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EXHIBIT 4.3
NINTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER OF DEFAULTS
This Amendment, dated as of May 23, 2001, is made by and among XXXXXXXX,
INC., a Minnesota corporation (the "Borrower"), XXXXX FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION f/k/a Norwest Bank Minnesota, National Association, a
national banking association ("Xxxxx Fargo"; in its separate capacity as
administrative agent for the Lenders, the "Agent"), and each of the financial
institutions appearing on the signature pages hereof.
Recitals
The Borrower, the Agent and the Lenders are parties to a Credit and
Security Agreement dated as of June 19, 1998, as amended by a First Amendment to
Credit and Security Agreement dated as of November 25, 1998, a Second Amendment
to Credit and Security Agreement dated as of March 31, 1999, a Third Amendment
to Credit and Security Agreement dated as of April 5, 1999, a Fourth Amendment
to Credit and Security Agreement dated as of November 9, 1999, a Fifth Amendment
to Credit and Security Agreement dated as of June 16, 2000, a Sixth Amendment to
Credit and Security Agreement dated as of June 27, 2000, a Seventh Amendment to
Credit and Security Agreement dated as of November 7, 2000, and an Eighth
Amendment to Credit Agreement dated as of December 26, 2000 (as so amended, the
"Credit Agreement"). Capitalized terms used in these recitals have the meanings
given to them in the Credit Agreement unless otherwise specified.
The Borrower has requested that the Lenders and the Agent consent to
certain transactions, waive certain Events of Default and that certain
amendments be made to the Credit Agreement. The Agent and the Lenders are
willing to grant the Borrower's requests pursuant to the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Amendment which are
defined in the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein. In addition, Section 1.1 of the Credit
Agreement is amended by adding or amending, as the case may be, the following
definitions:
"`EBITDA' for a period means, the sum of (i) pretax earnings from
continuing operations, (ii) Interest Expense and (iii) depreciation,
depletion, and amortization of tangible and intangible assets, before (a)
special extraordinary gains, (b) minority interests, and (c)
miscellaneous gains and losses, in each case for such period, computed
and calculated in accordance with GAAP."
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"`Eligible Accounts' means the sum of: (i) all unpaid Accounts
owed to the Borrower, net of any credits, and (ii) provided that neither
an Event of Default nor a Materials Business Sale has occurred, all
unpaid Accounts owed to IFT, net of any credits; except the following
shall not in any event be deemed Eligible Accounts:
(i) that portion of Accounts (other than dated Accounts)
unpaid 60 days or more after the due date, and that portion of
dated Accounts unpaid 30 days or more after the stated due date or
120 days or more after the shipping date;
(ii) that portion of Accounts that is disputed or subject
to a claim of offset or a contra account;
(iii) that portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by the
Borrower or IFT to the customer;
(iv) Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there shall be
included in Eligible Accounts that portion of Accounts owed by
such units of government for which the Borrower or IFT (as
applicable) has provided evidence satisfactory to the Agent that
(A) the Agent has a first priority perfected security interest and
(B) such Accounts may be enforced by the Agent directly against
such unit of government under all applicable laws);
(v) Accounts owed by an account debtor located outside the
United States which are not backed by a bank letter of credit
assigned to the Agent (if such assignment is required by the
Agent), in the possession of the Agent and acceptable to the Agent
in all respects, in its sole discretion; provided, however, that,
Accounts due and owing from Siemens, Bosch, Delco, Ford, Texas
Instruments, Polaroid, 3M, Hewlett Packard and Motorola which
satisfy all other requirements of this definition (including
without limitation clause (xiii)), shall not be deemed ineligible
because of this clause;
(vi) Accounts owed by an account debtor that is insolvent,
the subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of the Borrower or IFT;
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(viii) Accounts not subject to a duly perfected security
interest in the Agent's favor or which are subject to any lien,
security interest or claim in favor of any Person other than the
Agent including without limitation any payment or performance
bond;
(ix) Accounts owned by IFT until the Agent has received
evidence satisfactory to it of the perfection and priority of its
security interest in such Accounts;
(x) that portion of Accounts that has been restructured,
extended, amended or modified;
(xi) that portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
(xii) Accounts owed by an account debtor, regardless of
whether otherwise eligible, if 10% or more of the total amount due
under Accounts from such debtor is ineligible under clauses (i),
(ii) or (x) above, provided, however, that the Agent may from time
to time in its sole discretion exclude from the operation of this
clause (xii) those Accounts that the Agent designates; and;
(xiii) Accounts, or portions thereof, otherwise deemed
ineligible by the Agent in its sole discretion."
