1
Exhibit 4.10(b)
FIRST AMENDMENT TO CREDIT AGREEMENT
This Amendment is made as of the ____ day of , 1996, by and between
CRAGAR INDUSTRIES, INC., a Delaware corporation (the "Borrower"), and NORWEST
BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender").
Recitals
The Borrower and the Lender have entered into the Credit and Security
Agreement dated as of April 14, 1995 (the "Credit Agreement").
The Lender has agreed to make certain loan advances to the Borrower and
to issue or cause to be issued certain letters of credit for the account of the
Borrower pursuant to the terms and conditions set forth in the Credit Agreement.
The loan advances under the Credit Agreement are evidenced by the
Borrower's promissory note dated as of April 14, 1995, in the maximum principal
amount of $9,500,000.00 and payable to the order of the Lender (the "Note").
All indebtedness of the Borrower to the Lender is secured pursuant to
the terms of the Credit Agreement and all other Security Documents as defined
therein (collectively, the "Security Documents"). Xxxxxxx X. Xxxxxxxxx
("Xxxxxxxxx") has entered into that certain Support Agreement with the Borrower
and the Lender dated as of April 14, 1995.
The Borrower has requested that certain amendments be made to the
Credit Agreement, which the Lender is willing to make pursuant to the terms and
conditions set forth herein.
Agreements
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Terms used in this Agreement which are defined in the Credit
Agreement shall have the same meanings as defined therein, unless otherwise
defined herein.
2. Prior to the date of this Amendment, the Borrower has, at certain
times, failed to maintain the average minimum debt service coverage ratio
required by Section 6.12 of the Credit Agreement, the minimum book Adjusted Net
Worth required by Section 6.13 of the Credit Agreement and the minimum Net
Income required by Section 6.14 of the Credit Agreement, exceeded its limit on
Capital Expenditures for 1995 contained in Section 7.10 of the Credit Agreement
and has made certain payments on Subordinated Indebtedness which are not in
accordance with Section 7.19 of the Credit Agreement, all of which constitute
Defaults under the terms of the Credit Agreement (collectively, the "Current
Defaults"). Lender, although under no obligation to do so, hereby waives the
Current Defaults subject to the satisfaction by Cragar of all the terms and
conditions set forth in this Amendment. Nothing herein shall be construed as a
wavier by Lender of any existing default under the terms of the Credit Agreement
other than the Current Defaults. Nothing herein shall be construed as obligating
Lender to waive any future defaults under the Credit Agreement including any
future defaults under Sections 6.12, 6.13, 6.14, 7.10 and 7.19 of the Credit
Agreement.
3. The Credit Agreement is hereby amended as follows:
2
(a) Paragraph (ii)(B) contained in the definition of
"Borrowing Base" contained in Section 1.1 of the Credit Agreement is hereby
amended to read in its entirety as follows:
(B) The lesser of (x) the sum of the following percentages of
various classes of Eligible Inventory; (i) 55% of Raw
Materials Inventory; (ii) 55% of Current Finished Goods
Inventory; and (iii) 35% of Dated Finished Goods Inventory not
to exceed $500,000.00; or (y) $4,500,000.00, plus
(b) The definition of "Eligible Inventory" contained in
Section 1.1 of the Credit Agreement is hereby amended by adding a new
subparagraph (ix) thereto to read as follows:
(ix)Blemished Finished Goods Inventory.
(c) The definition of "Floating Rate" contained in Section 1.1
of the Credit Agreement is hereby amended effective December 1, 1995, to read in
its entirety as follows:
"Floating Rate" means an annual rate equal to the Base Rate plus two
and one quarter percent (2.25%), provided, however, that from the first
day of the first month following the receipt by the Lender of the
Borrower's 1996 fiscal year end audited financial statements showing
Net Income for the 1996 fiscal year of $935,000.00 or more and an
Adjusted Net Worth of not less than $3,435,000.00, the Floating Rate
shall be reduced to an annual rate equal to the sum of the Base Rate
plus one and one-quarter percent (1.25%), which Floating Rate in either
case shall change when and as the Base Rate changes.
