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EXHIBIT 10.5
FIRST AMENDMENT, CONSENT AND WAIVER
TO FINANCING AGREEMENT
FIRST AMENDMENT, CONSENT AND WAIVER, dated as of April 30, 2001 (this
"Amendment, Consent and Waiver"), to the Financing Agreement dated as of June
27, 2000 (the "Financing Agreement"), by and among Cannondale Corporation, a
Delaware corporation (the "Borrower"), the Lenders party thereto (the
"Lenders"), and Ableco Finance LLC, as agent for the Lenders (in such capacity,
the "Agent").
RECITALS
The Borrower, the Lenders and the Agent are parties to the Financing
Agreement, pursuant to which the Lenders made a term loan to the Borrower.
The Borrower has failed to comply with certain of its obligations
under the Financing Agreement and has asked the Lenders to consent to, and waive
any Event of Default that would otherwise result from, such noncompliance. The
Borrower has also asked the Lenders to agree to certain amendments to the
financial covenants and certain other provisions of the Financing Agreement. The
Lenders are willing to agree to the requested consent and waiver, and to the
requested amendments, but only upon the terms and subject to the conditions set
forth herein.
Accordingly, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used herein and not
otherwise defined herein shall have their respective meanings set forth in the
Financing Agreement.
SECTION 2. Consent and Waiver. Upon satisfaction of the conditions
precedent set forth in Section 4 hereof, the Lenders hereby consent to, and
waive any Event of Default that would otherwise arise under Section 10.01(d) of
the Financing Agreement by reason of the noncompliance by the Borrower with each
of the financial covenants of the Financing Agreement as of the Amendment
Effective Date (as defined below) and set forth in Schedule A hereto.
SECTION 3. Amendments.
(a) Section 1.01 Defined Terms. Section 1.01 of the Financing
Agreement is amended by (i) deleting the definition of the term "EBITDA" and
substituting the following definition in lieu thereof and (ii) adding the term
"First Amendment" and the following definition thereof, each in the appropriate
alphabetical order:
EBITDA shall mean, for any period, Net Income for such period plus,
to the extent deducted in determining Net Income for such
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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 Term
Loan (as defined in the Working Capital Loan Agreement), (x) write
offs of deferred taxes, (y) writedowns to the lower of cost or
market of the Borrower's motorcycle division inventory to the extent
required by GAAP ("inventory writedowns"), provided, however, that
the aggregate amount of such inventory writedowns for (A) the Fiscal
Quarter ending in March 2001 may not exceed the lesser of the actual
amount of such inventory writedowns for such Fiscal Quarter and the
sum of $326,000 and (B) the Fiscal Quarter ending in June 2001 may
not exceed the lesser of the actual amount of such inventory
writedowns 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 ▇▇▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇▇▇ Infusion, as applicable, being the date upon which
the amount of any 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 ▇▇▇▇▇▇▇▇▇▇ 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 the First Amendment, Consent and Waiver
dated as of April 30, 2001, executed and delivered by the Borrower,
the Lenders and the Agent with respect to this Financing Agreement.
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(b) Section 3.03 Mandatory Prepayments. Section 3.03(c) of the
Financing Agreement is hereby amended by adding the following proviso at the end
thereof:
,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 6.01 Fiscal Statements, Projections, Borrowing Base
Certificates and Other Information. Section 6.01(d) is amended by (i) deleting
the word "and" after "7.15" and before "(iii)"; and (ii) adding the following
new clause (iv) at the end thereof:
,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.
(d) Article VI Affirmative Covenants. Article VI of the Financing
Agreement is hereby amended by adding a new Section 6.14 as follows:
"Section 6.14. 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 (i) notify the Agent of the address of
such location and the type and value of the Collateral being held at
such location and (ii) 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 waiver or
collateral access agreement from the Person who has possession of
such Collateral, in form and substance reasonably satisfactory to
the Agent.
