1
EXHIBIT 10.3
FIRST AMENDMENT AND WAIVER dated as of April 30, 2001 ("Amendment") to
FINANCING AGREEMENT, dated as of June 27, 2000 (the "Financing Agreement"),
among CANNONDALE CORPORATION, as Borrower (the "Borrower"), the lenders party
thereto (each a "Lender" and collectively the "Lenders") and THE CIT
GROUP/BUSINESS CREDIT, INC., as agent for the Lenders (in such capacity, the
"Agent"). Terms which are capitalized in this Amendment and not otherwise
defined shall have the meanings ascribed to such terms in the Financing
Agreement.
WHEREAS, the Borrower has requested the Lenders to waive as Events of
Default violations of certain of the financial covenants contained in the
Financing Agreement, and to modify certain provisions contained in the Financing
Agreement, and the Lenders have agreed to the foregoing request;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Agent and the
Lenders hereby agree as follows:
SECTION ONE. AMENDMENT. Effective as of the date hereof, upon the
satisfaction of the conditions precedent set forth in Section Four hereof, the
Financing Agreement is hereby amended as follows; provided, however, that the
new definition of "Applicable Increment" set forth below shall be effective, on
a retroactive basis, as of December 31, 2000:
(a) SECTION 1.01 DEFINED TERMS. Section 1.01 is amended by deleting the
definitions of the terms "Applicable Increment," "Case 6" and "EBITDA," by
substituting the following definitions in lieu thereof and by adding the terms
"Case 7" and "First Amendment" and the following definitions thereof, each in
the appropriate alphabetical order:
"Applicable Increment shall mean ON ANY DATE OF DETERMINATION, WITH
RESPECT TO ANY REVOLVING LOAN BEARING INTEREST BASED ON THE BASE RATE
OR LIBOR, OR ANY PORTION OF THE TERM LOAN BEARING INTEREST BASED ON THE
BASE RATE OR LIBOR, THE APPLICABLE RATE PER ANNUM SET FORTH BELOW UNDER
THE APPLICABLE CAPTION, BASED UPON THE FIXED CHARGE COVERAGE RATIO
CORRESPONDING THERETO FOR THE PERIOD OF FOUR CONSECUTIVE FISCAL
QUARTERS ENDING IMMEDIATELY PRIOR TO SUCH DATE OF DETERMINATION. THE
APPLICABLE INCREMENT SHALL APPLY DURING THE PERIOD COMMENCING ON THE
FIRST DAY OF THE MONTH FOLLOWING THE MONTH DURING WHICH THE AGENT SHALL
HAVE RECEIVED THE FINANCIAL STATEMENTS REQUIRED TO BE DELIVERED
PURSUANT TO SECTION 8.01 FOR ANY REFERENCED FISCAL QUARTER, AND ENDING
ON THE LAST DAY OF THE MONTH DURING WHICH THE AGENT SHALL HAVE RECEIVED
SUCH FINANCIAL STATEMENTS FOR THE
2
NEXT SUCCEEDING FISCAL QUARTER; PROVIDED, HOWEVER, THAT UNTIL SUCH TIME
AS THE AGENT RECEIVES SUCH FINANCIAL STATEMENTS FOR THE FISCAL QUARTER
ENDING IN MARCH 2001, THE APPLICABLE INCREMENT SHALL BE AS SET FORTH
BELOW OPPOSITE CASE 1."
Applicable
Increment for Applicable Applicable Applicable
Fixed Charge Revolving Loans Increment for Increment for Increment for
Coverage Ratio based on the Revolving Loans Term Loan based Term Loan based
Base Rate based on LIBOR on the Base Rate on LIBOR
Case 1 1.25% N/A 1.75% N/A
Case 2 1.00% N/A 1.50% N/A
Case 3 .75% 2.50% 1.25% 3.00%
Case 4 .50% 2.25% 1.00% 2.75%
Case 5 .25% 2.00% .75% 2.50%
Case 6 .00% 1.75% .50% 2.25%
Case 7 .00% 1.75% .25% 2.00%"
"CASE 6 SHALL MEAN A FIXED CHARGE COVERAGE RATIO OF EQUAL TO OR GREATER
THAN 2.50 TO 1.00 AND LESS THAN 2.75 TO 1.00."
"CASE 7 SHALL MEAN A FIXED CHARGE COVERAGE RATIO OF EQUAL TO OR GREATER
THAN 2.75 TO 1.00."
"EBITDA shall mean, for any period, Net Income for such period plus, to
the extent deducted in determining Net Income for such period and
without duplication, Interest Expense, income tax expense,
depreciation, amortization and other non-cash charges for such period,
including non-cash charges in respect of (w) write offs of fees and
expenses incurred in connection with the prepayment of all or any
portion of the principal of the Term Loan or the Mezzanine Debt, (x)
write offs of deferred taxes, (y) write downs to the lower of cost or
market of the Borrower's motorcycle division inventory to the extent
required by GAAP ("inventory write downs"), provided, however, that the
aggregate amount of such inventory write downs for (I) the Fiscal
Quarter ending in March 2001 may not exceed the lesser of the actual
amount of such inventory write downs for such Fiscal Quarter and the
sum of $326,000 and (II) the Fiscal Quarter ending in June
-2-
3
2001 may not exceed the lesser of the actual amount of such inventory
write downs for such Fiscal Quarter and the sum of $500,000 and (z) any
beneficial conversion premium arising from the difference, if any,
between the market price of the Borrower's common stock and the
conversion price of the Borrower's common stock into which the
Institutional Infusion or the Xxxxxxxxxx Infusion (as such terms are
defined in the First Amendment), as the case may be, may be converted
(the date of consummation of the Institutional Infusion or the
Xxxxxxxxxx Infusion, as applicable, being the date upon which the
amount of such premium shall be calculated, and the date on which such
conversion price shall be determined), minus, to the extent included in
determining Net Income for such period, without duplication (i)
interest income for such period that has been deferred or has not been
paid in cash, (ii) interest income for such period with respect to the
Xxxxxxxxxx Debt, (iii) dividends paid in cash to the Borrower by any
Subsidiary during such period, except to the extent such dividends are
payable solely from the earnings of operations of such Subsidiary for
the twelve month period immediately preceding the date of payment of
such dividends and (iv) all amounts paid in cash to the Borrower during
such period resulting from the unwinding of any Hedging Obligation of
the Borrower, all determined in accordance with GAAP on a consistent
basis, but excluding the effect of extraordinary or non-recurring gains
or losses for such period."
"First Amendment shall mean that certain First Amendment and Waiver
dated as of April 30, 2001, executed and delivered by the Borrower, the
Lenders and the Agent in connection with this Financing Agreement."