"`Eligible Inventory' means the sum of: (i) all Inventory of the
Borrower, at the lower of cost or market value as determined in
accordance with GAAP, and (ii) provided that neither an Event of Default
nor a Materials Business Sale has occurred, all Inventory of IFT, at the
lower of cost or market value as determined in accordance with GAAP;
except the following shall not in any event be deemed Eligible Inventory:
(i) Inventory that is: in-transit (provided that goods in
transit in the ordinary course of business between the Borrower's
facilities in Xxxxx and Xxxxxxxx Counties, South Dakota, its
facilities in Rice and Dakota Counties, Minnesota and Boulder
County, Colorado shall not be excluded by this clause); located at
any warehouse, job site or other premises not approved by the
Agent in writing; located outside of the states, or localities, as
applicable, in which the Agent has filed financing statements to
perfect a first priority security interest in such Inventory;
covered by any negotiable or non-negotiable warehouse receipt,
xxxx of lading or other document of title not in the Agent's
possession; on consignment from or to any Person or subject to any
bailment;
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(ii) Supplies, packaging, maintenance parts or sample
Inventory;
(iii) Inventory that is damaged, obsolete, slow moving or
not currently saleable in the normal course of the Borrower's or
IFT's operations;
(iv) Inventory that the Borrower or IFT has returned, has
attempted to return, is in the process of returning or intends to
return to the vendor thereof;
(v) Inventory that is perishable or live;
(vi) Inventory manufactured by the Borrower or IFT pursuant
to a license, other than that manufactured under a license from
IBM, Inc., unless the applicable licensor has agreed in writing to
permit the Agent to exercise its rights and remedies against such
Inventory;
(vii) Inventory that is subject to a security interest in
favor of any Person other than the Agent;
(viii) Inventory owned by IFT until the Agent has received
evidence satisfactory to it of the perfection and priority of its
security interest in such Inventory; and
(ix) Inventory otherwise deemed ineligible by the Agent in
its sole discretion."
"`Margin' means, from March 1, 2001 and thereafter, four percent
(4.0%)."
"`Materials Business Sale' means a sale by the Borrower, which
sale is approved by the Agent and the Lenders in their sole discretion,
of the Borrower's adhesive-based tapes, laminates and composite materials
business, excluding Accentia, Comclad, lithium batteries products,
Novaclad, Novaflex, Flexbase, and those products and assets associated
with the flexible interconnect division."
"`Molex' means Molex Incorporated."
"`Ninth Amendment' means the Ninth Amendment to Credit and
Security Agreement by and among the Borrower, the Lenders and the Agent
dated as of May 23, 2001."
"`Ninth Amendment Effective Date' means the date all conditions
set forth in Paragraph 13 of the Ninth Amendment are satisfied."
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"`Subordinated Lender' means, individually and collectively,
Molex, Xxxxxxxxxxxx and Ampersand."
2. Term Note Payments. Section 2.10 is amended by deleting and replacing
such section in its entirety as follows:
Section 2.10 Payment of Term Notes. The principal of the Term
Notes will be payable in aggregate equal monthly installments of $205,130
beginning January 1, 1999 and on the first day of each month thereafter
until the Termination Date at which time the outstanding principal
balance of the Term Notes and all interest accrued thereon shall be due
and payable in full. The Agent has obtained, at the Borrower's expense,
an appraisal of the Eligible Equipment and all equipment owned by all
Subsidiaries of the Borrower following the Merger (the "Combined
Equipment") which has established that the aggregate outstanding
principal balance of the Term Notes exceeds 75% of the orderly
liquidation value of the Combined Equipment as shown on such appraisal.
Upon the earlier of: (i) the occurrence of an Event of Default, (ii) the
occurrence of a Materials Business Sale, (iii) the date of any
refinancing of the Obligations by any lender other than the Lenders or
(iv) July 30, 2001, the Borrower shall immediately prepay the Term Notes
in the amount of such excess together with any prepayment fee owed
pursuant to Section 2.16.
3. Financial Covenants. Sections 6.18 through 6.21 of the Credit
Agreement are amended to read as set forth below.
