**Exhibit 10.1**

 

**FOURTH AMENDMENT TOCREDIT AGREEMENT**

 

THIS FOURTH AMENDMENT TO CREDIT AGREEMENT(this “Amendment”) is made and entered into as of December 31, 2004, byJPMORGAN CHASE BANK, N.A., successor by merger to Bank One, NA (Main OfficeChicago), as Lender (the “Lender”); MAGNETEK, INC., a Delawarecorporation (“MagneTek”) and MAGNETEK ADS POWER, INC., a Delawarecorporation and Subsidiary of MagneTek, as Borrowers; and MAGNETEK LEASINGCORPORATION, a Delaware corporation, MAGNETEK MONDEL HOLDING, INC., a Delawarecorporation, MAGNETEK NATIONAL ELECTRIC COIL, INC., a Delaware corporation andMONDEL ULC, an unlimited liability corporation organized under the laws of NovaScotia, Canada, as Guarantors.

 

Recitals

 

A.                                   The Borrowers, the Guarantors and the Lenderhave entered into a Credit Agreement dated as of August 15, 2003, as amended bythe First Amendment to Credit Agreement dated as of November 25, 2003, by theSecond Amendment to Credit Agreement dated as of February 12, 2004, and by theThird Amendment to Credit Agreement dated as of September 9, 2004 (as amended,the “Credit Agreement”). Capitalized terms used, but not defined, in this Amendment which aredefined in the Credit Agreement will have the meanings given to them in theCredit Agreement.

 

B.                                     The Borrowers and the Guarantors desirethat the Lender: (i) waive certain Defaults and (ii) agree to certainamendments to the Credit Agreement, all as contemplated by the terms, andsubject to the conditions, of this Amendment.

 

C.                                     The Lender is willing to waive suchDefaults and amend the Credit Agreement as contemplated by the terms, andsubject to the conditions, of this Amendment.

 

Statementof Amendment 

 

In consideration of the mutual covenantsand agreements and the conditions set forth in this Amendment, and for othergood and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the Lender, the Borrowers, and the Guarantors hereby agreeas follows:

 

1.                                       Waiver of Current Financial CovenantDefaults.Based on financial information submitted by the Borrowers to the Lender,Defaults (collectively, the “Current Covenant Defaults”) have occurred:(i) under Section 6.29.2 of the Credit Agreement with respect to theFixed Charge Coverage Ratio for the Test Period ended September 26, 2004 (arequired 1.25 to 1 opposite an actual result of a negative ratio), (ii) Section6.29.3 of the Credit Agreement with respect to the EBITDA Covenant for theTest Period ended September 26, 2004 (a required $2,750,000 opposite an actualresult of ($1,009,000)), and (iii) Section 6.34(c) of the CreditAgreement with respect to the Operating Profit Covenant of TPG for the TestPeriod ended September 26, 2004 (a required maximum loss of ($1,250,000)opposite an actual result of

 

----

 

($1,315,000)). The Loan Parties have requestedthat the Lender waive the Current Covenant Defaults.  The Lender hereby waives the Current CovenantDefaults for the specific periods indicated. The waiver provided in this Section1 will not apply to any other Default or Unmatured Default, whether past,present, or future, including, without limitation, any violations of the abovedescribed financial covenants as of dates other than that specificallyreferenced in this Section 1. The waiver provided in this Section 1,either alone or together with other waivers which the Lender may give from timeto time, shall not, by course of dealing, implication or otherwise, obligatethe Lender to waive any Default or Unmatured Default, past, present or future,other than those specifically waived by this Amendment, or reduce, restrict orin any way affect the discretion of the Lender in considering any future waiverrequested by the Borrowers or any of the other Loan Parties.

