Exhibit 10.3

EXECUTION VERSION

February 17, 2016

Advanced Drainage Systems, Inc.

4640 Trueman Blvd.

Hilliard, OH 43026

 

  Re: Amendment No. 10 and Consent to Amended and Restated Private

Shelf Agreement

Ladies and Gentlemen:

Reference is made to that certain Amended and Restated Private Shelf Agreement,
dated as of September 24, 2010, as amended by that certain Amendment No. 1 to
Amended and Restated Private Shelf Agreement dated December 12, 2011, Limited
Waiver and Amendment No. 2 to Amended and Restated Private Shelf Agreement dated
March 9, 2012, Amendment No. 3 to Amended and Restated Private Shelf Agreement
dated March 30, 2012, Amendment No. 4 to Amended and Restated Private Shelf
Agreement dated April 26, 2013, Amendment No. 5 to Amended and Restated Private
Shelf Agreement dated June 12, 2013, including the Supplement thereto dated
June 24, 2013, Amendment No. 6 to Amended and Restated Private Shelf Agreement
dated September 23, 2013, Amendment No. 7 to Amended and Restated Private Shelf
Agreement dated December 31, 2013, Amendment No. 8 and Limited Waiver to Amended
and Restated Private Shelf Agreement dated August 21, 2015 and Amendment No. 9
and Consent to Amended and Restated Private Shelf Agreement (“Amendment No. 9”)
dated December 28, 2015 (as so amended, the “Note Agreement”), between Advanced
Drainage Systems, Inc., a Delaware corporation (the “Company”), on one hand, and
PGIM, Inc. (formerly known as Prudential Investment Management, Inc.)
(“Prudential”) and each other Prudential Affiliate as therein defined which
becomes bound by certain provisions thereof as therein provided, on the other
hand. Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to such terms in the Note Agreement.

Pursuant to Amendment No. 9, Prudential and the holders of the Notes have, among
other things, (A) extended the time for the delivery of (i) the audited
financial statements of the Company for the fiscal year ended on March 31, 2015,
certified by independent certified public accountants in accordance with
paragraph 5A(ii) of the Note Agreement (the “2015 Audited Financial Statements”)
until January 31, 2016, (ii) the financial statements of the Company for the
fiscal quarter ended on June 30, 2015, to be delivered in accordance with
paragraph 5A(i) of the Note Agreement (the “Q1 Quarterly Financial Statements”)
until January 31, 2016 and (iii) the financial statements of the Company for the
fiscal quarter ended on September 30, 2015, to be delivered in accordance with
paragraph 5A(i) of the Note Agreement (the “Q2 Quarterly Financial Statements”)
until January 31, 2016, (B) extended (i) the time by which the Excess Leverage
Fee, if any, shall be calculated and paid relating to the fiscal quarters ended
on March 31, 2015, June 30, 2015, and September 30, 2015, and (ii) the time for
delivery of the Officer’s Certificate pursuant to the last sentence of the
definition of “Leverage Ratio” in the Note Agreement, in each case, relating to
the fiscal quarters ended on March 31, 2015, June 30, 2015, and September 30,
2015, and (C) permitted the Company to characterize the Fleet Leases

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and Aircraft Leases as operating leases for the fiscal quarters ended on
March 31, 2015, June 30, 2015, and September 30, 2015 solely for the purposes of
paragraph 5M of the Note Agreement if the Company delivers an Officer’s
Certificate pursuant to the last sentence of the definition of “Leverage Ratio”
in the Note Agreement (i) relating to the fiscal quarter ended on September 30,
2015 by February 10, 2016 and (ii) relating to the fiscal quarters ended on each
of March 31, 2015 and June 30, 2015 by no later than the earlier of (x) the date
on which the Company delivers the financial statements required by paragraph 5A
of the Note Agreement for each such fiscal year or fiscal quarter, as
applicable, and (y) March 2, 2016.

