<PAGE>
Exhibit 10.1
EXECUTION
WAIVER AND AMENDMENT NO. 3
This WAIVER AND AMENDMENT NO. 3 (this "AMENDMENT") is made as
of December 8, 2000 by and among PRECISION PARTNERS, INC., a Delaware
corporation, PRECISION PARTNERS HOLDING COMPANY, a Delaware corporation, MID
STATE MACHINE PRODUCTS, a Maine corporation, GALAXY INDUSTRIES CORPORATION, a
Michigan corporation, CERTIFIED FABRICATORS, INC., a California corporation,
GENERAL AUTOMATION, INC., an Illinois corporation, NATIONWIDE PRECISION
PRODUCTS CORP., a New York corporation, GILLETTE MACHINE & TOOL CO., INC., a
New York corporation, the Lenders listed on the signature pages hereof and
CITICORP USA, INC., as Administrative Agent for the Lenders.
R E C I T A L S
A. The parties hereto are parties to that certain Credit
Agreement dated as of March 19, 1999, by and among the Borrower, the
Guarantors, the Administrative Agent, Bank of America, N.A. (successor to
NationsBank, N.A.), as Syndication Agent, SunTrust Bank, Atlanta, as
Documentation Agent, and the Lenders (as amended, the "CREDIT AGREEMENT").
All capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Credit Agreement.
B. The Loan Parties have requested that the Lenders waive and
amend certain provisions of the Credit Agreement.
C. The Lenders are willing to agree to such requests, but only
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto agree as
follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement
is, effective as of the date hereof, hereby amended as follows:
(a) the following definitions are added in correct
alphabetical order:
"'bps': basis points; each basis point is equal to one
one-hundredth of a percent.
"'Business Plan': the updated financial forecast for
Precision Partners, Inc. dated December 2000.
"'Certified Fabricators Restructuring': (i) the sale of
certain excess equipment by Certified Fabricators and (ii) the
<PAGE>
consolidation and restructuring of Certified Fabricators'
remaining business.
"'Consolidated EBITDAR': for any Person for any period,
Consolidated EBITDA of such Person for such period plus without
duplication and to the extent reflected as a charge in the
statement of such Person's Consolidated Net Income for such
period, Consolidated Rental Expense of such Person for such
period.
"'Consolidated GAAP EBITDA': for any Person for any period,
Consolidated Net Income for such period plus, without duplication
and to the extent reflected as a charge in the statement of such
Consolidated Net Income for such period, the sum of (a) income tax
expense, (b) interest expense, amortization or write-off of debt
discount and debt issuance costs and commissions, discounts and
other fees and charges associated with Indebtedness (including the
Loans and any Subordinated Indebtedness), (c) depreciation and
amortization expense, (d) amortization of intangibles (including,
but not limited to, goodwill) and organization costs, (e) a
management fee in an amount not greater than $400,000 accrued for
Saunders, Karp & Megrue, L.P. or an affiliate designated by it, on
account of the fiscal year ending December 31, 2001, (f) for the
fiscal year ending December 31, 2001, accrued relocation expenses
not to exceed $75,000, (g) in the aggregate, over the fiscal years
ending December 31, 2000 and December 31, 2001, fees and deferred
financing costs charged off in an amount not to exceed $400,000,
(h) for the purposes of Sections 7.1(e), (f) and (g), fees and
charges incurred in connection with the Galaxy Restructuring not
to exceed $1,700,000 in the aggregate and (i) for the purposes of
determining compliance with Sections 7.1(e), (f) and (g), for any
period referred to therein, an amount equal to the Net Cash
Proceeds, not to exceed $200,000, of any Capital Stock issued or
sold by Holdco or the Borrower, or equity otherwise contributed to
the capital of Holdco or the Borrower, PROVIDED, HOWEVER, that (I)
such Net Cash Proceeds are received no later than 15 days
following the day on which the certificate required by Section
6.2(b) is delivered for such period, (II) the amount of such Net
Cash Proceeds shall be disregarded for the purpose
<PAGE>
of determining the cumulative Consolidated GAAP EBITDA for any
other period and (III) no such Net Cash Proceeds received prior
to December 31, 2000 may be added.
"'Consolidated Rental Expense': for any Person for any
period, on a consolidated basis, the aggregate base rental
payments, other than Consolidated Lease Expenses, to lessors or
their assignees by such Persons for such period under agreements
to rent or lease any real or personal property as recorded in
accordance with GAAP.
"'Galaxy Restructuring': (i) the transfer of responsibility
and ultimate sale or contribution to Nationwide Precision Products
Corp. of certain equipment of, and the assumption of certain trade
payables, accruals and other liabilities incurred in the ordinary
course of business directly related to the production of engine
blocks for Caterpillar by, Galaxy and (ii) the transfer to
Gillette Machine & Tool Co., Inc., a New York corporation, of
responsibility for the management of Galaxy's remaining assets and
liabilities.
"'Maintenance Capital Expenditures': for any Person for any
period, the Capital Expenditures of such Person on a consolidated
basis, incurred to repair or maintain the current working
condition of existing equipment and facilities in the ordinary
course of business; provided, however, that in no event shall
Maintenance Capital Expenditures include growth Capital
Expenditures or cost improvement Capital Expenditures.
"'Master Lease Agreement': that certain Master Lease
Agreement dated as of March 31, 2000 and as amended from time to
time, between General Electric Capital Corporation, for itself and
as agent for certain participants, as lessor, and Galaxy, Mid
State, Nationwide Precision Products Corp. and General Automation,
Inc., as lessees.
