Exhibit 10.1

 

RBS CITIZENS, NATIONAL ASSOCIATION

 

  

SECOND MODIFICATION AGREEMENT

 

This Second Modification Agreement (the “Agreement”) is made and entered into
effective as of the 13th day of August, 2009, by and among the following
parties:

RBS Citizens, National Association (successor by merger to Citizens Bank of
Massachusetts), a national banking association with its principal office at 28
State Street, Boston, Massachusetts 02109 (the “Bank”);

Cybex International, Inc., a New York corporation with its principal office at
10 Trotter Drive, Medway, Massachusetts 02053 (the “Borrower”); and

Cybex International UK Limited, a United Kingdom corporation with a principal
office at Oak Tree House, Atherstone Road, Measham, Derbyshire, DE12 7EL,
England (the “Guarantor”);

the Borrower and the Guarantor are hereinafter sometimes collectively referred
to as the “Obligors”);

in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.

BACKGROUND

A. On or about October 17, 2006, the Bank and the Borrower entered into a
certain Loan Agreement (as ratified by instrument dated June 28, 2007, and as
amended, modified or supplemented, the “Loan Agreement”) pursuant to which,
among other things, the Bank and the Borrower agreed to certain terms and
conditions relative to the establishment of a $13,000,000 term loan facility
(the “Term Loan”), the purpose of which was to finance the Borrower’s
acquisition of the real property, with the buildings and improvements thereon,
located at 1975 24th Avenue SW, Lot 1 and Outlot A of Block 1, Ebeling Farm
Addition, Owatonna, Minnesota (the “Mortgaged Premises”). The Term Loan is
evidenced by a certain Commercial Promissory Note (as amended, modified or
supplemented, the “Term Note”) dated June 28, 2007 in the original principal
amount of $13,000,000 made by the Borrower payable to the order of the Bank. The
Term Loan and the obligations and liabilities incurred by Borrower to the Bank
in connection therewith are secured by, among other things, a certain Mortgage,
Security Agreement and Assignment dated June 28, 2007 (as amended, modified or
supplemented, the “Mortgage”), pursuant to which, among other things, the
Borrower has granted the Bank a first priority lien and security interest in and
to the Mortgaged Premises.

B. On or about July 2, 2008, the Bank and the Borrower entered into a certain
Credit Agreement (as amended by Amendment No. 1 to Credit Agreement dated
August 31, 2008, the Modification Agreement as defined below, and as further
amended, modified or supplemented, the “Credit Agreement”) pursuant to which,
among other things and subject to certain terms and conditions, the Bank
established a revolving line of credit in favor of the Borrower in the maximum
principal amount of $15,000,000 (the “Line of Credit”), the purpose of which was
to finance the Borrower’s working capital, letters of credit and general
business needs. Advances

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under the Line of Credit are evidenced by a certain Revolving Credit Note (as
amended, modified or supplemented, the “Revolving Note”) dated July 2, 2008 in
the maximum principal amount of $15,000,000 made by the Borrower payable to the
order of the Bank. The Line of Credit and the obligations and liabilities
incurred by Borrower to the Bank in connection therewith are secured by, among
other things, a certain Security Agreement (Accounts Receivable and Inventory)
dated July 2, 2008 (as amended, modified or supplemented, the “Security
Agreement”), pursuant to which Borrower has granted the Bank a first priority
lien and security interest in and to all of the Collateral (as defined in the
Security Agreement).

C. On or about July 2, 2008, the Guarantor executed and delivered to the Bank an
instrument of Guaranty (as amended, modified or supplemented, the “Guaranty”)
pursuant to which, among other things, the Guarantor guaranteed the payment and
performance of all of the Borrower’s Liabilities (as that term is defined in the
Guaranty) to the Bank.

D. On or about May 4, 2009, the Obligors and the Bank entered into a certain
Modification Agreement (the “Modification Agreement”) pursuant to which, among
other things and subject to certain terms and conditions, the Bank waived
certain defaults and agreed to forbear from exercising its rights and remedies
on account of such defaults.

E. The Loan Agreement, the Term Note, the Mortgage, the Credit Agreement, the
Revolving Note, the Security Agreement, the Guaranty, the Modification Agreement
and all other agreements, instruments and documents executed in connection with
the establishment and documentation of the Term Loan and the Line of Credit are
hereinafter collectively referred to as the “Loan Documents.” The Term Loan and
the Line of Credit (together, the “Loans”) are cross-defaulted such that a
default under any of the Loans constitutes a default under all of the Loans.

F. The Borrower is in default of its obligations with respect to the Loans on
account of failure to comply with Sections 8.2 and 8.3 of the Credit Agreement,
and Sections 9(b) and 9(c) of the Loan Agreement. The Borrower’s failure to
comply with such covenants may be referred to herein as the “Defaults”.

G. The Obligors have requested that the Bank waive the Defaults and forbear from
exercising its rights and remedies on account of the Defaults and to modify
certain other provisions of the Loan Documents.