(e) Section 7.03 Fundamental Changes. Section 7.03 of the Financing
Agreement is hereby amended by adding a new paragraph (f) as follows:
(f) Without the prior written consent of the Agent, the Borrower
will not (i) consent to any amendment or other modification of any
instruments evidencing the 2001 Subordinated Debt (as such term is
defined in the First Amendment) or any
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agreements or other 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) 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 payments of interest accrued thereon and any premium
included in the applicable Redemption Price (as defined in the
document, 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 ▇▇▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇▇▇ Infusion as in effect on the date of the
First Amendment), but only to the extent set forth in the document
evidencing the ▇▇▇▇▇▇▇▇▇▇ Infusion or the agreement pursuant to
which the ▇▇▇▇▇▇▇▇▇▇ 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 and payment of premium as described in clause (y) hereof,
(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
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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
6.01(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 (as defined in the Working Capital Loan Agreement), 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 (as defined in the Working Capital Loan
Agreement) required pursuant to clause (D) hereof and (3) the amount
of the net shipments required pursuant to clause (E) hereof.
(f) Section 7.09 Net Worth. Section 7.09 of the Financing Agreement
is deleted in its entirety and the following is substituted in lieu thereof:
SECTION 7.09. Adjusted 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 Term Loan (as defined in the
Working Capital Loan Agreement), (ii) non-cash write offs of
deferred taxes, or (iii) the unpaid principal balance of, and all
accrued and unpaid interest on, the ▇▇▇▇▇▇▇▇▇▇ Debt:
Fiscal Month or Minimum Net
Fiscal Quarter Worth
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(a) June 2000 $ 27,400,000
(b) July 2000 25,200,000
(c) August 2000 23,465,000
(d) September 2000 23,900,000
(e) October 2000 24,125,000
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(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 36,795,000
in September 2001
(o) Fiscal Quarter ending
in December 2001 36,840,000
(p) Fiscal Quarter ending
in March 2002 37,330,000
(q) Fiscal Quarter ending
in June 2002 38,925,000
(r) Fiscal Quarter ending
in September 2002 40,060,000
(s) Fiscal Quarter ending
in December 2002 41,430,000
(t) Fiscal Quarter ending
in March 2003 42,900,000
(u) Fiscal Quarter ending
in June 2003 45,930,000
(g) Section 7.10. Fixed Charge Coverage Ratio. Section 7.10 of the
Financing Agreement is deleted in its entirety, and the following is substituted
in lieu thereof:
SECTION 7.10. 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 Charge
Ending Coverage Ratio
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(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
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(j) April 2001 .08 to 1.00
(k) May 2001 .09 to 1.00
(l) June, July and August
2001 .01 to 1.00
(m) September, October
and November 2001 .01 to 1.00
(n) December 2001 and
January and February
2002 .15 to 1.00
(o) March, April and May
2002 .45 to 1.00
(p) June, July and August
2002 .75 to 1.00
(q) September, October
and November 2002 .92 to 1.00
(r) December 2002 and
January and February
2003 1.00 to 1.00
(s) March, April and May
2003 1.00 to 1.00
(t) June 2003 1.02 to 1.00
(h) Section 7.11 Consolidated Fixed Charge Coverage Ratio. Section
7.11 of the Financing Agreement is deleted in its entirety, and the following is
substituted in lieu thereof:
SECTION 7.11. 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:
Minimum Consolidated
Twelve Fiscal Fixed Charge Coverage
Months Ending Ratio
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(a) June 2000 .60 to 1.00
(b) July 2000 .60 to 1.00
(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
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(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
thereafter, in each case
together with the 11
preceding fiscal months 1.00 to 1.00
(i) Section 7.12 EBITDA. Section 7.12 of the Financing Agreement is
deleted in its entirety and the following is substituted in lieu thereof:
SECTION 7.12. 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:
Four Fiscal Quarters
Ending In Minimum EBITDA
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(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 16,000,000
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(j) Section 7.13 Adjusted EBITDA. Section 7.13 of the Financing
Agreement is deleted in its entirety, and the following is substituted in lieu
thereof:
SECTION 7.13 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 Minimum Adjusted
Ending In EBITDA
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(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
(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 4,500,000
(k) Section 7.14 Senior Leverage Ratio. Section 7.14 of the
Financing Agreement is deleted in its entirety, and the following is substituted
in lieu thereof:
SECTION 7.14 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:
Four Fiscal Quarters Maximum Senior
Ending In Leverage Ratio
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(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
(l) June 2003 1.80 to 1.00
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(l) Section 7.15 Availability. Section 7.15 of the Financing
Agreement is deleted in its entirety, and the following is substituted in lieu
thereof:
Section 7.15 Availability. 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 (as defined in the Working
Capital Loan Agreement) 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 (as defined in the Working Capital Loan
Agreement) 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 (as defined in the Working
Capital Loan Agreement) at the end of each day shall not be less
than $2,000,000.
