Meade Instruments Corp. (Form: 8-K)

This Third Amendment to Amended and Restated Credit Agreement (this “Amendment”) is dated as of December 15, 2004 (the “Amendment Closing Date”) and entered into by and among Bank of America, N.A., as lender (the “Lender”), with offices at 55 South Lake Avenue, Suite 900, Pasadena, California 91101, and Meade Instruments Corp., a Delaware corporation, Simmons Outdoor Corp., a Delaware corporation, and Coronado Instruments, Inc., a California corporation (such entities being referred to hereinafter each individually as a “Borrower” and collectively, the “Borrowers”).

WHEREAS, the Lender and the Borrowers have entered into that certain Amended and Restated Credit Agreement dated as of October 25, 2002 (as amended, restated or modified from time to time, the “Agreement”);

WHEREAS, the Borrowers have informed the Lender that a violation may occur, as of the fiscal quarter ending November 30, 2004, of the financial covenant set forth in Section 7.24 of the Agreement (the “Prospective Covenant Violation”). The Prospective Covenant Violation would constitute an Event of Default under the Agreement; and

WHEREAS, the Borrowers have requested a waiver of the Prospective Covenant Violation and certain amendments to the Agreement, and the Lender has agreed to waive the Prospective Covenant Violation and to amend the Agreement pursuant to the terms and conditions provided herein.

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in the Agreement and this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:

Section 1.01. Definitions. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meanings as in the Agreement, as amended hereby.

Section 2.01. Amended Definition. The following definition of “Applicable Margin” is hereby amended and restated to read in its entirety as follows:

(i) with respect to Base Rate Revolving Loans, and all other Obligations (other than LIBOR Loans), .25%; and

All adjustments in the Applicable Margins after July 15, 2004, shall be implemented quarterly on a prospective basis, commencing with the first day of the first calendar month that occurs more than 5 days after the required date of delivery to the Lender of quarterly unaudited or annual draft audited (as applicable) Financial Statements evidencing the need for an adjustment. In the event the draft audited Financial Statements are subsequently determined to be in error, then any resulting change in the Applicable Margin shall be made retroactively to the date when the incorrect Applicable Margin was utilized. Concurrently with the delivery of those Financial Statements, Meade shall deliver to the Lender a certificate, signed by its chief financial officer, setting forth in reasonable detail the basis for the continuance of, or any change in, the Applicable Margins. Failure to timely deliver such Financial Statements shall, in addition to any other remedy provided for in this Agreement, result in an increase in the Applicable Margins to the highest level set forth in the foregoing grid, until the first day of the first calendar month following the delivery of those Financial Statements demonstrating that such an increase is not required. If a Default or Event of Default has occurred and is continuing at the time any reduction in the Applicable Margins is to be implemented, no reduction may occur until the first day of the first calendar month following the date on which such Default or Event of Default is waived or cured.”

Section 2.02 Amendment to Section 7.22. Section 7.22 of the Agreement is hereby amended in its entirety and replaced to read as follows:

“ 7.22 Fixed Charge Coverage Ratio. Meade and its consolidated Subsidiaries will maintain a Fixed Charge Coverage Ratio for each period of four consecutive fiscal quarters ending on the last day of each fiscal quarter of not less than the applicable ratio set forth below:

Section 2.03. Amendment to Section 7.24. Section 7.24 of the Agreement is hereby amended in its entirety and replaced to read as follows:

“ 7.24 US Fixed Charge Coverage Ratio. Meade and its consolidated Subsidiaries will maintain a US Fixed Charge Coverage Ratio for each period of four consecutive fiscal quarters ending on the last day of each fiscal quarter set forth below of not less than the applicable ratio set forth opposite each such quarter:

Section 3.01. Waiver. The Lender hereby waives the Prospective Covenant Violation and agrees not to exercise any rights or remedies available as a result of the occurrence thereof.

Section 3.02. Limitation of Waiver. The waiver granted in Section 3.01 of this Amendment shall be limited strictly as written and shall not be deemed to constitute a waiver of, or any consent to noncompliance with, any term or provision of this Amendment, the Agreement or any other Loan Document except as expressly set forth herein. Further, the waiver granted in Section 3.01 of this Amendment shall not constitute a waiver of any other Default or Event of Default arising as a result of the violation of any other term or provision of this Amendment, the Agreement or any other Loan Document or a waiver of any rights or remedies arising as a result of any such other Defaults or Events of Default.