H. The Bank is willing to waive the Defaults and to forbear from exercising its
rights and remedies on account of the Defaults and to modify certain other
provisions of the Loan Documents, subject to and in accordance with the terms
and conditions set forth in this Agreement.

I. Capitalized terms used and not otherwise defined herein shall have the
meaning given to them in the Loan Documents.

NOW THEREFORE, in consideration of the mutual covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereby agree with the
terms and conditions of this Agreement as set forth herein.

 

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ARTICLE 1

Affirmation of Indebtedness, Acknowledgement of Default,

Waiver of Defenses and Claims, Ratification of Loan Documents

1.1 Affirmation of Indebtedness. The Obligors acknowledge and agree that the
balance of indebtedness owed to the Bank under the Loans as of August 13, 2009
is as follows:

 

Term Loan:

  

Line of Credit:

Principal

   $ 11,916,666.75    Principal    $ 250,000.00

Accrued and Unpaid Interest

   $ 8,376.85    Accrued and Unpaid Interest    $ 164.83                 

Total

   $ 11,925,043.60    Total    $ 250,164.83

In addition, the Obligors are and remain liable for the payment of all interest
accruing after August 13, 2009 with respect to the Loans, and for the payment of
all late fees, costs, expenses, professional fees and costs of collection
(including attorneys’ reasonable fees) heretofore or hereafter incurred by the
Bank in connection with the Loans (hereinafter collectively referred to as the
“Outstanding Obligations”). Each of the Obligors is unconditionally liable for
the Outstanding Obligations, jointly and severally.

1.2 Acknowledgement of Default. The Obligors acknowledge the occurrence of the
Defaults.

1.3 Waiver of Defenses and Claims. The Obligors hereby each individually
acknowledge and agree that none of them has any offsets, defenses, claims, or
counterclaims against the Bank or the Bank’s officers, directors, employees,
attorneys, representatives, parent, affiliates, predecessors, successors, or
assigns (hereinafter, collectively, “Bank Affiliates”) with respect to the
Loans, the Outstanding Obligations, or otherwise, and that if the Obligors now
have, or ever did have, any such offsets, defenses, claims, or counterclaims
against the Bank or any of the Bank Affiliates, whether known or unknown, at law
or in equity, from the beginning of the world through this date and through the
time of execution of this Agreement, then all of them are hereby expressly
WAIVED, and the Obligors hereby RELEASE the Bank and the Bank Affiliates from
any liability therefor. Without limiting the generality of the foregoing
release, the Obligors and each of their successors, assigns, parents,
subsidiaries, affiliates, predecessors, employees, agents, heirs, executors, as
applicable, jointly and severally, release and forever discharge the Bank and
the Bank Affiliates of and from any and all manner of action and actions, cause
and causes of action, suits, debts, controversies, damages, judgments,
executions, claims and demands whatsoever, asserted or unasserted, in law or in
equity which against the Bank and/or Bank Affiliates they ever had, now have
through this date or which any of such Obligors’ successors, assigns, parents,
subsidiaries, affiliates, predecessors, employees, agents, heirs, executors, as
applicable, both present and former ever had or now has through this date, upon
or by reason of any manner, cause, causes or thing whatsoever, including,
without limitation, any presently existing claim or defense whether or not
presently suspected, contemplated or anticipated.

1.4 Ratification of Loan Documents. The Obligors hereby ratify and confirm all
of the Loan Documents and acknowledge that the Loan Documents remain in full
force and effect in all respects, except as such Loan Documents are modified by
the express terms of this Agreement.

 

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ARTICLE 2

Bank’s Reservation of Rights

Except as otherwise specifically set forth herein, the Bank hereby reserves all
of its rights and remedies at law and in equity, including, without limitation,
the rights and remedies granted to the Bank pursuant to the Loan Documents to
collect all amounts due under the Loans. Except as otherwise specifically set
forth herein, nothing contained in this Agreement shall constitute a waiver by
the Bank of any default under the Loan Documents, whether now existing or
hereafter arising.

ARTICLE 3

Waiver and Forbearance

3.1 Waiver and Forbearance. Subject to the Obligors’ compliance with each of the
terms and provisions of this Agreement, including, without limitation, the
Obligors’ compliance with each of the Conditions Precedent contained in Article
4 below, the Bank agrees to waive the Defaults and to forbear from exercising
its rights both at law and in equity to accelerate and collect the indebtedness
owed to it under the Loans on account of the Defaults.

3.2 One Time Waiver; No Other Waiver. This is a one time waiver of the Defaults.
No other default or Event of Default is hereby waived by the Bank and the Bank’s
agreement to forbear shall be limited as specifically set forth herein.