(m) Section 8.01 Interest. Section 8.01 of the Financing Agreement
is hereby amended as follows:
(i) With effect as of December 31, 2000, Section 8.01(a)
is deleted in its entirety, and the following is substituted in lieu
thereof:
(a) Loans. The Term Loan shall bear interest on the principal amount
thereof from time to time outstanding, from the date of the Term
Loan until such principal amount becomes due, at a rate per annum
equal to the Base Rate plus 8.5%. Interest on the Term Loan shall be
payable monthly, in arrears, on the first day of each month,
commencing on the first day of the month following the month in
which the Term Loan is made and at maturity (whether upon demand, by
acceleration or otherwise) as follows: the amount of such interest
consisting of interest at the Base Rate plus 3% shall be payable in
cash and the amount of such interest consisting of interest at 5.5%
shall be payable by capitalizing such interest and adding it to the
outstanding principal of the Term Loan; provided, however, that upon
the occurrence and during the continuance of an Event of Default,
the right of the Borrower to so capitalize interest on the Term Loan
shall automatically cease and all interest shall be payable in cash.
Such capitalized interest shall bear interest in accordance with
this paragraph (a) as though such capitalized interest constituted a
part of the Term Loan made by such Lender to the Borrower.
(ii) The last sentence of Section 8.01(b) is deleted in
its entirety, and the following is substituted in lieu thereof:
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Interest at the Default Rate shall be payable on demand in cash.
(n) Annex II Lien Perfection Information. Annex II to the Financing
Agreement is deleted in its entirety, and Annex II attached to this Amendment is
substituted in lieu thereof.
SECTION 4. Conditions. The effectiveness of the waiver set forth in
Section 2, and the amendments set forth in Section 3, of this Amendment, Consent
and Waiver are subject to the fulfillment, in a manner satisfactory to the
Agent, of each of the following conditions (the date such conditions are
fulfilled is referred to herein as the "Amendment Effective Date"):
(a) Payment of Fees, Etc. The Borrower shall have paid to the
Agent for the ratable benefit of the Lenders (i) a non-refundable fee of
$150,000 (the receipt of $50,000 of which is hereby acknowledged by the Agent),
which shall be deemed fully earned when paid, and (ii) all fees, costs, expenses
and taxes payable pursuant to the Financing Agreement on or before the Amendment
Effective Date.
(b) Cash Infusion. 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 Cannondale Europe B.V., a Subsidiary
organized under the laws of the Netherlands, in the form of repayment of
intercompany indebtedness owing by one or more Subsidiaries to the Borrower, net
of any tax consequences or rights of set-off (the "Intercompany Payment"), (ii)
an infusion of $2,000,000 from ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, 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 " ▇▇▇▇▇▇▇▇▇▇ 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", and together with the ▇▇▇▇▇▇▇▇▇▇ Infusion and the
Institutional Infusion, the "2001 Subordinated Debt"). The principal of the
▇▇▇▇▇▇▇▇▇▇ 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 proviso contained in Section 7.03(f) of the Financing Agreement shall
have occurred. Interest on the ▇▇▇▇▇▇▇▇▇▇ 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
Cover 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 and (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 ▇▇▇▇▇▇▇▇▇▇ Infusion may be
made solely in accordance with the terms of Section 7.03(f) of the Financing
Agreement. The identity of the holders of the Institutional Infusion shall be
acceptable to the Lenders, in their commercially reasonably
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judgment. The documents governing the Institutional Infusion (x) may provide for
the current payment of accrued 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, (z) may allow for prepayments of the
principal thereof, solely in accordance with the terms of Section 7.03(f) of the
Financing Agreement and shall have such other terms, conditions and covenants as
are acceptable to the Lenders in their sole discretion.