Section 3.03. Minimum Availability. The Borrowers shall maintain Availability of equal to or greater than Three Million Dollars ($3,000,000) at all times from the Amendment Closing Date until the Lender’s receipt of a certificate signed by a Responsible Officer of Meade Instruments Corp. certifying that the conditions specified in Section 8.2(a)(1), (2) and (3) have been satisfied as of the fiscal quarter ending August 31, 2005.

Section 3.04. Amendment Fee. In connection with the preparation, negotiation and execution of this Amendment, the Borrowers shall pay to the Lender an amendment fee (the “Amendment Fee”) in the amount of Thirty-Five Thousand Dollars ($35,000), which, at the Lender’s option, may be charged as an advance and a Revolving Loan under the Agreement, and which fee is fully earned as of the Amendment Closing Date and payable on January 3, 2005.

Section 4.01. Conditions Precedent. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent:

(i) The representations and warranties contained herein and in the Agreement, as amended hereby, shall be true and correct in all material respects as of the date hereof as if made on the date hereof, except for such representations and warranties limited by their terms to a specific date;

(ii) The Borrowers shall have delivered to the Lender an executed original copy of this Amendment;

(iii) The Borrowers shall have delivered to the Lender executed original copies of each of the Consents and Reaffirmations attached to this Amendment;

(iv) No Default or Event of Default (other than the Prospective Covenant Violation) shall have occurred and be continuing;

(v) All proceedings taken in connection with the transactions contemplated by this Amendment and all documentation and other legal matters incident thereto shall be satisfactory to the Lender in its sole and absolute discretion.

Section 5.01. Acknowledgment. Each Borrower hereby represents and warrants that the execution and delivery of this Amendment and compliance by such Borrower with all of the provisions of this Amendment, (i) are within its powers and purposes, (ii) have been duly authorized or approved by such Borrower, and (iii) when executed and delivered by or on behalf of such Borrower, will constitute valid and binding obligations of the Borrower, enforceable in accordance with their terms. Each Borrower reaffirms its obligation to pay all amounts due the Lender under the Loan Documents in accordance with the terms thereof, as modified hereby.

Section 5.02. Loan Documents Unmodified. Except as otherwise specifically modified by this Amendment, all terms and provisions of the Agreement and all other Loan Documents, as modified hereby, shall remain in full force and effect. Nothing contained in this Amendment shall in any way impair the validity or enforceability of the Loan Documents, as modified hereby or alter, waive, annul, vary, affect, or impair any provisions, conditions, or covenants contained therein or any rights, powers, or remedies granted therein. Any lien and/or security interest granted to the Lender in the Collateral set forth in the Agreement or any other Loan Document are and shall remain unchanged and in full force and effect and the Agreement and the other Loan Documents shall continue to secure the payment and performance of all of the Obligations thereunder, as modified hereby, and the Borrowers’ obligations hereunder.

Section 5.03. Parties, Successors and Assigns. This Amendment shall be binding upon and shall inure to the benefit of each of the Borrowers, the Lender, and their respective successors and assigns.

Section 5.04. Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.

Section 5.05. Headings. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

Section 5.06. Expenses of the Lender. The Borrowers agree to pay on demand (i) all reasonable costs and expenses incurred by the Lender in connection with the preparation, negotiation and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all subsequent amendments, modifications, and supplements hereto or thereto, including, without limitation, the costs and fees of the Lender’s legal counsel and the allocated cost of staff counsel and (ii) all costs and expenses reasonably incurred by the Lender in connection with the enforcement or preservation of any rights under the Agreement, this Amendment and/or other Loan Documents, including, without limitation, the reasonable costs and fees of the Lender’s legal counsel, the allocated cost of staff counsel, and the costs and fees associated with any environmental due diligence conducted in relation hereto.

Section 5.07. Total Agreement. This Amendment, the Agreement, and all other Loan Documents shall constitute the entire agreement between the parties relating to the subject matter hereof, and shall rescind all prior agreements and understandings between the parties hereto relating to the subject matter hereof, and shall not be changed or terminated orally.

IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the day and year first above written.