ARTICLE 4

Conditions Precedent

Precedent to the effectiveness of this Agreement, the following matters and
documents, each in form and substance satisfactory to the Bank, shall have been
satisfied and/or delivered to the Bank, as applicable, prior hereto or
simultaneously herewith:

4.1 Authority. Each of the Obligors, as applicable, shall deliver to the Bank
appropriate resolutions authorizing the execution and delivery by the Obligors
of this Agreement and of all such other documents, instruments and agreements as
contemplated herein and as may reasonably be required by the Bank, and such
resolutions shall be certified by the Secretary of each Borrower pursuant to a
certificate authenticating the vote and otherwise acceptable to the Bank.

4.2 Additional Documentation and Financial Information. The Bank shall have
received (i) such other documents, certificates, resolutions, instruments, and
agreements from the Obligors as the Bank may reasonably request, and (ii) such
information and documentation about the financial condition, business and
operations of the Obligors as the Bank may reasonably request.

4.3 Payment of Bank’s Expenses and Costs. The Bank shall have been reimbursed
for all costs and expenses incurred in connection with the preparation and
negotiation of this Agreement, and any other fees, costs, and expenses incurred
by the Bank arising out of or relating to the Loans and the Bank’s relationship
with the Obligors, including, but not limited to, attorneys’ reasonable fees and
disbursements.

 

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ARTICLE 5

Amendment and Modification of Loan Documents

Subject to the Obligors’ compliance with the terms and conditions of this
Agreement, the Loan Agreement, Term Note, Credit Agreement, Revolving Note and
Security Agreement are hereby modified and amended as set forth below.

5.1 Amendment and Modification of Loan Agreement. The Loan Agreement is hereby
modified and amended as follows:

5.1.1 Section 7(a) of the Loan Agreement is deleted in its entirety and the
following is substituted in its place and stead:

“(a)(i) incur or permit to exist any lien, mortgage, security interest, pledge,
charge or other encumbrance against any of the Mortgaged Property, the
Collateral, as defined in that certain Credit Agreement dated July 2, 2008 by
and among the Borrower and the Bank (as same may be modified, supplemented or
amended, the “Credit Agreement”) whether now owned or hereafter acquired, the
Medway Manufacturing Facility (as defined in the Credit Agreement) or the
Borrower’s IP (as defined in the Credit Agreement) except: (1) liens in favor of
the Bank; (2) pledges or deposits in connection with or to secure worker’s
compensation and unemployment insurance; (3) tax liens which are being contested
in good faith; (4) Permitted Encumbrances, as defined in the Mortgage; (5) with
respect to the Medway Manufacturing Facility, the taking by the Town of Medway
for reconstruction of Alder Street by Order d. 2/22/99 rec. 13323/520, sh 16;
and (6) liens, mortgages, security interests, pledges, charges or other
encumbrances in favor of the Bank or specifically permitted, in writing, by the
Bank; or (ii) enter into or permit to exist any agreement, arrangement or
understanding, either oral or in writing, with any person or entity other than
the Bank, which restricts or prohibits the Borrower from incurring or permitting
to exist any lien, mortgage, security interest, pledge, charge or other
encumbrance on all or any portion of the Mortgaged Property or the Collateral.”

5.1.2 The definition of “Leverage Ratio” is changed from the ratio of Funded
Debt to EBITDA provided in Section 9(d) of the Loan Agreement to a ratio of
Total Liabilities to Tangible Net Worth (as defined herein). Specifically:

(a) The definition of “Leverage Ratio” as provided in Section 9(d) of the Loan
Agreement is hereby deleted in its entirety and replaced with the following new
definition in its place and stead:

“Leverage Ratio shall mean, for any applicable period of computation, the ratio
of the following for the Borrower and its subsidiaries on a consolidated basis
determined in accordance with GAAP: (a) Total Liabilities of the Borrower and
its subsidiaries as of the end of such period to (b) Tangible Net Worth as of
the date of the end of such period.”

 

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(b) The following definition of “Tangible Net Worth” is hereby inserted into
Section 9(d) of the Loan Agreement:

“Tangible Net Worth shall mean, as of the applicable measurement date, Total
Assets minus the sum of: (i) Intangible Assets, and (ii) Total Liabilities.”

(c) The following definition of “Total Assets” is hereby inserted into
Section 9(d) of the Loan Agreement:

“Total Assets means, total assets as determined by GAAP.”

(d) The following definition of “Total Liabilities” is hereby inserted into
Section 9(d) of the Loan Agreement:

“Total Liabilities means, total Indebtedness as determined by GAAP.”

(e) The following definition of “Indebtedness” is hereby inserted into
Section 9(d) of the Loan Agreement:

“Indebtedness means all obligations that in accordance with GAAP should be
classified as liabilities upon a balance sheet.”

(f) The following definition of “Intangible Assets” is hereby inserted into
Section 9(d) of the Loan Agreement:

“Intangible Assets means assets that in accordance with GAAP are properly
classifiable as intangible assets, including, but not limited to, goodwill,
franchises, licenses, patents, trademarks, trade names and copyrights.”