(d) The definition of "Inventory Overadvance Rate" contained
in Section 1.1 of the Credit Agreement is hereby amended effective December 1,
1995, to read in its entirety as follows:
"Inventory Overadvance Rate" means an annual rate equal to the sum of
the Base Rate, plus 3.25%, which Inventory Overadvance Rate shall
change when and as the Base Rate changes.
(e) Section 6.12 of the Credit Agreement is hereby amended to
read in its entirety as follows:
6.12 Debt Service Coverage Ratio. The Borrower agrees, that for each
fiscal quarter, beginning with the fiscal quarter ending March 31,
1996, it shall maintain an average minimum Debt Service Coverage Ratio
of not less than 1.2 to 1. For the fiscal quarter ending March 31,
1996, said ratio shall be based upon the immediately preceding three
month period. For the fiscal quarter ending June 30, 1996, said ratio
shall be based upon the immediately preceding six month period. For the
fiscal quarter ending September 30, 1996, said ratio shall be based
upon the immediately preceding nine month period. For each fiscal
quarter thereafter, said ratio shall be based upon the immediately
preceding twelve month period. The Debt Service Coverage Ratio shall be
calculated according to the following formula:
Funds from Operations + Interest Expense - Unfinanced Portion of
Capital Expense
Current Maturities Long Term Debt + Interest Expense
In making the foregoing calculation Interest Expenses shall not include
any interest
2
3
on Subordinated Indebtedness, the payment of which is accrued but
deferred under the terms of a subordination agreement between the
holder of such debt and Lender in accordance with the provisions of
Section 7.19 until such interest is actually paid.
(f) Section 6.13 of the Credit Agreement is hereby amended to
read in its entirety as follows:
6.13 Adjusted Net Worth. The Borrower will at all times from and after
March 31, 1996, maintain a minimum book Adjusted Net Worth of
$2,500,000.00 as of the last day of each calendar month. Thereafter, so
long as this Agreement remains in effect, such minimum book Adjusted
Net Worth shall be increased as of the end of each fiscal quarter over
the previous fiscal quarter's minimum book Adjusted Net Worth, as
follows:
(a) for the first quarter of each year $125,000.00;
(b) for the second quarter of each year $150,000.00;
(c) for the third quarter of each year $75,000.00; and
(d) for the fourth quarter of each year $50,000.00.
Adjusted Net Worth decreases for any one calendar month will be
permitted so long as the Adjusted Net Worth minimums set forth herein
are achieved.
(g) Section 7.19 of the Credit Agreement is hereby amended to
read in its entirety as follows:
7.19 Payments on Subordinated Indebtedness. The Borrower will not make
any payment of principal or interest on any Subordinated Indebtedness
so long as any of the Obligations are outstanding. Notwithstanding the
foregoing, in each fiscal year the Borrower may make payments (i) in an
amount equal to 25% of Borrower's Excess Cash Flow on the Investor Debt
payable by the Borrower semi-annually upon receipt by the Lender of the
Borrower's June 30th unaudited statement showing such calculation and
upon receipt by the Lender of the Borrower's audited financial
statement for the fiscal year; (ii) of regularly scheduled principal
and interest payments on the Seller Debt; upon receipt by the Lender of
the Borrower's June 30, 1996, unaudited statement showing that it is in
compliance with Sections 6.12, 6.13 and 6.14 hereof; and (iii)
regularly scheduled payments of interest owing on the Bridge Loan, as
such interest is earned or payment of principal owing on the Bridge
Loan; provided, however, that no interest accruing on the Bridge Loan
prior to December 31, 1995, shall be paid by the Borrower; provided,
however, that at the time of any such payment on the Subordinated
Indebtedness pursuant to clause (i) or (ii) above, each of the
following conditions are satisfied and at the time of any such payment
on the Subordinated Indebtedness pursuant to clause (iii) above the
following condition (a) is satisfied:
(a) No Default Period exists and such payment does not and
will not result in a Default or Event of Default;
(b) The average unborrowed availability under the Commitment
less the L/C Amount for the 30 day period immediately preceding such
payment as shown in the Lender's records shall equal not less than
$250,000.00; and
3
4
(c) Upon such payment by the Borrower the unborrowed
availability under the Commitment, less the L/C Amount shall total not
less than $250,000.00.