The Company has requested that Prudential and the holders of Notes (A) amend the
Note Agreement as set forth herein, (B) extend the time for the delivery of the
2015 Audited Financial Statements, the Q1 Quarterly Financial Statements and the
Q2 Quarterly Financial Statements until April 1, 2016, (C) extend the time for
delivery of the financial statements of the Company for the fiscal quarter ended
on December 31, 2015, to be delivered in accordance with paragraph 5A(i) of the
Note Agreement (the “Q3 Quarterly Financial Statements”) until April 1, 2016,
(D) modify the deadline for delivery of the Officer’s Certificate pursuant to
the last sentence of the definition of “Leverage Ratio” in the Note Agreement,
in each case, relating to the fiscal quarters ended on March 31, 2015, June 30,
2015 and September 30, 2015 to the earlier of (a) the date on which the Company
delivers the financial statements required by paragraph 5A of the Note Agreement
for each such fiscal year or fiscal quarter, as applicable, and (b) April 1,
2016 (such earlier date, the “Extension Date”), and (E) consent to the ESOP
Dividend (as defined below), and Prudential and the holders of the Notes
executing this letter agreement are willing to agree to such requests on the
terms and conditions set forth herein.

Accordingly, and in accordance with the provisions of paragraph 11C of the Note
Agreement, the parties hereto agree as follows:

SECTION 1. Amendments. From and after the Effective Date (as defined in
Section 4 hereof), the parties hereto agree that the Note Agreement is amended
as follows:

1.1. Paragraph 10B of the Note Agreement is hereby amended by inserting or
amending and restating, as the case may be, the following definitions:

“Leverage Ratio” shall mean ratio of consolidated total Indebtedness of the
Company and its Subsidiaries (excluding (i) any Indebtedness arising from
reimbursement obligations (contingent or otherwise) under standby letters of
credit in an aggregate amount not exceeding $10,000,000 and (ii) obligations
with respect to interest rate swaps, fuel hedges and other commodity hedging
arrangements and related marked-to-market liabilities, but including termination
obligations arising by reason of the termination or close out of such interest
rate swaps, fuel hedges and other commodity hedge arrangements the value of
which being determined as of such time of such termination or close out in
accordance with the terms of such agreements) to Consolidated EBITDAE,
calculated as of the end of each fiscal quarter for the four fiscal quarters
then ended. In connection with the Transaction Parties’ financial statements
characterizing the Fleet Leases and Aircraft Leases as capital leases, for
purposes of this Agreement the calculation of the Leverage Ratio resulting from
such characterization shall

 

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only apply to the Leverage Ratio as calculated at the fiscal year ended on
March 31, 2015 and at the end of each fiscal quarter thereafter. For the
purposes of paragraph 5M of the Note Agreement only, the Leverage Ratio for the
fiscal quarters ended on or before September 30, 2015 (but not any fiscal period
ending thereafter) shall be calculated by characterizing the Fleet Leases and
the Aircraft Leases as operating leases provided that such characterization
shall only apply to the fiscal quarters ended on (a) March 31, 2015, June 30,
2015 and September 30, 2015 if the holders of the Notes receive an Officer’s
Certificate no later than the earlier of (x) the date on which the Company
delivers the financial statements required by paragraph 5A of the Note Agreement
for each such fiscal year or fiscal quarter, as applicable, and (y) April 1,
2016 demonstrating (with computations in reasonable detail) that such Leverage
Ratios did not exceed (I) 3.00 to 1.00 for the fiscal quarter ended on March 31,
2015 and (II) 3.15 to 1.00 for the fiscal quarters ended on June 30, 2015 and
September 30, 2015.