		Name: Todd R. Eggertsen
		Title: Vice President

CONSENTS AND REAFFIRMATIONS

Each of MEADE INSTRUMENTS EUROPE CORP., a California corporation, and MEADE INSTRUMENTS HOLDINGS CORP., a California corporation, hereby acknowledges the execution of, and consent to, the terms and conditions of that Third Amendment to Amended and Restated Credit Agreement dated as of December 15, 2004, among MEADE INSTRUMENTS CORP., SIMMONS OUTDOOR CORP., CORONADO INSTRUMENTS, INC. and BANK OF AMERICA, N.A. (“Creditor”), and reaffirms its obligations under (a) that certain Continuing Guaranty (the “Guaranty”) dated as of September 24, 2001, made by the undersigned in favor of the Creditor, and (b) that certain Security Agreement (the “Security Agreement”) dated as of September, 2001, by and between the undersigned and the Creditor. Each of the undersigned acknowledges and agrees that each of the Guaranty and the Security Agreement remain in full force and effect and are hereby ratified and confirmed.

Dated as of December 15, 2004.

MEADE INSTRUMENTS EUROPE CORP., a California corporation


By:		/s/ Brent W. Christensen

Name:		Brent W. Christensen

Title:		Senior Vice President, Finance and

		Chief Financial Officer

MEADE INSTRUMENTS HOLDINGS CORP., a California corporation


By:		/s/ Brent W. Christensen

Name:		Brent W. Christensen

Title:		Senior Vice President, Finance and

		Chief Financial Officer

CONSENTS AND REAFFIRMATIONS

Each of MTSC HOLDINGS, INC., a California corporation (“MTSC”), MC HOLDINGS, INC., a California corporation (“MC HOLDINGS”), and MEADE CORONADO HOLDINGS CORP., a California corporation (“MCHC”), hereby acknowledges the execution of, and consents to, the terms and conditions of that Third Amendment to Amended and Restated Credit Agreement dated as of December 15, 2004, among MEADE INSTRUMENTS CORP., SIMMONS OUTDOOR CORP., CORONADO INSTRUMENTS, INC. and BANK OF AMERICA, N.A. (“Creditor”), and reaffirms its obligations under that certain Continuing Guaranty (the “Guaranty”) dated as of September 24, 2001 executed in favor of the Creditor and joined by each of the undersigned pursuant to an Instrument of Joinder, dated as of (i) October 25, 2002 with respect to MTSC and MC HOLDINGS, and (ii) December 1, 2004 with respect to MCHC (respectively, the “Instrument”). Each of the undersigned acknowledges and agrees that each of the Guaranty and Instrument remain in full force and effect and are hereby ratified and confirmed.

Dated as of December 15, 2004.

MTSC HOLDINGS, INC., a California corporation,


By:		/s/ Brent W. Christensen

Name:		Brent W. Christensen

Title:		Senior Vice President, Finance and

		Chief Financial Officer

MC HOLDINGS, INC., a California corporation


By:		/s/ Brent W. Christensen

Name:		Brent W. Christensen

Title:		Senior Vice President, Finance and

		Chief Financial Officer

MEADE CORONADO HOLDINGS CORP., a California corporation


By:		/s/ Brent W. Christensen

Name:		Brent W. Christensen

Title:		Senior Vice President, Finance and

		Chief Financial Officer

Meade Instruments Corporation
6001 OAK CANYON, IRVINE, CALIFORNIA 92618-5200 U.S.A.
(949) 451-1450 n FAX: (949) 451-1460 n www.meade.com


Brent W. Christensen, CFO Meade Instruments Corp. (949) 451-1450		Philip Bourdillon/Gene Heller Silverman Heller Associates (310) 208-2550

Meade Instruments Reports
Third-Quarter Fiscal 2005 Results

IRVINE, Calif. – December 16, 2004 – Meade Instruments Corp. (Nasdaq NM: MEAD) today reported results for the third quarter of fiscal year 2005, ended November 30, 2004. The Company’s fiscal year 2005 ends on February 28, 2005.

Net sales for the three months ended November 30, 2004 were $49.7 million versus $54.4 million in the comparable period a year ago. Excluding non-cash charges for the Company’s ESOP, net income for the three months ended November 30, 2004 was $2.9 million, or $0.15 per diluted share, compared to net income of $3.6 million, or $0.19 per diluted share, for the comparable period a year ago. Including ESOP charges, third-quarter 2005 net income was $2.8 million, or $0.14 per diluted share, compared to net income of $3.4 million, or $0.17 per diluted share, in the comparable period a year ago.