 

2.                                       Amendments to the Credit Agreement.

 

2.1                                 The definition of “Reserves” in Section1.1 of the Credit Agreement is hereby amended in its entirety bysubstituting the following in its stead:

 

“Reserves”means any and all reserves which the Lender deems necessary, in its PermittedDiscretion, to maintain (including reserves resulting from any Defaults, forcost testing, aged credits, accrued and unpaid interest on the SecuredObligations, Banking Services Reserves, reserves for rent at locations leasedby any Loan Party and for warehousemen’s and bailee’s charges, reserves fordilution of Accounts, reserves for Inventory shrinkage, reserves for customscharges and shipping charges related to any Inventory in transit, reserves forRate Management Transactions, reserves for contingent liabilities of any LoanParty, reserves for uninsured losses of any Loan Party and reserves for taxes,fees, assessments, and other governmental charges) with respect to theCollateral or any Loan Party.  Withoutlimiting the generality of the forgoing, Borrowers expressly agree that Reservesinclude (a) a reserve for the amount then due and owing to Lender or anAffiliate of Lender under the Equipment Leases, as determined by Lender fromtime to time, (b) a reserve for Lender’s automated clearinghouse exposure as itrespects Borrowers, as determined by Lender from time to time and (c) a fixedavailability reserve in the amount of Seven Million Dollars ($7,000,000) (the “AvailabilityReserve”).

 

2.2                                 Section 6.29.2 of the Credit Agreement is herebyamended in its entirety by substituting the following in its stead:

 

6.29.2.               Minimum Fixed Charge Coverage Ratio. The Borrowers will not permit the FixedCharge Coverage Ratio (“Fixed Charge Coverage Ratio Covenant”) for anyTest Period ending on the dates set forth below to be less than the ratio setforth below opposite such Test Period ending on such date:

 

2

----

 

 
| **Test Period**                                                                                                   | ** ** | **Minimum Fixed Charge  Coverage Ratio** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
|                                                                                                              |       |                                     |       |
| Fiscal Quarter  beginning March 28, 2005 and ending on June 26, 2005                                              |       | 1.250:1.0                                |       |
|                                                                                                              |       |                                     |       |
| Four Consecutive Fiscal  Quarters ending September 26, 2006 and each Four Consecutive Fiscal Quarters  thereafter |       | 1.250:1.0                                |       |

 

2.3                                 Sections 6.29.3 and 6.29.4 of the Credit Agreement each is herebyamended in their entirety by substituting the following in their stead:

 

6.29.3. Minimum EBITDA. TheBorrowers shall not permit Consolidated EBITDA (“EBITDA Covenant”) to beless than the amounts set opposite the Test Periods set forth below:

 
| **Test Period**                                                                                                   | ** ** | **Minimum EBITDA** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|
|                                                                                                              |       |               |       |
| Fiscal Quarter  beginning March 28, 2005 and ending on June 26, 2005                                              |       | $                  | 1,050,000  |   |
|                                                                                                              |       |               |       |
| Four Consecutive Fiscal  Quarters ending September 26, 2006 and each Four Consecutive Fiscal Quarters  thereafter |       | $                  | 5,500,000  |   |

 

6.29.4. Minimum Availability. TheBorrowers shall maintain, at all times and under all circumstances,Availability of not less than $500,000 in the aggregate; *providedthat* if Availability is less than$1,000,000 in the aggregate for two consecutive Business Days (“AvailabilityCondition”), then, within 30 days after each Availability Condition, theBorrowers will incur additional unsecured Subordinated Indebtedness, unsecuredDebt For Borrowed Money from SPA, or cause equity to be contributed to MagneTekin cash in an aggregate amount at least equal to $1,000,000 with respect to theoccurrence of each such Availability Condition. Notwithstanding the foregoing, so long as the Availability Reserve is ineffect, Borrowers shall not be required to maintain any minimum Availabilityunder this Section 6.29.4.