1.2. Paragraph 5M of the Note Agreement is hereby amended and restated in its
entirety to read as follows:

5M. Excess Leverage Fee. If the Leverage Ratio as of the end of any fiscal
quarter is greater than 3.00 to 1.00, then, in addition to accruing interest on
the Notes, the Company agrees to pay each holder of a Note a fee (the “Excess
Leverage Fee”) on the daily average outstanding principal amount of such Note
during such fiscal quarter at a rate per annum of 2.00%, provided that, with
respect to the fiscal quarters ended on each of June 30, 2015 and September 30,
2015, if the 2015 Audited Financial Statements are delivered to each Significant
Holder on or prior to April 1, 2016, the Excess Leverage Fee shall not be
payable for such fiscal quarter unless the Leverage Ratio as of June 30, 2015 or
September 30, 2015, as applicable, was greater than 3.15 to 1.00. The Excess
Leverage Fee with respect to each Note for any fiscal quarter shall be
calculated on a rate per annum on the same basis as interest on such Note is
calculated and shall be paid in arrears on the 45th day after the end of such
fiscal quarter. The payment of any Excess Leverage Fee shall not constitute a
waiver of any Default or Event of Default. If for any reason the Company fails
to deliver the financial statements required by paragraph 5A hereof for a fiscal
quarter by the date the Excess Leverage Fee, if any, would be payable for such
fiscal quarter, the an Excess Leverage Fee shall be payable for such fiscal
quarter.

SECTION 2. Consents. Effective upon the Effective Date:

(a) Prudential and the holders of Notes party hereto consent to an extension of
the time period within which the Company is required to deliver the 2015 Audited
Financial Statements, the Q1 Quarterly Financial Statements, the Q2 Quarterly
Financial Statements and the Q3 Quarterly Financial Statements, and, in each
case, the compliance certificate related thereto pursuant to the penultimate
sentence of paragraph 5A of the Note Agreement, until April 1, 2016, and hereby
waive any Default or Event of Default resulting solely from the Company’s
failure to comply with paragraphs 5A(i) and 5A(ii) of the Note Agreement within
the time periods previously provided. If the Company fails

 

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to deliver the 2015 Audited Financial Statements, the Q1 Quarterly Financial
Statements, the Q2 Quarterly Financial Statements and the Q3 Quarterly Financial
Statements to each Significant Holder on or before 11:59 P.M. New York City time
on April 1, 2016, such Default shall constitute an Event of Default without
regard to any grace period otherwise provided with respect to violations of
paragraph 7A(vi) of the Note Agreement.

(b) Notwithstanding anything to the contrary contained in the Note Agreement or
any prior consent under the Note Agreement, the Excess Leverage Fee, if any, for
the fiscal quarters ended on March 31, 2015, June 30, 2015, September 30, 2015
and December 31, 2015 shall be calculated and paid for each such fiscal quarter
on or prior to the Extension Date.

(c) On May 6, 2015, the Company declared a cash dividend of $0.0195 per share
for payment to the ESOP on March 31, 2016 with respect to the preferred shares
of the Company held in the ESOP (the “ESOP Dividend”). Subsequent to the
declaration of the ESOP Dividend, the Company was prohibited by paragraph 6F of
the Note Agreement from remaining liable to pay the ESOP Dividend as a result of
the existence of a Default. Pursuant to the Company’s request, Prudential and
the holders of the Notes party hereto hereby waive any Default or Event of
Default resulting solely from the Transaction Parties’ non-compliance with
paragraph 6F of the Note Agreement with respect to the Company remaining liable
to pay the ESOP Dividend.

(d) The foregoing consents are limited to the specific provisions referenced
above and do not constitute a consent to the non-compliance with any other
provision of the Note Agreement or any other Transaction Document, nor do such
consents indicate any agreement on the part of Prudential or any holder of a
Note to grant any such consent in the future, and the foregoing limited waiver
shall be limited precisely as written and shall relate solely to the Note
Agreement in the manner and to the extent described herein, and nothing in this
letter agreement shall be deemed to (i) constitute a consent to or waiver of any
Defaults or Events of Default existing under the Note Agreement or the other
Transaction Documents (other than in the manner and to the extent described in
the foregoing limited waiver), or (ii) prejudice any right or remedy that
Prudential or any holder of any Note may now have (after giving effect to the
foregoing limited waiver) or may have in the future under or in connection with
the Note Agreement or any other Transaction Document.