Net sales for the nine months ended November 30, 2004 were $92.1 million versus $107.2 million in the comparable period a year ago. Excluding non-cash charges for the Company’s ESOP, net income for the nine months ended November 30, 2004 was $0.9 million, or $0.05 per diluted share, compared to net income of $3.1 million, or $0.16 per diluted share, for the comparable period a year ago. Including ESOP charges, net income for the nine months ended November 30, 2004 was $0.8 million, or $0.04 per diluted share, compared to net income of $2.7 million, or $0.14 per diluted share, in the comparable period a year ago.

Steven G. Murdock, president and CEO of Meade Instruments, said: “We are pleased with third-quarter profitability and sales at our Simmons and European subsidiaries. Sales of mid-priced and higher-priced telescopes in the U.S fell below our expectations for the quarter. We continue to believe that telescope sales in the U.S in the prior year were higher because of the Mars opposition; but even after taking into consideration the Mars event, sales have been weaker than expected in those price categories. Sales of most of our other key Meade branded products were down from the prior year as well, due in part to lower sales to our two largest customers.”

Murdock noted that third-quarter gross margins — which decreased to 28.0% from 30.4% in the prior year — principally reflect the effect of fixed costs on lower sales volume. “We have adjusted our expenses in light of our current operations while continuing to make investments in categories, such as engineering and marketing, that we believe will be key to the successful roll-out of several new products over the next several months,” continued Murdock. “Ongoing development efforts will result in new product introductions across nearly every product line. Our development efforts are concentrated on producing higher-margin, technologically superior products for every market we serve. We expect many of those new products to begin shipping over the remainder of the fiscal year.”

Murdock also stated that the company expects to begin realizing contributions to sales and profits from its recent acquisition of Coronado. Murdock said he is pleased with the integration of the two companies currently underway.

As noted in a press release of November 23, 2004, the Company estimates that fiscal 2005 net revenues will be in the range of $119 million to $123 million, with a net loss, excluding ESOP expense, of as much as ($0.10) per share.

In conjunction with the announcement, the Company’s management will conduct a teleconference today, December 16, to discuss these recent financial results and Meade Instruments’ business outlook. To participate in the teleconference, which begins at 7:30 a.m. PST (10:30 a.m. EST), please call 877-869-7690 (or 706-758-0239) approximately 10 minutes prior to the teleconference start time. Investors can also listen to the call live via the Internet at www.meade.com and www.fulldisclosure.com. These websites will host an audio archive of the call.

Meade Instruments is a leading designer and manufacturer of optical products including telescopes and accessories for the beginning to serious amateur astronomer marketed under the Meade®, Bresser® and Coronado™ brand names. Meade offers a complete line of binoculars that address the needs of everyone from the casual observer to the serious sporting or birding observer. Meade also offers a complete line of riflescopes under the Simmons®, Weaver® and Redfield® brand names. The Company distributes its products worldwide through a network of specialty retailers, mass merchandisers and domestic and foreign distributors. Additional information on Meade is available at www.meade.com

“Safe-Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This news release contains comments and forward-looking statements based on current plans, exceptions, events, and financial and industry trends that may affect the Company’s future operating results and financial position expectations, including net sales and income for fiscal 2005. Such statements involve risks and uncertainties which cannot be predicted or quantified and which may cause future activities and results of operations to differ materially from those discussed above. Such risks and uncertainties include, without limitation: any significant decline in general economic conditions or uncertainties affecting consumer spending; any general decline in demand for the Company’s products; the Company’s inability to develop and bring to market new and innovative products; any loss of, or failure to replace, any significant portion of the sales made to any significant customer of the Company; the inherent risks and liabilities related to the introduction of new products, including lack of customer acceptance, production and development delays, lower than anticipated margins; the risks and uncertainties associated with intellectual property litigation; the inherent risks associated with international sales, as well as the other risks and uncertainties previously set forth in the Company’s filings with the Securities and Exchange Commission. The historical results achieved are not necessarily indicative of future prospects of the Company. For additional information, refer to the Company’s filings with the Securities and Exchange Commission.

