Exhibit 10.3
 
 
AMENDMENT NO. 10 TO RATIFICATION AND AMENDMENT AGREEMENT AND
AMENDMENT NO. 12 TO LOAN AND SECURITY AGREEMENT
 
AMENDMENT NO. 10 TO RATIFICATION AND AMENDMENT AGREEMENT AND AMENDMENT NO. 12 TO
LOAN AND SECURITY AGREEMENT, dated as of October 6, 2008 (this “Tenth
Ratification Amendment”), by and among CONGOLEUM CORPORATION, a Delaware
corporation, as debtor and debtor-in-possession (“Borrower”), CONGOLEUM FISCAL,
INC., a New York corporation, as debtor and debtor-in-possession (“CFI”),
CONGOLEUM SALES, INC., a New York corporation, as debtor and
debtor-in-possession (“CSI” and together with CFI, collectively, “Guarantors”
and each individually, a “Guarantor”), and WACHOVIA BANK, NATIONAL ASSOCIATION,
successor by merger to Congress Financial Corporation (“Lender”).
 
W I T N E S S E T H:
 
WHEREAS, Lender, Borrower and Guarantors have entered into financing
arrangements pursuant to which Lender may make loans and advances and provide
other financial accommodations to Borrower as set forth in the Loan and Security
Agreement, dated December 10, 2001, between Lender and Borrower, as amended by
Amendment No. 1 to Loan and Security Agreement, dated September 19, 2002,
between Lender and Borrower, Amendment No. 2 to Loan and Security Agreement,
dated as of February 27, 2003, among Lender, Borrower and Guarantors, and as
further amended and ratified by the Ratification and Amendment Agreement, dated
as of January 7, 2004 (the “Ratification Agreement”), between Lender and
Borrower, as acknowledged by Guarantors, Amendment No. 1 to Ratification
Agreement and Amendment No. 3 to Loan and Security Agreement, dated as of
December 14, 2004, between Lender and Borrower, as acknowledged by Guarantors,
Amendment No. 2 to Ratification Agreement and Amendment No. 4 to Loan and
Security Agreement, dated as of January 13, 2005, between Lender and Borrower,
as acknowledged by Guarantors, Amendment No. 3 to Ratification Agreement and
Amendment No. 5 to Loan and Security Agreement, dated as of June 7, 2005,
between Lender and Borrower, as acknowledged by Guarantors, Amendment No. 4 to
Ratification Agreement and Amendment No. 6 to Loan and Security Agreement, dated
as of December 19, 2005, as acknowledged by Guarantors, Amendment No. 5 to
Ratification Agreement and Amendment No. 7 to Loan and Security Agreement, dated
as of September 27, 2006 between Lender and Borrower, as acknowledged by
Guarantors, Amendment No. 6 to Ratification Agreement and Amendment No. 8 to
Loan and Security Agreement, dated as of November 27, 2006 between Lender and
Borrower, as acknowledged by Guarantors, Amendment No. 7 to Ratification
Agreement and Amendment No. 9 to Loan and Security Agreement dated as of June
12, 2007 between Lender and Borrower, as acknowledged by Guarantors, Amendment
No. 8 to Ratification and Amendment Agreement and Amendment No. 10 to Loan and
Security Agreement dated as of December 11, 2007, between Lender and Borrower,
as acknowledged by Guarantors, and Amendment No. 9 to Ratification and Amendment
Agreement and Amendment No. 11 to Loan and Security Agreement dated as of June
4, 2008, between Lender and Borrower, as acknowledged by Guarantors, permitting
debtor
 

 
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and debtor-in-possession financing for Borrower and Guarantors, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced (all of the foregoing, as amended hereby and as the same
may hereafter be further amended, modified, supplemented, extended, renewed,
restated or replaced, collectively, the “Loan Agreement”, and together with all
agreements, documents and instruments at any time executed and/or delivered in
connection therewith or related thereto, including the Reaffirmation and
Amendment of Guarantor Documents, dated as of January 7, 2004, between Lender
and Guarantors, as from time to time amended, modified, supplemented, extended,
renewed, restated or replaced, collectively, the “Financing Agreements”);
 
WHEREAS, Borrower and each Guarantor have each commenced a case under Chapter 11
of Title 11 of the United States Code in the United States Bankruptcy Court for
the District of New Jersey and have each retained possession of its assets and
is authorized under the Bankruptcy Code to continue the operation of its
businesses as a debtor-in-possession;
 
WHEREAS, Borrower and Guarantors have requested that Lender make certain
amendments to the Loan Agreement, and Lender is willing to agree to such
request, subject to the terms and conditions contained herein;
 
WHEREAS, by this Tenth Ratification Amendment, Lender, Borrower and Guarantors
desire and intend to evidence such amendments;
 
