EXHIBIT 10.65
AMENDMENT NO. 2 TO CREDIT
AGREEMENT (this "Amendment"), dated
as of October 29, 2002, among DJ
ORTHOPEDICS, INC., a Delaware
corporation ("Holdings"), DJ
ORTHOPEDICS, LLC, a Delaware limited
liability company (the "Borrower"),
the financial institutions listed on
the signature pages hereto (the
"Lenders"), WACHOVIA BANK, NATIONAL
ASSOCIATION, as administrative agent
(in such capacity, the
"Administrative Agent"), and
JPMORGAN CHASE BANK, as syndication
agent (in such capacity, the
"Syndication Agent").
WHEREAS, pursuant to the Credit Agreement, dated as of June 30,
1999, among Holdings, the Borrower, the Lenders, the Administrative Agent and
the Syndication Agent (as amended by Amendment No. 1 dated as of May 25, 2000
and Agreement dated as of July 13, 2000, as such may be amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), the Lenders have
extended credit to the Borrower, and have agreed to extend credit to the
Borrower, pursuant to the terms and subject to the conditions set forth therein;
WHEREAS, the Borrower anticipates incurring certain cash and
non-cash charges attributable to the third and fourth fiscal quarters of fiscal
year 2002 and the first fiscal quarter of fiscal year 2003 in connection with
its performance improvement program; and
WHEREAS, the anticipated charges, together with the good faith
estimate of the Borrower's management as to the amounts thereof, are described
on Schedule A hereto; and
WHEREAS, the Borrower has requested that the Required Lenders
agree to amend certain provisions of the Credit Agreement in order to permit the
addback of such charges in the calculation of Consolidated EBITDA and in order
to avoid anticipated financial covenant violations during the fourth fiscal
quarter of fiscal year 2002 and the first fiscal quarter of fiscal year 2003;
and
WHEREAS, the Required Lenders are willing to amend the Credit
Agreement, pursuant to the terms and subject to the conditions set forth herein.
ACCORDINGLY, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
Section 1.Defined Terms. Capitalized terms used and not otherwise
defined in this Amendment shall have the meanings given to them in the Credit
Agreement.
Section 2.Amendments.
(a) The following defined term is hereby added to Section 1.01
of the Credit Agreement in proper alphabetical order:
1. " `Second Amendment' shall mean Amendment No. 2 to Credit
Agreement, dated as of October 29, 2002, among Holdings, the Borrower,
the Lenders party thereto, the Administrative Agent and the Syndication
Agent."
(a) The definition of "Consolidated EBITDA" set forth in Section
1.01 of the Credit Agreement is hereby amended by adding the following proviso
at the end of the first sentence thereof immediately before the period:
"; provided that, in determining Consolidated EBITDA, the Borrower may
add back cash and non-cash charges and expenses of the types described
on Schedule A to the Second Amendment (collectively, `Permitted
Addbacks') that are recorded during the period consisting of the third
and fourth fiscal quarters of the Borrower's 2002 fiscal year and the
first quarter of the Borrower's 2003 fiscal year (such period, the
`Permitted Addback Period'), in each case to the extent originally
deducted from revenues in determining Consolidated Net Income for any
applicable period; but provided further that (I) no cash or non-cash
charges or expenses of any kind (other than Permitted Addbacks and items
of the types described in clauses (a), (b), (c), (d) (but as to clause
(d), only depreciation an amortization), (e), (g), and (h) above)
recorded during the Permitted Addback Period may be added back to
Consolidated Net Income in calculating Consolidated EBITDA for any
period and (II) the aggregate of all Permitted Addbacks recorded during
the Permitted Addback Period and added back to Consolidated Net Income
pursuant to this definition shall not exceed $17,000,000"
(b) The definition of "Permitted Acquisition" set forth in
Section 1.01 of the Credit Agreement is hereby amended by adding the following
proviso at the end of the last sentence thereof immediately before the period:
"and provided further that the aggregate amount of cash consideration
paid with respect to Permitted Acquisitions consummated during the
period consisting of the fourth fiscal quarter of the Borrower's 2002
fiscal year and the first fiscal quarter of the Borrower's 2003 fiscal
year shall not exceed $3,000,000"
(c) Section 6.13 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
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"SECTION 6.13. Leverage Ratio. The Borrower will not permit the
Leverage Ratio as of any date during any period set forth below to be in
excess of the ratio set forth below opposite such period:
Period Ratio
------ -----
December 31, 2001 through September 28, 2002 4.50
September 29, 2002 through February 15, 2003 5.75
February 16, 2003 through December 30, 2003 4.00
December 31, 2003 and thereafter 3.50"
(d) Section 6.14 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"SECTION 6.14. Consolidated Interest Coverage Ratio. The
Borrower will not permit the Consolidated Interest Coverage Ratio for
any four-fiscal-quarter period ending during any period set forth below
to be less than the ratio set forth below opposite such period:
Period Ratio
------ -----
December 31, 2001 through December 30, 2002 1.80
December 31, 2002 through March 28, 2003 1.70
March 29, 2003 through December 30, 2003 2.10
December 31, 2003 and thereafter 2.50"
Section 2.Representations and Warranties. In order to induce the Lenders
to enter into this Amendment, each of Holdings and the Borrower hereby
represents and warrants to the Lenders as of the Effective Date, as follows:
(a) This Amendment has been duly executed and delivered by it
and constitutes its legal, valid and binding obligation enforceable against it
in accordance with its terms except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting creditors' rights generally and except as such enforceability may be
limited by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(b) No Default or Event or Default has occurred and is
continuing.