"'Specified Equipment Finance
<PAGE>
Facilities': (i) the lease facilities made available pursuant
to the Master Lease Agreement, (ii) the equipment purchase
facilities made available pursuant to that certain Loan,
Security and Guaranty Agreement dated as of December 8, 2000
and as amended from time to time, between General Electric
Capital Corporation, for itself and as agent for certain
participants, as lender, and Galaxy, Mid State, Nationwide
Precision Products Corp. and General Automation, Inc., as
borrowers, (iii) any other facilities designated as "Specified
Equipment Finance Facilities" by the Borrower and approved by
the Required Lenders in their sole and absolute discretion, and
(iv) any facilities refinancing or replacing the facilities
referred to in clauses (i), (ii) and (iii) of this definition on
terms which are not materially less favorable to the Loan
Parties.";
(b) the definition of Applicable Margin is amended by replacing
"225 bps" with "400 bps" and "200 bps" with "300 bps" and by replacing "is
three months after the Closing Date" with "the financial statements have been
delivered in accordance with Section 6.1 for the period ending December 31,
2000";
(c) the definition of Asset Sale is amended by replacing
"$1,000,000" in the fifth line thereof with "$250,000" and "Holdco" in the
sixth line thereof with "the Borrower";
(d) the definition of Consolidated Fixed Charge Coverage Ratio is
amended by replacing "Consolidated EBITDA" with "Consolidated EBITDAR" and
inserting after "such period" in clause (a) "minus the amount of Maintenance
Capital Expenditures for such period";
(e) the definition of Consolidated Fixed Charges is amended by
replacing clause (c) thereof with "(c) Consolidated Rental Expense of such
Person for such period and" and deleting "and (e) Capital Expenditures for
such period";
(f) the definition of Consolidated Senior Leverage Ratio is amended
by inserting after "Consolidated EBITDA" "plus rent incurred under the Master
Lease Agreement";
(g) the definition of Consolidated Total Senior Debt is amended by
inserting after "Subordinated Indebtedness" ", plus the aggregate unpaid
balance of the capitalized lessor's cost outstanding under the Master Lease
Agreement";
(h) the definition of Permitted Acquisitions is amended by
replacing clause (v) with "(v) the Required Lenders shall have consented, in
their sole and absolute discretion, to such acquisition and";
<PAGE>
(i) the definition of Reinvestment Deferred Amount is amended by
replacing "Section 2.7(c)" with "Section 2.7(b)";
(j) the definition of Reinvestment Prepayment Amount is amended by
inserting before the period at the end thereof "or, as the case may be, to
perform a restoration";
(k) Sections 2.2(c) and (d) are added as follows:
"(c) The Administrative Agent may (i) establish and
increase or decrease reserves against Eligible Receivables and
Eligible Inventory, (ii) reduce the advance rates against Eligible
Receivables and Eligible Inventory, or restore such advance rates
to any level equal to or below the advance rates in effect on the
Closing Date, or apply different advance rates to different
Precision Group Members or to different product lines of the
Precision Group Members, (iii) impose additional restrictions (or
eliminate the same) to the standards of eligibility set forth in
the definitions of Eligible Receivables and Eligible Inventory and
(iv) delete Persons from, or restore such Persons to, the
definition of Eligible Account Debtor, provided that such actions
shall only be taken by the Administrative Agent acting reasonably
to meet specific concerns regarding certain Eligible Receivables,
Eligible Inventory, Precision Group Members, product lines,
Eligible Account Debtors or categories of Accounts or Inventory.
"(d) If on any date the Total Revolving Extensions of
Credit as of such date exceed the difference between the Total
Revolving Commitments then in effect and $3,000,000.00, then,
without notice or demand, the Borrower shall, on such date, prepay
the Revolving Loans and, if necessary, cash collateralize the
Letters of Credit by depositing an amount equal to such excess in
a cash collateral account established with the Administrative
Agent for the benefit of the Lenders on terms and conditions
satisfactory to the Administrative Agent.";
<PAGE>
(l) Section 2.7(a) is amended and restated as follows:
"(a) Unless the Required Prepayment Lenders shall otherwise
agree, if any Capital Stock shall be issued or sold by Holdco or
the Borrower, or if any equity is otherwise contributed to the
capital of Holdco or any Precision Group Member, or if any
Indebtedness shall be incurred by any Precision Group Member
(excluding any Indebtedness incurred in accordance with Section
7.2), an amount equal to 100% of the Net Cash Proceeds thereof
shall be applied on the date of such issuance, receipt or
incurrence first towards the prepayment of the Term Loans and then
towards the payment of the Revolving Loans and the reduction of
the Revolving Commitments as set forth in Section 2.7(d);
provided, that no such prepayment will be required with respect to
capital contributions made by any Sponsor or Precision Partners,
L.L.C. directly or indirectly to Holdco (and contributed as common
equity to the Borrower) to support the working capital needs of
the Precision Group Members or for the purpose of funding a
particular Capital Expenditure or Permitted Acquisition if such
proceeds are used for such working capital needs, Capital
Expenditure or Permitted Acquisition substantially concurrently
with the making of such capital contribution, as the case may be."
