Amend. No.1 & Consent To Credit Agreement

AMENDMENT NO. 1 AND CONSENT
TO AMENDED AND RESTATED CREDIT AGREEMENT


Amendment No. 1 AND CONSENT to Amended and Restated Credit Agreement, dated as of April 30, 2001 (this "Amendment"), among AAVID THERMAL TECHNOLOGIES, INC., a Delaware corporation (the "Borrower"), HEAT HOLDINGS CORP., a Delaware corporation (the "Parent"), HEAT HOLDINGS II CORP., a Delaware corporation ("Heat Holdings II"), the several banks and other financial institutions from time to time parties to the Credit Agreement (the "Lenders"), CIBC WORLD MARKETS CORP., as lead arranger and bookrunner (in such capacity, the "Lead Arranger"), CANADIAN IMPERIAL BANK OF COMMERCE, as issuer of certain letters of credit (the "Issuer"), FLEET NATIONAL BANK, formerly known as BankBoston, N.A., as documentation agent (the "Documentation Agent") and CANADIAN IMPERIAL BANK OF COMMERCE, as agent for the Lenders hereunder (in such capacity, the "Administrative Agent"), amends that certain Amended and Restated Credit Agreement, dated as of February 2, 2000 (such agreement, as amended from time to time, the "Credit Agreement"; terms defined in the Credit Agreement are used herein as defined therein), among the Borrower, the Parent, Heat Holdings II, the Lenders from time to time parties thereto and the Administrative Agent.


W I T N E S S E T H


WHEREAS, the Borrower has requested that the Administrative Agent and the Lenders agree to amend certain provisions of the Credit Agreement; and


WHEREAS, the Lenders have agreed to such amendment upon the terms set forth herein;


NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


SECTION 1. Amendments to Article 1 of the Credit Agreement.


(a) The definition of "Applicable Margin" is hereby amended in its entirety to
read as follows:


"Applicable Margin" shall mean (i) for the period commencing April 30, 2001, until delivery of a Compliance Certificate in respect of the period ending June 30, 2002, 1.75% in respect of any Alternate Base Rate Loans and 3.00% in respect of any Eurodollar Loans, and (ii) for any period other than the period set forth in clause (i), a percentage per annum determined by reference to the Total Leverage Ratio as set forth below:


Alternate Base Total Leverage Ratio Rate Loans Eurodollar Loans Greater than 4.50 to 1.00 1.75% 3.00% Less than or equal to 4.50 to 1.00, but greater than 4.00 to 1.00 1.375% 2.625% Less than or equal to 4.00 to 1.00, but greater than 3.50 to 1.00 1.00% 2.25% Less than or equal to 3.50 to 1.00 0.625% 1.875%


The Total Leverage Ratio shall be determined on the basis of the most recent Compliance Certificate delivered by the Borrower pursuant to Section 5.2(c). Any change in the Applicable Margin as a result of a change in the Total 2 Leverage Ratio shall be adjusted to the Applicable Margin set forth for such Type of Loan opposite the Total Leverage Ratio in effect on such Business Day; provided, that if the Borrower fails timely to deliver such certificate, without otherwise limiting the rights of the Lenders under this Agreement, the Total Leverage Ratio shall be deemed to be greater than 4.50 to 1.00 for purposes of calculating the Applicable Margin hereunder until such time as such certificate is delivered.


(b) The definition of "EBITDA" is hereby amended in its entirety to read as
follows:


