EXHIBIT 4(t)
FIRST AMENDMENT TO INVESTMENT AGREEMENT
THIS FIRST AMENDMENT TO INVESTMENT AGREEMENT is made as of the 12th day
of September, 1997 by and among: (i) PICO PRODUCTS, INC., a New York
corporation (the "Parent"); (ii) PICO MACOM, INC., a Delaware corporation
("PMI"), and such other parties as listed on Schedule A upon execution of a
joinder as hereinafter provided; (the Parent, PMI, and such other parties
(the "Subsidiaries") who have executed the joinder in the form set forth as
Exhibit A hereto, are hereinafter collectively referred to as "Borrowers");
and (iii) ALLIED CAPITAL CORPORATION ("ACC"), ALLIED INVESTMENT CORPORATION
("AIC"), ALLIED INVESTMENT CORPORATION II ("AICII") and ALLIED CAPITAL
CORPORATION II ("ACCII"), each a Maryland corporation (collectively,
"Allied").
RECITALS:
A. Pursuant to the terms and conditions of an Investment Agreement,
dated as of the date hereof, among the Borrowers and certain other parties
named therein, ACC, AIC and ACCII made an aggregate investment of One Million
Four Hundred Eighty-Five Thousand Dollars ($1,485,000) (the "Allied
Investment") in the Borrowers to be evidenced by certain junior secured
subordinated debentures.
B. Pursuant to the terms and conditions of an Investment Agreement
dated November 21, 1996 (the "1996 Investment Agreement"), among the
Borrowers and Allied, Allied made an aggregate investment of Five Million
Dollars ($5,000,000) in the Borrowers which were evidenced by certain senior
secured subordinated debentures.
C. Pursuant to the Investment Agreement dated as of the date hereof,
the Borrowers and Allied agreed to enter into this agreement to amend the
1996 Investment Agreement.
NOW THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. Section 4.09 of the 1996 Investment Agreement will be replaced in
its entirety by the following:
"4.09 FINANCIAL COVENANTS.
(a) PMI shall maintain each of the following levels of
financial performance, measured in accordance with GAAP:
(i) Net Working Capital of not less than $3,500,000,
determined at the end of each fiscal quarter;
(ii) Working Capital Ratio of not less than 1.30:1,
determined at the end of each fiscal quarter;
(iii) Tangible Net Worth of not less than $7,500,000,
determined at the end of each fiscal quarter;
(iv) Debt to Tangible Net Worth ratio of not more than
2.25:1, determined at the end of each fiscal quarter; and
(v) Net Income After Taxes of not less than $900,000,
for each fiscal year.
Notwithstanding the foregoing provision, all covenants contained in
this Section 4.09(a) are waived with respect to the fiscal year ended July
31, 1997 and during the first sixty (60) days following September 12, 1997.
In addition, if PMI renegotiates the financial covenants applicable to PMI or
the Parent with the Senior Holder during the 60 day period, those
renegotiated financial covenants are hereby incorporated in this Agreement as
if set forth in full and the financial covenants set forth above are
terminated. No future amendments to or waivers of the renegotiated financial
covenants by the Senior Holder will apply to this Agreement unless separately
consented to by Allied. In the event that no financial covenants are
renegotiated with the Senior Holder within 60 days after September 12, 1997,
the foregoing 60-day waiver by the Holders set forth above shall terminate
and the provisions of this Section 4.09(a) will apply to PMI, from and after
such date.
As used in this Section 4.09(a), the following terms shall have the
meanings indicated with respect to PMI:
(1) "NET WORKING CAPITAL" shall mean the amount by which
current assets (excluding any Intangible Assets, as defined below) exceed
current liabilities;
(2) "WORKING CAPITAL RATIO" shall mean the ratio of
current assets (excluding any Intangible Assets) to current liabilities;
(3) "TANGIBLE NET WORTH" shall mean the (i) the sum of
stockholders' equity and the principal balance of any debt subordinate to the
Senior Loan, less (ii) the book value of Intangible Assets;
(4) "DEBT TO TANGIBLE NET WORTH" shall mean the ratio of
total liabilities, excluding the principal balance of any debt that is
subordinate to the Senior Loan, to Tangible Net Worth;
(5) "NET INCOME AFTER TAXES" shall mean, with respect to
any fiscal year, net income after provisions for taxes for such fiscal year;
and
(6) "INTANGIBLE ASSETS" shall mean (i) all loans or
advances to, and other receivables owing from, any officers, employees,
subsidiaries and other affiliates, (ii) all investments, whether in a
subsidiary, a joint venture or otherwise, (iii) goodwill, (iv) any
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other assets deemed intangible under GAAP; and (v) any other assets
determined to be intangible by Holders in its reasonable credit judgment.