(m) Section 2.7(b) is amended by inserting after "then towards" "the
payment of the Revolving Loans and", replacing "and" at the end of clause (i) of
the proviso thereto with a comma and inserting before the period at the end
thereof:
"and (iii) prior to the delivery of the financial statements and
certificates required by Sections 6.1(a), 6.2(a) and 6.2(b) for
the period ending December 31, 2001, unless the Required
Prepayment Lenders shall otherwise agree in their sole and
absolute discretion, no Reinvestment Notice shall be delivered in
respect of Net Cash Proceeds of any Assets Sales other than one or
more Reinvestment Notices in an aggregate amount not to exceed
$1,250,000 with respect to 50% of the Net Cash Proceeds of Assets
Sales contemplated in the Business Plan which occur in connection
with the Certified Fabricators Restructuring or the Galaxy
Restructuring";
<PAGE>
(n) Section 2.7(c) is amended by inserting after "then towards" in
the fourth line thereof "the payment of the Revolving Loans and" and
replacing "final" in the ninth line thereof with "fiscal";
(o) Section 2.7(d) is amended by replacing the first three
sentences thereof with the following:
"Amounts to be applied in connection with prepayments and
Commitment reductions made pursuant to Section 2.7 shall be
applied, first to prepay the Term Loans and, second, to the
payment of the Revolving Loans and the permanent reduction of the
Revolving Commitments. Amounts applied to prepay Term Loans shall
reduce future amortization payments in inverse order of their
maturity. In the event that following any such payment of the
Revolving Loans and permanent reduction of the Revolving
Commitments, the Total Revolving Extensions of Credit exceed the
amount of the Total Revolving Commitments as so reduced because
L/C Obligations constitute a portion thereof, the Borrower shall,
to the extent of the balance of such excess, replace outstanding
Letters of Credit and/or deposit an amount in cash in a cash
collateral account established with the Administrative Agent for
the benefit of the Lenders on terms and conditions satisfactory to
the Administrative Agent.";
(p) Section 3.5 is amended by replacing "Section 2.11(b)" with
"Section 2.10(b)" and by replacing "Section 2.11(c)" with "Section 2.10(c)";
(q) Section 3.6(c) is amended by replacing "Credit Parties" with "Loan
Parties";
(r) Sections 6.1(a), (b) and (c) are amended by inserting after "for
the previous year", "and from the Business Plan";
(s) Section 6.2(b) is amended by inserting in line two after
"Responsible Officer", "(x)", replacing in line five "and" with "(y)" and
inserting in line 6 after "certificate" the following:
"and (z) a narrative discussion of the results then reported, including
an analysis of the Loan Parties' liquidity, Capital Expenditures and any
material
<PAGE>
variances from the results of the prior year or the Business
Plan as well as anticipated changes to the Business Plan";
(t) Section 6.2(e) is amended by inserting after "month," "(i)" and
adding before the semicolon at the end thereof:
"and (ii) a rolling six month report on each Precision
Group Member's order backlog";
(u) Section 6.6 is amended and restated as follows:
"6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS;
DISCUSSIONS. (a) Keep proper books of records and accounts in
which full, true and correct entries in conformity with GAAP and
all Requirements of Law shall be made of all dealings and
transactions in relation to its business and activities and (b)
provide the Administrative Agent or any Lender and their agents
access to the premises of each Loan Party and Precision Group
Member at any time and from time to time, during normal business
hours and upon reasonable notice under the circumstances, and at
any time after the occurrence and during the continuance of a
Default or Event of Default, for the purposes of (A) inspecting
and verifying the Collateral and the Borrowing Base, (B)
inspecting and copying (at the Loan Parties' expense) any and all
records pertaining thereto, and (C) discussing the affairs,
finances and business of any Loan Party and Precision Group Member
with any officer, employee or director of any Loan Party or
Precision Group Member or with the certified public accountants
which reported on or have been engaged to report on any financial
statements delivered or to be delivered pursuant to Section 6.1(a)
(the "Auditors"), all of whom are hereby authorized to disclose to
the Administrative Agent, the Lenders and their agents all
financial statements, work papers, and other information relating
to such affairs, finances or business. Without limiting the
obligations of Holdco and the Borrower under Section 10.5, the
Loan Parties shall reimburse the Administrative Agent and the
Lenders for the reasonable travel and related expenses of the
Administrative Agent's and the Lenders' employees or, at the
Administrative Agent's discretion, reasonably exercised, of such
outside accountants or examiners as may be retained by the
Administrative Agent to verify or inspect
<PAGE>
Collateral, records or documents of a Loan Party or Precision
Group Member on a regular basis or for a special inspection if
the Administrative Agent deems the same appropriate. If the
Administrative Agent's or Lenders' own employees are used, the
Borrower shall also pay such reasonable per diem allowance as
the Administrative Agent or the Lenders may from time to time
establish, or, if outside examiners or accountants are used,
the Loan Parties shall also pay the Administrative Agent and
the Lenders such sum as the Administrative Agent and the
Lenders may be obligated to pay as fees therefor.
Notwithstanding the foregoing, prior to the occurrence of a
Default or Event of Default, the Loan Parties shall not be
required to reimburse the Administrative Agent and the Lenders
for audits and inspections which occur more than one time
during any three-month period."
(v) Section 6.9(c)(iii)(A) is amended by inserting after
"Administrative Agent", "a guaranty substantially in the form of Exhibit A-2
and";
(w) Sections 7.1(a), (b) and (c) are amended and restated as follows:
"(a) CONSOLIDATED LEVERAGE RATIO. Permit the Consolidated
Leverage Ratio of the Borrower as at the last day of any period of
four consecutive fiscal quarters ending during any period set
forth below to exceed the ratio set forth below in the column
opposite such period:
<TABLE>
<CAPTION>
Consolidated
Leverage
Period Ratio
--------------------------------------------------------------------------------
<S> <C>
October 1, 2000 - March 31, 2001 7.12 to 1.0
--------------------------------------------------------------------------------
April 1, 2001 - June 30, 2001 6.46 to 1.0
--------------------------------------------------------------------------------
July 1, 2001 - September 30, 2001 5.55 to 1.0
--------------------------------------------------------------------------------
October 1, 2001 - December 31, 2001 4.51 to 1.0
--------------------------------------------------------------------------------
January 1, 2002 and thereafter 4.50 to 1.0
--------------------------------------------------------------------------------
</TABLE>
"(b) CONSOLIDATED INTEREST COVERAGE RATIO. Permit the
Consolidated Interest
<PAGE>
Coverage Ratio of the Borrower for any period of four
consecutive fiscal quarters ending during any period set forth
below to be less than the ratio set forth below in the column
opposite such period:
<TABLE>
<CAPTION>
Period Consolidated Interest
Coverage Ratio