"EBITDA" shall mean, for any period of determination, an amount equal to the sum of (without duplication) (i) Net Income for such period, after exclusion of (x) all items which should be classified as extraordinary, all determined in accordance with U.S. GAAP, (y) all insurance proceeds (other than proceeds of business interruption insurance) received during such period to the extent, if any, included in Net Income and (z) tax gains and losses upon the disposition of capital assets, plus (ii) all amounts deducted in computing such Net Income in respect of (1) Interest Expense (after giving effect to all Hedging Agreements and payments and receipts thereunder), (2) non-cash amortization expense (including amortization of financing costs, noncurrent assets and non-cash charges), (3) depreciation, (4) income taxes, (5) all other non-cash charges including but not limited to write-offs of intangible assets (other than for minority interests) less extraordinary gains, (6) non-recurring transaction expenses and underwriting fees, (7) the Thermalloy Management Fees, (8) one-time, non-recurring expenses accrued on or prior to December 31, 2000 associated with facility closings and headcount reductions related to the Thermalloy Acquisition and agreed to by the Borrower's independent accounting firm and one-time severance expenses incurred on or prior to December 31, 2000 and related to the Merger; provided that all such severance expenses shall not exceed $3,000,000 in the aggregate, (9) solely for purposes of calculating EBITDA for any period including December 31, 2000, the excess of (A) the value of the inventory sold during such period as would be set forth on the balance sheet of the Thermalloy Companies on the date the Thermalloy Acquisition was consummated (after giving effect to the Thermalloy Acquisition) over (B) the value of such inventory (based upon the standard cost inventory valuation methodology adopted by the Borrower at the date of the Thermalloy Acquisition) as would be set forth on the balance sheet of the Thermalloy Companies on such date (immediately prior to giving effect to the Thermalloy Acquisition), (10) solely for purposes of calculating EBITDA for any period including September 30, 2001, the excess of (A) the value of the inventory sold during such period as would be set forth on the balance sheet of the Borrower on the date the Merger was consummated (after giving effect to the Merger) over (B) the value of such inventory as would be set forth on the balance sheet of the Borrower on such date (immediately prior to giving effect to the Merger), (11) solely for purposes of calculating EBITDA for any period including July 3, 1999, the corporate overhead costs and expenses allocated to the Thermalloy Companies by the Sellers and paid to the Sellers during such period, (12) to the extent not duplicative, the amount attributable to the minority interests owned by Heat Holdings II in AT as reflected on the books and records of Heat Holdings II as such, and (13) solely for purposes of calculating the covenants under Section 6.1, salaries and other expenses that will be eliminated as a result of the Borrower's permanent reduction of its workforce in Texas and New Hampshire and the cessation of its manufacturing operations in Dallas, Texas which have occurred or will have occurred on or before June 30, 2001 in an amount not to exceed (I) $10,800,000 for the twelve month period ending on the last day of the first fiscal quarter of 2001, (II) $9,600,000 for the twelve month period ending 3 on the last day of the second fiscal quarter of 2001, (III) $6,900,000 for the twelve month period ending on the last day of the third fiscal quarter of 2001, (IV) $4,200,000 for the twelve month period ending on the last day of the fourth fiscal quarter of 2001, (V) $1,500,000 for the twelve month period ending on the last day of the first fiscal quarter of 2002 and (VI) zero thereafter, plus (iii) for any period of determination which occurs after the Thermalloy Acquisition or a Permitted Acquisition but incorporates fiscal quarters prior thereto, the EBITDA attributable to the assets or Capital Stock so acquired (it being understood that, in calculating such EBITDA, (x) all references to the Borrower in the definition thereof (or in any other defined term contained therein) shall be deemed to be references to the Person or attributable to the assets so acquired), (y) such acquisition shall be deemed to have occurred as of the first day of the period being measured and (z) EBITDA for any Permitted Acquisition shall be adjusted for changes in the value of inventory resulting from such Permitted Acquisition being accounted for as a "purchase" for financial reporting purposes), minus (iv) for any period which occurs after a Permitted Disposition but incorporates fiscal quarters prior thereto, the EBITDA attributable to the assets or Capital Stock so disposed (it being understood that, in calculating such EBITDA, such disposition shall be deemed to have occurred as of the first day of the period being measured, minus (v) solely for purposes of calculating EBITDA for any period prior to the date that the German Lease is deemed to be an operating lease for financial accounting purposes and not a financing lease, the amount by which EBITDA during such period is increased as a result of such lease being deemed a financing lease for financial accounting purposes.


