Exhibit 10.10

 

FIRST AMENDMENT AGREEMENT

 

Dated as of February 1, 2005

 

among

 

LYDALL, INC.

 

LYDALL DEUTSCHLAND HOLDING GMBH

 

The LENDERS Party Hereto

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

and

 

THE BANK OF NEW YORK,

as Documentation Agent

--------------------------------------------------------------------------------

FIRST AMENDMENT AGREEMENT, dated as of February 1, 2005, among LYDALL, INC., a
Delaware corporation (the “Borrower”), LYDALL DEUTSCHLAND HOLDING GMBH, a German
corporation (the “Subsidiary Borrower”), the LENDERS party hereto, JPMORGAN
CHASE BANK, N.A. (formerly known as JPMorgan Chase Bank), as Administrative
Agent, and THE BANK OF NEW YORK, as Documentation Agent.

 

WHEREAS, the Borrower, the Subsidiary Borrower, the Lenders, the Administrative
Agent and Fleet National Bank, as Documentation Agent, have entered into that
certain Credit Agreement dated as of July 14, 1999 (as amended and restated as
of May 13, 2002, as amended and restated as of August 29, 2003, as amended as of
July 27, 2004 and as in effect prior to the effectiveness of this Agreement, the
“Existing Credit Agreement,” and, as amended by this Agreement, the “Amended
Credit Agreement”), pursuant to which the Lenders have agreed, subject to the
terms and conditions therein set forth, to make or participate in Loans to, and
to issue or participate in Letters of Credit for the account of, the Borrower
and the Subsidiary Borrower;

 

WHEREAS, the Borrower, the Subsidiary Borrower, the Lenders, the Administrative
Agent and the Documentation Agent have agreed to enter into this Agreement to
provide for, among other things, the extension of the Revolving Credit
Termination Date and the modification of certain covenants and definitions; and

 

WHEREAS, the Loan Documents (including, without limitation, this Agreement and
the Amended Credit Agreement), as amended and supplemented by this Agreement and
as each may be amended or supplemented from time to time, are referred to herein
as the “Amended Loan Documents”;

 

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

 

ARTICLE I.

 

Amendments to Existing Credit Agreement.

 

Each of the Borrower and the Subsidiary Borrower and, subject to the
satisfaction of the conditions set forth in Article III, the Lenders hereby
consent and agree to the amendments to the Existing Credit Agreement set forth
below:

 

(a) The “Commitment Fee Rate” established in the definition of “Applicable Rate”
contained in Section 1.01 of the Existing Credit Agreement is hereby amended and
restated as follows: (i) for Category 1, the “Commitment Fee Rate” shall be
equal to .375%, (ii) for Category 2, the “Commitment Fee Rate” shall be equal to
.325%, (iii) for Category 3, the “Commitment Fee Rate” shall be equal to .275%
and (iv) for Category 4, the “Commitment Fee Rate” shall be equal to .225%.

 

(b) The definition of “Consolidated EBITDA” contained in Section 1.01 of the
Existing Credit Agreement is hereby amended to insert “, plus (f) the aggregate
amount of

--------------------------------------------------------------------------------

legal and due diligence expenses arising from litigation with or claims by
Walter A. Ruschmeyer not to exceed $1,919,000 for the fiscal period ending
December 31, 2004, $1,877,000 for the fiscal period ending March 31, 2005,
$749,000 for the fiscal period ending June 30, 2005, $81,000 for the fiscal
period ending September 30, 2005 and $0 thereafter, plus (g) the aggregate
amount of non-cash stock option expense” at the end of clause (e).

 

(c) The definition of “Documentation Agent” contained in Section 1.01 of the
Existing Credit Agreement is hereby amended to substitute “The Bank of New York”
in place of “Fleet National Bank”.

 

(d) The definition of “Indebtedness” contained in Section 1.01 of the Existing
Credit Agreement is hereby amended to insert “Solely for purposes of determining
the Leverage Ratio, the amount of obligations of a Consolidated Entity in
respect of a Hedging Agreement shall be deemed to be 20% of the notional amount
of such Hedging Agreement.” at the end of such definition.

 

(e) The definition of “Revolving Credit Maturity Date” contained in Section 1.01
of the Existing Credit Agreement is hereby amended to substitute “February 1,
2009” in place of “September 30, 2005”.

 

(f) The definition of “Swingline Lender” contained in Section 1.01 of the
Existing Credit Agreement is hereby amended to delete “or Fleet National Bank,
as the case may be, “.