--------------------------------------------------------------------------------
<S> <C>
October 1, 2000 - December 31, 2000 1.30 to 1.0
--------------------------------------------------------------------------------
January 1, 2001 - March 31, 2001 1.29 to 1.0
--------------------------------------------------------------------------------
April 1, 2001 - June 30, 2001 1.34 to 1.0
--------------------------------------------------------------------------------
July 1, 2001 - September 30, 2001 1.49 to 1.0
--------------------------------------------------------------------------------
October 1, 2001 - December 31, 2001 1.67 to 1.0
--------------------------------------------------------------------------------
January 1, 2002 and thereafter 2.00 to 1.0
--------------------------------------------------------------------------------
</TABLE>
"(c) CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Permit the
Consolidated Fixed Charge Coverage Ratio of the Borrower for any
period of four consecutive fiscal quarters ending during any
period set forth below to be less than the ratio set forth below
in the column opposite such period:
<TABLE>
<CAPTION>
Consolidated Fixed
Period Charge Coverage Ratio
--------------------------------------------------------------------------------
<S> <C>
October 1, 2000 - December 31, 2000 0.96 to 1.0
--------------------------------------------------------------------------------
January 1, 2001 - March 31, 2001 0.85 to 1.0
--------------------------------------------------------------------------------
April 1, 2001 - June 30, 2001 0.84 to 1.0
--------------------------------------------------------------------------------
July 1, 2001 - September 30, 2001 0.92 to 1.0
--------------------------------------------------------------------------------
October 1, 2001 and thereafter 1.00 to 1.0"
--------------------------------------------------------------------------------
</TABLE>
(x) Section 7.1(d) is amended by replacing "$10,500,000" opposite
"January 1, 2000 - December 31, 2000" with "$33,500,000";
(y) Sections 7.1(e), (f), (g) and (h) are added as follows:
"(e) MINIMUM QUARTERLY CONSOLIDATED GAAP EBITDA. Permit the
Consolidated GAAP EBITDA for any fiscal quarter ending during any
period set forth below to be less than the amount set forth below
in the column opposite such period:
<TABLE>
<CAPTION>
Quarterly Consolidated
Period GAAP EBITDA
--------------------------------------------------------------------------------
<S> <C>
October 1, 2000 - December 31, 2000 $5,468,050.00
--------------------------------------------------------------------------------
January 1, 2001 - March 31, 2001 $6,250,500.00
--------------------------------------------------------------------------------
April 1, 2001 - June 30, 2001 $5,677,100.00
--------------------------------------------------------------------------------
July 1, 2001 - September 30, 2001 $6,242,600.00
--------------------------------------------------------------------------------
October 1, 2001 - December 31, 2001 $7,515,950.00
--------------------------------------------------------------------------------
</TABLE>
"(f) MINIMUM CUMULATIVE CONSOLIDATED GAAP EBITDA. Permit
the cumulative Consolidated GAAP EBITDA for each period set
<PAGE>
forth below to be less than the amount set forth below in the
column opposite such period:
<TABLE>
<CAPTION>
Cumulative Consolidated
Period GAAP EBITDA
--------------------------------------------------------------------------------
<S> <C>
January 1, 2001 - June 30, 2001 $14,507,800.00
--------------------------------------------------------------------------------
January 1, 2001 - September 30, 2001 $22,671,200.00
--------------------------------------------------------------------------------
January 1, 2001 - December 31, 2001 $32,499,750.00
--------------------------------------------------------------------------------
</TABLE>
"(g) MINIMUM ALTERNATE CONSOLIDATED GAAP EBITDA. Permit the
Consolidated GAAP EBITDA for any fiscal quarter set forth below to
be less than the amount set forth in column A opposite such fiscal
quarter unless the cumulative Consolidated GAAP EBITDA for the
period beginning on January 1, 2001 and ending on the last day of
such fiscal quarter is greater than the amount set forth in column
B opposite such fiscal quarter:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Consolidated GAAP EBITDA
--------------------------------------------------------------------------------
Quarter Ending A B
--------------------------------------------------------------------------------
<S> <C> <C>
June 30, 2001 $6,550,500.00 $15,361,200.00
--------------------------------------------------------------------------------
September 30, 2001 $7,203,000.00 $24,004,800.00
--------------------------------------------------------------------------------
December 31, 2001 $8,672,250.00 $34,411,500.00
--------------------------------------------------------------------------------
</TABLE>
"(h) CONSOLIDATED SENIOR LEVERAGE RATIO. Permit the
Consolidated Senior Leverage Ratio of the Borrower as at the last
day of any period of four consecutive fiscal quarters ending
during any period set forth below to exceed the ratio set forth
below in the column opposite such period:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Consolidated
Period Senior Leverage Ratio
--------------------------------------------------------------------------------
<S> <C>
October 1, 2000 - March 31, 2001 2.93 to 1.0
--------------------------------------------------------------------------------
April 1, 2001 - June 30, 2001 2.51 to 1.0
--------------------------------------------------------------------------------
July 1, 2001 - September 30, 2001 2.19 to 1.0
--------------------------------------------------------------------------------
October 1, 2001 and thereafter 2.00 to 1.0"
--------------------------------------------------------------------------------
</TABLE>
(z) Section 7.2(d) is amended by inserting before the semicolon at
the end thereof ", provided that no Indebtedness listed in Schedule 5.1(e)
may be refinanced, refunded, renewed, replaced or extended without the
consent of the Required Lenders in their sole and absolute discretion";
(aa) Section 7.2(e) is amended by inserting at the beginning
thereof, "after delivery of the financial statements and certificates
required by Sections 6.1(a), 6.2(a) and 6.2(b) for
<PAGE>
the period ending December 31, 2001, if no Default or Event of Default shall
have occurred and be continuing,";
(ab) Section 7.2(l) is amended by replacing "$1,000,000" with
"$500,000" and inserting before the semicolon at the end thereof "provided
that trade letters of credit may not be outstanding at any one time in excess
of $250,000";
(ac) the "and" at the end of Section 7.2(l) is deleted, the period
at the end of Section 7.2(m) is replaced with "; and" and Section 7.2(n) is
added as follows:
"(n) Indebtedness arising under Specified Equipment Finance
Facilities and Indebtedness arising under any Guaranty Obligations
in respect thereof; PROVIDED, HOWEVER, that on or after December
8, 2000, no Indebtedness may be incurred under any Specified
Equipment Finance Facility for any equipment to be acquired,
leased or used by Certified Fabricators or Galaxy and PROVIDED
FURTHER, HOWEVER that on or after December 1, 2000, no increase
may be made to the principal outstanding balance or unpaid balance
of the capitalized lessor's cost outstanding thereunder without
the consent of the Required Lenders in their sole and absolute
discretion."