(b) SECTION 4.02 MANDATORY PREPAYMENTS. Section 4.02 (d) is deleted in
its entirety, and the following is substituted in lieu thereof:
"(d) Beginning with the Fiscal Year ending in June 2001, THE BORROWER
SHALL MAKE A MANDATORY PREPAYMENT OF THE UNPAID PRINCIPAL BALANCE OF
THE TERM LOAN NO LATER THAN NINETY DAYS AFTER THE END OF EACH FISCAL
YEAR, IN AN AGGREGATE AMOUNT EQUAL TO FIFTY PERCENT (50%) OF SURPLUS
CASH FOR THE FISCAL YEAR THEN ENDED (SUCH AMOUNT, THE "REFERENCED
AMOUNT"), AS CALCULATED IN ACCORDANCE WITH AND AS SET FORTH IN THE
AUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS OF THE BORROWER FOR THE
FISCAL YEAR THEN ENDED, WHICH CALCULATION SHALL BE CERTIFIED BY AN
AUTHORIZED OFFICER, PROVIDED, HOWEVER, THAT IF AT THE TIME ANY SUCH
MANDATORY PREPAYMENT SHALL BE MADE, ANY PORTION OF THE PRINCIPAL OF THE
MEZZANINE DEBT SHALL BE OUTSTANDING AND UNPAID,
-3-
4
THEN THE BORROWER SHALL INSTEAD PAY TO THE AGENT, AS A MANDATORY
PREPAYMENT OF THE UNPAID PRINCIPAL BALANCE OF THE TERM LOAN, ONLY THE
LENDERS' PROPORTIONATE SHARE OF THE REFERENCED AMOUNT, AND THE BORROWER
SHALL CONCURRENTLY MAKE A PREPAYMENT OF THE UNPAID PRINCIPAL BALANCE OF
THE MEZZANINE DEBT IN AN AMOUNT EQUAL TO THE MEZZANINE LENDERS'
PROPORTIONATE SHARE OF SUCH REFERENCED AMOUNT, PROVIDED, FURTHER, THAT
THE PROCEEDS OF THE INTERCOMPANY PAYMENT AND THE 2001 SUBORDINATED
DEBT, AS SUCH TERMS ARE DEFINED IN THE FIRST AMENDMENT, RECEIVED BY THE
BORROWER DURING THE FISCAL YEAR ENDING IN JUNE 2001, SHALL BE EXCLUDED
FROM THE CALCULATION OF SURPLUS CASH FOR SUCH FISCAL YEAR."
(c) SECTION 6.03. COLLECTION OF TRADE ACCOUNTS RECEIVABLE. Section 6.03
is amended by adding the following language immediately after the last sentence
thereof:
"Without in any way waiving or limiting the Agent's right to require
the Borrower to strictly comply with this Section, the Borrower hereby
agrees to take the following actions with respect to each account of
the Borrower held at a bank or other depository institution located in
Canada, into which any proceeds of Collateral may be deposited at any
time (each, a "Canadian Account"): (a) the Borrower shall deliver to
the Agent, together with each Borrowing Base Certificate, a report
setting forth the amount on deposit in each Canadian Account on the
date of such Borrowing Base Certificate; (b) the Borrower shall deliver
to the Agent copies of all periodic account statements with respect to
each Canadian Account, promptly upon the Borrower's receipt thereof;
and (c) on Monday of each week (or on the next Business Day, if such
Monday is not a Business Day) the Borrower shall cause to be
transferred, by wire or book-entry transfer, in immediately available
funds, all funds on deposit in each Canadian Account to a Blocked
Account or to such other bank account as the Agent may from time to
time designate for such purpose. The Borrower hereby confirms and
agrees that all amounts deposited in each Canadian Account, whether as
proceeds of Inventory or other Collateral or otherwise, shall be the
property of the Agent."
(d) SECTION 8.01. FISCAL STATEMENTS, PROJECTIONS, BORROWING BASE
CERTIFICATES AND OTHER INFORMATION. Section 8.01 (d) is deleted in its entirety,
and the following is substituted in lieu thereof:
"(d) CONCURRENTLY WITH ANY DELIVERY OF FINANCIAL STATEMENTS UNDER
CLAUSE (a), (b) or (c) ABOVE, A CERTIFICATE OF AN AUTHORIZED OFFICER OF
THE BORROWER (i) CERTIFYING AS TO WHETHER A DEFAULT HAS
-4-
5
OCCURRED AND, IF A DEFAULT HAS OCCURRED, SPECIFYING THE DETAILS THEREOF
AND ANY ACTION TAKEN OR PROPOSED TO BE TAKEN WITH RESPECT THERETO, (ii)
SETTING FORTH REASONABLY DETAILED CALCULATIONS (A) IN THE CASE OF
QUARTERLY FINANCIAL STATEMENTS, OF THE FIXED CHARGE COVERAGE RATIO FOR
THE PERIOD OF FOUR FISCAL QUARTERS THEN ENDED AND (B) DEMONSTRATING
COMPLIANCE WITH SECTIONS 9.09 THROUGH AND INCLUDING 9.11, (iii) STATING
WHETHER ANY CHANGE IN GAAP OR IN THE APPLICATION THEREOF HAS OCCURRED
SINCE THE DATE OF THE AUDITED FINANCIAL STATEMENTS REFERRED TO IN
CLAUSE (a) AND, IF ANY SUCH CHANGE HAS OCCURRED, SPECIFYING THE EFFECT
OF SUCH CHANGE ON THE FINANCIAL STATEMENTS ACCOMPANYING SUCH
CERTIFICATE AND (iv) SETTING FORTH REASONABLY DETAILED CALCULATIONS, IN
THE CASE OF QUARTERLY FINANCIAL STATEMENTS, OF ALL NON-CASH CHARGES
DEDUCTED IN DETERMINING NET INCOME FOR THE APPLICABLE FISCAL QUARTER,
INCLUDING WITHOUT LIMITATION ALL OF THE NON-CASH CHARGES DESCRIBED IN
CLAUSES (w), (x), (y) AND (z) OF THE DEFINED TERM EBITDA."
(e) SECTION 8.14. NEW COLLATERAL LOCATIONS. Section 8.14 is deleted in
its entirety and the following is substituted in lieu thereof:
"SECTION 8.14. NEW COLLATERAL LOCATIONS. AS SOON AS POSSIBLE AND IN ANY
EVENT NO LATER THAN TEN (10) DAYS AFTER ANY COLLATERAL IS FIRST HELD AT
A LOCATION (WHETHER LEASED PREMISES, A WAREHOUSE, A PROCESSOR'S
LOCATION OR OTHER LOCATION) WHICH IS NOT SET FORTH ON ANNEX II, THE
BORROWER SHALL (a) NOTIFY THE AGENT OF THE ADDRESS OF SUCH LOCATION AND
THE TYPE AND VALUE OF THE COLLATERAL BEING HELD AT SUCH LOCATION AND
(b) DELIVER TO THE AGENT SUCH UCC FINANCING STATEMENTS AS THE AGENT IN
ITS DISCRETION SHALL REQUIRE to ensure the Agent's first priority
perfected security interest hereunder in such Collateral. In addition,
the Borrower shall use its reasonable best efforts to deliver to the
Agent, within sixty (60) days of the date on which any Collateral is
first held at a location (whether leased premises, a warehouse, a
processor's location or otherwise) which is not set forth on Annex II,
a warehouseman's or processor's waiver substantially in the form of
Exhibit E-1 or Exhibit E-2, as applicable, duly executed by the lessor
or owner of such location."