"Section 6.18 - Reserved"
"Section 6.19 - Reserved"
"Section 6.20 - Reserved"
"Section 6.21 Minimum EBITDA. The Borrower will achieve during the
period described below, EBITDA, of not less than the amount set forth
opposite such period:
March 30, 2001 through
May 3, 2001 $(5,000,000)
March 30, 2001 through
May 31, 2001 $(5,000,000)
March 30, 2001 through
June 29, 2001 $(5,000,000)
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4. New Compliance Certificate. Exhibit F to the Credit Agreement is
hereby amended in its entirety and replaced by Exhibit A to this Amendment.
5. Other Affirmative Covenants. Article 6 is amended by adding the
following Sections 6.23, 6.24 and 6.25:
"Section 6.23 Sale Commitment Information. By May 23, 2001, the
Borrower will deliver to the Agent a copy of an engagement letter from a
reputable investment banking firm retained by the Borrower to broker a
Materials Business Sale. By June 15, 2001, the Borrower will deliver to
the Agent a copy of those written materials prepared by such investment
banking firm regarding such Materials Business Sale.
Section 6.24 Potential Sale Updates. Prior to the close of
business on Friday of each week following the date of the Ninth
Amendment, the Borrower will deliver to the Agent, in form and detail
acceptable to the Agent, progress reports regarding any potential
Materials Business Sale; simultaneously, upon request by the Agent, the
Borrower will deliver to the Agent those documents deemed by the Agent to
be material to any such potential Materials Business Sale.
Section 6.25 Sale Documentation. Prior to a Materials Business
Sale, the Borrower will deliver to the Agent: (i) a copy of the final
proposed purchase agreement to consummate such Materials Business Sale,
(ii) a calculation of the Borrowing Base prior to giving effect to such
proposed Materials Business Sale and (iii) a calculation of the Borrowing
Base after giving effect to such proposed Materials Business Sale."
6. Expressed Consent. Section 7.1 of the Credit Agreement is amended by
replacing the final period with "; and" and inserting the following new
subsection (f):
"(f) a lien in favor of the Subordinated Lender on all assets,
other than real property assets, including but not limited to
Manufacturing Fixtures (as defined in the Subordinated Secured Notes
Purchase Agreement, dated as of May 18, 2001, by and among the Borrower
and the Subordinated Lender) of the Borrower, its Affiliates and its
Subsidiaries, including but not limited to IFT, which lien shall be
junior to the interest of the Agent and the Lenders, and which lien shall
be automatically released upon the closing of the sale of any such assets
to any bona fide purchaser approved by the Agent. Following such a sale
contemplated in this subsection 7.1(f), the Subordinated Lender may hold
a lien on only those proceeds of such sale which are in excess of the
Obligations."
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7. New Subordinated Debt. Section 7.2 of the Credit Agreement is amended
to add the following new subsection (b-1) immediately following subsection (b):
"(b-1) indebtedness to be used for general corporate purposes and
working capital only not exceeding a principal amount of $5,000,000 and
subordinated to the Obligations pursuant to a subordination agreement
satisfactory to the Agent in its sole discretion, with the Borrower's
obligation to pay such indebtedness being evidenced by instruments (which
may be assigned) notifying any holder thereof of such subordination."
8. Events of Default. Subsection 8.1(t) of the Credit Agreement is
amended by replacing the final period with "; or" and inserting the following
new subsections (u), (v) and (w):
"(u) By July 16, 2001, the Subordinated Lender shall not have
indicated to the Agent in writing their continuing commitment to
consummate a Materials Business Sale and the Borrower has not provided
the Agent with a written offer proposing a Materials Business Sale from
another bona fide purchaser;
(v) By June 29, 2001, the Borrower shall fail to deliver to the
Agent financial projections for the period from June 30, 2001 through
December 31, 2001;
(w) By July 20, 2001, the Agent, the Lenders and the Borrower
shall fail to establish, for the period from July 20, 2001 through
December 31, 2001: (i) a new definition for Borrowing Base in Section 1.1
and (ii) new financial covenants in Article 6."
9. No Other Changes. Except as explicitly amended by this Amendment, all
of the terms and conditions of the Credit Agreement shall remain in full force
and effect and shall apply to any advance or letter of credit thereunder.
10. Expressed Consent to New Subordinated Debt. Notwithstanding any
language in the Credit Agreement, including but not limited to Sections 7.2 and
7.9, the Agent and the Lenders hereby consent to the Borrower's incurring
indebtedness in the principal amount of $5,000,000, which indebtedness shall be
owed to the Subordinated Lender and which indebtedness shall be fully
subordinated to the Obligations pursuant to a Subordination Agreement of even
date herewith by the Subordinated Lender for the benefit of the Agent on behalf
of the Lenders.