 

(g) Section 6.02(e) of the Existing Credit Agreement is hereby amended to
substitute “any real property or capital asset” in place of “any property or
asset”.

 

(h) Section 6.06(a)(iii) of the Existing Credit Agreement is hereby amended (i)
to substitute “(A) $1,000,000” in place of “$8,000,000” and (ii) to insert “or
(B) if the Leverage Ratio did not exceed 1.50 to 1.00 as of the end of the
preceding fiscal quarter (as reported in the Borrower’s compliance certificate
delivered under Section 6.01(d)), $1,800,000 during any fiscal quarter; provided
that the aggregate amount of Restricted Payments permitted under this clause (B)
shall in no event exceed $5,000,000 during any fiscal year of the Borrower”
immediately prior to the end thereof.

 

(i) Section 6.13 of the Existing Credit Agreement is hereby amended to
substitute “2.75 to 1.00” in place of “2.50 to 1.00”.

 

(j) Section 6.16 of the Existing Credit Agreement is hereby amended and restated
to read as follows:

 

Section 6.16. Minimum EBITDA. The Borrower will not permit Consolidated EBITDA
as determined as of the end of each fiscal quarter of the Borrower to be less
than (a) for the fiscal quarters ended June 30, 2004, September 30, 2004,
December 31, 2004, March 31, 2005 and June 30, 2005, $18,000,000, (b) for the
fiscal quarter ending September 30, 2005, $22,000,000, (c) for the fiscal
quarter ending December 31, 2005,

 

2

--------------------------------------------------------------------------------

$22,500,000, (d) for the fiscal quarter ending March 31, 2006, $23,000,000, (e)
for the fiscal quarter ending June 30, 2006, $23,500,000, (f) for the fiscal
quarter ending September 30, 2006, $24,000,000, (g) for the fiscal quarter
ending December 31, 2006, $24,500,000 and (h) thereafter, $25,000,000.

 

(k) Section 10.01 of the Existing Credit Agreement is hereby amended to (i)
insert “and” at the end of paragraph (d), (ii) to delete paragraph (e) and (iii)
to substitute “(e)” in place of “(f)”.

 

(l) The Schedules to the Existing Credit Agreement are hereby amended and
restated as set forth on the Schedules hereto.

 

ARTICLE II.

 

Representations and Warranties

 

The Borrower hereby represents and warrants that as of the Effective Date (as
defined in Article III):

 

Section 2.01. Existing Representations and Warranties. Each of the
representations and warranties contained in Article III of the Existing Credit
Agreement and in each of the other Loan Documents is true and correct, except
that (a) any representation or warranty limited by its terms to a specific date
shall be true and correct as of such specific date and (b) the Borrower hereby
discloses that (i) the U.S. Food and Drug Administration conducted a full scope
directed audit at CML Medical, Ltd., (ii) CML Medical, Ltd. was unable to
provide adequate documentation relating to one of its EtO sterilization
validations affecting a portion of its blood products and (iii) CML Medical,
Ltd. has recalled such products, all as more fully described in the Memorandum
dated January 31, 2005 from Thomas Smith to the Lenders (the “CML Recall”),
which shall constitute a “Disclosed Matter” for purposes of the Existing Credit
Agreement.

 

Section 2.02. No Defaults. After giving effect to the amendments set forth in
Article I and the disclosure of the CML Recall, no event has occurred and no
condition exists which would constitute a Default or an Event of Default under
the Existing Credit Agreement, and no event has occurred and no condition exists
(including financial performance during the fiscal quarter ending December 31,
2004) which would constitute a Default or an Event of Default under the Amended
Credit Agreement.

 

Section 2.03. Power and Authority; No Conflicts. The execution, delivery and
performance by each of the Loan Parties of the Amended Loan Documents to which
it is a party are within such party’s corporate, partnership or limited
liability company powers and have been duly authorized by all necessary
corporate, partnership or limited liability company and, if required,
stockholder, partner or member action. Each Amended Loan Document to which any
Loan Party is a party has been duly executed and delivered by such party and
constitutes a legal, valid and binding obligation of such party, enforceable in
accordance with its terms, subject to

 

3

--------------------------------------------------------------------------------

applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors’ rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.