(g) Section 9(c) of the Loan Agreement is deleted in its entirety and the
following is substituted in its place and stead:

“9(c) Leverage Ratio. At all times, the Borrower’s Leverage Ratio shall not
exceed 1.25 to 1.0. This covenant is to be tested quarterly, with the first test
as of September 26, 2009.”

5.1.3 Measurement of the Debt Service Coverage Ratio is hereby suspended until
the quarter ending June 26, 2010. Specifically, Section 9(b) of the Loan
Agreement is deleted in its entirety and the following shall be substituted in
its place and stead:

“9(b) Minimum Debt Service Coverage. At all times, the Borrower shall generate a
minimum Debt Service Coverage Ratio of 1.20X. The Debt Service Coverage Ratio
shall be established by taking the Borrower’s EBITDA, less unfinanced capital
expenditures, less dividends paid, divided by interest expense, plus regularly
scheduled payments of principal paid on Indebtedness plus cash taxes for the
period in question. This covenant is to be tested quarterly, with the first test
as of June 26, 2010, on a trailing twelve (12) month basis. The Borrower and the
Bank have agreed to suspend the requirement of the Borrower’s compliance with
this Debt Service Coverage Ratio covenant for the testing periods ending
September 26, 2009, December 31, 2009, and March 27, 2010; provided however,
that this suspension of the Debt Service Coverage Ratio covenant is granted on a
one time basis, shall not apply to any subsequent period, and shall

 

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not result in an obligation of the Bank to grant any additional suspensions or
waivers in the future. For purposes of measuring the Debt Service Coverage
Ratio, the payment of a one-time “bullet” payment to Wachovia/Wells Fargo Bank
in the amount of $1,000,000.00 due in December 2009 shall be excluded from the
calculation of “regularly scheduled payments of principal paid on
Indebtedness.””

5.1.4 New Section 9(e)

The following is added as Section 9(e) of the Loan Agreement:

“9(e) Consolidated EBITDA. Commencing with the fiscal quarter ending
September 26, 2009, and measured quarterly as of the final day of each fiscal
quarter thereafter for the cumulative periods as set forth below, the Borrower
shall not permit the EBITDA to be less than the following:

 

Cumulative Period:

   Minimum EBITDA

3 Months ending September 26, 2009

   Not less than $0.00

6 months ending December 31, 2009

   $2,500,000.00

9 months ending March 27, 2010

   $3,500,000.00

5.1.5 New Section 9(f)`

The following is added as Section 9(f) of the Loan Agreement:

“9(f) Maximum Capital Expenditures. The Borrower, will not permit, directly or
indirectly, its aggregate Capital Expenditures for the purchase, fabrication,
lease (capital leases), or creation of fixed assets to exceed the amount of
$2,000,000 for the twelve (12) month period ending June 30, 2010.”

5.2 Amendment and Modification of Term Note. The Term Note is hereby modified
and amended as follows:

5.2.1 The definition of “Applicable Margin” found on page 1 of the Term Note is
hereby deleted, substituting in its place and stead the following:

““Applicable Margin” means (i) 3.00% per annum if the Debt Service Coverage
Ratio is less than or equal to 1:1; (ii) 2.75% per annum if the Debt Service
Coverage Ratio is greater than 1:1, but less than 1.2:1; and (iii) 2.50% per
annum if the Debt Service Coverage Ratio is greater than or equal to 1.2:1.””

 

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5.3 Amendment and Modification of Credit Agreement. The Credit Agreement is
hereby modified and amended as follows:

5.3.1 The definition of “Applicable Margin” as provided in Section 1.1 of the
Credit Agreement is hereby deleted in its entirety, substituting in its place
and stead the following:

“Applicable Margin means (i) with respect to the Revolving Credit Facility, for
any LIBOR Rate Loans and any LIBOR Advantage Rate Loans, (x) 3.00% per annum if
the Debt Service Coverage Ratio is less than or equal to 1:1; (y) 2.75% per
annum if the Debt Service Coverage Ratio is greater than 1:1, but less than
1.2:1; and (z) 2.50% per annum if the Debt Service Coverage Ratio is greater
than or equal to 1.2:1, and (ii) with respect to the Unused Fee, one quarter of
one (.25%) percent per annum.”

5.3.2 The following definition of “Borrower’s IP” is hereby inserted
alphabetically into Section 1.1 of the Credit Agreement:

“Borrower’s IP means all intellectual property now or in the future owned or
licensed by the Borrower, including, without limitation, any and all trademarks,
tradenames, service marks, patents and copyrights (including any registrations
of or pending applications for any of the foregoing).”

5.3.3 The definition of “Leverage Ratio” is changed from the ratio of Total
Funded Debt to EBITDA to a ratio of Total Liabilities to Tangible Net Worth (as
defined herein). Specifically:

(a) The definition of “Leverage Ratio” as provided in Section 1.1 of the Credit
Agreement is hereby deleted in its entirety and replaced with the following new
definition in its place and stead:

“Leverage Ratio means, as of the applicable measurement date, the ratio of Total
Liabilities to Tangible Net Worth.”