SECTION 3. Representations and Warranties. The Company represents and warrants
to Prudential and each holder of a Note that (i) the execution and delivery of
this letter agreement has been duly authorized by all necessary corporate action
on behalf of the Company and each Guarantor, (ii) this letter agreement has been
executed and delivered by a duly authorized officer of the Company and each
Guarantor, (iii) the Company and each Guarantor has obtained all authorizations,
consents, and approval necessary for the execution, delivery and performance of
this letter agreement and such authorizations, consents and approval are in full
force and effect, (iv) since March 31, 2015, no Material Adverse Effect shall
have occurred with respect to the Company or any of the Guarantors and (v) after
giving effect hereto (a) each representation and warranty set forth in paragraph
8 of the Note Agreement is true and correct as of the date of the execution and
delivery of this letter agreement by the Company with the same

 

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effect as if made on such date (except to the extent that such representations
and warranties expressly refer to an earlier date, in which case they were true
and correct as of such earlier date and except that the representation and
warranty set forth in: (1) paragraph 8D shall be interpreted to be addressing
only the Company and its Material Subsidiaries, (2) paragraph 8F shall be
interpreted to be addressing only the Company and its Material Subsidiaries and
(3) paragraph 8Q shall be interpreted to be addressing only the Company and the
Guarantors), (b) no Event of Default or Default exists and (c) neither the
Company nor any Subsidiary has paid or agreed to pay, and the Company and its
Subsidiaries will not pay or agree to pay, any fees or other consideration to
the Bank Agent, any Bank or any lender under the Mexicana Credit Agreement for
or with respect to the amendments to the Credit Agreement or the Mexicana Credit
Agreement referred to in Section 4.2 below other than (x) the legal fees paid to
counsel for the Banks, Bank Agent and such lenders, (y) the amendment fee
referred to in Section 5 of the amendment to the Credit Agreement referred to in
Section 4.2(a) below and (z) the arrangement fee referred to in Section 1(a) of
the Fee Letter, dated as of February 17, 2016, by and among PNC Bank, National
Association, PNC Capital Markets LLC and the Company.

SECTION 4. Conditions Precedent. The amendments in Section 1 and consents in
Section 2 of this letter agreement shall become effective on the date (the
“Effective Date”) that each of the following conditions has been satisfied:

4.1. Documents. Prudential and each holder of a Note shall have received
counterparts of this letter agreement executed by Prudential, the Required
Holder(s), the Company and each Guarantor.

4.2. Credit Agreement and Mexicana Credit Agreement. Prudential and each holder
of a Note shall have received an executed copy of a consent to each of (a) the
Credit Agreement and (b) the Mexicana Credit Agreement, each in form and
substance consistent with the terms set forth herein and satisfactory to
Prudential and the Required Holder(s).

4.3. Amendment Fee. The Company shall have paid an amendment fee in the
aggregate principal amount of $50,000, paid to each holder of a Note pro rata in
proportion to the respective outstanding principal amount of Notes held by such
holder as of the Effective Date, which payment shall be made in the same manner
and to the same accounts as for payments of interest pursuant to the Note
Agreement.

4.4. Representations. All statements set forth in Section 3 shall be true and
correct as of the Effective Date, except to the extent that any such statement
expressly relates to an earlier date (in which case such statement was true and
correct on and as of such earlier date).

4.5. Proceedings. All corporate and other proceedings taken or to be taken in
connection with the transactions contemplated by this letter agreement shall be
satisfactory to Prudential and each holder of a Note and its counsel, and
Prudential and each holder of a Note shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.

