EXHIBIT 10.2
THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of March 26, 1998, is made by and between
MEDICAL GRAPHICS CORPORATION, a Minnesota corporation (the "Borrower") and
NORWEST BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender").
Recitals
The Borrower and the Lender have entered into a Credit and Security
Agreement dated as of March 31, 1997 as amended by First Amendment to Credit
and Security Agreement dated as of July 10, 1997 and Second Amendment to
Credit and Security Agreement dated as of November 12, 1997 (as so amended,
the "Credit Agreement"). Capitalized terms used in these recitals have the
meanings given to them in the Credit Agreement unless otherwise specified.
The Borrower has requested that the Lender waive certain Defaults
and reset the financial covenants to the Credit Agreement, which the Lender
is willing to do pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. FINANCIAL COVENANTS. Sections 6.12, 6.14 and 6.15 of the Credit
Agreement are hereby amended in their entirety and replaced with the
following new sections:
"Section 6.12 MINIMUM BOOK NET WORTH. The Borrower will maintain its
Book Net Worth, determined as of each date below, at an amount not less
than the amount set forth opposite the applicable date described below:
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DATE MINIMUM BOOK NET WORTH
---------------------------------------------------------
March 31, 1998 $1,878,000
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June 30,1998 $2,078,000
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September 30, 1998 $2,228,000
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December 31, 1998 $2,828,000
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"Section 6.14 MINIMUM NET INCOME. The Borrower will achieve as of
each date listed below, Net Income, of not less than the amount set forth
opposite such date:
DATE MINIMUM NET INCOME
---- ------------------
March 31, 1998 ($750,000)
June 30, 1998 ($550,000)
September 30, 1998 ($400,000)
December 31, 1998 $200,000
In addition, beginning February 1, 1998 and continuing thereafter, the
Borrower must achieve Net Income of not less than ($500,000) during each
month.
"Section 6.15 MINIMUM DEBT SERVICE COVERAGE RATIO. The Borrower will
achieve a Debt Service Coverage Ratio of .85 to 1.00 as of each fiscal year
end beginning with December 31, 1998."
2. CAPITAL EXPENDITURES. Section 7.10 of the Credit Agreement is
hereby amended in its entirety and replaced with the following new section:
"Section 7.10 CAPITAL EXPENDITURES. The Borrower will not incur or
contract to incur Capital Expenditures of more than $250,000 in the
aggregate during any fiscal year, or more than $60,000 in any one
transaction."
3. NO OTHER CHANGES. 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.
4. WAIVER OF DEFAULT. The Borrower is in default of Section 6.17
of the Credit Agreement which provides that new covenants will be set on or
before January 31, 1998 (the "Default"). Upon the terms and subject to the
conditions set forth in this Amendment, the Lender hereby waives the Default.
This waiver shall be effective only in this specific instance and for the
specific purpose for which it is given, and this waiver shall not entitle the
Borrower to any other or further waiver in any similar or other circumstances.
5. CONDITIONS PRECEDENT. This Amendment, and the waiver set forth
in Paragraph 4 hereof, shall be effective when the Lender shall have received
an executed original hereof, together with such other matters as the Lender
may require in its sole discretion.
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6. REPRESENTATIONS AND WARRANTIES. 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.
(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 V
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.
7. REFERENCES. 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.
8. NO OTHER WAIVER. Except as set forth in Paragraph 4 hereof, 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.
9. RELEASE. 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
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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.
10. COSTS AND EXPENSES. 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.
11. MISCELLANEOUS. This Amendment 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.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the date first written above.
NORWEST BUSINESS CREDIT, INC. MEDICAL GRAPHICS CORPORATION
/s/ Xxxxx Xxxxxxxx /s/ Xxxx X. Xxxxxxx
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Xxxxx Xxxxxxxx Xxxx X. Xxxxxxx
Its Vice President Chief Financial Officer
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Exhibit B to Credit and Security
Agreement
COMPLIANCE CERTIFICATE
To: Xxxxx X. Xxxxxx
Norwest Business Credit, Inc.
Date: , 199
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Subject: Medical Graphics Corporation
Financial Statements
In accordance with our Credit and Security Agreement dated as of
March 31, 1997 (the "Credit Agreement"), attached are the financial
statements of Medical Graphics Corporation (the "Borrower") as of and for
________________, _____ (the "Reporting Date") and the year-to-date period
then ended (the "Current Financials"). All terms used in this certificate
have the meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and fairly
present the Borrower's financial condition and the results of its operations
as of the date thereof.
EVENTS OF DEFAULT. (Check one):
/ / The undersigned does not have knowledge of the occurrence of a Default
or Event of Default under the Credit Agreement, as amended.
/ / The undersigned has knowledge of the occurrence of a Default or Event
of Default under the Credit Agreement and attached hereto is a
statement of the facts with respect to thereto.
FINANCIAL COVENANTS. I further hereby certify as follows:
1. MINIMUM BOOK NET WORTH. Pursuant to Section 6.12 of the Credit
Agreement, as of the Reporting Date, the Borrower's Book Net Worth was
$____________ which / / satisfies / / does not satisfy the requirement that
such amount be not less than $_____________ on the Reporting Date as set
forth in the table below:
DATE MINIMUM BOOK NET WORTH
---- ----------------------
March 31, 1998 $1,878,000
June 30,1998 $2,078,000
September 30, 1998 $2,228,000
December 31, 1998 $2,828,000
2. MINIMUM NET INCOME. Pursuant to Section 6.14 of the Credit
Agreement, the Borrower's Net Income
(a) for the month ending on the Reporting Date, was $____________,
which / / satisfies / / does not satisfy the requirement that such
amount be not less than ($500,000) during any one month; and
(b) for the period ending on the Reporting Date, was $____________,
which / / satisfies / / does not satisfy the requirement that such
amount be not less than $_____________ for such period as set forth in
the table below:
DATE MINIMUM NET INCOME
---- ------------------
March 31, 1998 ($750,000)
June 30, 1998 ($550,000)
September 30, 1998 ($400,000)
December 31, 1998 $200,000
3. MINIMUM DEBT SERVICE COVERAGE RATIO. (To be completed for each
fiscal year end beginning with December 31, 1998.) Pursuant to Section 6.15 of
the Credit Agreement, the Reporting Date marks the Borrower's fiscal year end
and the Borrower's Debt Service Coverage Ratio on the Reporting Date was ____ to
1.00 which / / satisfies / / does not satisfy the requirement that such amount
be not less than .85 to 1.00.
4. CAPITAL EXPENDITURES. Pursuant to Section 7.10 of the Credit
Agreement, for the year-to-date period ending on the Reporting Date, the
Borrower has expended or contracted to expend during the fiscal year ended
______________, ___, for Capital Expenditures, $__________________ in the
aggregate and at most $______________ in any one transaction, which / /
satisfies / / does not satisfy the requirement that such expenditures not exceed
$250,000 in the aggregate and $60,000 for any one transaction during such year.
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5. SALARIES. As of the Reporting Date, the Borrower / / is / / is
not in compliance with Section 7.17 of the Credit Agreement concerning
salaries.
Attached hereto are all relevant facts in reasonable
detail to evidence, and the computations of the financial covenants referred
to above. These computations were made in accordance with GAAP.
MEDICAL GRAPHICS CORPORATION
By
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Its Chief Financial Officer
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