(Financial Data Follow)

MEADE INSTRUMENTS CORP.
INCOME STATEMENT DATA
(Unaudited)
(000s omitted, except share and per share data)


	Three Months Ended				Nine Months Ended
	November 30,				November 30,
	2004		2003		2004		2003
Net sales	$	49,687	$	54,448	$	92,060	$	107,223
Cost of sales		35,775		37,892		67,626		76,773

Gross profit		13,912		16,556		24,434		30,450
Selling expenses		5,911		6,573		13,163		14,158
General and administrative expenses		2,223		3,275		7,410		8,970
ESOP expense		130		341		318		635
Research and development expenses		672		462		1,639		1,451

Operating income		4,976		5,905		1,904		5,236
Interest expense		283		325		633		761

Income before income taxes		4,693		5,580		1,271		4,475
Income tax provision		1,894		2,204		512		1,771

Net income	$	2,799	$	3,376	$	759	$	2,704

Per share information:
Net income — basic	$	0.14	$	0.18	$	0.04	$	0.14

Net income —diluted	$	0.14	$	0.17	$	0.04	$	0.14

Weighted average common shares outstanding — basic		19,312,000		19,070,000		19,269,000		18,911,000
Weighted average common shares outstanding — diluted		19,477,000		19,335,000		19,445,000		19,068,000

Reconciliation of Net income, excluding ESOP charges, to Net income, including ESOP charges (000s omitted, except per share data):


	Three Months Ended				Nine Months Ended
	November 30,				November 30,
	2004		2003		2004		2003
Net income	$	2,799	$	3,376	$	759	$	2,704
ESOP expense, net of tax		71		209		180		356

Net income excluding ESOP, net of tax	$	2,870	$	3,585	$	939	$	3,060

Per share information:
Net income — diluted	$	0.14	$	0.17	$	0.04	$	0.14
ESOP expense, net of tax		0.01		0.02		0.01		0.02

Net income excluding ESOP — diluted	$	0.15	$	0.19	$	0.05	$	0.16

Management believes net income, excluding ESOP expense, net of tax is a supplemental financial measure commonly used by management and industry analysts to evaluate the Company’s financial performance. The ESOP expense is a non-cash expense related to the allocation of Company stock to participants in its Employee Stock Ownership Plan. The expense related to the ESOP stock allocation is based on the market value of the allocated stock. The market value of the Company’s stock has fluctuated significantly over the last several years. Excluding the ESOP expense, net of tax, eliminates the volatility introduced into the income statement by the market value expense of the ESOP allocation. Given the possibility for volatility in the future share price of the Company’s stock, the Company is unable to provide guidance with respect to future net income including ESOP charges.

# # #


Delaware	0-22183	95-2988062
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

6001 Oak Canyon, Irvine, California		92618-5200
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	Meade Instruments Corp.

December 16, 2004	By:	/s/ Mark D. Peterson

		Name: Mark D. Peterson
		Title: Senior Vice President and General Counsel


Exhibit No.		Description

10.60		Third Amendment to Amended and Restated Credit Agreement dated December 15, 2004
99.1		Press release, dated December 16, 2004, issued by Meade Instruments Corp.


If Fixed Charge Coverage Ratio	Pricing Level

Greater than 2.00 to 1.00	Level I
Greater than 1.75 to 1.00 but equal to or less than 2.00 to 1.00	Level II
Greater than 1.50 to 1.00 but equal to or less than 1.75 to 1.00	Level III
Greater than 1.20 to 1.00 but equal to or less than 1.50 to 1.00	Level IV
Greater than 1.00 to 1.00 but equal to or less than 1.20 to 1.00	Level V
	Applicable Margins
	Level I			Level II			Level III			Level IV			Level V

Base Rate Revolving Loans		0.0	%		0.0	%		0.0	%		0.25	%		0.50	%
LIBOR Revolving Loans		1.75	%		2.00	%		2.25	%		2.50	%		2.75	%
Term Loans		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%


“Fiscal Quarter Ending		Minimum Fixed Charge Coverage Ratio


November 30, 2004		1.00 to 1.00


February 28, 2005		1.00 to 1.00


May 31, 2005 and each fiscal quarter ending thereafter		1.20 to 1.00”


Date of Report (Date of Earliest Event Reported):		December 15, 2004


Registrant’s telephone number, including area code:		949 451-1450


“Fiscal Quarter Ending		Minimum US Fixed Charge Coverage Ratio


May 31, 2005		0.25 to 1.00


August 31, 2005		1.00 to 1.00


November 30, 2005 and each fiscal quarter ending thereafter		1.20 to 1.00”