SECTION 5. Reference to and Effect on Note Agreement; Ratification of Note
Agreement. Upon the effectiveness of the amendments and consents to the Note
Agreement

 

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made in this letter agreement, each reference to the Note Agreement in any other
document, instrument or agreement shall mean and be a reference to the Note
Agreement as modified by this letter agreement. Except as specifically set forth
in Sections 1 and 2 hereof, the Note Agreement shall remain in full force and
effect and is hereby ratified and confirmed in all respects. Except as
specifically stated in this letter agreement, the execution, delivery and
effectiveness of this letter agreement shall not (a) amend the Note Agreement or
any Note, (b) operate as a waiver of any right, power or remedy of any holder of
a Note, or (c) constitute a waiver of, or consent to any departure from, any
provision of the Note Agreement or Note at any time. Nothing contained in this
letter agreement shall be construed as a course of dealing or other implication
that Prudential and any holder of a Note has agreed to or is prepared to grant
any consents or agree to any amendments to the Note Agreement or any Note in the
future, whether or not under similar circumstances.

SECTION 6. Expenses. The Company hereby confirms its obligations under the Note
Agreement, whether or not the transactions hereby contemplated are consummated,
to pay, promptly after request by Prudential or any holder of a Note, all
reasonable out-of-pocket costs and expenses, including attorneys’ fees and
expenses, incurred by Prudential or such holder of a Note in connection with
this letter agreement or the transactions contemplated hereby, in enforcing any
rights under this letter agreement, or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with this
letter agreement or the transactions contemplated hereby. The obligations of
Company under this Section 6 shall survive transfer by any holder of a Note of
any Note and payment of any Note.

SECTION 7. Governing Law. THIS LETTER AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW
OF THE STATE OF NEW YORK (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD
OTHERWISE CAUSE THIS AGREEMENT TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH,
OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER
JURISDICTION).

SECTION 8. Reaffirmation. Each Guarantor hereby consents to the foregoing
amendments and consents to the Note Agreement and hereby ratifies and reaffirms
all of their payment and performance obligations, contingent or otherwise, under
the Guaranty Agreement after giving effect to such amendments and consents. Each
Guarantor hereby acknowledges that, notwithstanding the foregoing amendments and
consents, that the Guaranty Agreement remains in full force and effect and is
hereby ratified and confirmed. Without limiting the generality of the foregoing,
each Guarantor agrees and confirms that the Guaranty Agreement continues to
guaranty the Guarantied Obligations (as defined in the Guaranty Agreement)
arising under or in connection with the Note Agreement or any of the Shelf
Notes, as the same are amended by this letter agreement.

SECTION 9. Counterparts; Section Titles. This letter agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which when taken together shall constitute but one and
the same instrument. Delivery of an executed counterpart of a signature page to
this letter agreement by facsimile shall be effective as delivery

 

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of a manually executed counterpart of this letter agreement. The section titles
contained in this letter agreement are and shall be without substance, meaning
or content of any kind whatsoever and are not a part of the agreement between
the parties hereto.

[Signature Pages Follow]

 

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Very Truly Yours, PGIM, INC. By:  

/s/ David Quackenbush

  Vice President

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

By:  

/s/ David Quackenbush

  Vice President

PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY

By:   PGIM, Inc.,   as investment manager By:  

/s/ David Quackenbush

  Vice President

PRUCO LIFE INSURANCE COMPANY

By:  

/s/ David Quackenbush

  Assistant Vice President

 

AMENDMENT NO. 10 AND CONSENT TO

AMENDED AND RESTATED PRIVATE SHELF AGREEMENT

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Accepted and Agreed: COMPANY: ADVANCED DRAINAGE SYSTEMS, INC. By:  

/s/ Mark B. Sturgeon

Name:   Mark B. Sturgeon Title:   Executive Vice President GUARANTORS: STORMTECH
LLC HANCOR HOLDING CORPORATION By:  

/s/ Mark B. Sturgeon

Name:   Mark B. Sturgeon Title:   Secretary and Treasurer

 

AMENDMENT NO. 10 AND CONSENT TO

AMENDED AND RESTATED PRIVATE SHELF AGREEMENT