WHEREAS, this Tenth Ratification Amendment has been filed with the Bankruptcy
Court and notice thereof has been served upon all parties that have requested
notice in the Borrower’s and Guarantors’ bankruptcy cases pursuant to the Final
Order (1) Authorizing Debtors’ Use of Cash Collateral, (2) Authorizing Debtors
to Obtain Post-Petition Financing, (3) Granting Senior Liens and Priority
Administrative Expense Status Pursuant to 11 U.S.C. §§105 and 364(c), (4)
Modifying the Automatic Stay Pursuant to 11 U.S.C. §362, and (5) Authorizing
Debtors to Enter Into Agreements with Congress Financial Corporation (as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, the “Final DIP Financing Order”), which was
approved by the Bankruptcy Court on February 2, 2004;
 
WHEREAS, no objection has been filed by any interested party to the terms and
conditions of this Tenth Ratification Amendment and Borrower and Guarantors are
authorized to execute and deliver this Tenth Ratification Amendment in
accordance with the terms of the Final DIP Financing Order; and
 
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender, Borrower and
Guarantors hereby covenant, warrant and agree as follows:
 
1.  DEFINITIONS.
 
1.1   Additional Definition.  “Ninth Ratification Amendment” shall mean this
Tenth Ratification Amendment, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
 

 
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1.2  Amendments to Definitions in Financing Agreements.
 
(a)  All references to the term “Financing Agreements” in this Tenth
Ratification Amendment and in any of the Financing Agreements shall be deemed
and each such reference is hereby amended to include, in addition and not in
limitation, this Tenth Ratification Amendment, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
 
(b)  All references to the term “Ratification Agreement” in this Tenth
Ratification Amendment and in any of the Financing Agreements shall be deemed
and each such reference is hereby amended to mean the Ratification Agreement, as
amended hereby, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
 
1.3  Interpretation.  For purposes of this Tenth Ratification Amendment, unless
otherwise defined herein, all capitalized terms used herein, including, but not
limited to, those terms used and/or defined in the recitals above, shall have
the respective meanings assigned to such terms in the Loan Agreement.
 
2.  AMENDMENTS TO LOAN AGREEMENT
 
2.1  Minimum EBITDA.  Section 9.23(c) of the Loan Agreement is hereby deleted in
its entirety and replaced with the following:
 
“(c)  Borrower and its Subsidiaries shall not, for any period set forth below
during fiscal year 2008 and fiscal year 2009 of Borrower and its Subsidiaries
(each, a “Test Period”), permit EBITDA of Borrower and its Subsidiaries on a
rolling four (4) quarter basis to be less than the respective amount set forth
below opposite such Test Period; provided, that, if Excess Availability was
equal to or greater than $15,000,000 for each of the ninety (90) consecutive
days immediately preceding the last day of any such Test Period, then Borrower
and its Subsidiaries shall not be required to comply with the terms of this
Section 9.23(c) for such Test Period:

 
Test Period
 
 
Minimum EBITDA
 
   
 
For the four (4) quarters ending September 30, 2008
 
 
$12,000,000
 
   
 
For the four (4) quarters ending December 31, 2008
 
 
$12,000,000
 
   
 
For the four (4) quarters ending March 31, 2009
 
 
$12,000,000
 
   
For the four (4) quarters ending June 30, 2009
$12,000,000”
   

 
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2.2  Term.
 
(a)  The first sentence of Section 12.1(a) of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
 
“This Agreement and the other Financing Agreements shall become effective as of
the date set forth on the first page hereof and shall continue in full force and
effect for a term ending on the earlier of (i) June 30, 2009 and (ii) the date
the plan of reorganization in the Borrower’s and Guarantors’ bankruptcy cases,
as confirmed by the Bankruptcy Court, becomes effective (such earlier date, the
“Termination Date”).”

(b)  Section 12.1(c)(iii) of the Loan Agreement is hereby amended by deleting
the reference to “December 31, 2008” and replacing it with “June 30, 2009”.
 
3.  COVENANT MODIFICATION AND AMENDMENT FEE.  In addition to and not in
limitation of all other fees, costs and expenses payable to Lender under the
Financing Agreements, in consideration of this Tenth Ratification Amendment,
Borrower shall pay Lender (i) a covenant modification fee in the amount of
$25,000 which covenant modification fee shall be fully earned and payable upon
the entry of an order approving and authorizing this Tenth Amendment, plus (ii)
an amendment fee in the amount of $15,000 per month, which monthly fee shall be
fully earned and payable upon the first day of each month commencing from the
date of entry of an order approving and authorizing this Tenth Amendment and
continuing through the Termination Date.  Each of the covenant modification fee
and the amendment fee may be charged directly to the loan account of Borrower.
 
4.  ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS.  In addition to the
continuing representations, warranties and covenants heretofore made in the Loan
Agreement or otherwise and hereafter made by Borrower and Guarantors to Lender,
whether pursuant to the Financing Agreements or otherwise, and not in limitation
thereof, Borrower and Guarantors hereby represent, warrant and covenant with, to
and in favor of Lender the following (which shall survive the execution and
delivery of this Agreement), the truth and accuracy of which, or compliance
with, to the extent such compliance does not violate the terms and provisions of
the Bankruptcy Code, being a continuing condition of the making of loans by
Lender:
 
4.1  This Tenth Ratification Amendment has been duly authorized, executed and
delivered by Borrower and Guarantors and the agreements and obligations of
Borrower and Guarantors contained herein constitute legal, valid and binding
obligations of Borrower and Guarantors enforceable against Borrower and
Guarantors in accordance with their respective terms.
 