5.3.4 The following definition of “Medway Manufacturing Facility” is hereby
inserted alphabetically into Section 1.1 of the Credit Agreement:

“Medway Manufacturing Facility means that certain real property, together with
the buildings, structures and improvements thereon known and numbered as 10
Trotter Drive, Medway, Massachusetts.”

5.3.5 The definition of “Revolving Credit Facility Limit” as provided in
Section 1.1 of the Credit Agreement is hereby deleted in its entirety,
substituting in its place and stead the following:

“Revolving Credit Facility Limit shall mean Ten Million Dollars
($10,000,000.00).”

5.3.6 The following definition of “Tangible Net Worth” is hereby inserted
alphabetically into Section 1.1 of the Credit Agreement:

“Tangible Net Worth means, as of the applicable measurement date, Total Assets
minus the sum of: (i) Intangible Assets, and (ii) Total Liabilities.”

 

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5.3.7 As of the date hereof, the Maximum Availability under the Line of Credit
is reduced from $15,000,000.00 to $10,000,000.00. Specifically, Section 2.1(b)
of the Credit Agreement is hereby deleted in its entirety and the following
Section 2.1(b) is inserted in its place and stead:

“(b) As used herein, the term “Maximum Availability” refers at any time to the
lesser of (i) or (ii) below:

 

  (i) up to (A) Ten Million Dollars ($10,000,000.00); minus (B) the sum of the
aggregate amounts then undrawn on all outstanding letters of credit,
acceptances, or any other accommodations issued or incurred by the Bank for the
account and/or the benefit of Borrower; minus (C) the Liquidity Reserve.

 

  (ii) up to (A) eighty-five percent (85%) of Domestic Eligible Receivables;
plus (B) fifty percent (50%) of Foreign Eligible Receivables; plus (C) fifty
percent (50%) of the value of Borrower’s Eligible Inventory; minus (D) the sum
of the aggregate amounts then undrawn on all outstanding letters of credit,
acceptances, or any other accommodations issued or incurred by the Bank for the
account and/or benefit of Borrower.”

5.3.8 As of the date hereof, the negative pledge (restricting the ability of
Borrower to encumber the Collateral) set forth in Section 7.1(a) of the Credit
Agreement shall be expanded to cover the Medway Manufacturing Facility and the
Borrower’s IP. Specifically:

(a) Section 7.1(a) of the Credit Agreement is hereby deleted in its entirety and
the following is substituted in its place and stead:

“(a) Incur or permit to exist any lien, mortgage, security interest, pledge,
charge or other encumbrance against any of the Collateral whether now owned or
hereafter acquired, the Medway Manufacturing Facility or the Borrower’s IP
except: (i) liens in favor of the Bank; (ii) pledges or deposits in connection
with or to secure worker’s compensation and unemployment insurance; (iii) tax
liens which are being contested in good faith; (iv) with respect to the Medway
Manufacturing Facility, the taking by the Town of Medway for reconstruction of
Alder Street by Order d. 2/22/99 rec. 13323/520, sh 16; and (v) liens,
mortgages, security interests, pledges, charges or other encumbrances in favor
of the Bank or specifically permitted, in writing, by the Bank.”

5.3.9 As of the date hereof, the aggregate maximum amount of permitted
additional Indebtedness is decreased from $4,000,000.00 to $2,000,000.00.
Specifically, Section 7.2 of the Credit Agreement is hereby modified and amended
by deleting subsection (c) from said Section 7.2 in its entirety and the
following shall be substituted in its place and stead:

“(c) other Indebtedness up to an aggregate maximum of $2,000,000.00;”

5.3.10 As of the date hereof, the aggregate maximum contingent liabilities is
reduced from $10,000,000.00 to $7,000,000.00. Specifically, Section 7.4 of the
Credit Agreement is hereby modified and amended by deleting the amount
“$10,000,000.00” and substituting in its place and stead, the amount
“$7,000,000.00.”

5.3.11 As of the date hereof, the acquisition of the assets or business of a
third party by Borrower is prohibited. Specifically, Section 7.5 of the Credit
Agreement is hereby deleted in its entirety and substituted with the following
in its place and stead:

“7.5 Consolidation, Merger, or Conversion. Merge, consolidate or convert with or
into any other corporation or entity; and, for the purposes of this Section 7.5,
the acquisition of all or substantially all of the

 

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assets, together with the assumption of all or substantially all of the
obligations and liabilities, of any corporation or entity shall be deemed to be
a consolidation with such corporation or entity; provided, that this Section 7.5
shall not restrict the ability of Borrower to merge or consolidate with any of
its Subsidiaries (other than Cybex UK), so long as the Borrower is the surviving
entity. Acquisition by the Borrower of the assets or business of a third party
is not permitted.”

