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EXHIBIT 10.10
WAIVER AND THIRD AMENDMENT TO PARTICIPATION AGREEMENT
This Waiver and Third Amendment to Participation Agreement (this "Third
Amendment"), dated as of February 24, 2000, is entered into among REMEC, INC., a
California corporation, as Lessee; UNION BANK OF CALIFORNIA, N.A., not in its
individual capacity except as expressly stated herein but solely as Certificate
Trustee; the Persons named on Schedule I-A of the Participation Agreement
(together with their respective permitted successors, assigns and transferees),
as Certificate Purchasers; the Persons listed on Schedule I-B of the
Participation Agreement (together with their respective permitted successors,
assigns and transferees), as Lenders; and UNION BANK OF CALIFORNIA, N.A., as
Agent.
W I T N E S S E T H:
WHEREAS, Lessee, Lessor, Agent, the Certificate Purchasers and the
Lenders have entered into that certain Participation Agreement, dated as of
August 25, 1998 (as amended by those certain First and Second Amendments to
Participation Agreement, dated as of September 29, 1998 and September 21, 1999,
respectively, the "Participation Agreement") (capitalized terms used herein
without definition shall have the meanings ascribed to them in Appendix 1 to the
Participation Agreement, except as modified pursuant to Section 3 below); and
WHEREAS, the parties hereto desire to enter into this Third Amendment
in order to amend the Participation Agreement and Appendix 1 thereto to modify
certain terms in those documents with respect to the matters provided for in
this Third Amendment.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
terms and conditions herein contained, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Waiver. Lessor, Agent and each of the Participants hereby
(a) waive, for the fiscal quarter of Lessee ended October 31, 1999, and only for
such fiscal quarter, compliance with (i) the Funded Debt to EBITDA ratio
requirement set forth in Section 5.11 of the Participation Agreement, (ii) the
restrictions on loans or advances to Affiliates and Subsidiaries set forth in
Section 5.19 of the Participation Agreement, and (iii) the limitation on
quarterly losses set forth in Section 5.23 of the Participation Agreement, and
(b) agree that such noncompliance shall not constitute a Lease Default or a
Lease Event of Default. The waiver here given is specific to the covenants, and
for the fiscal quarter of Lessee, referred to above and shall not operate as a
waiver of compliance by Lessee with any other covenants set forth in the
Participation Agreement, or with the covenants set forth above for any other
fiscal quarter of Lessee.
Section 2. Modifications to Participation Agreement. The parties hereto
amend the Participation Agreement as follows and all references to the words
"Participation Agreement" shall hereinafter refer to the Participation Agreement
as amended by this Section 2 and by Section 3 below:
2.1 Section 2.15 of the Participation Agreement is amended and
restatedin its entirety to read as follows:
SECTION 2.15. Collateralization. Lessee shall at all times
cause its obligations under the Lessee Guarantee to be collateralized
to the extent and in the manner provided in this Section 2.15.
(a) Lessee shall cause its obligations under the
Lessee Guarantee to be collateralized with Liquid Assets which
constitute Permitted Investments and have an aggregate Current Value of
not less than the Lease Balance until such time as Lessee has delivered
to
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Agent on behalf of Lessor and each of the Participants a
quarterly or annual financial statement of Lessee as required
by Section 5.6(a) or Section 5.6(b) of the Participation
Agreement, as the case may be, which reflects that (i) as at
the end of each of the four (4) consecutive fiscal quarters of
Lessee most recently ended, Lessee has maintained (A) a
Tangible Net Worth of not less than the sum of (1) One Hundred
Sixty-five Million Dollars ($165,000,000), (2) ninety percent
(90%) of Lessee's net profit after taxes for each fiscal
quarter of Lessee ending after October 31, 1999 and on or
before the date of computation, and (3) one hundred percent
(100%) of the net proceeds of any equity securities issued by
Lessee on or after November 1, 1999, (B) a ratio of Funded
Debt to EBITDA of not more than 1.5:1.0, (C) a ratio of cash,
accounts receivable and marketable securities to current
liabilities of not less than 1.5:1.0, as such terms are
defined by GAAP, and (D) a ratio of EBITDA, plus Rent and all
operating and capital lease payments, for the twelve (12)
month period preceding the date of calculation to Fixed
Charges of not less than 2.0:1.0, and (ii) for each of the
four (4) consecutive fiscal quarters of Lessee most recently
ended, Lessee has achieved an operating profit of not less
than Two Million Two Hundred Fifty Thousand Dollars
($2,250,000).
(b) From and after Lessee's delivery to Agent of the
financial statement referred to in Section 2.15(a), Lessee
shall cause its obligations under the Lessee Guarantee to be
collateralized with Liquid Assets which constitute Permitted
Investments and have an aggregate Current Value of not less
than Six Million Dollars ($6,000,000).