4.2   No Default or Event of Default or act, condition or event which with
notice or passage of time or both would constitute an Event of Default exists or
has occurred as of the date of this Tenth Ratification Amendment.
 

 
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5.  CONDITIONS PRECEDENT.  In addition to any other conditions contained herein
or in the Loan Agreement, as in effect immediately prior to the date hereof,
with respect to the Loans, Letter of Credit Accommodations and other financial
accommodations available to Borrower (all of which conditions, except as
modified or made pursuant to this Tenth Ratification Amendment shall remain
applicable to the Loans and be applicable to Letter of Credit Accommodations and
other financial accommodations available to Borrower), the following are
conditions to Lender’s obligation to extend further loans, advances or other
financial accommodations to Borrower pursuant to the Loan Agreement:
 
5.1  Borrower and Guarantors shall execute and/or deliver to Lender this Tenth
Ratification Amendment, and all other Financing Agreements that Lender may
request to be delivered in connection herewith, in form and substance
satisfactory to Lender;
 
5.2  No trustee, examiner or receiver or the like shall have been appointed or
designated with respect to Borrower or any Guarantor, as debtor and
debtor-in-possession, or its business, properties and assets;
 
5.3  Borrower and Guarantors shall execute and/or deliver to Lender all other
Financing Agreements, and other agreements, documents and instruments, in form
and substance satisfactory to Lender, which, in the good faith judgment of
Lender are necessary or appropriate and implement the terms of this Tenth
Ratification Amendment and the other Financing Agreements, as modified pursuant
to this Tenth Ratification Amendment, all of which contains provisions,
representations, warranties, covenants and Events of Default, as are reasonably
satisfactory to Lender and its counsel;
 
5.4  Each of Borrower and Guarantors shall comply in full with the notice and
other requirements of the Bankruptcy Code, the applicable Federal Rules of
Bankruptcy Procedure, and the terms and conditions of the Final DIP Financing
Order in a manner acceptable to Lender and its counsel;
 
5.5  No objection has been filed by any interested party to the terms and
conditions of this Tenth Ratification Amendment and Borrower and Guarantors are
authorized, in accordance with the terms of the Final DIP Financing Order, to
execute, deliver, comply with and fully be bound by this Tenth Ratification
Amendment; and
 
5.6  No Default or Event of Default shall be continuing under any of the
Financing Agreements, as of the date hereof.
 
6.  MISCELLANEOUS.
 
6.1  Amendments and Waivers.  Neither this Tenth Ratification Amendment nor any
other instrument or document referred to herein or therein may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought.
 

 
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6.2  Further Assurances.  Each of Borrower and Guarantors shall, at its expense,
at any time or times duly execute and deliver, or shall cause to be duly
executed and delivered, such further agreements, instruments and documents, and
do or cause to be done such further acts as may be necessary or proper in
Lender’s opinion to evidence, perfect, maintain and enforce the security
interests of Lender, and the priority thereof, in the Collateral and to
otherwise effectuate the provisions or purposes of this Tenth Ratification
Amendment, any of the other Financing Agreements or the Financing Order.
 
6.3  Headings.  The headings used herein are for convenience only and do not
constitute matters to be considered in interpreting this Tenth Ratification
Amendment.
 
6.4  Counterparts.  This Tenth Ratification Amendment may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which shall together constitute one and the same agreement.
 
6.5  Additional Events of Default.  The parties hereto acknowledge, confirm and
agree that the failure of Borrower or any Guarantor to comply with any of the
covenants, conditions and agreements contained herein or in any other agreement,
document or instrument at any time executed by Borrower or any Guarantor in
connection herewith shall constitute an Event of Default under the Financing
Agreements.
 
6.6  Effectiveness.  This Tenth Ratification Amendment shall become effective
upon the execution hereof by Lender.
 

 
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IN WITNESS WHEREOF, the parties hereto have caused this Tenth Ratification
Amendment to be duly executed as of the day and year first above written.

WACHOVIA BANK, NATIONAL ASSOCIATION,
successor by merger to Congress Financial Corporation

By: /s/ Marc J. Breire

Title: Managing Director

CONGOLEUM CORPORATION,
as Debtor and Debtor-in-Possession

By: /s/ Howard N. Feist III

Title: CFO

CONGOLEUM SALES, INC.,
as Debtor and Debtor-in-Possession

By: /s/ Howard N. Feist III

Title: Vice President

CONGOLEUM FISCAL, INC.,
as Debtor and Debtor-in-Possession

By:  /s/ Howard N. Feist III

Title: Vice President

 
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