5.3.12 As of the date hereof, common stock repurchases by Borrower is
prohibited. Specifically, Section 7.7 of the Credit Agreement is hereby deleted
in its entirety and substituted with the following in its place and stead:

“7.7 Acquisition of Shares of Borrower. Purchase, acquire, redeem or retire, or
make any commitment to purchase, acquire, redeem or retire any of the shares or
other ownership interest of the Borrower, whether now or hereafter outstanding.”

5.3.13 Measurement of the Debt Service Coverage Ratio is hereby suspended until
the quarter ending June 30, 2010. Specifically, Section 8.2 of the Credit
Agreement is deleted in its entirety and the following shall be substituted in
its place and stead:

“8.2 Debt Service Coverage Ratio. The Borrower shall not permit its Debt Service
Coverage Ratio to be less than the ratio of 1.20 to 1.0, such Debt Service
Coverage Ratio being measured quarterly, on a trailing twelve (12) month basis,
as of the final day of each fiscal quarter, beginning June 30, 2010. The
Borrower and the Bank have agreed to suspend the requirement of the Borrower’s
compliance with this Debt Service Coverage Ratio covenant for the testing
periods ending September 30, 2009, December 31, 2009, and March 31, 2010;
provided however, that this suspension of the Debt Service Coverage Ratio
covenant is granted on a one time basis, shall not apply to any subsequent
period, and shall not result in an obligation of the Bank to grant any
additional suspensions or waivers in the future. For purposes of measuring the
Debt Service Coverage Ratio, the payment of a one-time “bullet” payment to
Wachovia/Wells Fargo Bank in the amount of $1,000,000.00 due in December 2009
shall be excluded from the calculation of Current Maturity of Long-Term Debt.”

5.3.14 The Leverage Ratio requirement is changed to a ratio of 1.25 to 1.0.
Specifically, Section 8.3 of the Credit Agreement is deleted in its entirety and
the following is substituted in its place and stead:

“8.3 Leverage Ratio. The Borrower shall not permit its Leverage Ratio to exceed
1.25 to 1.0, such Leverage Ratio being measured quarterly, as of the final day
of each fiscal quarter of Borrower.”

5.3.15 As of the date hereof, Borrower shall maintain a minimum liquidity
reserve of $5,000,000.00. Specifically, the following new Section 8.4 shall be
added to the Credit Agreement as a new financial covenant:

“8.4 Liquidity Reserve. The Borrower shall maintain a liquidity reserve (which
is defined as availability for Loan advances under the Line of Credit and herein
referred to as the “Liquidity Reserve”), at all times, in an amount equal to
$5,000,000.00. This financial covenant shall be eliminated once the Borrower has
maintained a Debt Service Coverage Ratio of greater than 1.20 to 1.0 for two
(2) consecutive quarterly measurement periods, such measurements to be
calculated on a trailing twelve (12) month basis.”

 

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5.3.16 As of the date hereof, Borrower shall be required to maintain a minimum
consolidated EBITDA. Specifically, the following new Section 8.5 shall be added
to the Credit Agreement as a new financial covenant:

“8.5 Consolidated EBITDA. Commencing with the fiscal quarter ending
September 26, 2009, and measured quarterly as of the final day of each fiscal
quarter thereafter for the cumulative periods as set forth below, the Borrower
shall not permit the EBITDA to be less than the following:

 

Cumulative Period:

   Minimum EBITDA

3 Months ending September 26, 2009

   Not less than $0.00

6 months ending December 31, 2009

   $2,500,000.00

9 months ending March 27, 2010

   $3,500,000.00

5.3.17 For the twelve (12) month period ending June 30, 2010, Borrower shall not
permit its cumulative Capital Expenditures to exceed $2,000,000.00.
Specifically, the following new Section 8.6 shall be added to the Credit
Agreement as a new financial covenant:

“8.6 Maximum Capital Expenditures. The Borrower, will not permit, directly or
indirectly, its aggregate Capital Expenditures for the purchase, fabrication,
lease (capital leases), or creation of fixed assets to exceed the amount of
$2,000,000 for the twelve (12) month period ending June 30, 2010.”

5.3.18 Section 9.11 of the Credit Agreement is hereby deleted in its entirety,
substituting in its place and stead the following:

“9.11(i) Failure by the Borrower or any Subsidiary to pay any other Indebtedness
or obligation to a Person other than the Bank in excess of $500,000.00, whether
contingent or otherwise, which failure continues beyond any applicable grace or
cure periods, or (ii) if any such other Indebtedness or obligation shall be
accelerated unless the reason for such acceleration is being contested in good
faith and the Borrower has set aside funds or posted a bond to the reasonable
satisfaction of the Bank sufficient to satisfy such contested amounts (but, with
respect to a Subsidiary other than Cybex UK, only if such event would have a
Material Adverse Effect on Borrower) or (iii) if the Borrower is in default with
respect to any financial covenant contained in any agreement with any Person
other than the Bank; or”

5.3.19 Schedule 7.2 to the Credit Agreement is amended by adding, under the
heading “Wachovia Bank, National Association”, the following:

“$1,000,000 Term Loan. Maturity Date December 31, 2009.”