 

Section 2.04. Governmental Approvals; No Conflicts. The execution, delivery and
performance by each of the Loan Parties of the Amended Loan Documents to which
it is a party (a) do not require the Borrower or any Subsidiary to obtain or
make any consent or approval of, registration or filing with, or other action
by, any Governmental Authority, except such as have been obtained or made and
are in full force and effect or that could not reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect, (b)
will not violate any law or regulation applicable to the Borrower or any
Subsidiary, or the charter, by-laws or other organizational documents of any
Loan Party, or any Subsidiary, or any order of any Governmental Authority,
except as to any law, regulation or order the violation of which could not
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon the Borrower or any
Significant Subsidiary or their respective assets, or give rise to a right
thereunder to require any payment to be made by the Borrower or any Significant
Subsidiary, except for any such violations, defaults or rights to require
payment that could not reasonably be expected, individually or in the aggregate,
to result in a Material Adverse Effect, and (d) will not result in the creation
or imposition of any Lien (other than a Permitted Encumbrance) on any asset of
the Borrower or any of its Subsidiaries.

 

Section 2.05. Financial Condition; No Material Adverse Change. (a) The Borrower
has heretofore furnished to the Lenders the consolidated and consolidating
balance sheets of the Borrower and its consolidated Subsidiaries and the related
statements of income, stockholders equity and cash flows (i) as of and for the
fiscal years ended December 31, 2001, December 31, 2002 and December 31, 2003,
such consolidated financial statements being reported on by
PricewaterhouseCoopers, LLP, independent public accountants, and (ii) as of and
for the fiscal quarter and the portion of the fiscal year ended September 30,
2004. Such financial statements present fairly, in all material respects, the
financial condition and results of operations and cash flows of the Borrower and
its consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes in the case of the statements referred to in clause (ii) above.

 

(b) Since September 30, 2004, there has been no material adverse change in the
business, assets, operations, prospects or condition, financial or otherwise, of
the Borrower and the Subsidiaries, taken as a whole (other than the CML Recall).

 

4

--------------------------------------------------------------------------------

ARTICLE III.

 

Conditions Precedent

 

The effectiveness of this Agreement is subject to the condition precedent that
the Administrative Agent, the Documentation Agent and the Lenders shall have
received on or before February 1, 2005 (the “Effective Date”) each of the
following, in form and substance satisfactory to the Administrative Agent, the
Documentation Agent and the Lenders:

 

(a) counterparts of this Agreement executed by each of the Borrower, the
Subsidiary Borrower, all of the Lenders, the Administrative Agent and the
Documentation Agent;

 

(b) evidence that each of the Guarantors shall have reaffirmed its obligations
under the Guarantee Agreement to which it is a party;

 

(c) evidence that the Loan Parties shall have taken all actions requested by the
Administrative Agent to ensure a legal, valid and enforceable perfected
first-priority Lien on the Collateral;

 

(d) favorable written opinions (addressed to the Administrative Agent and the
Lenders and dated the Effective Date) of Mary A. Tremblay and Linklaters,
Oppenhoff & Radler, substantially in the form of Exhibit A-1 and Exhibit A-2,
respectively; the Borrower and the Subsidiary Borrower hereby request such
counsel to deliver such opinion;

 

(e) such documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and good standing
of the Loan Parties and the authorization of the Transactions by the Loan
Parties;

 

(f) a certificate, dated the Effective Date and signed by the President, a Vice
President, General Counsel and Secretary or a Financial Officer of the Borrower,
confirming compliance with the conditions set forth in Article III and in
paragraphs (a) and (b) of Section 4.02 of the Amended Credit Agreement; and

 

(g) evidence that all fees and other amounts required to be paid under Section
4.04 of this Agreement shall have been paid in full.

 

ARTICLE IV.

 

Miscellaneous

 

Section 4.01. Defined Terms. The terms used herein and not defined herein shall
have the meanings assigned to such terms in the Existing Credit Agreement. All
references to “JP Morgan Chase Bank” in any Loan Document shall be deemed to be
to “JP Morgan Chase Bank, N.A.”

 

5

--------------------------------------------------------------------------------

Section 4.02. Nonwaiver. The terms of this Agreement shall not operate as a
waiver by the Administrative Agent, the Documentation Agent or the Lenders of
any affirmative, negative or financial covenant contained in the Credit
Agreement or otherwise prejudice the rights, remedies or powers of the
Administrative Agent, the Documentation Agent or any Lender under the Amended
Credit Agreement, the other Amended Loan Documents or applicable law. Except as
set forth in Article I: (x) no terms and provisions of the Loan Documents are
modified or changed by this Agreement; and (y) the terms and provisions of the
Loan Documents shall continue in full force and effect.

