EXHIBIT 10.1
FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of August 14, 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, Second Amendment to
Credit and Security Agreement dated as of November 12, 1997 and Third Amendment
to Credit and Security Agreement dated as of March 26, 1998 (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:
DATE MINIMUM BOOK NET WORTH
----------------------------------------------------
September 30, 1998 $1,328,000
----------------------------------------------------
December 31, 1998 $1,728,000
----------------------------------------------------
"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
----------------------------------------------------
July 31, 1998 ($1,346,000)
----------------------------------------------------
----------------------------------------------------
DATE MINIMUM NET INCOME
----------------------------------------------------
August 31, 1998 ($1,346,000)
----------------------------------------------------
September 30, 1998 ($1,300,000)
----------------------------------------------------
October 31, 1998 ($1,600,000)
----------------------------------------------------
November 30, 1998 ($1,600,000)
----------------------------------------------------
December 31, 1998 ($900,000)
----------------------------------------------------
"Section 6.15 MINIMUM DEBT SERVICE COVERAGE RATIO. The
Borrower will achieve a Debt Service Coverage Ratio at or above (i) .25
to 1.00 as of the fiscal year ending December 31, 1998, and (ii) 1.00
to 1.00 as of each fiscal year end thereafter."
2. 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.
3. WAIVER OF DEFAULTS. The Borrower is in default of the
following provisions of the Credit Agreement (collectively, the "Defaults"):
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SECTION/COVENANT PERIOD REQUIRED ACTUAL
------------------------------------------------------------------------------------------------
6.12 Minimum Book Net Worth 6/30/98 not less than $2,078,000 $2,022,000
------------------------------------------------------------------------------------------------
6.14 Minimum Net Income 6/30/98 not less than ($550,000) ($746,000)
------------------------------------------------------------------------------------------------
Upon the terms and subject to the conditions set forth in this
Fourth Amendment, the Lender hereby waives the Defaults. 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.
4. AMENDMENT FEE. The Borrower shall pay the Lender, in four
equal monthly installments, the first installment due on September 15, 1998 and
each subsequent installment due on the 15th of each month thereafter, a fully
earned, non-refundable fee in the amount of $40,000 in consideration of the
Lender's execution of this Amendment.
5. CONDITIONS PRECEDENT. This Amendment, and the waiver set
forth in Paragraph 3 hereof, shall be effective when the Lender shall have
received an executed original hereof, together with such other matters as the
Lender may require. If the Amendment fee set forth in Paragraph 4 hereof is not
paid in full when due, the waiver set forth in Paragraph 3 shall be null and
void.
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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 3
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 X. Xxxxxx s/s Xxxx X. Xxxxxxx
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Xxxxx X. Xxxxxx Xxxx X. Xxxxxxx
Its Officer Its 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___
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
---------------------------------------------------
September 30, 1998 $1,328,000
---------------------------------------------------
December 31, 1998 $1,728,000
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2. MINIMUM NET INCOME. Pursuant to Section 6.14 of the Credit
Agreement, the Borrower's Net Income 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
-----------------------------------------------------------
July 31, 1998 ($1,346,000)
-----------------------------------------------------------
August 31, 1998 ($1,346,000)
-----------------------------------------------------------
September 30, 1998 ($1,300,000)
-----------------------------------------------------------
October 31, 1998 ($1,600,000)
-----------------------------------------------------------
November 30, 1998 ($1,600,000)
-----------------------------------------------------------
December 31, 1998 ($900,000)
-----------------------------------------------------------
3. MINIMUM DEBT SERVICE COVERAGE RATIO. 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 ratio be not less than ___ to 1.00 as set forth below:
-----------------------------------------------------------
FISCAL YEAR ENDING MINIMUM DEBT SERVICE
COVERAGE RATIO
-----------------------------------------------------------
December 31, 1998 .25 to 1.00
-----------------------------------------------------------
December 31, 1999 and
thereafter 1.00 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.
5. Salaries. As of the Reporting Date, the Borrower / / is / /
is not in compliance with Section 7.17 of the Credit Agreement concerning
salaries.
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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 ______________________________
Xxxx X. Xxxxxxx
Its Chief Financial Officer
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