(c) Satisfactory ▇▇▇▇▇▇▇▇▇▇ Documentation. 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 ▇▇▇▇▇▇▇▇▇▇ Infusion,
including without limitation the covenants, events of default and terms of
subordination pertaining to the ▇▇▇▇▇▇▇▇▇▇ Infusion, and (ii) the instruments
that evidence the ▇▇▇▇▇▇▇▇▇▇ Infusion, and the agreements and documents pursuant
to which the ▇▇▇▇▇▇▇▇▇▇ Infusion or such instruments, as the case may be, will
be issued or will be governed, and the Agent on behalf of the Lenders, and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ shall have entered into a subordination agreement
substantially in the form of Exhibit A attached hereto.
(d) Satisfactory Institutional Documentation. The Agent, the
Lenders and their counsel shall have received and reviewed to their reasonable
satisfaction 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 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 provider of the
Intuitional Infusion shall enter into a subordination agreement with the Agent,
on behalf of the Lenders, substantially in the form of Exhibit B attached
hereto.
(e) Representations and Warranties; No Event of Default. The
representations and warranties contained herein, in Article V of the Financing
Agreement and in each other Loan Document and certificate or other writing
delivered to the Agent pursuant hereto on or prior to the Amendment Effective
Date shall be correct on and as of the Amendment Effective Date as though made
on and as of such date, except to the extent that such representations and
warranties (or any schedules related thereto) expressly relate solely to an
earlier date (in which case such representations and warranties shall be true
and correct on and as of such date); no Default or Event of Default shall have
occurred and be continuing on the Amendment Effective Date or would result from
this Amendment, Consent and Waiver becoming effective in accordance with its
terms; and no 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.
(f) Effectiveness of Amendment to Working Capital Loan
Agreement. The First Amendment and Waiver with respect to the Working Capital
Loan (the "Working Capital Amendment") shall be in form and substance
satisfactory to the Lenders and shall have become effective in accordance with
its terms.
(g) Delivery of Documents. The Agent shall have received and
reviewed to its reasonable satisfaction (i) a counterpart of this Amendment,
Consent and Waiver signed by the Borrower, (ii) a counterpart of the Working
Capital Amendment signed by all of the parties thereto, (iii) a field
examination, performed as of a recent date by the members of the
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Agent's field examination staff, of the Borrower's books, records and
Collateral, (iv) 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, (v) an updated Annex II to the Financing
Agreement, completed by the Borrower, (vi) such additional UCC Financing
Statements as the Agent shall request, signed by the Borrower and required to be
filed in order to perfect, in favor of the Agent on behalf of the Lenders, a
first priority security interest in the Collateral maintained at the locations
set forth in Annex II, as revised hereby and in addition, the Borrower shall use
its reasonable best efforts to deliver to the Agent a warehouseman's waiver or
collateral access agreement in a form acceptable to the Agent duly executed by
the lessor or owner, as the case may be, of each location set forth in Annex II,
within sixty (60) days of the date hereof, (vii) 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, (viii) internally prepared financial
statements of the Borrower and its consolidated Subsidiaries for the six month
period ended in December 2000 and (xi) 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 (as defined at
Section 4(b) above), (ix) an officer's certificate, executed by the chief
financial officer or chief executive officer of the Borrower, confirming the
truth and accuracy of the foregoing, and (x) a copy of the resolutions of the
Board of Directors of the Borrower authorizing the execution, delivery and
performance of this Amendment, and the consummation of the transactions
contemplated to occur hereunder and thereunder, certified by the Secretary or
Assistant Secretary of the Borrower as of the date hereof.
SECTION 5. Representations and Warranties. The Borrower hereby
represents and warrants to the Agent and the Lenders as follows:
(a) After giving effect to this Amendment, Consent and Waiver,
the representations and warranties herein, in Article V of the Financing
Agreement and in each other Loan Document and certificate or other writing
delivered to the Lender pursuant hereto on or prior to the Amendment Effective
Date are correct on and as of the Amendment Effective Date as though made on and
as of such date, except to the extent that such representations and warranties
(or any schedules related thereto) expressly relate solely to an earlier date
(in which case such representations and warranties shall be true and correct on
and as of such date); and no Default or Event of Default has occurred and be
continuing on the Amendment Effective Date or would result from this Amendment,
Consent and Waiver becoming effective in accordance with its terms.