 

Section 4.03. Waivers; Amendments. Any provision of this Agreement may be
amended or modified only by an agreement or agreements in writing signed by the
Borrower, the Subsidiary Borrower and the Required Lenders, or by the Borrower,
the Subsidiary Borrower and the Administrative Agent acting with the consent of
the Required Lenders; provided that the consent of each Lender shall be required
with respect to any matters as to which such Lender’s consent is required under
Section 10.02(b) of the Amended Credit Agreement.

 

Section 4.04. Expenses. The Borrower shall pay to the Administrative Agent, for
the account of each Lender, an amendment fee equal to .20% of such Lender’s
Commitments as of the Effective Date. The Borrower shall pay all reasonable
documented out-of-pocket expenses incurred by the Administrative Agent,
including the reasonable fees, charges and disbursements of counsel for the
Administrative Agent, in connection with the preparation and administration of
this Agreement, the other Amended Loan Documents or any amendments,
modifications or waivers of the provisions hereof or thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated).

 

Section 4.05. Notices. All notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy in accordance with
the terms of the Amended Credit Agreement.

 

Section 4.06. Headings. Article and Section headings used herein are for
convenience of reference only, are not part of this Agreement and shall not
affect the construction of, or be taken into consideration in interpreting, this
Agreement.

 

Section 4.07. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

 

Section 4.08. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement, the other
Amended Loan Documents and the separate letter agreements with respect to fees
payable to the Administrative Agent and the Documentation Agent constitute the
entire contract among the parties relating to the subject matter hereof and

 

6

--------------------------------------------------------------------------------

thereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof and thereof. Subject to the
satisfaction of the conditions set forth in Article III, this Agreement shall
become effective when it shall have been executed by the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of the Lenders, and thereafter shall be
binding upon and inure to the benefit of the parties to the Existing Credit
Agreement and their respective successors and assigns. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.

 

Section 4.09. Governing Law. This Agreement shall be construed in accordance
with and governed by the law of the State of New York.

 

Section 4.10. Reaffirmation. Each of the Borrower and the Subsidiary Borrower
hereby unconditionally and absolutely affirms its obligations under each Loan
Document to which it is a party, as herein modified, and agrees that such
obligations are valid and binding upon it, and enforceable against it, without
defense, offset or counterclaim and hereby acknowledges and consents to, and
waives all objections to, all of the transactions contemplated by or consented
to under or in connection with this Agreement. The Board of Directors of the
Borrower shall unconditionally ratify all of its obligations under the Amended
Loan Documents at its next regularly scheduled meeting on February 24, 2005.

 

7

--------------------------------------------------------------------------------

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

 

LYDALL, INC., a Delaware corporation By  

/S/    THOMAS P. SMITH

--------------------------------------------------------------------------------

Name:   Thomas P. Smith Title:   Vice President, Chief Financial Officer and
Treasurer

LYDALL DEUTSCHLAND HOLDING GMBH,

a German limited liability company

By  

/S/    DAVID FREEMAN

--------------------------------------------------------------------------------

Name:   David Freeman Title:   Managing Director JPMORGAN CHASE BANK, N.A.
(formerly known as JPMorgan Chase Bank), individually and as Administrative
Agent By  

/S/    PETER M. KILLEA

--------------------------------------------------------------------------------

Name:   Peter M. Killea Title:   Vice President

THE BANK OF NEW YORK, individually and

as Documentation Agent

By  

/S/    SCOTT BOGNAR

--------------------------------------------------------------------------------

Name:   Scott Bognar Title:   Vice President

 

[SIGNATURE PAGE TO FIRST AMENDMENT AGREEMENT]

--------------------------------------------------------------------------------

WEBSTER BANK

By

 

/S/    MATTHEW O. RILEY

--------------------------------------------------------------------------------

Name:

 

Matthew O. Riley

Title:

 

Senior Vice President

BROWN BROTHERS HARRIMAN & CO.

By

 

/S/    J. EDWARD HALL

--------------------------------------------------------------------------------

Name:

 

J. Edward Hall

Title:

 

Managing Director

WACHOVIA BANK, N.A.

By

 

/S/    PHILIP GALIOTO

--------------------------------------------------------------------------------

Name:

 

Philip Galioto

Title:

 

Vice President

 

[SIGNATURE PAGE TO FIRST AMENDMENT AGREEMENT]