(f) SECTION 9.03 FUNDAMENTAL CHANGES. Section 9.03(d) is deleted in its
entirety, the following is substituted in lieu thereof, and a new paragraph (e)
is added to Section 9.03, as follows:
"(d) WITHOUT THE PRIOR WRITTEN CONSENT OF THE AGENT, THE BORROWER WILL
NOT (i) CONSENT TO ANY AMENDMENT OR OTHER MODIFICATION OF THE MEZZANINE
FINANCING AGREEMENT OR ANY OF
-5-
6
THE OTHER MEZZANINE DEBT DOCUMENTS RESULTING IN (A) AN INCREASE IN THE
PRINCIPAL AMOUNT OF THE MEZZANINE DEBT, (B) A CHANGE (OTHER THAN BY
POSTPONEMENT) IN ANY SCHEDULED PAYMENT OR PREPAYMENT OF THE MEZZANINE
DEBT, (C) AN INCREASE IN ANY INTEREST RATE APPLICABLE TO THE MEZZANINE
DEBT, OR (D) THE ADDITION OF NEW FINANCIAL COVENANTS OR NEW EVENTS OF
DEFAULT OR THE IMPOSITION OF STRICTER LEVELS OR RATIOS WITH RESPECT TO
EXISTING FINANCIAL COVENANTS APPLICABLE TO THE MEZZANINE DEBT, OR (ii)
make any voluntary prepayment of the Mezzanine Debt, provided, however,
that at any time after the date on which the Agent receives the
Borrower's consolidated and consolidating financial statements for the
Fiscal Quarter and Fiscal Year ending in June, 2001, on not less than
ten (10) days prior written notice to the Agent, the Borrower may make
prepayments of all or any portion of the principal of the Mezzanine
Debt, so long as, at the time the Borrower proposes to make such
prepayment (A) no Event of Default shall have occurred and then be
continuing, (B) the Fixed Charge Coverage Ratio of the Borrower, on a
consolidated basis with its consolidated Subsidiaries, for the most
recently ended period of twelve consecutive fiscal months shall be
greater than 1.00 to 1.00, (C) the Agent shall have received, in
accordance with Section 8.01 (c), the Borrower's consolidated and
consolidating financial statements for the most recently ended fiscal
month, (D) after giving effect to such proposed prepayment, the
Borrower's Availability, on a pro forma basis, calculated as if a
prepayment of $2,000,000 of principal of the Institutional Infusion (as
such term is defined in the First Amendment), to the extent not
previously converted to equity, were being made concurrently with the
proposed prepayment of the Mezzanine Debt, shall be not less than
$10,000,000, (E) no material portion of the Borrower's trade payables
shall be past due beyond the Borrower's historic payment practices, and
the Agent shall have verified the foregoing to its satisfaction, (F)
the ratio of (1) the value of the Borrower's Inventory, based on the
lower of cost or market, to (2) the aggregate face amount of all of the
Borrower's trade payables then outstanding is not less than .50 to 1.00
and (G) the Agent shall have received a certificate, duly executed by
an Authorized Officer, setting forth in reasonable detail the
calculation of (1) the minimum Fixed Charge Coverage Ratio required
pursuant to clause (B) hereof, (2) the minimum pro forma Availability
required pursuant to clause (D) hereof, and (3) the minimum inventory
to trade payables ratio required pursuant to clause (F) hereof."
"(e) Without the prior written consent of the Agent, the Borrower will
not (i) consent to any amendment or other modification of any
-6-
7
instruments evidencing the 2001 Subordinated Debt, as such term is
defined in the First Amendment, or any agreements or documents pursuant
to which such instruments were issued or are governed, which amendment
or modification results in (A) an increase in the principal amount of
the 2001 Subordinated Debt, (B) a change (other than by postponement)
in any scheduled payment or prepayment of the 2001 Subordinated Debt,
(C) an increase in any interest rate applicable to the 2001
Subordinated Debt or (D) the addition of new financial covenants or new
events of default or the imposition of stricter levels or ratios with
respect to existing financial covenants applicable to the 2001
Subordinated Debt or (ii) make any voluntary prepayment of the 2001
Subordinated Debt, provided, however, that at any time after the date
on which the Agent receives the Borrower's consolidated and
consolidating financial statements for the Fiscal Quarter and Fiscal
Year ending in June, 2001 and on not less than ten (10) ten days prior
written notice to the Agent, the Borrower may make prepayments of up to
(x) $2,000,000 in the aggregate of the principal of the Institutional
Infusion, as such term is defined in the First Amendment, together with
the payment of interest accrued thereon and any premium included in the
applicable Redemption Price (as defined in the documents evidencing the
Institutional Infusion as in effect on the date of the First
Amendment), but only to the extent set forth in the document evidencing
the Institutional Infusion or the agreement pursuant to which the
Institutional Infusion was issued or is governed, as in effect on the
date of issuance of such document or the date of execution of such
agreement, as the case may be and (y) at any time after the date on
which the Institutional Infusion shall have been paid or otherwise
satisfied in full (including all accrued interest thereon), or
converted to equity, $2,000,000 in the aggregate of the principal of
the Xxxxxxxxxx Infusion, as such term is defined in the First
Amendment, together with payments of accrued interest thereon and the
payment of any premium included in the applicable Redemption Price (as
defined in the documents evidencing the Xxxxxxxxxx Infusion as in
effect on the date of the First Amendment), but only to the extent set
forth in the document evidencing the Xxxxxxxxxx Infusion or the
agreement pursuant to which the Xxxxxxxxxx Infusion was issued or is
governed, as in effect on the date of issuance of such document or the
date of execution of such agreement, as the case may be, so long as, at
the time the Borrower proposes to make any such prepayment of
principal, payment of accrued interest or payment of premium described
in clause (x) or any such prepayment of principal, payment of accrued
interest or payment of premium described in clause (y) hereof, (A) no
Event of Default shall have occurred and then be continuing, (B) the
-7-
8
Fixed Charge Coverage Ratio of the Borrower, on a consolidated basis
with its consolidated Subsidiaries, for the most recently ended period
of twelve consecutive fiscal months, shall be greater than 1.00 to
1.00, (C) the Agent shall have received, in accordance with Section
8.01(c), the Borrower's consolidated and consolidating financial
statements for the most recently ended fiscal month, (D) after giving
effect to such proposed prepayment, the Borrower's Availability, on a
pro forma basis, shall be not less than $10,400,000, (E) with respect
to any Fiscal Year in which such payment is proposed to be made, the
net shipments, expressed in dollars, for the prior Fiscal Year
(commencing with the Fiscal Year ending in June 2001) made by the
Borrower's domestic bicycle division shall be not less than
$103,839,000 and (F) the Agent shall have received a certificate, duly
executed by an Authorized Officer, setting forth in reasonable detail
the calculation of (1) the consolidated Fixed Charge Coverage Ratio
required pursuant to clause (B) hereof, (2) the minimum pro forma
Availability required pursuant to clause (D) hereof and (3) the amount
of the net shipments required pursuant to clause (E) hereof."
(g) SECTION 9.09 NET WORTH Section 9.09 is deleted in its entirety and
the following is substituted in lieu thereof:
"SECTION 9.09. NET WORTH. THE BORROWER SHALL MAINTAIN AT ALL TIMES
DURING AND AS OF THE END OF EACH FISCAL MONTH SET FORTH IN SUBSECTIONS
(a) THROUGH (m) BELOW, AND DURING AND AS OF THE END OF EACH FISCAL
QUARTER SET FORTH IN SUBSECTIONS (n) THROUGH (v) BELOW, A NET WORTH OF
NOT LESS THAN THE AMOUNT SET FORTH BELOW OPPOSITE SUCH FISCAL MONTH OR
FISCAL QUARTER. FOR PURPOSES OF CALCULATING THE BORROWER'S COMPLIANCE
WITH THIS COVENANT, NET WORTH SHALL NOT BE REDUCED BY (i) NON-CASH
WRITE OFFS OF FEES AND EXPENSES INCURRED IN CONNECTION WITH THE
PREPAYMENT OF ALL OR ANY PORTION OF THE PRINCIPAL OF THE TERM LOAN OR
THE MEZZANINE DEBT, (ii) NON-CASH WRITE OFFS OF DEFERRED TAXES, OR
(iii) THE UNPAID PRINCIPAL BALANCE OF, AND ALL ACCRUED AND UNPAID
INTEREST ON, THE XXXXXXXXXX DEBT:
FISCAL MONTH OR FISCAL QUARTER MINIMUM NET WORTH
(a) JUNE 2000 $ 27,400,000
(b) JULY 2000 25,200,000
(c) AUGUST 2000 23,465,000
-8-
9
(d) SEPTEMBER 2000 23,900,000
(e) OCTOBER 2000 24,125,000
(f) NOVEMBER 2000 24,135,000
(g) DECEMBER 2000 25,250,000
(h) JANUARY 2001 25,230,000
(i) FEBRUARY 2001 25,425,000
(j) MARCH 2001 37,700,000
(k) APRIL 2001 37,140,000
(l) MAY 2001 36,785,000
(m) JUNE 2001 37,110,000
(n) FISCAL QUARTER ENDING IN 36,795,000
SEPTEMBER 2001
(o) FISCAL QUARTER ENDING IN 36,840,000
DECEMBER 2001
(p) FISCAL QUARTER ENDING IN MARCH 37,330,000
2002
(q) FISCAL QUARTER ENDING IN JUNE 38,925,000
2002
(r) FISCAL QUARTER ENDING IN 40,060,000
SEPTEMBER 2002
(s) FISCAL QUARTER ENDING IN 41,430,000
DECEMBER 2002
(t) FISCAL QUARTER ENDING IN MARCH 42,900,000
2003
(u) FISCAL QUARTER ENDING IN JUNE 45,930,000
2003
(v) FISCAL QUARTER ENDING IN
SEPTEMBER 2003, AND EACH FISCAL
QUARTER THEREAFTER, A NET WORTH
IN AN AMOUNT EQUAL TO $45,930,000
PLUS FIFTY PER CENT (50%) OF NET
-9-
10
INCOME FOR EACH FISCAL QUARTER
(TO THE EXTENT NET INCOME FOR
SUCH FISCAL QUARTER IS POSITIVE),
COMMENCING WITH THE FISCAL
QUARTER ENDING IN JUNE 2003."