(ad) after Section 7.2(n) a paragraph is added as follows:
"Notwithstanding anything in this Section, the sum, without
duplication, of (i) the amount of all Indebtedness outstanding
under Sections 7.2(c), (f), (l) and (m) and (ii) the net amount,
if any, that any Precision Group Member would be required to pay
in connection with the termination of any Hedging Agreements
permitted under Section 7.2(i) may not exceed at any one time, the
amount of $5,000,000";
(ae) Section 7.3(i) is replaced with "Omitted.";
(af) Section 7.3(l) is amended by replacing "$1,500,000" with
"$1,000,000";
(ag) the "and" at the end of Section 7.3(q) is deleted, the period at
the end of Section 7.3(r) is replaced with "; and" and Section 7.3(s) is added
as follows:
"(s) Liens arising under or otherwise securing Specified
Equipment Finance Facilities and any Liens arising in respect of
deposits made with sellers of equipment to be financed
thereunder.";
<PAGE>
(ah) Section 7.4(b) is amended by inserting before the period at the
end thereof "and the Certified Fabricators Restructuring and the Galaxy
Restructuring may proceed in accordance with the Business Plan";
(ai) the "and" at the end of Section 7.5(g) is deleted, the period
at the end of Section 7.5(h) is replaced with "; and" and Section 7.5(i) is
added as follows:
"(i) any other Disposition consented to by the Required
Lenders in their sole and absolute discretion.";
(aj) Section 7.6 is amended by inserting after "scheduled repayment"
in the second line thereof ", scheduled rental payment", by inserting after
"Indebtedness" in the third line thereof "or lease obligation", by inserting
after "Precision Group Member in the sixth line thereof "or Holdco" and by
replacing clause (y) thereof with "(y) the Borrower may make payments to
Holdco to pay management, advisory and acquisition transaction fees of
Saunders Group, Carlisle Group and Harvey Group permitted under Section 7.9.";
(ak) Section 7.8 is amended by inserting after "any of the terms of
" ", the Specified Equipment Finance Facilities";
(al) Section 7.9 is amended by inserting before the period at the
end thereof:
"; PROVIDED, HOWEVER, from November 1, 2000 through
December 31, 2001, in no event shall any management, advisory or
acquisition transaction fees be incurred or paid by any Loan Party
or Precision Group Member, except that Holdco may, after April 1,
2002, pay to Saunders, Karp & Megrue, L.P. or an affiliate
designated by it, on account of the fiscal year ending December
31, 2001, a management fee in an amount not greater than $400,000
if (y) no Default or Event of Default shall have occurred and be
continuing and (z) after giving effect to the payment thereof, the
lesser of (A) the Total Revolving Commitments minus $3,000,000 or
(B) the Borrowing Base is at least $600,000 in excess of the Total
Revolving Extensions of Credit then outstanding, as certified by a
Responsible Officer and PROVIDED, FURTHER HOWEVER, that
notwithstanding anything contained in this
<PAGE>
Section, the Certified Fabricators Restructuring and the Galaxy
Restructuring may proceed in accordance with the Business Plan";
(am) Section 7.10 is amended by replacing "Enter" at the beginning
thereof with "Except for the Specified Equipment Finance Facilities, enter";
(an) Section 7.12 is amended by inserting in the beginning of clause
(b) thereof "the Specified Equipment Finance Facilities and";
(ao) Section 7.18 is added as follows:
"7.18 LEASES. Enter into or become liable with respect to
any leases other than (a) leases entered into under the Specified
Equipment Finance Facilities, excluding any leases of equipment to
be acquired, leased or used by Certified Fabricators or Galaxy,
(b) operating leases of personal property entered into in the
ordinary course of business or operating leases of personal
property which are not material on-going obligations, (c)
extensions of leased facilities in line with business expansion
pursuant to the Business Plan at market rates and on market terms
not to exceed $100,000 in the aggregate in any one fiscal year of
the Precision Group Members on a consolidated basis or (d)
existing leases, renewals or replacements thereof.";
(ap) Section 8(h) is amended by replacing "$1,500,000" with
"$1,000,000";
(aq) Section 8(l) is amended by adding to the end thereof "or" and
Sections 8(m) is added as follows:
"(m) any default shall occur under any agreement referred
to in clauses (i) or (ii) of the definition of Specified Equipment
Finance Facility or the Borrower shall make any payment under any
guarantee given by the Borrower for the obligations of any
Precision Group Member under any Specified Equipment Finance
Facility;"; and
(ar) Annex A, Exhibit B-2 and Schedules 1.1B, 4.4, 4.15, 4.19(a),
4.19(b), 4.19(c), 7.2(d) and 7.3(f) are replaced with Annex A, Exhibit B-2
and Schedules 1.1B, 4.4, 4.15, 4.19(a), 4.19(b), 4.19(c), 7.2(d) and 7.3(f)
attached hereto as Exhibit I.
