit of
the Lenders, an amendment fee in the amount of $267,187.50 in immediately
available funds, payable on the Effective Date (the “Amendment Fee”).

 

(b)           Expenses.  The Borrower hereby reconfirms its obligations pursuant
to Section 11.3(b) of the Credit Agreement to reimburse Agent for all
out-of-pocket fees, costs and expenses, including the reasonable fees, costs and
expenses of counsel, consultants, auditors or other advisors, incurred in
connection incurred with the negotiation, preparation, execution and delivery of
this Amendment and all other documents and instruments delivered in connection
herewith.

 

10.           GOVERNING LAW.  THIS AMENDMENT, IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA.

 

11.           Effectiveness.  This Amendment shall become effective as of the
date hereof (the “Amendment Effective Date”) only upon satisfaction in full in
the judgment of the Agent of each of the following conditions on or before June
30, 2004:

 

(a)           Amendment.  Agent shall have received facsimile copies of this
Amendment duly executed and delivered by the Agent, the Requisite Lenders, the
Requisite Revolving Lenders, the Borrower and each Credit Party.

 

(b)           Representations and Warranties.  All representations and
warranties of or on behalf of the Borrower and each Credit Party in this
Amendment and all the other Loan Documents shall be true and correct in all
respects with the same effect as though such representations and warranties had
been made on and as of the date hereof and on and as of the date that the other
conditions precedent in this Section 11 have been satisfied, except to the
extent that any such representation or warranty expressly relates to an earlier
date.

 

(c)           Payment of Expenses.  Borrower shall have paid to Agent all costs,
fees and expenses owing in connection with this Amendment, including, without
limitation, the Amendment Fee and the other Loan Documents and due to Agent
(including, without limitation,

 

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reasonable legal fees and expenses).

 

12.           Counterparts.  This Amendment may be executed in any number of
counterparts, each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.

 

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, each of the parties hereto has executed this Amendment as of
date and year first written above.

 

 

BORROWER

 

 

 

APPLIED EXTRUSION TECHNOLOGIES,
INC.

 

 

 

By:

/s/ Brian P. Crescenzo

 

Name:

Brian P. Crescenzo

 

Title:

Vice President, Secretary and Chief
Financial Officer

 

 

 

 

 

 

 

GENERAL ELECTRIC CAPITAL
CORPORATION,
as Agent and Lender

 

 

 

By:

/s/ James H. Kaufman

 

 

Duly Authorized Signatory

 

 

 

 

By:

/s/ Christopher Cox

 

 

Duly Authorized Signatory

 

 

 

 

 

 

 

LENDERS

 

 

 

BLACK DIAMOND INTERNATIONAL
FUNDING, LTD.

 

By:

/s/ Alan Corkish

 

Title:

Director

 

 

 

 

 

 

 

TRS 1, LLC

 

By:

/s/ Deborah O’Keeffe

 

Title:

 

Vice President

 

 

 

 

 

 

 

MERRILL LYNCH CAPITAL, a division of
Merrill Lynch Business Financial Services Inc.

 

 

 

By:

/s/ Jeffrey L. Wilkison

 

Title:

 

Director, Senior Credit Officer

 

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The following Persons are signatories to this Agreement in their capacity as
Credit Parties and not as Borrower.

 

 

APPLIED EXTRUSION TECHNOLOGIES
(CANADA) INC.

 

 

 

By:

/s/ Brian P. Crescenzo

 

Name:

Brian P. Crescenzo

 

Title:

Vice President Finance,
Secretary and Treasurer

 

 

 

 

APPLIED EXTRUSION TECHNOLOGIES
LIMITED

 

 

 

 

 

By:

/s/ Brian P. Crescenzo

 

Name:

Brian P. Crescenzo

 

Title:

Vice President Finance,
Secretary and Treasurer

 

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