(c) The collateralization required by this Section
2.15 shall operate to reduce the Applicable Margin as and to
the extent provided in the definition of such term which is
set forth in Appendix 1 to the Participation Agreement.
2.2 Section 5.8 of the Participation Agreement is amended and
restated in its entirety to read as follows:
SECTION 5.8. Tangible Net Worth. Lessee will at all times
maintain a Tangible Net Worth of not less than the sum of (a) One
Hundred Sixty-five Million Dollars ($165,000,000), (b) ninety percent
(90%) of Lessee's net profit after taxes for each fiscal quarter of
Lessee ending after October 31, 1999 and on or before the date of
computation, and (c) one hundred percent (100%) of the net proceeds of
any equity securities issued by Lessee on or after November 1, 1999.
2.3 Section 5.9 of the Participation Agreement is hereby
deleted in its entirety.
2.4 Section 5.11 of the Participation Agreement is amended and
restated in its entirety to read as follows:
SECTION 5.11. Funded Debt to EBITDA. Lessee will maintain a
ratio of Funded Debt to EBITDA of not more than (a) as at the end of
the fiscal quarter of Lessee ending January 31, 2000, 2.50:1.00, (b) as
at the end of the fiscal quarter of Lessee ending April 30, 2000,
2.00:1.00, and (c) as at the end of the fiscal quarter of Lessee ending
July 31, 2000, and at all times thereafter, 1.5:1.0.
2.5 The second sentence of Section 5.18 of the Participation
Agreement is hereby amended to read as follows:
Lessee will not, and will not permit any Subsidiary to, borrow any
money, become contingently liable to borrow money, or enter any
agreement to directly or indirectly obtain borrowed money, except
pursuant to agreements made with UBOC, except for loans and other
borrowings secured by liens permitted by Section 5.2 and except for
obligations incurred by AirTech under the foreign exchange and shipside
bond facilities of AirTech referred to in Section 5.19(a)(iv).
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2.6 Section 5.19 of the Participation Agreement is amended and
restated in its entirety to read as follows:
SECTION 5.19. Loans, Advances and Guaranties. Lessee will not,
and will not permit any Subsidiary to, except in the ordinary course of
business as currently conducted, make any loans or advances, become a
guarantor or surety, pledge its credit or properties in any manner or
extend credit; provided, however, that (a) Lessee may (i) make loans or
advances to its Affiliates or Subsidiaries, (ii) make a loan to
SkyOnline Inc. (formerly known as Direct-to-Phone International, Inc.)
("SkyOnline") in a principal amount not to exceed Five Million Dollars
($5,000,000), (iii) guarantee the obligations of AirTech referred to in
Section 5.19(b), and (iv) guarantee the obligations of AirTech to
Lloyds Bank arising under the foreign exchange facility in an amount
not to exceed Five Hundred Thousand Pounds Sterling (GBP500,000) and
the shipside bond facility in an amount not to exceed One Hundred
Thousand Pounds Sterling (GBP100,000) which are presently provided to
AirTech by Lloyds Bank, and (b) AirTech may (i) provide E-Plus
Mobilfunk GmbH with a contract performance bond in an amount not to
exceed One Million Seven Hundred Fifty Thousand German Marks
(DM1,750,000) and with an expiry of not later than June 30, 2000, and
(ii) provide Bouygues Telecom SA with a contract performance bond in an
amount not to exceed Four Million Seven Hundred Thousand French Francs
(FF4,700,000) and with an expiry of not later than December 31, 2000.
2.7 Section 5.20(b) of the Participation Agreement is amended
and restated in its entirety to read as follows:
(b) Lessee's purchase of preferred stock in SkyOnline in the amount of
Four Million Six Hundred Thousand Dollars ($4,600,000).
2.8 Section 5.23 of the Participation Agreement is amended and
restated in its entirety to read as follows:
SECTION 5.23. Profitability. Lessee will not (a) incur a
cumulative net loss for any two or more consecutive fiscal quarters
(commencing with the two fiscal quarter period of Lessee ending April
30, 2000), and (b) incur a net loss for any fiscal year (commencing
with the fiscal year of Lessee ending January 31, 2001).