 

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5.4 Amendment and Modification of Security Agreement. The Security Agreement is
hereby modified and amended as follows:

5.4.1 The fourth paragraph of the first page of the Security Agreement is hereby
deleted in its entirety, substituting in its place and stead the following:

“The security interest in the Collateral is being granted by the Debtor to the
Bank to secure the payment and performance of all liabilities and obligations
now or hereafter owing from the Debtor to the Secured Party, including, without
limitation, those liabilities and obligations pursuant to the (i) Revolving
Credit Note dated July 2, 2008 made by the Debtor payable to the order of the
Secured Party as same may be modified, supplemented, or amended, (ii) Credit
Agreement by and among the Debtor and the Secured Party dated July 2, 2008 (as
same may be modified, supplemented or amended, the “Credit Agreement”),
including, without limitation, any Hedging Obligations as defined therein,
(iii) Loan Agreement dated October 17, 2006 by and among the Debtor and the
Secured Party (as same may be modified, supplemented or amended, the “Loan
Agreement”), and (iv) Commercial Promissory Note dated June 28, 2007 made by the
Debtor payable to the order of the Secured Party (as same may be modified,
supplemented or amended, collectively, the “Obligations”), which term shall
include all accrued interest and all costs and expenses, including attorney’s
reasonable fees, costs and expenses relating to the appraisal and/or valuation
of assets and all costs and expenses incurred or paid by the Bank in exercising,
preserving, defending, collecting, enforcing, or protecting any of its rights
under the Obligations or hereunder or with respect to the Collateral or in any
litigation arising out of the transactions evidenced by the Obligations.”

5.5 Amendment and Modification of the Modification Agreement. The requirement
that the Bank release the cross-collateralization, in one direction, if Borrower
satisfied certain financial conditions is eliminated. Specifically, the
Modification Agreement is hereby modified and amended by deleting Section 7.1 in
its entirety and substituting in its place and stead the following:

“7.1 Cross-Default and Cross-Collateralization. The Obligors acknowledge and
agree that the Loans are cross defaulted and that the Bank is empowered and
authorized to exercise all of its rights and remedies upon the occurrence of a
default or Event of Default under either of them, and that the Term Loan is
cross-collateralized with the Line of Credit such that the collateral granted to
the Bank to secure the Line of Credit secures the indebtedness under the Term
Loan. The Obligors shall execute and furnish to the Bank, upon its request, with
such additional documents and instruments as the Bank may require to further
confirm or otherwise further effect the cross-defaulted, cross- collateralized
status of the Loans, including, but not limited to, ratifications, modifications
and/or amendments of any of the Loan Documents.”

ARTICLE 6

Representations and Warranties

The Obligors hereby each represent and warrant as follows:

6.1 Representations and Warranties Confirmed. The representations and warranties
contained in the Loan Documents, as hereby amended, are true and correct as of
the date hereof with the same effect as though such representations and
warranties had been made on the date hereof.

 

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6.2 Compliance with Loan Documents. Except as specifically set forth herein, the
Obligors have complied and are now in compliance with all of the terms and
provisions set forth in the Loan Documents, on its or their part, as applicable,
to be observed and performed.

6.3 No Default. Except for the Defaults, no default or Event of Default as
specified in any of the Loan Documents has occurred or is continuing.

6.4 Authority. The execution, delivery, and performance of this Agreement
(i) has been duly authorized by all requisite action, (ii) will not violate
either (x) any provision of law applicable to any Obligor, or any Obligor’s
charter documents or (y) any order of any court or other agency of government
binding on the any Obligor or any indenture, agreement, or other instrument to
which any Obligor is a party, or by which it or any of its property is bound,
and (iii) will not be in conflict with, result in a breach of, or constitute
(with due notice and/or lapse of time) a default under, any such indenture,
agreement, or other instrument.

6.5 Financial Statements. The most current financial statements of the Borrower
and Guarantor have been furnished to the Bank. Such statements are true and
complete in all material respects. There has been no material adverse change in
the financial condition contained therein since the dates of such statements.

ARTICLE 7

Miscellaneous

7.1 Payment of Fees and Expenses. The Obligors agree to reimburse the Bank on
demand for all expenses which the Bank may incur in connection with the
preparation of this Agreement and all documents and instruments executed and
delivered in connection herewith and in connection with the administration of
the Loans, collection of the Outstanding Obligations and/or the protection or
enforcement of any of the Bank’s rights against the Borrowers or any collateral,
including attorneys’ reasonable fees, and disbursements, appraisal fees,
inspection fees, and professional fees and charges. The Obligors authorize the
Bank, at its option, to pay all such expenses and to charge the same to any
account of the Obligors with the Bank.