SECTION 2. AMENDMENTS TO THE SECURITY AGREEMENT. The
<PAGE>
Security Agreement is, effective as of the date hereof, hereby amended as
follows:
(a) Section 1(d) is amended by inserting after "furniture," in the
third line thereof "fixtures,";
(b) Section 1(h) is amended by inserting after "each Person" in the
first line thereof "owned by Pledgor, including the shares of capital stock
of each Person";
(c) Section 1(j) is amended by inserting after "each Person" in the
first line thereof "owned by Pledgor, including the membership interests
and/or partnership interests, as applicable, of each Person";
(d) Section 1(l) is amended by inserting after "intercompany notes"
in the first line thereof ", including all intercompany notes";
(e) Section 6(l) is added as follows:
"(l) INVENTORY LOCATIONS. Substantially contemporaneously
with, but in no event later than 30 days after, the delivery of
Inventory to any Person for storage or processing which has an
aggregate value, when added to the value of all other Inventory
held by such Person, in excess of $50,000, the Pledgors shall
deliver to the Administrative Agent an agreement, satisfactory in
form and substance to the Administrative Agent, providing for the
waiver or subordination of any applicable Lien on the part of such
Person with respect to such Inventory and providing the
Administrative Agent with the right to repossess such Inventory
upon the occurrence and during the continuance of an Event of
Default.";
(f) Section 7(b)(ii)(A) is amended by replacing "without any action
or the giving of any notice" with "upon written notice sent by the
Administrative Agent"; and
(g) Schedules 1-A, IV, V and VII and Annexes A, B and C are
replaced with Schedules 1-A, IV, V and VII and Annexes A, B and C attached
hereto as Exhibit II.
SECTION 3. AMENDMENTS TO SECURITIES PLEDGE AGREEMENT. The Securities
Pledge Agreement is, effective as of the date hereof, hereby amended as
follows:
(a) Section 1(a) is amended by inserting after "each Person" in the
first line thereof "owned by Pledgor, including the shares of capital stock
of each Person";
(b) Section 1(c) is amended by inserting after "each
<PAGE>
Person" in the first line thereof "owned by Pledgor, including the membership
interests and/or partnership interests, as applicable, of each Person";
(c) Section 6(b)(ii)(A) is amended by replacing "without any action
or the giving of any notice" with "upon written notice sent by the
Administrative Agent"; and
(d) Annex A is replaced with Annex A attached hereto as Exhibit III.
SECTION 4. WAIVERS. Effective as of the date hereof, the Lenders and
the Administrative Agent waive:
(a) the right to require application, in accordance with Section
2.7(a) of the Credit Agreement, of the capital contribution being made to
Holdco or the Borrower pursuant to Section 5(b) of this Amendment; and
(b) their rights and remedies arising by reason of:
(i) any default under Section 8(b) of the Credit Agreement,
but only with respect to any representation which was not true when made by
reason of any failure or default referred to in Sections 1.1 through 1.5 of
the Waiver made as of November 14, 2000 or the Waiver made as of November 30,
2000 (collectively, the "WAIVERS") by and among the Loan Parties, the Lenders
listed on the signature pages thereof and the Administrative Agent; and
(ii) any default under Section 8(c) or Section 8(d) of the
Credit Agreement, but only with respect to any default thereunder by reason
of any failure referred to in Section 1.1, 1.2, 1.3 or 1.5 of the Waivers.
SECTION 5. CONDITIONS OF EFFECTIVENESS. This Amendment shall become
effective when, and only when, the following conditions precedent shall have
been satisfied, in each case as determined by the Administrative Agent in its
sole discretion:
(a) the Administrative Agent shall have received (i) this
Amendment, executed and delivered by the Administrative Agent, the Lenders
and each Loan Party, (ii) the Intercreditor Agreement dated as of the date
hereof executed and delivered by the Administrative Agent and General
Electric Capital Corporation, (iii) the Security Agreement dated as of the
date hereof executed and delivered by the Administrative Agent as agent for
General Electric Capital Corporation and each of the Grantors named therein
and (iv) the Security Agreement dated as of the date hereof executed and
delivered by General Electric Capital
<PAGE>
Corporation as agent for the Administrative Agent and each of the Grantors named
therein.
(b) Holdco shall have received a cash capital contribution to its
common equity of not less than $6,000,000 from Precision Partners, L.L.C.,
contributed the proceeds thereof to the common equity of the Borrower and the
Borrower shall have applied the proceeds thereof to the reduction of the
Revolving Loans; and the Administrative Agent shall have received from Bank of
America, N.A., reasonably satisfactory evidence that the sources of the cash
capital contribution made by Precision Partners, L.L.C. are $5,000,000
transferred by Saunders, Karp and Megrue and $1,000,000 transferred by John G.
Raos to the account of the Borrower with Bank of America, N.A.;
(c) (i) the Administrative Agent shall have received certified copies
of (A) the Master Lease Agreement dated as of March 31, 2000 between General
Electric Capital Corporation, for itself and as agent for certain participants
("GE CAPITAL"), as lessor, and Galaxy, Mid State, Nationwide Precision Products
Corp. and General Automation, Inc., as lessees, together with all of the
documents executed and delivered in connection therewith and any supplements,
modifications and amendments thereto (the "LEASE AGREEMENT") and (B) the Amended
and Restated Master Lease Agreement dated as of the date hereof between GE
Capital, as lessor, and Galaxy, Mid State, Nationwide Precision Products Corp.
and General Automation, Inc., as lessees (the "LEASE AGREEMENT AMENDMENT"),
together with all of the documents executed and delivered in connection
therewith and (ii) all conditions precedent to the effectiveness of the Lease
Agreement Amendment shall have been satisfied or waived;
(d) (i) the Administrative Agent shall have received certified copies
of the Loan, Security and Guaranty Agreement dated as of the date hereof between
GE Capital, as lender, and Galaxy, MidState, Nationwide Precision Products Corp.