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11. Defaults. The following Events of Default exist (the "Existing
Defaults"):
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CREDIT AGREEMENT SECTION/COVENANT REQUIRED AS OF 3/30/01 ACTUAL AS OF 3/30/01
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Section 6.18 Minimum Cash Flow
Available for Debt Service $12,600,000 $9,212,000
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Section 6.19 Minimum Debt Service
Coverage Ratio 1.50 to 1.00 1.43 to 1.00
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Section 6.20 Pre-Tax Net Income $(4,000,000) $(11,772,000)
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Upon the terms and subject to the conditions set forth in this Amendment, the
Lenders hereby waive the Existing Defaults. This waiver shall be effective only
in this specific instance and for the specific purpose for which it is given,
and this waiver shall not entitle the Borrower to any other or further waiver in
any similar or other circumstances.
12. Amendment Fee. In consideration of the Lenders' execution of this
Amendment, the Borrower shall pay the Agent a fully earned, non-refundable fee
in the amount of $300,000, which fee shall be paid as follows: (a) $150,000
shall be paid as of the date hereof; (b) $150,000 shall be paid on the earlier
of: (i) the occurrence of an Event of Default, (ii) the occurrence of a
Materials Business Sale, (iii) the date of any refinancing of the Obligations by
any lender other than the Lenders or (iv) July 30, 2001.
13. Conditions Precedent. This Amendment, and the waiver set forth in
Paragraph 11 hereof, shall be effective when the following conditions have been
met to the satisfaction of the Agent:
(a) the Agent shall have received an executed original hereof;
(b) the Agent shall have received those executed documents
necessary for the Lenders to properly perfect their liens against the
intellectual property of the Borrower and IFT;
(c) the Agent shall have received, in form and content
satisfactory to the Agent, a mortgage from the Borrower securing the
Obligations with the Borrower's Britton, South Dakota facility and real
property;
(d) the Agent shall have received, in form and content
satisfactory to the Agent, an unconditional, limited guaranty from Molex
Incorporated in the amount of $1,000,000;
(e) the Agent shall have received, in form and content
satisfactory to the Agent, a subordination agreement from the
Subordinated Lender with respect to a $5,000,000 loan to the Borrower,
including but not limited to a subordination and deferral of any fees to
be charged by the Subordinated Lender. Such loan may be secured by a lien
junior to the interest of the Agent and the Lenders on those assets of
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the Borrower other than real property assets; but such lien shall be
automatically released upon the closing of the sale of any such assets to
any bona fide purchaser approved by the Agent, and the Subordinated
Lender shall have no further rights or interests in such assets. At the
request of the Agent or the Borrower, the Subordinated Lender shall
execute and deliver all documents evidencing and effectuating such
release of any security interests. Thereafter, the loan from the
Subordinated Lender may be secured by a lien which shall attach only to
those proceeds of the sale contemplated in this subparagraph (e) which
proceeds are in excess of the Obligations.
14. Representations and Warranties. The Borrower hereby represents and
warrants to the Lenders as follows:
(a) The Borrower has all requisite corporate power and authority
to execute this Amendment and to perform all of its obligations
hereunder, and this Amendment has been duly executed and delivered by the
Borrower and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of
this Amendment have been duly authorized by all necessary corporate
action and do not (i) require any authorization, consent or approval by
any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any
law, rule or regulation or of any order, writ, injunction or decree
presently in effect, having applicability to the Borrower, or the
articles of incorporation or by-laws of the Borrower, or (iii) result in
a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or
affected.
(c) All of the representations and warranties contained in Article
V of the Credit Agreement are correct on and as of the date hereof as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
15. References. All references in the Credit Agreement to "this
Agreement" shall be deemed to refer to the Credit Agreement as amended hereby;
and any and all references in the Security Documents to the Credit Agreement
shall be deemed to refer to the Credit Agreement as amended hereby.
16. No Other Waiver. Except as set forth in Paragraph 11, the execution
of this Amendment and acceptance of any documents related hereto shall not be
deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document or
other document held by the Lenders, whether or not known to the Lenders and
whether or not existing on the date of this Amendment.