(h) SECTION 9.10. FIXED CHARGE COVERAGE RATIO. Section 9.10 is deleted
in its entirety, and the following is substituted in lieu thereof:
"SECTION 9.10. FIXED CHARGE COVERAGE RATIO. THE BORROWER SHALL HAVE A
FIXED CHARGE COVERAGE RATIO, AS OF THE END OF EACH PERIOD OF TWELVE
CONSECUTIVE FISCAL MONTHS ENDING ON THE LAST DAY OF THE FISCAL MONTH
SET FORTH BELOW, OF NOT LESS THAN THE RATIO SET FORTH BELOW OPPOSITE
SUCH MONTH:
TWELVE FISCAL MONTHS MINIMUM FIXED
ENDING CHARGE COVERAGE RATIO
(a) JULY 2000 .20 TO 1.00
(b) AUGUST 2000 .20 TO 1.00
(c) SEPTEMBER 2000 .35 TO 1.00
(d) OCTOBER 2000 .35 TO 1.00
(e) NOVEMBER 2000 .35 TO 1.00
(f) DECEMBER 2000 .15 TO 1.00
(g) JANUARY 2001 .10 TO 1.00
(h) FEBRUARY 2001 .08 TO 1.00
(i) MARCH 2001 .09 TO 1.00
(j) APRIL 2001 .08 TO 1.00
(k) MAY 2001 .09 TO 1.00
(l) JUNE, JULY AND AUGUST 2001 .01 TO 1.00
SEPTEMBER, OCTOBER
-10-
11
(m) NOVEMBER 2001 .01 TO 1.00
(n) DECEMBER 2001 AND JANUARY .15 TO 1.00
AND FEBRUARY 2002
(o) MARCH, APRIL AND MAY 2002 .45 TO 1.00
(p) JUNE, JULY AND AUGUST 2002 .75 TO 1.00
(q) SEPTEMBER, OCTOBER AND .92 TO 1.00
NOVEMBER 2002
(r) DECEMBER 2002 AND JANUARY 1.00 TO 1.00
AND FEBRUARY 2003
(s) MARCH, APRIL AND MAY 2003 1.00 TO 1.00
(t) JUNE 2003, AND EACH FISCAL 1.02 TO 1.00
MONTH THEREAFTER,
IN EACH CASE TOGETHER WITH
THE 11 PRECEDING
FISCAL MONTHS"
(i) SECTION 9.11 CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Section 9.11
is deleted in its entirety, and the following is substituted in lieu thereof:
"SECTION 9.11. CONSOLIDATED FIXED CHARGE COVERAGE RATIO. THE BORROWER
SHALL HAVE, ON A CONSOLIDATED BASIS WITH ITS CONSOLIDATED SUBSIDIARIES,
A FIXED CHARGE COVERAGE RATIO, AS OF THE END OF EACH PERIOD OF TWELVE
CONSECUTIVE FISCAL MONTHS ENDING ON THE LAST DAY OF THE FISCAL MONTH
SET FORTH BELOW, OF NOT LESS THAN THE RATIO SET FORTH BELOW OPPOSITE
SUCH PERIOD:
TWELVE FISCAL MONTHS ENDING MINIMUM CONSOLIDATED
FIXED CHARGE
COVERAGE RATIO
(a) JUNE 2000 .60 TO 1.00
(b) JULY 2000 .60 TO 1.00
-11-
12
(c) AUGUST 2000 .60 TO 1.00
(d) SEPTEMBER 2000 .65 TO 1.00
(e) OCTOBER 2000 .65 TO 1.00
(f) NOVEMBER 2000 .65 TO 1.00
(g) DECEMBER 2000 .40 TO 1.00
(h) JANUARY 2001 .35 TO 1.00
(i) FEBRUARY 2001 .30 TO 1.00
(j) MARCH 2001 .22 TO 1.00
(k) APRIL 2001 .20 TO 1.00
(l) MAY 2001 .19 TO 1.00
(m) JUNE, JULY AND AUGUST 2001 .13 TO 1.00
(n) SEPTEMBER, OCTOBER AND NOVEMBER 2001 .20 TO 1.00
(o) DECEMBER 2001 AND JANUARY AND FEBRUARY 2002 .30 TO 1.00
(p) MARCH, APRIL AND MAY 2002 .59 TO 1.00
(q) JUNE, JULY AND AUGUST 2002 .82 TO 1.00
(r) SEPTEMBER, OCTOBER AND NOVEMBER 2002 .95 TO 1.00
(s) DECEMBER 2002, AND EACH FISCAL MONTH 1.00 TO 1.00
THEREAFTER, IN EACH CASE TOGETHER WITH THE
11 PRECEDING FISCAL MONTHS"
(j) SECTION 9.12 EBITDA Section 9.12 is deleted in its entirety and the
following is substituted in lieu thereof:
"SECTION 9.12. EBITDA. THE BORROWER SHALL HAVE EBITDA, AS OF THE END OF
EACH PERIOD OF FOUR CONSECUTIVE FISCAL QUARTERS SET FORTH BELOW, OF NOT
LESS THAN THE AMOUNT SET FORTH BELOW OPPOSITE SUCH PERIOD:
-12-
13
FOUR FISCAL QUARTERS ENDING IN MINIMUM EBITDA
(a) SEPTEMBER 2000 $ 4,750,000
(b) DECEMBER 2000 2,000,000
(c) MARCH 2001 1,200,000
(d) JUNE 2001 100,000
(e) SEPTEMBER 2001 200,000
(f) DECEMBER 2001 2,200,000
(g) MARCH 2002 7,000,000
(h) JUNE 2002 12,000,000
(i) SEPTEMBER 2002 14,500,000
(j) DECEMBER 2002 15,500,000
(k) MARCH 2003 15,500,000
(l) JUNE, 2003, AND EACH FISCAL QUARTER 16,000,000
THEREAFTER, IN EACH CASE TOGETHER WITH THE
THREE PRECEDING FISCAL QUARTERS"
(k) SECTION 9.13 ADJUSTED EBITDA Section 9.13 is deleted in its
entirety, and the following is substituted in lieu thereof:
"SECTION 9.13 Adjusted EBITDA. The Borrower shall have Adjusted EBITDA,
as of the end of each period of four consecutive Fiscal Quarters set
forth below, of not less than the amount set forth below opposite such
period:
FOUR FISCAL QUARTERS ENDING IN MINIMUM ADJUSTED EBITDA
(a) SEPTEMBER 2000 $ 11,580,000
(b) DECEMBER 2000 10,000,000
(c) MARCH 2001 10,585,000
(d) JUNE 2001 9,830,000
(e) SEPTEMBER 2001 8,000,000
-13-
14