(b) This Amendment, Consent and Waiver constitutes the legal,
valid and binding obligation of the Borrower, enforceable against the Borrower
in accordance with its terms.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or other Person is required
in connection with the due execution, delivery and performance by the Borrower
of this Amendment, Consent and Waiver.
(d) 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
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ended in February, 2001, no change or event has occurred which has had or is
reasonably likely to have a Material Adverse Effect.
SECTION 6. Miscellaneous.
(a) Continued Effectiveness of the Financing Agreement. Except
as otherwise expressly provided herein, the Financing Agreement and the other
Loan Documents are, and shall continue to be, in full force and effect and are
hereby ratified and confirmed in all respects, except that on and after the
Amendment Effective Date (i) all references in the Financing Agreement to "this
Agreement", "hereto", "hereof", "hereunder" or words of like import referring to
the Financing Agreement shall mean the Financing Agreement as amended by this
Amendment, Consent and Waiver, and (ii) all references in the other Loan
Documents to which the Borrower is a party to the "Financing Agreement",
"thereto", "thereof", "thereunder" or words of like import referring to the
Financing Agreement shall mean the Financing Agreement as amended by this
Amendment, Consent and Waiver. Except as expressly provided herein, the
execution, delivery and effectiveness of this Amendment, Consent and Waiver
shall not operate as an amendment of any right, power or remedy of the Lender
under the Financing Agreement or any other Loan Document, nor constitute an
amendment of any provision of the Financing Agreement or any other Loan
Document.
(b) Delivery of Appraisal and Field Study Reports. The
Borrower acknowledges that, within a reasonable time after the date hereof, the
Agent and the Lenders will require (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.
(c) Counterparts. This Amendment, Consent and Waiver may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which shall be deemed to be an original, but all
of which taken together shall constitute one and the same agreement.
(d) Headings. Section headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment,
Consent and Waiver for any other purpose.
(e) Governing Law. This Amendment, Consent and Waiver shall be
governed by, and construed in accordance with, the law of the State of New York.
(f) Amendment, Consent and Waiver as Loan Document. The
Borrower hereby acknowledges and agrees that this Amendment, Consent and Waiver
constitutes a "Loan Document" under the Financing Agreement. Accordingly, it
shall be an Event of Default under the Financing Agreement if (i) any
representation or warranty made by a Borrower in or in connection with this
Amendment, Consent and Waiver shall have been untrue,
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false or misleading in any material respect when made, or (ii) the Borrower
shall fail to perform or observe any term, covenant or agreement contained in
this Amendment, Consent and Waiver.
(g) Withdrawal of Notice of Default. Upon the effectiveness of
this Amendment, Consent and Waiver, the Notice of Event of Default, dated
February 8, 2001, from the Agent to the Borrower shall cease to have any force
and effect.
(h) Status of Prior Amendment. The First Amendment, Consent
and Waiver, dated as of February 13, 2001, to the Financing Agreement ceased to
take effect because the condition precedent set forth in Section 4(b) thereof
was not fulfilled, and, accordingly, such agreement is of no force and effect
and is hereby superseded by this Amendment, Consent and Waiver.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment,
Consent and Waiver to be executed and delivered as of the date first above
written.
BORROWER:
CANNONDALE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. Luca
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Luca
Title: Vice President
AGENT AND LENDER:
ABLECO FINANCE LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: SVP - Chief Credit Officer
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Schedule A
Events of Default
1. Violations of Section 7.11 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 day of
the fiscal month set forth below, of not less than the ratio set
forth below opposite such month, in violation of Section 7.11 of the
Financing Agreement (before giving effect to this Amendment):
Minimum Consolidated
Twelve Fiscal Months Ending Fixed Charge 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 7.15 of Financing Agreement. The Borrower
failed to maintain an average Availability (as defined in the
Working Capital Loan Agreement) for the month of March 2001 of at
least $1,500,000, in violation of Section 7.15 of the Financing
Agreement (before giving effect to this Amendment).
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Annex II
Lien Perfection Information
[To be Attached]
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Exhibit A
Form of ▇▇▇▇▇▇▇▇▇▇ Subordination Agreement
[See Attached]
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Exhibit B
Form of Institutional Subordination Agreement
[See Attached]
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