(b) Parent shall maintain each of the following levels of
financial performance, measured on a consolidated basis in accordance with
GAAP:
(i) Total revenues of not less than $8,000,000,
determined for the quarter ending on October 31, 1997 (the "First
Quarter"); $8,300,000, determined for the quarter ending on January
31, 1998 (the "Second Quarter"), $9,000,000, determined for the
quarter ending on April 30, 1998 (the "Third Quarter"); $9,200,000,
determined for the quarter ending on July 31, 1998 (the "Fourth
Quarter"); $9,500,000, determined for the quarter ending on October
31, 1998 (the "Fifth Quarter") and quarterly thereafter;
(ii) EBITDA of not less than $425,000 for the First
Quarter; $525,000 for the Second Quarter; $625,000 for the Third
Quarter; $625,000 for the Fourth Quarter; $650,000 for the Fifth
Quarter and quarterly thereafter;
(iii) The ratio of EBITDA to Total Interest Expense
shall be equal to or greater than 1.0:1 for the First Quarter;
1.1:1 for the Second Quarter; 1.2:1 for the Third Quarter, 1.3:1
for the Fourth Quarter; 1.4:1 for the Fifth Quarter; 1.5:1,
determined for the quarter ending January 31, 1999 and quarterly
thereafter; and
(iv) The ratio of Total Debt to EBITDA shall be less than
or equal to 8.5:1 for the annualized First Quarter; 7.75:1 for the
annualized results of the combined First Quarter and Second
Quarter; 7.0:1 for the annualized results of the combined First
Quarter, Second Quarter and Third Quarter; 6.5:1 for the combined
First Quarter, Second Quarter, Third Quarter and Fourth Quarter;
6.0:1 for the quarter ending October 31, 1998 based on immediately
preceding four-quarter period; 5.5:1 for the quarter ending January
31, 1999 based on the immediately preceding four-quarter period;
5.0:1 for each fiscal quarter thereafter, based on immediately
preceding four-quarter period.
As used in this Section 4.09(b), the following
terms shall have the meanings indicated with respect to the Parent,
on a consolidated basis:
(1) "EBITDA" shall mean earnings before
interest expense (excluding interest on any trade debt incurred as
permitted under Section 5.08), tax expense on federal and state
income taxes, depreciation expense, and amortization expense;
(2) "TOTAL INTEREST EXPENSE" shall mean the
aggregate amount of installment interest payments paid or payable
in respect of the Debentures and the instruments evidencing the
Senior Debt; and
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(3) "TOTAL DEBT" shall mean the sum of the
principal amount of the Senior Loan, the Senior Debentures and the
Debentures."
2. Allied hereby waives its right to a collateral assignment
of the life insurance policy in the amount of $1,500,000 insuring
the life of Xxxxxxx Xxxxx, as provided for in Section 4.21 of the
1996 Investment Agreement
3. Allied hereby acknowledges and renders its consent, as
required by Section 5.02(b) of the 1996 Investment Agreement, to
the winding up of affairs of Pico Products Asia Limited, a Hong
Kong corporation.
4. Within 90 days of from the date hereof, each subsidiary
listed on Schedule A hereto shall take all corporate action
necessary for the execution and delivery of the joinders to this
amendment in the form set forth as Exhibit A hereto and shall so
execute and deliver all such joinders.
5. Except as specifically amended hereby, the 1996
Investment Agreement remains in full force and effect in accordance
with its terms.
6. This Amendment to Investment Agreement may be executed in
multiple counterparts, each of which shall be deemed to be an
original, and all such counterparts shall constitute one instrument.
{SIGNATURES TO FOLLOW}
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IN WITNESS WHEREOF, the undersigned have executed and
delivered this Amendment to Investment Agreement as of the date
first above written.
WITNESS/ATTEST: "BORROWERS":
PICO PRODUCTS, INC.
a New York corporation
By: By:
---------------------------- ------------------------- (SEAL)
Xxxx X. Xxxxxxxx Xxxxxxx X. Xxxxx, Xx.
Assistant Secretary Chairman and Chief Executive Officer
PICO MACOM, INC.
a Delaware corporation
By: By:
---------------------------- ------------------------- (SEAL)
Xxxx X. Xxxxxxxx Xxxxxxx X. Xxxxx, Xx.