(f) DECEMBER 2001 5,500,000
(g) MARCH 2002 4,000,000
(h) JUNE 2002 3,700,000
(i) SEPTEMBER 2002 4,000,000
(j) DECEMBER 2002 4,200,000
(k) MARCH 2003 4,200,000
(l) JUNE 2003,AND EACH FISCAL QUARTER 4,500,000
THEREAFTER, IN EACH CASE TOGETHER WITH
THE THREE PRECEDING FISCAL QUARTERS"
(l) SECTION 9.14 SENIOR LEVERAGE RATIO Section 9.14 is deleted in its
entirety, and the following is substituted in lieu thereof:
"SECTION 9.14 SENIOR LEVERAGE RATIO. THE BORROWER SHALL HAVE A SENIOR
LEVERAGE RATIO, AS OF THE END OF EACH PERIOD OF FOUR CONSECUTIVE FISCAL
QUARTERS SET FORTH BELOW, OF NOT GREATER THAN THE RATIO SET FORTH BELOW
OPPOSITE SUCH PERIOD:
MAXIMUM SENIOR
FOUR FISCAL QUARTERS ENDING IN LEVERAGE RATIO
(a) SEPTEMBER 2000 12.50 TO 1.00
(b) DECEMBER 2000 19.00 TO 1.00
(c) MARCH 2001 34.60 TO 1.00
(d) JUNE 2001 471.63 TO 1.00
(e) SEPTEMBER 2001 511.94 TO 1.00
(f) DECEMBER 2001 20.00 TO 1.00
(g) MARCH 2002 6.00 TO 1.00
(h) JUNE 2002 3.20 TO 1.00
(i) SEPTEMBER 2002 2.90 TO 1.00
(j) DECEMBER 2002 2.60 TO 1.00
(k) MARCH 2003 2.15 TO 1.00
-14-
15
(l) JUNE 2003,AND EACH FISCAL QUARTER 1.80 TO 1.00
THEREAFTER, IN EACH CASE TOGETHER WITH THE
THREE PRECEDING FISCAL QUARTERS"
(m) SECTION 9.15 AVAILABILITY SECTION 9.15 IS DELETED IN ITS ENTIRETY,
IS RE-CAPTIONED "COLLATERAL MANAGEMENT FEE AND AVAILABILITY" AND THE FOLLOWING
IS SUBSTITUTED IN LIEU THEREOF:
"SECTION 9.15 COLLATERAL MANAGEMENT FEE AND AVAILABILITY. THE BORROWER
SHALL PAY TO THE AGENT, FOR THE RATABLE BENEFIT OF THE LENDERS, IN
CASH, ON APRIL 30, 2001, AND ON THE FIRST BUSINESS DAY OF EACH OF JULY
AND OCTOBER, 2001, AND JANUARY, APRIL AND JULY 2002, A NON-REFUNDABLE
COLLATERAL MANAGEMENT FEE OF $50,000, WHICH FEE SHALL BE DUE AND
PAYABLE, AND DEEMED TO BE FULLY EARNED, ON EACH SUCH DATE. IN ADDITION,
WITH RESPECT TO EACH CALENDAR MONTH PRIOR TO THE FIRST BUSINESS DAY
FOLLOWING THE SUNDAY CLOSEST TO JULY 1, 2002, THE BORROWER'S AVERAGE
AVAILABILITY FOR THE 30 OR 31 DAY PERIOD (OR 28 DAY PERIOD, IN THE CASE
OF THE MONTH OF FEBRUARY) ENDING AT THE END OF EACH SUCH MONTH SHALL
NOT BE LESS THAN $1,500,000. BEGINNING WITH THE FIRST BUSINESS DAY
FOLLOWING THE SUNDAY CLOSEST TO JULY 1, 2002, THROUGH THE END OF THE
FISCAL YEAR BEGINNING ON SUCH SUNDAY, THE BORROWER'S AVAILABILITY AT
THE END OF EACH DAY DURING SUCH FISCAL YEAR SHALL NOT BE LESS THAN
$1,500,000. BEGINNING WITH THE FIRST BUSINESS DAY FOLLOWING THE SUNDAY
CLOSEST TO JULY 1, 2003, AND AT ALL TIMES THEREAFTER, THE BORROWER'S
AVAILABILITY AT THE END OF EACH DAY SHALL NOT BE LESS THAN $2,000,000."
(n) SECTION 10.09 ADMINISTRATIVE MANAGEMENT FEE SECTION 10.09 IS
AMENDED BY DELETING THE NUMBER "35,000" CONTAINED THEREIN AND SUBSTITUTING IN
LIEU THEREOF THE NUMBER "50,000", AND IS FURTHER AMENDED BY ADDING THE FOLLOWING
PROVISO AT THE END THEREOF:
"PROVIDED, HOWEVER, THAT THE ADMINISTRATIVE MANAGEMENT FEE PAYABLE FOR
THE PERIOD FROM THE CLOSING DATE THROUGH THE FIRST ANNIVERSARY THEREOF
SHALL BE PAID IN TWO INSTALLMENTS; THE FIRST INSTALLMENT OF $35,000
SHALL BE FULLY EARNED, DUE AND PAYABLE ON THE CLOSING DATE, AND THE
SECOND INSTALLMENT OF $15,000 SHALL BE DUE AND PAYABLE ON APRIL 30,
2001, UPON THE EXECUTION OF THE FIRST AMENDMENT."
-15-
16
(o) ANNEX II LIEN PERFECTION INFORMATION. ANNEX II TO THE FINANCING
AGREEMENT IS DELETED IN ITS ENTIRETY, AND ANNEX II TO THIS AMENDMENT IS
SUBSTITUTED IN LIEU THEREOF.
SECTION TWO. WAIVER. EFFECTIVE AS OF THE DATE HEREOF, UPON THE
SATISFACTION OF THE CONDITIONS PRECEDENT SET FORTH IN SECTION FOUR HEREOF, THE
LENDERS HEREBY WAIVE AS SEPARATE EVENTS OF DEFAULT (i) EACH EVENT OF DEFAULT SET
FORTH ON SCHEDULE A HERETO AND (ii) THE OCCURRENCE AND CONTINUANCE AS OF THE
DATE OF THIS AMENDMENT OF AN "EVENT OF DEFAULT" UNDER, AND AS DEFINED IN, THE
MEZZANINE FINANCING AGREEMENT, PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO BE A WAIVER OF ANY OTHER EVENT OF DEFAULT, WHETHER OR NOT THE
LENDERS HAVE ANY KNOWLEDGE THEREOF, NOR SHALL ANYTHING CONTAINED HEREIN BE
DEEMED TO BE A WAIVER OF ANY FUTURE EVENT OF DEFAULT WHATSOEVER.