and General Automation, Inc., as borrowers (the "EQUIPMENT FINANCE AGREEMENT"),
together with all of the documents executed and delivered in connection
therewith, (ii) all conditions precedent to the effectiveness of the Equipment
Finance Agreement shall have been satisfied or waived, (iii) GE Capital shall
have advanced no less than $9,000,000 thereunder for the purchase of "New
Equipment" as defined in the Equipment Finance Agreement and (iv) the
Administrative Agent shall have received a certificate setting forth the receipt
and disbursement of all amounts advanced under the Equipment Finance Agreement;
(e) the Administrative Agent shall have received a certified copy of
the Business Plan, accompanied by a certificate of a Responsible Officer
certifying to the Administrative Agent and the Lenders that the Business Plan
has been prepared in good faith based upon the assumptions contained therein and
all information available to the Loan Parties at the time of preparation thereof
and, as of the date of such certificate, such Responsible Officer is not aware
of any information contained in the Business Plan which is false or misleading
in any material
<PAGE>
respect or of any omission of information which causes the Business Plan to be
false or misleading in any material respect;
(f) the Administrative Agent shall have received the results of
Requests for Information (Form UCC-11), tax lien, judgment lien and pending
lawsuit searches or equivalent reports or lien search reports, each of a recent
date listing all effective financing statements, lien notices or comparable
documents that name any Loan Party as debtor in each of the jurisdictions where
assets of the Loan Parties are located and each such Loan Party's principal
place of business is located, and such search shall reveal no liens on any of
the assets of the Loan Parties except for Permitted Liens;
(g) the Administrative Agent shall have received, with a counterpart
for each Lender, a certificate of each Loan Party, substantially in the form of
Exhibit A hereto;
(h) the Administrative Agent shall have received for the account of
the Lenders which sign this Amendment an amendment fee in the amount of
$200,000.00 to be shared pro rata among such Lenders;
(i) the Administrative Agent and each Lender shall have received
reimbursement for all reasonable costs, fees and expenses, including legal fees,
incurred in connection with the development, negotiation, preparation and
execution of this Amendment and the other documents being executed and delivered
herewith and all due diligence in connection therewith;
(j) the Administrative Agent shall have received the legal opinion of
Jones, Day, Reavis & Pogue, counsel to the Precision Group Members and Holdco,
substantially in the form of Exhibit B hereto and opinions of counsel regarding
Maine and Michigan law, from counsel and in form and substance satisfactory to
the Administrative Agent;
(k) the Administrative Agent shall have received insurance
certificates satisfying the requirements of the Security Documents.
SECTION 6. REPRESENTATIONS AND WARRANTIES. To induce the Administrative
Agent and the Lenders to enter into this Amendment, the Loan Parties hereby
jointly and severally represent and warrant to the Administrative Agent and each
Lender that:
(a) The financial statements for the Loan Parties delivered to the
Lenders for the year ended December 31, 1999 in accordance with Section 6.1(a)
of the Credit Agreement and for the quarter ended September 30, 2000 in
accordance with Section 6.1(b) of the Credit Agreement present fairly in all
material respects the consolidated financial condition of the Loan Parties as at
such dates, and the consolidated results of their operations and their
consolidated retained earnings, stockholders' equity and cash flows for the
respective periods then ended. Since September 30,
<PAGE>
2000, there has been no development or event that has had or could reasonably be
expected to have a Material Adverse Effect.
(b) Each Loan Party (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
the corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification except as, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(c) Each Loan Party has the corporate power and authority, and the
legal right, to make, deliver and perform this Amendment and the other documents
to be executed and delivered by it in connection herewith. Each Loan Party has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Amendment and the other documents to be executed and
delivered by it in connection herewith. No consent or authorization of, filing
with, notice to or other act by or in respect of, any Governmental Authority or
any other Person is required in connection with the execution, delivery,
performance, validity or enforceability of this Amendment and the other
documents to be executed and delivered by it in connection herewith. This
Amendment and each other document to be executed and delivered in connection
herewith has been duly executed and delivered on behalf of each Loan Party party
thereto. This Amendment constitutes, and each other document to be executed and
delivered in connection herewith upon execution will constitute, a legal, valid
and binding obligation of each Loan Party party thereto, enforceable against
each such Loan Party in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
(d) The execution, delivery and performance of this Amendment and the
other documents to be executed and delivered in connection herewith will not
violate any Requirement of Law or any material Contractual Obligation of Holdco
or any Precision Group Member which could reasonably be expected to have a
Material Adverse Effect and will not result in, or require, the creation or
imposition of any Lien on any of their respective
<PAGE>
properties or revenues pursuant to any Requirement of Law or any such
Contractual Obligation. No Requirement of Law or Contractual Obligation
applicable to Holdco or any Precision Group Member could reasonably be
expected to have a Material Adverse Effect.
(e) Schedule 1 hereto sets forth the name and jurisdiction of
incorporation of each Subsidiary of Holdco and the Borrower and, as to each such
Subsidiary, the percentage of each class of Capital Stock owned by Holdco or any
Precision Group Member.
(f) Each Loan Party is, and after giving effect to this Amendment, the
Lease Agreement Amendment and the Equipment Finance Agreement and the incurrence
of all Indebtedness and obligations being incurred in connection herewith and
therewith will be and will continue to be, Solvent.
(g) The Business Plan was prepared in good faith on the basis of
assumptions which were fair in light of the conditions existing at the time of
delivery thereof, and represents the Loan Parties' best estimate of their future
financial performance.
(h) Except as amended hereby, each Exhibit, Schedule and Annex to each
Security Document remains true, accurate and complete in all material respects.
(i) After giving effect to this Amendment no violation of the terms of
the Credit Agreement exists in any material respect and all representations and
warranties contained in the Credit Agreement are true, correct and complete in
all material respects on and as of the date hereof except to the extent such
representations and warranties specifically relate to an earlier date in which
case they were true, correct and complete in all material respects on and as of
such earlier date.
(j) No Loan Party has any right of setoff, recoupment, counterclaim or
defense of any nature whatsoever to the Obligations.
(k) All of the proceeds of the Equipment Finance Agreement have been
or will be used to pay for Capital Expenditures being made substantially
contemporaneously with the closing thereof or to pay Revolving Loans, the
proceeds of which were used to pay for Capital Expenditures.
(l) On or about July 7, 1999, Calbrit Design, Inc. merged into
Certified Fabricators which was the surviving corporation of the merger.
SECTION 7. RELEASE.