(h) Exhibits C and G attached to this Amendment are hereby
substituted for Exhibits C and G attached to the Credit Agreement.
4. Notwithstanding the prohibitions of Section 7.6 of the Credit
Agreement, the Lender hereby consents to the sale by the Borrower of its plant
in Mexicali, Mexico for a purchase price of $350,000.00 and hereby further
consents to the retention and use of the proceeds of such sale by the Borrower.
This waiver is a one-time waiver of the provisions of Section 7.6 of the Credit
Agreement solely with respect to the sale of the Borrower's plant in Mexicali,
Mexico and Section 7.6 shall remain in full force and effect, unmodified in any
way notwithstanding this one-time waiver.
5. Except as explicitly amended by this Amendment, all of the terms and
conditions of the Credit Agreement shall remain in full force and effect and
shall apply to any advance or letter of credit thereunder.
6. The Borrower agrees to pay the Lender as of the date hereof a fully
earned, non-refundable fee in the amount of $7,500.00 in consideration of the
execution by the Lender of this Amendment and consents to the recalculation of
interest due to the modification of the definition of "Floating Rate" in
paragraph 3(c) above.
7. This Amendment shall be effective upon receipt by the Lender of an
executed original hereof, together with each of the following, each in substance
and form acceptable to the Lender in its sole discretion:
(a) The Acknowledgment and Agreement of Hartzmark set forth at
the end of this Amendment, duly executed by Hartzmark.
(b) Certificate of the Secretary of the Borrower certifying as
to (i) the resolutions of the board of directors of the Borrower approving the
execution and delivery of this Amendment, (ii) the fact the Articles of
Incorporation and Bylaws of the Borrower, which were certified and delivered to
the Lender pursuant to the Certificate of the Borrower's Secretary dated as of
April 14, 1995 in connection with the execution and delivery of the Credit
Agreement continue in full force and effect and have not been amended or
otherwise modified except as set forth in the Certificate to be delivered, and
(iii) certifying that the officers and agents of the Borrower who have been
certified to the Lender, pursuant to the Certificate of the Borrower's Secretary
dated as of April 14, 1995, as being authorized to sign and to act on behalf of
the Borrower continue to be so authorized or setting forth the sample signatures
of each of the officers and agents of the Borrower authorized to execute and
deliver this Amendment and all other documents, agreements and certificates on
behalf of the Borrower.
(c) Opinion of the Borrower's counsel as to the matters set
forth in paragraphs 8(a) and (b) hereof and as to such other matters as the
Lender shall require.
8. The Borrower hereby represents and warrants to the Lender as
follows:
(a) The Borrower has all requisite power and authority to
execute this Amendment and to perform all of its obligations hereunder, and this
Amendment has been duly executed and delivered by the Borrower and constitutes
the legal, valid and binding obligation of the Borrower, enforceable in
accordance with its terms.
4
5
(b) The execution, delivery and performance by the Borrower of
this Amendment have been duly authorized by all necessary corporate action and
do not (i) require any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) violate any provision of any law, rule or regulation or of any
order, writ, injunction or decree presently in effect, having applicability to
the Borrower, or the articles of incorporation or by-laws of the Borrower, or
(iii) result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or affected.
(c) All of the representations and warranties contained in
Article 5 of the Credit Agreement are correct on and as of the date hereof as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
9. All references in the Credit Agreement to "this Agreement" shall be
deemed to refer to the Credit Agreement as amended hereby; and any and all
references in the Security Documents to the Credit Agreement shall be deemed to
refer to the Credit Agreement as amended hereby.