(c) Each of the representations and warranties set forth in
Article III of the Credit Agreement is true and correct in all material respects
with the same effect as if made on the
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Effective Date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be true and correct in all material respects as to such earlier
date).
Section 3.Effectiveness. This Amendment shall be deemed effective as of
the date (the "Effective Date") when each of the following conditions precedent
has been satisfied or waived:
(a) The Administrative Agent shall have received duly executed
counterparts of this Amendment bearing the authorized signatures of the Required
Lenders, Holdings and the Borrower.
(b) In consideration of this Amendment and the amendments made
herein, the Borrower shall have paid to the Administrative Agent, for the
account of each Lender executing this Amendment by 5:00 p.m. (New York time) on
the Effective Date, a fee in the amount of 25 basis points (0.25%) on the
aggregate principal amount of such Lender's Revolving Commitment and outstanding
Term Loans.
Section 4.Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 5.Effect of Amendment. Except as expressly set forth herein,
this Amendment shall not, by implication or otherwise, limit, impair, constitute
a waiver of, or otherwise affect the rights and remedies of the Lenders, the
Administrative Agent, the Syndication Agent, the Borrower or Holdings under the
Credit Agreement or any other Loan Document, and shall not alter, modify, amend
or in any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Credit Agreement or any other Loan Document, all of
which are ratified and affirmed in all respects and shall continue in full force
and effect. Nothing herein shall be deemed to entitle the Borrower or Holdings
to a consent to, or a waiver, amendment, modification or other change of, any of
the terms, conditions, obligations, covenants or agreements contained in the
Credit Agreement or any other Loan Document in similar or different
circumstances. After the date hereof, any reference to the Credit Agreement
shall mean the Credit Agreement as modified hereby. This Amendment shall
constitute a "Loan Document" for all purposes of the Credit Agreement and the
other Loan Documents. This Amendment may not be amended nor may any provision
hereof be waived except pursuant to a writing signed by each of the parties
hereto.
Section 6.Notices. All notices hereunder shall be given in accordance
with the provisions of Section 9.01 of the Credit Agreement.
Section 7.Counterparts. This Amendment may be executed by one or more of
the parties to this Amendment on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument, and shall become effective as
provided in Section 4 hereof.
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Section 8.Headings. The headings used herein are for convenience of
reference only, are not part of this Amendment and are not to be taken into
consideration in interpreting this Amendment.
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IN WITNESS WHEREOF, this Amendment has been duly executed as of
the day and year first above written.
DJ ORTHOPEDICS, LLC
By: /s/ Vickie L. Capps
-------------------------------
Name: Vickie L. Capps
Title: Sr. V.P. & CFO
DJ ORTHOPEDICS, INC.
By: /s/ Vickie L. Capps
-------------------------------
Name: Vickie L. Capps
Title: Sr. V.P. & CFO
WACHOVIA BANK, NATIONAL ASSOCIATION,
individually and as Administrative
Agent and Collateral Agent
By: /s/ Harry E. Ellis
-------------------------------
Name: Harry E. Ellis
Title: Managing Director,
Senior Vice President
JPMORGAN CHASE BANK, individually
and as Syndication Agent, Issuing
bank and Swingline Lender
By: /s/ Robert Bottamedi
-------------------------------
Name: Robert Bottamedi
Title: Vice President
AMSOUTH BANK
By:
-------------------------------
Name:
Title:
BAYERISCHE HYPO-UND VEREINSBANK AG,
NEW YORK BRANCH
By: /s/ Ajay Nanda
-------------------------------
Name: Ajay Nanda
Title: Associate Director
By: /s/ Elizabeth Tallmadge
-------------------------------
Name: Elizabeth Tallmadge
Title: Chief Investment Officer
BANK LEUMI USA
By: /s/ Gloria Bucher
-------------------------------
Name: Gloria Bucher
Title: Senior Vice President,
Managing Director
FLEET NATIONAL BANK
By: /s/ Christopher J. Wickles
-------------------------------
Name: Christopher J. Wickles
Title: Vice President
WELLS FARGO BANK, N.A.
By: /s/ Martin Roblee
-------------------------------
Name: Martin Roblee
Title: Vice President
THE PROVIDENT BANK
By: /s/ Thomas W. Doe
-------------------------------
Name: Thomas W. Doe
Title: Vice President
PROVIDENT BANK OF MARYLAND
By: /s/ Samuel B. Bayne, Jr.
-------------------------------
Name: Samuel B. Bayne, Jr.
Title: Vice President
Schedule A
Performance Improvement Program Costs
Type of Cost Estimated Amount
------------ ----------------
Severance $4.1 million
AlixPartners--Consulting Expenses $3.5 million
Non-cash reserves for inventory and intangibles $3.3 million
related to refocus of product strategy
Vacated facilities rent accrual $2.5 million
IT Consulting $1.0 million
Moving costs and other $1.1 million