(c) The definition of "Fixed Charges" is hereby amended in its entirety to read as follows:


"Fixed Charges" shall mean, with respect to any period, the sum (without duplication) of (a) cash Interest Expense for such period, (b) Capital Expenditures during such period, (c) income or other taxes actually paid or payable during such period, (d) regularly scheduled payments of principal on the Term Loans during such period (other than any such payments during the fiscal year ending December 31, 2001) and (e) regularly scheduled payments of principal on other Funded Debt of the Borrower and its Subsidiaries on a consolidated basis during such period.


(d) The definition of "Fixed Charges Ratio" is hereby amended in its entirety to read as follows:


"Fixed Charges Ratio" shall mean, in respect of any period, the ratio of:


(i) EBITDA for the preceding four consecutive fiscal quarters, to


(ii) the excess of (x) Fixed Charges for such four quarters, over (y) all interest expense attributable to the Permitted High Yield Securities surrendered to the Trustee for cancellation in connection with the Permitted Makewell Acquisition during such period.


(e) The definition of "Interest Coverage Ratio" is hereby amended in its entirety to read as follows:


"Interest Coverage Ratio" shall mean, as of any date of determination, the ratio of:


(i) EBITDA for the preceding four consecutive fiscal quarters, to 4
(ii) the excess of (x) cash Interest Expense for such four quarters, over (y) all interest expense attributable to the Permitted High Yield Securities surrendered to the Trustee for cancellation in connection with the Permitted Makewell Acquisition during such period; provided, that for purposes of calculating the Interest Coverage Ratio for (a) the last day of the first full fiscal quarter of 2000, Interest Expense shall be based on Interest Expense for such fiscal quarter multiplied by 4, (b) the last day of the second full fiscal quarter 2000, Interest Expense shall be based on Interest Expense for the six month period ending on such date multiplied by 2 and (c) the last day of the third full fiscal quarter of 2000, Interest Expense shall be based on Interest Expense for the nine month period ending on such date multiplied by 4/3;


(f) The following definition of "Permitted Makewell Acquisition" is hereby added in the appropriate alphabetical order:


"Permitted Makewell Acquisition" shall mean the acquisition by the Borrower of Permitted High Yield Securities with a face amount of not less than $20,000,000.


(g) The following definition of "Permitted Makewell Acquisition Transaction Documents" is hereby added in the appropriate alphabetical order:


"Permitted Makewell Acquisition Transaction Documents" shall mean the collective reference to (i) the Holdings - Holdings II Securities Purchase Agreement, dated as of April 30, 2001, between the Parent and Heat Holdings II, (ii) the Holdings - ATT Securities Purchase Agreement, dated as of April 30, 2001, between the Parent and the Borrower, (iii) the ATT - AT Securities Purchase Agreement, dated as of April 30, 2001, between the Borrower and AT, (iv) the Warrant to Purchase ___ Series B Preferred Units of AT issued by the Borrower, (v) the Second Amended and Restated Certificate of Incorporation of Aavid Thermal Technologies, Inc., (vi) the Amended and Restated Limited Liability Company Agreement of Aavid Thermalloy, LLC, (vii) the Makewell Securities Purchase Agreement, dated as of April 30, 2001, among Heat Holdings Corp., Heat Holdings II Corp., Willis Stein & Partners II, L.P., Willis Stein & Partners III, L.P., other coinvestor entities set forth on the signature page to such Agreement, as Coinvestors, and certain members of the management of Aavid Thermal Technologies, Inc. and its subsidiaries set forth on the signature page to such Agreement, as Management Investors, (viii) the Call Option Agreements, dated as of April 30, 2001, between Heat Holdings II Corp., as Seller, and each of the stockholders of Holdings II, as Buyer, (ix) the Second Amended and Restated Certificate of Incorporation of Heat Holdings II Corp., (x) the Second Amended and Restated Certificate of Incorporation of Heat Holdings Corp. and (xi) the Security Holders' Agreement, dated as of April 30, 2001, among Holdings II , as an Issuer of Securities (as defined therein), the Parent, as an Issuer of Securities, Willis Stein & Partners II, L.P., Willis Stein & Partners III, L.P., other coinvestor entities set forth on the signature page to such Agreement, as Coinvestors and certain members of the management of Aavid Thermal Technologies, Inc. and its subsidiaries set forth on the signature page to such A ...