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17. Release. The Borrower hereby absolutely and unconditionally releases
and forever discharges the Lenders, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Amendment, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.
18. Costs and Expenses. The Borrower hereby reaffirms its agreement under
the Credit Agreement to pay or reimburse the Lenders on demand for all costs and
expenses incurred by the Lenders in connection with the Credit Agreement, the
Security Documents and all other documents contemplated thereby, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lenders for the
services performed by such counsel in connection with the preparation of this
Amendment and the documents and instruments incidental hereto. The Borrower
hereby agrees that the Lenders may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to the
Borrower under the Credit Agreement, or apply the proceeds of any loan, for the
purpose of paying any such fees, disbursements, costs and expenses, including
without limitation the fee owed under Paragraph 12.
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19. Miscellaneous. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
XXXXX FARGO BANK MINNESOTA, XXXXXXXX, INC.
NATIONAL ASSOCIATION, as Agent
By /s/ Xxxxx X. Xxxxxx By /s/ Xxxxx Xxxx
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Xxxxx X. Xxxxxx Xxxxx Xxxx
Its Vice President Its Vice President - Finance
XXXXX FARGO BANK MINNESOTA, THE CIT GROUP/EQUIPMENT
NATIONAL ASSOCIATION FINANCING, INC.
By /s/ Xxxxx X. Xxxxxx By /s/ Xxxxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxx Xxxxxxx X. Xxxxxxx
Its Vice President Its Vice President
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Exhibit A to Ninth Amendment to
Amended and Restated Credit and
Security Agreement
COMPLIANCE CERTIFICATE
TO: Xxxxx X. Xxxxxx
Xxxxx Fargo Bank Minnesota, National Association
DATE: ____________________, ______
SUBJECT: Financial Statements
Dear Xx. Xxxxxx:
I am the duly qualified and acting Chief Financial Officer of Xxxxxxxx,
Inc. (the "Borrower") and I am familiar with the financial statements and
financial affairs of the Borrower. I am authorized to execute this Compliance
Certificate on behalf of the Borrower.
Pursuant to Section 6.1 of the Credit and Security Agreement dated as of
June 19, 1998, by and among the Borrower, Xxxxx Fargo Bank Minnesota, National
Association, as agent ("Xxxxx Fargo"; herein in such capacity, together with any
party which may become the successor Agent under such Credit and Security
Agreement, the "Agent"), and each of the financial institutions which are now or
may hereafter become parties to such Credit and Security Agreement, as amended
to date and as the same may be further amended, supplemented or restated from
time to time, the "Credit Agreement"), enclosed are an unaudited balance sheet
and statements of income and retained earnings of the Borrower, as of
___________, ____ (the "Reporting Date"), and for the year-to-date period ending
on the Reporting Date. All terms used in this Compliance Certificate shall have
the meanings given in the Credit Agreement.
The balance sheet and statements of income and retained earnings fairly
present the financial condition of the Borrower as of the date thereof. They
have been prepared in accordance with GAAP.
I hereby certify to the Lenders as follows:
[ ] The undersigned does not have knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement.
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[ ] The undersigned has knowledge of the occurrence of a Default or
Event of Default under the Credit Agreement and attached hereto is
a statement of the facts with respect thereto.
I further certify to the Lenders as follows:
1. Minimum EBITDA. Pursuant to Section 6.21 of the Credit
Agreement, as of the Reporting Date, the Borrower's Cash Flow Available
for Debt Service was $_____________, which [ ] satisfies [ ] does not
satisfy the requirement that such amount be no less than $(5,000,000).
2. Capital Expenditures. Pursuant to Section 7.12 of the Credit
Agreement, for the fiscal quarter ending on the Reporting Date, the
Borrower and its Subsidiaries have expended or contracted to expend for
Capital Expenditures, $__________________ in the aggregate, excluding the
conversion of any existing operating leases to capital leases, which [ ]
satisfies [ ] does not satisfy the requirement that such expenditures not
exceed in the aggregate the amount set forth below for such fiscal
quarter:
Fiscal Quarter Ending on or about Maximum Capital Expenditures
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March 31, 2001 $5,000,000
June 30, 2001 $10,000,000
September 30, 2001 $16,000,000
December 31, 2001 $16,000,000
Attached hereto are all relevant facts in reasonable detail to evidence, and the
computations of the financial covenants referred to above. These computations
were made in accordance with GAAP.
XXXXXXXX, INC.
By
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Its Vice President - Finance
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