The Loan Parties on their own behalf, and on behalf of their successors
and assigns, hereby release, waive and forever discharge the Agents, the
Lenders, their respective affiliates and all of their officers, directors,
employees, attorneys, consultants and agents from any and all actions, causes of
<PAGE>
action, debts, dues, claims, demands, liabilities and obligations of every kind
and nature, both in law and equity, known or unknown, whether matured or
unmatured, absolute or contingent arising from the beginning of the world
through the date hereof with respect to the Credit Agreement, the Loan Documents
and the transactions contemplated thereby. The release, waiver and discharge in
this Section shall be effective regardless of whether the conditions to this
Amendment are satisfied.
SECTION 8. AUTHORIZATION OF AGENT. The Lenders authorize and direct the
Administrative Agent to execute and deliver each of the documents to be executed
and delivered by it hereunder. The Lenders and the Loan Parties acknowledge and
agree that, in acting as "Agent" for General Electric Capital Corporation under
the Security Agreement, dated as of the date hereof, made by the Grantors named
therein, Citicorp USA, Inc. shall be entitled to the benefit of Sections 9.2
through 9.8 of the Credit Agreement.
SECTION 9. ACKNOWLEDGMENT AND CONSENT OF LOAN PARTIES . Each of the Loan
Parties acknowledges and consents to the terms of the Intercreditor Agreement
dated as of the date hereof between the Administrative Agent and General
Electric Capital Corporation. Each of the Loan Parties also acknowledges and
agrees that the Liens granted to the Administrative Agent have been duly
perfected and have attached to the rights of the lessees under the Master Lease
Agreement and all proceeds thereof.
SECTION 10. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS .
(a) Upon the effectiveness hereof, each reference in the Credit
Agreement, the Security Agreement or the Securities Pledge Agreement to "this
Agreement," "hereunder," "hereof" or words of like import referring to the
Credit Agreement, the Security Agreement or the Securities Pledge Agreement, as
the case may be, and each reference in the Loan Documents to the Credit
Agreement, the Security Agreement or the Securities Pledge Agreement to
"thereunder," "thereof" or words of like import referring to the Credit
Agreement, the Security Agreement or the Securities Pledge Agreement, as the
case may be, shall mean and be a reference to the Credit Agreement, the Security
Agreement or the Securities Pledge Agreement, as the case may be, as amended
hereby.
(b) Except as specifically provided herein, the Credit Agreement and
the other Loan Documents are and shall continue to be in full force and effect
and are hereby in all respects ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Administrative Agent or any Lender under any of the Loan
Documents, nor constitute a waiver of any provision of any of the Loan
Documents.
(d) This Amendment shall constitute a Loan Document.
<PAGE>
(e) THIS AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS.
(f) THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 11. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
SECTION 12. WAIVERS OF JURY TRIAL. EACH OF THE LOAN PARTIES, THE AGENTS
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AMENDMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 13. EXECUTION IN COUNTERPARTS, ETC. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement. Delivery of an executed counterpart of a signature
page to this Amendment by telecopier shall be effective as delivery of a
manually executed counterpart of this Amendment.
{The remainder of this page intentionally left blank.}
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PRECISION PARTNERS, INC.
PRECISION PARTNERS HOLDING COMPANY
By: /s/ Frank Reilly
-------------------------------------
Name: Frank Reilly
Title: Executive Vice President
and Cheif Financial Officer
MID STATE MACHINE PRODUCTS
GALAXY INDUSTRIES CORPORATION
CERTIFIED FABRICATORS, INC.
NATIONWIDE PRECISION PRODUCTS CORP.
GENERAL AUTOMATION, INC.
GILLETTE MACHINE & TOOL CO., INC.
By: /s/ Frank Reilly
-------------------------------------
Name: Frank Reilly
Title: Vice President
CITICORP USA, INC.,
as Administrative Agent
By: /s/ Michael Becker
-------------------------------------
Name: Michael Becker
Title:
<PAGE>
CITICORP USA, INC.,
as a Lender
By: /s/ Michael Becker
-------------------------------------
Name: Michael Becker
Title: Vice President
BANK OF AMERICA, N.A. (successor to
NationsBank, N.A.), as a Lender
By: /s/ John J. O'Neill
-------------------------------------
Name: John J. O'Neill
Title: Managing Director
SUNTRUST BANK, ATLANTA,
as a Lender
By: /s/ Michael F. Lapnriesi
-------------------------------------
Name: Micheal F. Lapnriesi
Title: Director
<PAGE>
Annex A
PRICING GRID
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Consolidated Leverage Applicable Applicable
Ratio Margin for Margin for CommitmentF
Eurodollar Base Rate ee Rate
Loans Loans
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Greater than or equal to 400 bps 300 bps 50 bps
4.25 to 1.0
---------------------------------------------------------------------------------------
Greater than or equal to 350 bps 250 bps 50 bps
4.00 to 1.0 and less
than 4.25 to 1.0
---------------------------------------------------------------------------------------
Less than 4.00 to 1.0 300 bps 200 bps 50 bps
---------------------------------------------------------------------------------------
</TABLE>
Changes in the Applicable Margin resulting from changes in the Consolidated
Leverage Ratio shall become effective on the date (the "ADJUSTMENT DATE") on
which financial statements are delivered to the Lenders pursuant to Section 6.1
(but in any event not later than the 45th day after the end of each of the
first three quarterly periods of each fiscal year or the 90th day after the
end of each fiscal year, as the case may be) and shall remain in effect until
the next change to be effected pursuant to this paragraph. If any financial
statements referred to above are not delivered within the time periods
specified above, then, until such financial statements are delivered, the
Consolidated Leverage Ratio of the Borrower as at the end of the fiscal
period that would have been covered thereby shall for the purposes of this
definition be deemed to be greater than 4.25 to 1.0. In addition, at all
times while an Event of Default shall have occurred and be continuing, the
Consolidated Leverage Ratio of the Borrower shall for the purposes of this
definition be deemed to be greater than 4.25 to 1.0. Each determination of
the Consolidated Leverage Ratio pursuant to this pricing grid shall be made
with respect to (or, in the case of Consolidated Total Debt, as at the end
of) the period of four consecutive fiscal quarters of the Borrower ending at
the end of the period covered by the relevant financial statements.