 

2.4                                 Section 6.34(a) of the Credit Agreement is herebyamended in its entirety by substituting the following in its stead:

 

3

----

 

(a)                 ICG:

 
| **Test Period**                                                                                                   | ** ** | **Minimum Operating Profit of ICG** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|
|                                                                                                              |       |                                |       |
| Fiscal Quarter  beginning March 28, 2005 and ending on June 26, 2005                                              |       | $                                   | 2,325,000  |   |
|                                                                                                              |       |                                |       |
| Four Consecutive Fiscal  Quarters ending September 26, 2006 and each Four Consecutive Fiscal Quarters  thereafter |       | $                                   | 7,000,000  |   |

 

3.                                       Reaffirmationof Security.  The Borrowers,Guarantors and the Lender hereby expressly intend that this Amendment shall notin any manner (i) constitute the refinancing, refunding, payment orextinguishment of the Obligations evidenced by the existing Loan Documents;(ii) be deemed to evidence a novation of the outstanding balance of theObligations; or (iii) affect, replace, impair, or extinguish the creation,attachment, perfection or priority of the Liens on the Collateral grantedpursuant to the Loan Documents evidencing, governing or creating a Lien on theCollateral.  The Borrowers and Guarantorsratify and reaffirm any and all grants of Liens to the Lender on the Collateralas security for the Obligations, and the Borrowers and Guarantors acknowledgeand confirm that the grants of the Liens to the Lender on the Collateral: (a)represent continuing Liens on all of the Collateral, (b) secure all of theObligations, and (c) represent valid, first and best Liens on all of theCollateral except to the extent, if any, of the Permitted Liens.

 

4.                                       Representations.  To induce the Lender to accept this Amendment,the Borrowers and the Guarantors hereby represent and warrant to the Lender asfollows:

 

4.1                                 EachBorrower and Guarantor has full power and authority to enter into, and toperform its obligations under, this Amendment, and the execution and deliveryof, and the performance of its obligations under and arising out of, thisAmendment have been duly authorized by all necessary corporate action.

 

4.2                                 ThisAmendment constitutes the legal, valid and binding obligations of each Borrowerand Guarantor enforceable in accordance with its terms, except as suchenforceability may be limited by bankruptcy, insolvency, reorganization orsimilar laws affecting creditors’ rights generally.

 

4.3                                 Eachof the Borrower’s and each of the Guarantor’s representations and warrantiescontained in the Loan Documents are complete and correct as of the date of thisAmendment (other than a representation or warranty that is stated to relatesolely to an earlier date) with the same effect as though such representationsand warranties had been made again on and as of the date of this Amendment,subject to those changes as are not prohibited by, or do not constitute aDefault under, the Loan Documents.

 

4

----

 

4.4                                 NoDefault or Unmatured Default has occurred and is continuing, other than theCurrent Covenant Defaults specified under Section 1 of this Amendment.

 

6.                                       Costsand Expenses; Fee.  The Borrowers will promptly on demand pay orreimburse the Lender for the reasonable costs and expenses incurred by theLender in connection with this Amendment. The Borrowers will pay to the Lender an amendment and waiver fee in theamount of $25,000 upon Borrowers’ and Guarantors’ execution of this Amendment.

 

7.                                       Release.  The Borrowers and the Guarantors herebyrelease the Lender from any and all liabilities, damages and claims arisingfrom or in any way related to the Loans or any of the Loan Documents, otherthan such liabilities, damages and claims which arise after the execution ofthis Amendment.  The foregoing releasedoes not release or discharge, or operate to waive performance by, the Lenderof its express agreements and obligations stated in the Loan Documents on andafter the date of this Amendment.

 

8.                                       ContinuingEffect of Credit Agreement.  Except as expressly amended hereby, all of theprovisions of the Credit Agreement are ratified and confirmed and remain infull force and effect.

 

9.                                       OneAgreement; References; Fax Signature.  The Credit Agreement, as amended by thisAmendment, will be construed as one agreement. All references in any of the Loan Documents to the Credit Agreement willbe deemed to be references to the Credit Agreement as amended by thisAmendment.  This Amendment may be signedby facsimile signatures, and if so signed, (i) may be relied on by each partyas if the document were a manually signed original and (ii) will be binding oneach party for all purposes.

 

10.                                 Captions.  The headings to the Sections of this Amendmenthave been inserted for convenience of reference only and shall in no way modifyor restrict any provisions hereof or be used to construe any such provisions.