Section 3. Modifications to Appendix 1. The parties hereto hereby amend
Appendix 1 to the Participation Agreement as follows, and all references to
"Appendix 1" or "Appendix 1 to the Participation Agreement" or "Appendix 1 to
that certain Participation Agreement. . ." (and whether or not identifying the
parties thereto) shall hereinafter refer to Appendix 1 as amended hereby:
3.1 The final two (2) sentences of the definition of the term
"Applicable Margin" are hereby amended and restated as follows:
Notwithstanding the foregoing, for any day during an Interest Period
with respect to the portion of the outstanding principal amount of the
Loans which, on such day, are collateralized pursuant to the Pledge
Agreement with Liquid Assets which constitute Permitted Investments,
the Applicable Margin for such day shall be 0.75% (75 basis points).
For purposes of the foregoing sentence (a) the portion of the
outstanding principal amount of the Loans which is so collateralized
shall be determined by multiplying (i) the aggregate outstanding
principal amount of the Loans by (ii) a fraction, the numerator of
which is the Current Value (as defined in the Pledge Agreement) of the
Liquid Assets which have so been pledged and the denominator of which
is the Lease Balance, and (b) the portion of the outstanding principal
amount of any given Lender's Loan which is so collateralized shall be
determined by multiplying (i) the outstanding principal amount of such
Lender's Loan by (ii) the fraction more particularly described in
clause (a)(ii) of this sentence.
3.2 The definition of the term "Custodial Agreement" is hereby
deleted in its entirety.
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3.3 The definition of the term "Operative Documents" is hereby
amended by adding to the end of such definition the phrase ", including without
limitation, the Pledge Agreement."
3.4 A definition of the term "Pledge Agreement" is hereby
added immediately following the definition of the term "Plan", said definition
to read as follows:
"Pledge Agreement" shall mean a Security Agreement (Investment
Securities) by Lessee in favor of Agent (both individually and as
Agent), the Certificate Purchasers, the Lenders and each of their
respective successors and assigns, in form and substance satisfactory
to Agent and the Participants, under which Lessee pledges Liquid Assets
as collateral for Lessee's obligations under the Lessee Guarantee.
Section 4. Representations and Warranties. Lessee represents and
warrants to each of the other parties hereto that each of the representations
and warranties of Lessee contained in the Participation Agreement and in each
other Operative Document is true and correct in all material respects on the
date hereof, with the same effect as though made on and as of such date and, for
purposes of this paragraph, all references in such representations and
warranties to the "Operative Documents" shall be deemed to include this Third
Amendment.
Section 5. Effectiveness. This Third Amendment shall become effective
on the date on which Agent, on behalf of itself, Lessor and each of the
Participants, shall have received the following, each in form and substance
satisfactory to Agent, Lessor and each of the Participants:
(a) This Third Amendment, duly executed by each of the parties hereto;
(b) The Pledge Agreement, dated the date of this Third Amendment, duly
executed by Lessee;
(c) Evidence that all steps necessary in the opinion of Agent to
perfect the security interest granted by Lessee pursuant to the Pledge Agreement
have been duly taken; and
(d) Such other documents and agreements as Agent or any Participant may
reasonably require to effectuate the intent and purpose of this Third Amendment
and to establish the accuracy and completeness of the representations and
warranties, and compliance with the terms and conditions, contained in this
Third Amendment, the Participation Agreement and the other documents,
instruments and agreements entered into in connection herewith and therewith.
Section 6. Applicable Law. THIS THIRD AMENDMENT HAS BEEN DELIVERED IN,
AND SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF, THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES
OF SUCH STATE.
Section 7. Counterparts. This Third Amendment may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each executed counterpart constituting an original but all together one
agreement.
Section 8. Direction to Trustee. By signing this Third Amendment, the
Participants authorize and direct Union Bank of California, N.A., as Certificate
Trustee, and Union Bank of California, N.A., as Agent, to sign this Third
Amendment.
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IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be executed and delivered as of the date first above written.
Lessee: REMEC, INC., a California corporation, as Lessee
By:______________________________________
Name Printed: Xxxx XxXxxxxx
Title: Chief Financial Officer
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Certificate Trustee: UNION BANK OF CALIFORNIA, N.A., not in its individual
capacity except as expressly stated herein, but solely
as Certificate Trustee
By:____________________________________
Name Printed: Xxxxxx X. Xxxx
Title: Vice President
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Agent: UNION BANK OF CALIFORNIA, N.A., not in its individual capacity
except as expressly stated herein, but solely as Agent
By:____________________________________
Name Printed: Xxxx Xxxxx
Title: Vice President
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Certificate Purchaser: BANKERS COMMERCIAL CORPORATION, as Certificate Purchaser
By:____________________________________
Name Printed: Xxxxx X. Xxxxxxxxx
Title: President
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Lender: UNION BANK OF CALIFORNIA, N.A., not in its individual capacity
except as expressly stated herein, but solely as Lender
By:____________________________________
Name Printed: Xxxx Xxxxx
Title: Vice President
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