SECTION THREE. REPRESENTATIONS AND WARRANTIES. TO INDUCE THE AGENT AND
THE LENDERS TO ENTER INTO THIS AMENDMENT, THE BORROWER WARRANTS AND REPRESENTS
TO THE AGENT AND THE LENDERS AS FOLLOWS:
(a) ALL OF THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THE
FINANCING AGREEMENT AND EACH OTHER LOAN DOCUMENT TO WHICH THE BORROWER IS A
PARTY CONTINUE TO BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS AS OF THE DATE
HEREOF, AS IF REPEATED AS OF THE DATE HEREOF, EXCEPT FOR SUCH REPRESENTATIONS
AND WARRANTIES WHICH, BY THEIR TERMS, ARE ONLY MADE AS OF A PREVIOUS DATE;
(b) THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS AMENDMENT BY THE
BORROWER IS WITHIN ITS CORPORATE POWERS, HAS BEEN DULY AUTHORIZED BY ALL
NECESSARY CORPORATE ACTION, AND THE BORROWER HAS RECEIVED ALL NECESSARY CONSENTS
AND APPROVALS (IF ANY SHALL BE REQUIRED) FOR THE EXECUTION AND DELIVERY OF THIS
AMENDMENT;
(c) UPON ITS EXECUTION, THIS AMENDMENT SHALL CONSTITUTE THE LEGAL,
VALID AND BINDING OBLIGATION OF THE BORROWER, ENFORCEABLE AGAINST THE BORROWER
IN ACCORDANCE WITH ITS TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY
(i) BANKRUPTCY, INSOLVENCY OR SIMILAR LAWS AFFECTING CREDITORS' RIGHTS GENERALLY
AND (ii) GENERAL PRINCIPLES OF EQUITY;
(d) THE BORROWER IS NOT IN DEFAULT UNDER ANY INDENTURE, MORTGAGE, DEED
OF TRUST, OR OTHER MATERIAL AGREEMENT (OTHER THAN THE MEZZANINE FINANCING
AGREEMENT) OR MATERIAL INSTRUMENT TO WHICH IT IS A PARTY OR BY WHICH IT MAY BE
BOUND. NEITHER THE EXECUTION AND DELIVERY OF THIS AMENDMENT, NOR THE
CONSUMMATION OF THE TRANSACTIONS HEREIN CONTEMPLATED, NOR COMPLIANCE WITH THE
PROVISIONS HEREOF WILL (i) VIOLATE ANY LAW OR REGULATION APPLICABLE TO IT, (ii)
CAUSE A VIOLATION BY THE BORROWER OF ANY ORDER OR DECREE OF ANY COURT OR
GOVERNMENT INSTRUMENTALITY APPLICABLE TO IT, (iii) CONFLICT WITH, OR RESULT IN
THE BREACH OF, OR CONSTITUTE A DEFAULT UNDER, ANY INDENTURE, MORTGAGE, DEED OF
TRUST, OR OTHER MATERIAL AGREEMENT OR MATERIAL INSTRUMENT TO WHICH THE BORROWER
IS A PARTY OR BY WHICH IT MAY BE BOUND, (iv) RESULT IN THE CREATION OR
IMPOSITION OF ANY LIEN, CHARGE, OR ENCUMBRANCE UPON ANY
-16-
17
OF THE PROPERTY OF THE BORROWER, EXCEPT IN FAVOR OF THE AGENT, TO SECURE THE
OBLIGATIONS, OR (v) VIOLATE ANY PROVISION OF THE CERTIFICATE OF INCORPORATION,
BY-LAWS OR ANY CAPITAL STOCK PROVISIONS OF THE BORROWER;
(e) NO EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, EXCEPT FOR
THOSE EVENTS OF DEFAULT WHICH HAVE BEEN WAIVED PURSUANT TO SECTION TWO HEREOF;
AND
(f) SINCE THE DATE OF THE RECEIPT BY THE AGENT AND THE LENDERS OF THE
FINANCIAL STATEMENTS OF THE BORROWER AND ITS CONSOLIDATED SUBSIDIARIES FOR THE
FIVE-MONTH PERIOD ENDED IN FEBRUARY, 2001, NO CHANGE OR EVENT HAS OCCURRED WHICH
HAS HAD OR IS REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT.
SECTION FOUR. CONDITIONS PRECEDENT. THIS AMENDMENT SHALL BECOME
EFFECTIVE UPON THE DATE THAT THE LAST OF THE FOLLOWING EVENTS SHALL HAVE
OCCURRED:
(a) THE BORROWER SHALL HAVE RECEIVED THE PROCEEDS OF A CASH INFUSION IN
AN AGGREGATE AMOUNT OF NOT LESS THAN $7,000,000 (THE "CASH INFUSION"), WHICH
SHALL CONSIST OF (i) AN INFUSION OF NO MORE THAN $3,000,000 IN THE FORM OF CASH
FROM ONE OR MORE FOREIGN SUBSIDIARIES IN THE FORM OF REPAYMENT OF INTERCOMPANY
INDEBTEDNESS OWING TO THE BORROWER BY ANY ONE OR MORE OF SUCH FOREIGN
SUBSIDIARIES, NET OF ANY TAX CONSEQUENCES OR RIGHTS OF SET-OFF (THE
"INTERCOMPANY PAYMENT"), (ii) AN INFUSION OF $2,000,000 FROM XXXXXX XXXXXXXXXX,
WHICH MAY BE IN THE FORM OF EITHER EQUITY OR UNSECURED SUBORDINATED
INDEBTEDNESS, WHICH MAY BE CONVERTIBLE INTO THE COMMON STOCK OF THE BORROWER
(THE "XXXXXXXXXX INFUSION") AND (iii) AN INFUSION OF $2,000,000 FROM AN
INVESTOR, WHICH IS NOT AN AFFILIATE OF THE BORROWER, WHICH MAY BE IN THE FORM OF
EITHER EQUITY OR UNSECURED SUBORDINATED INDEBTEDNESS, WHICH MAY BE CONVERTIBLE
INTO THE COMMON STOCK OF THE BORROWER (THE "INSTITUTIONAL INFUSION"; THE
XXXXXXXXXX INFUSION AND THE INSTITUTIONAL INFUSION SHALL BE REFERRED TO
COLLECTIVELY AS THE "2001 SUBORDINATED DEBT").
(b) (i) THE AGENT, THE LENDERS AND THEIR COUNSEL SHALL HAVE RECEIVED
AND REVIEWED TO THEIR REASONABLE SATISFACTION (x) ALL OF THE TERMS AND
CONDITIONS OF THE XXXXXXXXXX INFUSION, INCLUDING WITHOUT LIMITATION, COVENANTS,
EVENTS OF DEFAULT AND TERMS OF SUBORDINATION PERTAINING TO THE XXXXXXXXXX
INFUSION, AND (y) THE INSTRUMENTS THAT EVIDENCE THE XXXXXXXXXX INFUSION, AND THE
AGREEMENTS AND DOCUMENTS PURSUANT TO WHICH THE XXXXXXXXXX INFUSION OR SUCH
INSTRUMENTS, AS THE CASE MAY BE, WILL BE ISSUED OR WILL BE GOVERNED. THE AGENT,
ON BEHALF OF THE LENDERS, AND XXXXXX XXXXXXXXXX SHALL HAVE ENTERED INTO A
SUBORDINATION AGREEMENT SUBSTANTIALLY IN THE FORM OF EXHIBIT A ATTACHED HERETO.
(ii) THE PRINCIPAL OF THE XXXXXXXXXX INFUSION SHALL BE PAYABLE IN A
SINGLE INSTALLMENT WHICH, BY ITS TERMS, MAY ONLY BE PAYABLE ON THE EARLIER TO
OCCUR OF (x) THE DATE FOLLOWING THE DATE ON WHICH THE OBLIGATIONS ARE PAID AND
SATISFIED IN FULL IN CASH AND (y) THE DATE ON WHICH ALL OF THE EVENTS SPECIFIED
IN CLAUSES (A), (B), (C), (D), (E) AND (F) TO THE
-17-
18
PROVISO CONTAINED IN SECTION 9.03(e) OF THE FINANCING AGREEMENT SHALL HAVE
OCCURRED. INTEREST ON THE XXXXXXXXXX INFUSION MAY BE PAID IN CASH, ON THE FIRST
DAY OF EACH CALENDAR QUARTER IN ARREARS FOR THE PREVIOUS CALENDAR QUARTER AND
UPON THE FULL CONVERSION OF THE ENTIRE UNPAID PRINCIPAL BALANCE THEREOF INTO
EQUITY IN ACCORDANCE WITH THE TERMS THEREOF, SO LONG AS (x) THE FIXED CHARGE
COVERAGE RATIO OF THE BORROWER, ON A CONSOLIDATED BASIS WITH ITS CONSOLIDATED
SUBSIDIARIES, FOR THE MOST RECENTLY ENDED PERIOD OF TWELVE CONSECUTIVE FISCAL
MONTHS, SHALL BE GREATER THAN 1.00 TO 1.00, (y) THE AGENT SHALL HAVE RECEIVED A
CERTIFICATE, DULY EXECUTED BY AN AUTHORIZED OFFICER, SETTING FORTH IN REASONABLE
DETAIL THE CALCULATION OF SUCH FIXED CHARGE COVERAGE RATIO AND (z) NO EVENT OF
DEFAULT SHALL HAVE OCCURRED AND THEN BE CONTINUING. PREPAYMENTS OF PRINCIPAL OF
AND PAYMENTS OF ACCRUED INTEREST ON THE XXXXXXXXXX INFUSION MAY BE MADE SOLELY
IN ACCORDANCE WITH THE TERMS OF SECTION 9.03(e) OF THE FINANCING AGREEMENT.
