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EXHIBIT 4.10(c)
[NORWEST BUSINESS CREDIT LETTERHEAD]
November 20, 1996
Xxxxxxx X. Xxxxxxxxx
Cragar Industries, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, XX 00000
Dear Xx. Xxxxxxxxx:
According to Section 6.14 of the Credit and Security Agreement dated April 14,
1995 (the "Agreement") by and between Cragar Industries, Inc., a Delaware
corporation (the "Borrower" or "Cragar"), and Norwest Business Credit, Inc.
(the "Lender" or "NBCI"), the Borrower will achieve a cumulative Net Income
(after tax net income from continuing operations) for the preceding three
fiscal quarters ending September 30, 1996 of not less than $350,000. Xxxxxx has
represented and warranted to Norwest Business Credit, Inc. ("NBCI") that it has
failed to achieve the required cumulative Net Income level as outlined in
Section 6.14 of the Agreement. Furthermore, Cragar has stated that its Net
Income for the three quarters ended September 30, 1996 was <$199,773>. THIS
RESULT CONSTITUTES AN EVENT OF DEFAULT PURSUANT TO SECTION 8.1 OF THE
AGREEMENT.
According to Section 6.13 of the Agreement, the Borrower will at all times
maintain a minimum book Adjusted Net Worth (net worth as defined by GAAP plus
Seller Debt plus Junior Debt) of $2,500,000 as of the last day of each calendar
month. Thereafter, such minimum book Adjusted Net worth shall be increased as
of the quarter ended September 30, 1996 over the previous fiscal quarter's
minimum book Adjusted Net Worth by $75,000. Xxxxxx has represented and
warranted to NBCI that it has failed to achieve the required cumulative book
Adjusted Net Worth level as outlined in Section 6.13 of the Agreement.
Furthermore, Xxxxxx has stated that its book Adjusted Net Worth for the quarter
ended June 30, 1996 was $2,686,730 and for the quarter ended September 30, 1996
was $351,118. THIS RESULT CONSTITUTES AN EVENT OF DEFAULT PURSUANT TO SECTION
8.1 OF THE AGREEMENT.
According to Section 6.12 of the Agreement, the Borrower will at all times
maintain an average minimum Debt Service Coverage Ratio (funds from operations
plus interest expense less unfinanced portion of capital expense divided by
current maturities long term debt plus interest expense) of not less than 1.2 to
1. Xxxxxx has represented and warranted to NBCI that it has failed to achieve
the required average minimum Debt service Coverage Ratio as outlined in Section
6.12 of the Agreement. Furthermore, Cragar has stated that its average minimum
Debt Service Coverage Ratio for the period ended September 30, 1996 was 0.35 to
1. THIS RESULT CONSTITUTES AN EVENT OF DEFAULT PURSUANT TO SECTION 8.1 OF THE
AGREEMENT.
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CRAGAR INDUSTRIES
NOVEMBER 20, 1996
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As an accommodation to Cragar, NBCI hereby agrees to waive the cumulative Net
Income, the minimum book Adjusted Net Worth, and average minimum Debt Service
Coverage Ratio covenant defaults for the period ending September 30, 1996 as
described above. THIS WAIVER IS APPLICABLE ONLY TO THE CUMULATIVE NET INCOME,
THE MINIMUM BOOK ADJUSTED NET WORTH, AND AVERAGE MINIMUM DEBT SERVICE COVERAGE
RATIO COVENANT FOR THE PERIOD ENDING SEPTEMBER 30, 1996 DEFAULT AND NOT TO ANY
OTHER EXISTING OR FUTURE DEFAULT OF ANY KIND. NBCI reserves all rights and
remedies allowed it under the Agreement.
In addition to the above referenced covenant default waivers, Cragar and NBCI
have agreed to the following amendments to the financial covenants:
- The cumulative Net Income Covenant will be amended to a quarterly covenant
for the period ended December 31, 1996. In addition, the covenant target for
this period will be changed to allow for a net loss for the quarter ended
December 31, 1996 of no more than $250,000. All subsequent periods will
remain unchanged.
- The minimum book Adjusted Net Worth covenant will be amended to include the
$1,500,000 in Investor Debt and Negative Goodwill in the covenant
calculation for all subsequent periods. In addition, the Adjusted Net Worth
target for December 31, 1996 will be reduced to correspond to the Net Income
Covenant. Specifically, the Adjusted Net Worth for the period ended December
31, 1996 will be allowed to decline by $250,000 to $2,498,000. All other
minimum book Adjusted Net Worth covenant targets will remain unchanged.
- The average minimum Debt Service Coverage Ratio will be waived for the
period ended December 31, 1996. This ratio will be maintained at 1.2 for all
subsequent measurement periods and will be calculated based on the operating
results for the preceding twelve months. However, for the period ended March
31, 1997, the ratio will be based on the preceding three months; for the
period ended June 30, 1997, the preceding six months; for the period ended
September 30, 1997, the preceding nine months; and for the period ended
December 31, 1997, the preceding twelve months. All other terms and
conditions will remain unchanged.
In consideration for these amendments and waivers, Xxxxxx agrees to pay to NBCI
an amendment/waiver fee in the amount of $7,500. This amount will be charged to
your loan on or after January 1, 1997. In addition, Xxxxxx will be responsible
for all costs and fees associated with the implementation of the above outlined
waivers and amendments.
If you have any questions regarding this matter, please feel free to contact me
at (000) 000-0000.
Sincerely,
/s/ Xxxxx Xxxxx Xxxxx
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Xxxxx Xxxxx Xxxxx
Vice President