10. Except as noted in Paragraph 2 above, the execution of this
Amendment and acceptance of any documents related hereto shall not be deemed to
be a waiver of any Default or Event of Default under the Credit Agreement or
breach, default or event of default under any Security Document or other
document held by the Lender, whether or not known to the Lender and whether or
not existing on the date of this Amendment.
11. The Borrower hereby absolutely and unconditionally releases and
forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Amendment, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.
12. The Borrower hereby reaffirms its agreement under the Credit
Agreement to pay or reimburse the Lender on demand for all costs and expenses
incurred by the Lender in connection with the Credit Agreement, the Security
Documents and all other documents contemplated thereby, including without
limitation all reasonable fees and disbursements of legal counsel. Without
limiting the generality of the foregoing, the Borrower specifically agrees to
pay all fees and disbursements of counsel to the Lender for the services
performed by such counsel in connection with the preparation of this Amendment
and the documents and instruments incidental hereto. The Borrower hereby agrees
that the Lender may, at any time or from time to time in its sole discretion and
without further authorization by the Borrower, make a loan to the Borrower under
the Credit Agreement, or apply the proceeds of any loan, for the purpose of
paying any such fees, disbursements, costs and expenses and the fee required
under paragraph 6 hereof.
13. This Amendment and the Acknowledgment and Agreement of Hartzmark
may be executed in any number of counterparts, each of which when so executed
and delivered shall be deemed an original and all of which counterparts, taken
together, shall constitute one and the same instrument.
5
6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
CRAGAR INDUSTRIES, INC., a Delaware corporation
By ___________________________________
Its___________________________________
NORWEST BUSINESS CREDIT, INC., a Minnesota
corporation
By ___________________________________
Its___________________________________
6
7
ACKNOWLEDGMENT AND AGREEMENT OF HARTZMARK
The undersigned, Xxxxxxx X. Xxxxxxxxx, having entered into that certain
Support Agreement dated as of April 14, 1995, with Cragar Industries, Inc. (the
"Borrower") and Norwest Business Credit, Inc. (the "Lender"), hereby (i)
acknowledges receipt of the foregoing Amendment; (ii) consents to the terms and
execution thereof; (iii) reaffirms his obligations to the Lender pursuant to the
terms of said Support Agreement; and (iv) acknowledges that the Lender may
amend, restate, extend, renew or otherwise modify the Credit Agreement and any
indebtedness or agreement of the Borrower, or enter into any agreement or extend
additional or other credit accommodations, without notifying or obtaining the
consent of the undersigned and without impairing the obligations of the
undersigned under said Support Agreement.
_________________________________
Xxxxxxx X. Xxxxxxxxx
7
8
EXHIBIT C
Permitted Liens, Indebtedness and Guarantees
Liens
Time Clocks (UCC Filed)
Studebaker Worthington Leasing Corp.
XL/Datacomp, Inc.
ACM Equipment Rental and Sales, Co.
Xxxxxx Financial (Mori Seki CNC)
Indebtedness
Subordinated Indebtedness
Indebtedness evidenced by that certain Promissory Note dated December 15, 1994
in the original principal amount of $350,000.00 executed by Borrower in favor of
Xxxxxx Xxxxxxx (the "Bridge Loan");
Indebtedness evidenced by those certain Two-Year Convertible Subordinate Secured
Notes of Borrower totaling $1,500,000.00 dated from August 1993 through February
1994 (the "Junior Debt"); and
Indebtedness evidenced by that certain Cognovit Promissory Note dated January,
1995 in the original principal amount of $1,340,000.00 executed by Borrower in
favor of Performance Industries, Inc., an Ohio corporation (the "Seller Debt")
8
9
EXHIBIT G
Assets for Sale by Borrower
Paint Line (with associated conveyors, washers, burners, blowers, booths, powder
guns, cyclones, baghouses, dryers, motors, pumps, and other related equipment)
Waste Water Treatment Equipment
Miscellaneous Chrome Plating Equipment
Vapor Degreaser
Pro-Trac Tire Molds
One-Piece Aluminum Wheel Molds
Mexicali Polishing Equipment
Spinning Machine
9