(c) (i) THE IDENTITY OF THE HOLDERS OF THE INSTITUTIONAL INFUSION SHALL
BE ACCEPTABLE TO THE LENDERS, IN THEIR COMMERCIALLY REASONABLE JUDGMENT, AND THE
AGENT, THE LENDERS AND THEIR COUNSEL SHALL HAVE RECEIVED AND REVIEWED TO THEIR
REASONABLE SATISFACTION (i) ALL OF THE TERMS AND CONDITIONS OF THE INSTITUTIONAL
INFUSION, INCLUDING WITHOUT LIMITATION THE PRINCIPAL AMOUNT, RATE OF INTEREST,
COVENANTS, EVENTS OF DEFAULT AND TERMS OF SUBORDINATION PERTAINING THERETO, AND
(ii) THE INSTRUMENTS THAT EVIDENCE THE INSTITUTIONAL INFUSION, AND THE
AGREEMENTS AND DOCUMENTS PURSUANT TO WHICH THE INSTITUTIONAL INFUSION, OR SUCH
INSTRUMENTS, AS THE CASE MAY BE, WILL BE ISSUED OR WILL BE GOVERNED. THE AGENT,
ON BEHALF OF THE LENDERS, AND THE HOLDERS OF THE INSTITUTIONAL INFUSION SHALL
HAVE ENTERED INTO A SUBORDINATION AGREEMENT SUBSTANTIALLY IN THE FORM OF EXHIBIT
B ATTACHED HERETO.
(ii) THE DOCUMENTS GOVERNING THE INSTITUTIONAL INFUSION (x) MAY PROVIDE
FOR THE CURRENT PAYMENT OF INTEREST, (y) MAY NOT ALLOW FOR THE SCHEDULED
REPAYMENT OF THE PRINCIPAL THEREOF IN WHOLE OR IN PART PRIOR TO THE DAY ONE
BUSINESS DAY AFTER THE MATURITY DATE OF THE MEZZANINE DEBT AND (z) MAY ALLOW FOR
PREPAYMENTS OF THE PRINCIPAL THEREOF SOLELY IN ACCORDANCE WITH THE TERMS OF
SECTION 9.03(e) OF THE FINANCING AGREEMENT.
(d) THE AGENT AND THE LENDERS SHALL HAVE RECEIVED AND REVIEWED TO THEIR
REASONABLE SATISFACTION (i) A FIELD EXAMINATION, PERFORMED AS OF A RECENT DATE
BY THE MEMBERS OF THE AGENT'S FIELD EXAMINATION STAFF, OF THE BORROWER'S BOOKS,
RECORDS AND COLLATERAL, (ii) A UCC SEARCH, PERFORMED AS OF A RECENT DATE AT THE
BORROWER'S EXPENSE, WITH RESPECT TO ALL OF THE LOCATIONS AT WHICH THE BORROWER'S
BOOKS AND RECORDS, AND ANY ASSETS OR PROPERTIES OWNED OR LEASED BY THE BORROWER,
ARE LOCATED, STORED OR MAINTAINED, AND (iii) AN UPDATED ANNEX II TO THE
FINANCING AGREEMENT, COMPLETED BY THE BORROWER;
(e) THE AGENT AND THE LENDERS SHALL HAVE RECEIVED AND REVIEWED TO THEIR
REASONABLE SATISFACTION (i) A CURRENT AGING OF THE BORROWER'S TRADE PAYABLES, NO
MATERIAL PORTION OF WHICH MAY BE PAST DUE BEYOND THE BORROWER'S HISTORIC PAYMENT
PRACTICES, (ii)
-18-
19
INTERNALLY PREPARED FINANCIAL STATEMENTS OF THE BORROWER AND ITS
CONSOLIDATED SUBSIDIARIES FOR THE SIX MONTH PERIOD ENDED IN DECEMBER 2000 AND
(iii) A PRO FORMA BALANCE SHEET OF THE BORROWER, PREPARED BY ITS CHIEF FINANCIAL
OFFICER, REFLECTING THE BORROWER'S RECEIPT, AND THE ACCOUNTING TREATMENT, OF THE
CASH INFUSION;
(f) EACH OF THE LENDERS SHALL HAVE OBTAINED THE APPROVAL BY ITS
EXECUTIVE CREDIT COMMITTEE OF THE TRANSACTIONS CONTEMPLATED TO OCCUR HEREUNDER;
(g) THE AGENT, THE LENDERS AND THEIR COUNSEL SHALL HAVE RECEIVED AND
REVIEWED A FINAL DRAFT OF (i) AN AMENDMENT TO THE MEZZANINE FINANCING AGREEMENT
CONTAINING FINANCIAL COVENANT MODIFICATIONS THAT ARE CONSISTENT WITH THE
MODIFICATIONS CONTAINED IN THIS AMENDMENT AND (ii) A WAIVER OF ALL EVENTS OF
DEFAULT THAT HAVE OCCURRED AND ARE CONTINUING THEREUNDER, EACH OF WHICH DRAFTS
SHALL CONTAIN SUCH TERMS AND CONDITIONS (INCLUDING CONDITIONS TO ITS
EFFECTIVENESS) AS SHALL BE REASONABLY SATISFACTORY TO THE AGENT, THE LENDERS AND
THEIR COUNSEL;
(h) THE LENDERS SHALL HAVE RECEIVED THIS AMENDMENT, DULY EXECUTED BY
THE BORROWER;
(i) EXCEPT FOR THOSE EVENTS OF DEFAULT WHICH HAVE BEEN WAIVED PURSUANT
TO SECTION TWO HEREOF, NO DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING WHICH
CONSTITUTES AN EVENT OF DEFAULT OR WOULD CONSTITUTE AN EVENT OF DEFAULT UPON THE
GIVING OF NOTICE OR LAPSE OF TIME OR BOTH, AND NO EVENT OR DEVELOPMENT WHICH HAS
HAD OR IS REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT SHALL HAVE
OCCURRED, IN EACH CASE SINCE THE DATE OF DELIVERY TO THE LENDERS OF THE
BORROWER'S MOST RECENT FINANCIAL STATEMENTS;
(j) THE LENDERS SHALL HAVE RECEIVED (i) AN OFFICER'S CERTIFICATE,
EXECUTED BY THE CHIEF FINANCIAL OFFICER OR CHIEF EXECUTIVE OFFICER OF THE
BORROWER, CONFIRMING THE TRUTH AND ACCURACY OF THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN SECTION THREE HEREOF AND CONTAINED IN SECTION FOUR (j)
HEREOF, AND (ii) A SECRETARY'S CERTIFICATE, EXECUTED BY THE CORPORATE SECRETARY
OF THE BORROWER, CERTIFYING THAT THE BORROWER'S BOARD OF DIRECTORS SHALL HAVE
MET AND CONSIDERED THE TRANSACTIONS CONTEMPLATED TO OCCUR UNDER THIS AMENDMENT,
AND SHALL HAVE APPROVED THE SAME; AND
(k) COUNSEL TO THE AGENT AND THE LENDERS SHALL HAVE RECEIVED PAYMENT OF
ALL FEES AND DISBURSEMENTS INCURRED IN CONNECTION WITH THE PREPARATION,
NEGOTIATION AND CLOSING OF THIS AMENDMENT AND THE TRANSACTIONS CONTEMPLATED TO
OCCUR HEREUNDER.