Assistant Secretary Chairman and Chief Executive Officer
"ALLIED":
ALLIED CAPITAL CORPORATION,
a Maryland corporation
By: By:
---------------------------- ------------------------- (SEAL)
Xxxx X. Xxxxxxx, Principal
ALLIED INVESTEMENT CORPORATION,
a Maryland corporation
By: By:
---------------------------- ------------------------- (SEAL)
Xxxx X. Xxxxxxx, Principal
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ALLIED INVESTMENT CORPORATION II,
a Maryland corporation
By: By:
---------------------------- ------------------------- (SEAL)
Xxxx X. Xxxxxxx, Principal
ALLIED CAPITAL CORPORATION, II,
a Maryland corporation
By: By:
---------------------------- ------------------------- (SEAL)
Xxxx X. Xxxxxxx, Principal
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SCHEDULE A
PICO MACOM TAIWAN CO., LTD.
PICO (ST. KITTS) LTD.
PICO (BERMUDA) LTD.
PICOMACOM PRODUTOS DE TELECOMMUNICACAO LTDA.
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EXHIBIT A
JOINDER AGREEMENT
JOINDER AGREEMENT dated as of this ____ day of _____, 1997 by
______________, a ______________ corporation (the "Additional Borrower") and
Allied Capital Corporation, Allied Investment Corporation, Allied Investment
Corporation II, and Allied Capital Corporation II, each a Maryland
corporation (collectively, "Allied").
BACKGROUND: Pico Products, Inc., a New York corporation (the "Parent"),
Pico Macom, Inc., a Delaware corporation ("PMI") and such other subsidiaries
of the Parent as have heretofore executed a Joinder Agreement in this form
(collectively, the "Current Borrowers") and Allied entered into a certain
Investment Agreement dated as of September 12, 1997 (the "Investment
Agreement"). Pursuant to the terms of the Investment Agreement the Parent
and PMI agreed to cause the Additional Borrower named herein to join in the
Amendment to a certain investment agreement by and among Allied and the
Borrowers dated November 21, 1996 (the "1996 Investment Agreement"), within
90 days from September 12, 1997, amending the 1996 Investment Agreement.
NOW, THEREFORE, the Current Borrowers and Additional Borrower each
intending to be legally bound hereby, agree with Allied as follows:
1. DEFINITIONS: All terms used in this Joinder Agreement as defined
terms, but not defined herein, shall have the meanings ascribed to them in
the Amendment to Investment Agreement dated September 12, 1997.
2. JOINDER: The Additional Borrower hereby joins in the Amendment to
Investment Agreement as a joint and several obligor thereunder and party
thereto, subject to all the terms and provisions thereof. From and after the
effective date of this Joinder Agreement the term "Borrowers" as defined and
used in the Agreement and herein, shall refer to the Additional Borrower as
well as to all other Borrowers now or hereafter parties to the Investment
Agreement. Without limitation on the foregoing, the Additional Borrower
expressly agrees to be jointly and severally liable for all liabilities under
the 1996 Investment Agreement and all other amounts which may be presently
due thereunder, and hereby ratifies all actions heretofore taken and all
Obligations heretofore incurred by the Parent or other of the Borrowers under
the Agreement.
3. EFFECTIVE DATE: This Joinder Agreement shall be effective as of
the date first written above.
4. MISCELLANEOUS: This Joinder Agreement may be executed in two or
more counterparts, and by different parties on different counterparts, each
of which shall be deemed an original and in making proof of this Joinder
Agreement it shall be necessary only to produce sufficient counterparts to
evidence the execution by all parties. This Joinder Agreement shall be
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governed by and construed under the laws of the State of Maryland, and shall
bind the successors and assigns of the Parent and the other Borrowers and
inure to the benefit of the successors and assigns of Allied.
{SIGNATURES TO FOLLOW}
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IN WITNESS WHEREOF, the parties hereto have caused this Joinder
Agreement to be executed and delivered by their proper and dully authorized
officers as of the date first above written.
WITNESS/ATTEST: PICO MACOM TAIWAN CO., LTD.
a Taiwan corporation
By: By:
---------------------------- ------------------------- (SEAL)
Name: Name:
Title: Title:
WITNESS/ATTEST: PICO (ST. KITTS) LTD.
a St. Xxxxxxxxxxx and Nevis corporation
By: By:
---------------------------- ------------------------- (SEAL)
Name: Name:
Title: Title:
WITNESS/ATTEST: PICO (BERMUDA) LTD.
a Bermuda corporation
By: By:
---------------------------- ------------------------- (SEAL)
Name: Name:
Title: Title:
WITNESS/ATTEST: PICOMACOM PRODUCTS DE
TELECOMMUNICACAO LTDA.
a Brazil limited liability company
By: By:
---------------------------- ------------------------- (SEAL)
Name: Name:
Title: Title:
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