7.2 Governing Law. This Agreement has been negotiated and accepted in, and shall
be deemed to have been made in The Commonwealth of Massachusetts, and the
validity of this Agreement, its construction, interpretation and enforcement,
and the rights of the parties hereunder, shall be determined under, governed by,
and construed in accordance with the laws (and not the law of conflicts) of The
Commonwealth of Massachusetts. All parties submit to the jurisdiction of The
Commonwealth of Massachusetts with regard to any dispute arising under the Loan
Documents and this Agreement.

7.3 Waiver of Jury Trial. The Obligors make the following waiver knowingly,
voluntarily, and intentionally, and understand that the Bank, in entering into
this Agreement is relying thereon. THE OBLIGORS, TO THE EXTENT OTHERWISE
ENTITLED THERETO, HEREBY EACH IRREVOCABLY WAIVE ANY PRESENT OR FUTURE RIGHT OF
THE OBLIGORS TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE BANK
IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR
AGAINST THE BANK OR IN WHICH THE

 

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BANK IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF, OR
IS IN RESPECT OF, ANY RELATIONSHIP BETWEEN ANY OF THE OBLIGORS OR ANY OTHER
PERSON AND BANK.

7.4 No Waiver of Defaults. Except as otherwise set forth in Article 3.1 above,
the Bank does not waive any defaults or Events of Default now existing or
hereafter arising under the Loan Documents.

7.5 Entire Agreement. This Agreement and all other documents, instruments, and
agreements executed in connection herewith represent the entire agreement of the
parties hereto and incorporate the final results of all discussions and
negotiations between the Obligors and the Bank, either express or implied,
concerning the matters included herein and in such other documents, instruments,
and agreements, any custom, usage, or course of dealings to the contrary
notwithstanding. No such discussions, negotiations, custom, usage, or course of
dealings shall limit, modify, or otherwise affect the provisions hereof. Any
modification, amendment, or waiver of any provision of this Agreement or of any
provision of any other agreement between the Obligors and the Bank must be
executed in writing by the Bank and the Obligors.

7.6 Best Interests of Obligors. The transaction evidenced by this Agreement and
the other Loan Documents is in the best interests of the Obligors. The direct
and indirect benefits to inure to the Obligors pursuant to this Agreement and
the other Loan Documents constitute substantially more than “reasonably
equivalent value” (as such term is used in §548 of the United States Bankruptcy
Code (Title 11 U.S.C. §§101 et seq. (the “Bankruptcy Code”))) and “valuable
consideration,” “fair value,” and “fair consideration,” (as such terms are used
in any applicable state fraudulent conveyance law), in exchange for the benefits
to be provided by the Obligors pursuant to this Agreement and the other Loan
Documents.

7.7 Interpretation of Agreement. In connection with the interpretation of this
Agreement and all other documents, instruments, and agreements incidental
hereto:

7.7.1 The captions of this Agreement are for convenience purposes only, and
shall not be used in construing the intent of the Bank and the Obligors under
this Agreement.

7.7.2 In the event of any inconsistency between the provisions of this Agreement
and any other document, instrument, or agreement entered into by and between the
Bank, and any of the Obligors, the provisions of this Agreement shall govern and
control.

7.7.3 The Bank and the Obligors have prepared this Agreement and all documents,
instruments, and agreements incidental hereto with the aid and assistance of
their respective counsel. Accordingly, all of them shall be deemed to have been
drafted by the Bank and the Obligors and shall not be construed against either
the Bank or the Obligors.

7.7.4 Any determination that any provision or application of this Agreement is
invalid, illegal, or unenforceable in any respect, or in any instance, shall not
affect the validity, legality, or enforceability of any such provision in any
other instance, or the validity, legality, or enforceability of any other
provision of this Agreement.

 

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7.7.5 The Obligors warrant and represent to the Bank that the Obligors: (a) have
read and understand all of the terms and conditions of this Agreement;
(b) intend to be bound by the terms and conditions of this Agreement; (c) are
executing this Agreement freely and voluntarily, without duress, after
consultation with independent counsel of their own selection; and
(d) acknowledge and agree that the forbearance provided to the Obligors by the
Bank pursuant to this Agreement constitutes a fair and reasonable time frame
within which all Obligations are to be paid in full.

7.7.6 The provisions of this Agreement shall be binding upon and shall inure to
the benefit of the successors and assigns of the Obligors and the Bank.

[Signatures on the Following Page]

 

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This Agreement is executed as a sealed instrument as of the date first set forth
above.

 

WITNESS TO ALL:    

BORROWER:

 

CYBEX INTERNATIONAL, INC.

/s/ Patty Waisner     By:   /s/ Arthur Hicks       Name:   Arthur Hicks      
Title:   President      

GUARANTOR:

 

CYBEX INTERNATIONAL UK LIMITED

    By:   /s/ Arthur Hicks       Name:   Arthur Hicks       Title:   Treasurer
WITNESS:    

BANK:

 

RBS CITIZENS, NATIONAL ASSOCIATION

/s/ Nanette Capine Halpiu     By:   /s/ David J. Bugbee     Name:   David J.
Bugbee     Title:   Senior Vice President

 

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