 

11.                                 Counterparts.  This Amendment may be executed in multiplecounterparts, each of which shall be an original but all of which togethershall constitute one and the same instrument.

 

12.                                 EntireAgreement.  This Amendment,together with the Credit Agreement and the other Loan Documents, sets forth theentire agreement of the parties with respect to the subject matter of this Amendmentand supersedes all previous understandings, written or oral, in respect of thisAmendment.

 

13.                                 GoverningLaw.  This Amendment shallbe governed by and construed in accordance with the internal laws of the Stateof Ohio (without regard to Ohio conflicts of law principles).

 

14.                                 Reaffirmationof Guaranties.  The Guarantorshereby each reaffirm their respective Guaranty and acknowledge and agree thatno Guarantor is released from its obligations under its Guaranty by reason ofthis Amendment and that the obligations of the

 

5

----

 

Guarantors under their respective Guaranties extend to theCredit Agreement and the other Loan Documents as amended by thisAmendment.  This reaffirmation ofGuaranty shall not be construed, by implication or otherwise, as imposing anyrequirement that the Lender notify or seek the consent of any of the Guarantorsrelative to any past or future extension of credit, or modification, extensionor other action with respect thereto, in order for any such extension of creditor modification, extension or other action with respect thereto to be subjectto the Guaranties, it being expressly acknowledged and reaffirmed that theGuarantors have under each respective Guaranty consented, among others things,to modifications, extensions and other actions with respect thereto without anynotice thereof or consent thereto.

 

15.                                 OtherDocuments.  With the signing ofthis Amendment, the Borrowers and Guarantors will deliver to the Lender suchother documents, instruments, and agreements deemed necessary or desirable bythe Lender to effect the amendments to the Borrowers’ credit facilities withthe Lender contemplated by this Amendment.

 

[REMAINDER INTENTIONALLY LEFT BLANK]

 

6

----

 

IN WITNESS WHEREOF, the Borrowers and theGuarantors have executed this Amendment to be effective as of the date setforth in the opening paragraph of this Amendment.

 
| ** ** | **THE BORROWERS:**                    |
|------------|---------------------------------------|
|       |                                  |
|       | MAGNETEK, INC.                        |
|       |                                  |
|       | By:                                   | /s/ David P. Reiland |   |
|       |                                  | David P. Reiland, Executive Vice  President and Chief Financial Officer |
|       |                                  |
|       | MAGNETEK ADS POWER, INC.              |
|       |                                  |
|       | By:                                   | /s/ David P. Reiland |   |
|       |                                  | David P. Reiland, President |
|       |                                  |
| ** ** | **THE GUARANTORS:**                   |
|       |                                  |
|       | MONDEL ULC                            |
|       |                                  |
|       | By:                                   | /s/ David P. Reiland |   |
|       |                                  | David P. Reiland, President |
|       |                                  |
|       | MAGNETEK MONDEL HOLDING, INC.         |
|       |                                  |
|       | By:                                   | /s/ David P. Reiland |   |
|       |                                  | David P. Reiland, President |
|       |                                  |
|       | MAGNETEK LEASING CORPORATION          |
|       |                                  |
|       | By:                                   | /s/ David P. Reiland |   |
|       |                                  | David P. Reiland, President |
|       |                                  |
|       | MAGNETEK NATIONAL ELECTRIC COIL, INC. |
|       |                                  |
|       | By:                                   | /s/ David P. Reiland |   |
|       |                                  | David P. Reiland, President |
|            |                                       |  |  |  |  |  |  |  |

 

7

----

 
| Accepted at Cincinnati, Ohio,  as of December 31, 2004       |                              |
|--------------------------------------------------------------|-----------------------------------|
|                                                         |                              |
| JPMORGAN CHASE BANK, N.A.                                    |                              |
| (successor by merger to Bank One, NA (Main Office  Chicago)) |                              |
|                                                         |                              |
|                                                         |                              |
| By:                                                          | /s/ Jeffrey W. Swartz             |   |   |
|                                                         | Jeffrey W. Swartz, Vice President |   |
|                                                              |                                   |  |  |

 

8

----