SECTION FIVE. GENERAL PROVISIONS.
(a) EXCEPT AS HEREIN EXPRESSLY AMENDED, THE FINANCING AGREEMENT AND ALL
OTHER AGREEMENTS, DOCUMENTS, INSTRUMENTS AND CERTIFICATES EXECUTED IN CONNECTION
THEREWITH,
-19-
20
ARE RATIFIED AND CONFIRMED IN ALL RESPECTS AND SHALL REMAIN IN FULL FORCE AND
EFFECT IN ACCORDANCE WITH THEIR RESPECTIVE TERMS.
(b) ALL REFERENCES TO THE FINANCING AGREEMENT IN THE FINANCING
AGREEMENT SHALL MEAN THE FINANCING AGREEMENT AS AMENDED AS OF THE EFFECTIVE DATE
HEREOF, AND AS AMENDED HEREBY AND AS HEREAFTER AMENDED, SUPPLEMENTED AND
MODIFIED FROM TIME TO TIME.
(c) IN CONSIDERATION OF THE WILLINGNESS OF THE LENDERS TO ENTER INTO
THIS AMENDMENT AND TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED TO OCCUR
HEREUNDER, AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, THE BORROWER IRREVOCABLY AGREES TO
PAY IN CASH TO THE AGENT, FOR THE RATABLE BENEFIT OF THE LENDERS, A
NON-REFUNDABLE ACCOMMODATION FEE IN THE AMOUNT OF $125,000, WHICH SHALL BE
DEEMED TO BE FULLY EARNED ON THE DATE OF THIS AMENDMENT, BUT SHALL BE PAYABLE IN
THREE INSTALLMENTS ON THE FOLLOWING DATES AND IN THE FOLLOWING AMOUNTS (i) JUNE
1, 2001 - $41,000, (ii) JULY 2, 2001 - $41,000 AND (iii) AUGUST 1 - $43,000.
(d) THE BORROWER SHALL PAY TO THE AGENT, ON THE DATE HEREOF, FOR THE
AGENT'S OWN ACCOUNT, $15,000 IN PAYMENT OF THAT PORTION OF THE ADMINISTRATIVE
FEE (WHICH IS BEING INCREASED RETROACTIVELY PURSUANT TO SECTION 1(j) HEREOF) FOR
THE PERIOD FROM THE CLOSING DATE THROUGH THE FIRST ANNIVERSARY THEREOF AND
PAYABLE ON APRIL 30, 2001, UPON THE EXECUTION OF THIS AMENDMENT.
(e) THE BORROWER HEREBY AUTHORIZES THE AGENT TO CHARGE THE BORROWER'S
LOAN ACCOUNT WITH THE AMOUNT OF EACH INSTALLMENT OF THE FEES SET FORTH IN
CLAUSES (c) AND (d) ABOVE AS AND WHEN SUCH FEES AND INSTALLMENTS OF FEES BECOMES
PAYABLE.
(f) PROMPTLY AFTER EXECUTION HEREOF, THE BORROWER SHALL DELIVER TO THE
AGENT SUCH UCC FINANCING STATEMENTS AS THE AGENT SHALL, IN ITS DISCRETION,
REQUIRE WITH RESPECT TO THE LOCATIONS SET FORTH IN ANNEX II, AS REVISED HEREBY.
THE BORROWER SHALL USE ITS REASONABLE BEST EFFORTS TO DELIVER TO THE AGENT A
WAREHOUSEMAN'S OR PROCESSOR'S WAIVER SUBSTANTIALLY IN THE FORM OF EXHIBIT E-1 OR
EXHIBIT E-2, AS APPLICABLE, DULY EXECUTED BY THE LESSOR OR OWNER OF EACH
LOCATION SET FORTH IN ANNEX II, AS REVISED HEREBY, WITHIN SIXTY (60) DAYS AFTER
THE DATE HEREOF.
(g) THE BORROWER ACKNOWLEDGES THAT, WITHIN A REASONABLE TIME AFTER THE
DATE HEREOF, THE AGENT AND THE LENDERS WILL CAUSE TO BE PERFORMED (i) A
COMPREHENSIVE INVENTORY APPRAISAL PERFORMED BY AN APPRAISAL FIRM ENGAGED AND
PAID FOR BY THE BORROWER AND ACCEPTABLE TO THE AGENT, WHICH APPRAISAL SHALL
INCLUDE WITHOUT LIMITATION AN EXAMINATION OF THE VALUE, COUNT, AND MIX OF THE
BORROWER'S INVENTORY, AND (ii) THE FIELD STUDY PERFORMED BY AN INDUSTRY
SPECIALIST ENGAGED AND PAID FOR BY THE BORROWER AND ACCEPTABLE TO THE AGENT, OF
THE ALTERATIONS MADE BY THE BORROWER TO ITS MOTORCYCLE PLANT LOCATED IN BEDFORD,
PENNSYLVANIA;
-20-
21
(h) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS
OF LAW PRINCIPALS THEREOF.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-21-
22
IN WITNESS WHEREOF, EACH OF THE BORROWER, THE AGENT AND EACH OF THE
LENDERS HAS SIGNED BELOW TO INDICATE ITS AGREEMENT WITH THE FOREGOING AND ITS
INTENT TO BE BOUND THEREBY.
CANNONDALE CORPORATION
AS BORROWER
BY: /S/ XXXXXXX X. LUCA
------------------------------------
NAME: XXXXXXX X. LUCA
TITLE: VICE PRESIDENT
THE CIT GROUP/BUSINESS CREDIT, INC.,
AS AGENT AND AS A LENDER
BY: /S/ XXXX XXXXXXXXXXXX
------------------------------------
NAME: XXXX XXXXXXXXXXXX
TITLE: V.P. - TEAM LEADER
GMAC COMMERCIAL CREDIT LLC,
AS A LENDER
BY: /S/ XXXXX XXXXXXXX, S.V.P.
----------------------------------------
NAME: XXXXX XXXXXXXX
TITLE: SENIOR VICE PRESIDENT
23
SCHEDULE A
EVENTS OF DEFAULT
1. VIOLATIONS OF SECTION 9.11 OF FINANCING AGREEMENT. THE BORROWER FAILED
TO HAVE, ON A CONSOLIDATED BASIS WITH ITS CONSOLIDATED SUBSIDIARIES, A
FIXED CHARGE COVERAGE RATIO, AS OF THE END OF EACH PERIOD OF TWELVE
CONSECUTIVE FISCAL MONTHS ENDING ON THE LAST SAY OF THE FISCAL MONTH
SET FORTH BELOW, OF NOT LESS THAN THE RATIO SET FORTH BELOW OPPOSITE
SUCH MONTH, IN VIOLATION OF SECTION 9.11 OF THE FINANCING AGREEMENT
(BEFORE GIVING EFFECT TO THIS AMENDMENT):
MINIMUM CONSOLIDATED FIXED CHARGE
TWELVE FISCAL MONTHS ENDING COVERAGE RATIO
--------------------------------- ---------------------------------
(a) DECEMBER 2000 .75 TO 1.00
(b) JANUARY 2001 .75 TO 1.00
(c) FEBRUARY 2001 .75 TO 1.00
(d) MARCH 2001 .90 TO 1.00
2. VIOLATION OF SECTION 9.15 OF FINANCING AGREEMENT. THE BORROWER FAILED
TO MAINTAIN AN AVERAGE AVAILABILITY FOR THE MONTH OF MARCH 2001 OF AT
LEAST $1,500,000, IN VIOLATION OF SECTION 9.15 OF THE FINANCING
AGREEMENT (BEFORE GIVING EFFECT TO THIS AMENDMENT).
SCHEDULE A - 1
24
ANNEX II
LIEN PERFECTION INFORMATION
[TO BE ATTACHED]
