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EXHIBIT 10.7.4
FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Amendment, dated as of November 12, 1999, is made by and
among Xxxxxxxx, Inc., a Minnesota corporation (the "Borrower"), NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking association ("Norwest"; in
its separate capacity as administrative agent for the Lenders, the "Agent"), and
each of the financial institutions appearing on the signature pages hereof.
Recitals
The Borrower, the Agent and the Lenders are parties to a
Credit and Security Agreement dated as of June 19, 1998, as amended by a First
Amendment to Credit and Security Agreement dated as of November 25, 1998, as
amended by a Second Amendment to Credit and Security Agreement dated as of March
31, 1999 and as amended by a Third Amendment to Credit and Security Agreement
dated as of April 5, 1999 (the "Credit Agreement"). Capitalized terms used in
these recitals and in the preamble have the meanings given to them in the Credit
Agreement unless otherwise specified.
The Borrower is presently in default of various financial
covenants and has requested that the Lenders waive such defaults and reset the
financial covenants in the Credit Agreement. The Agent is willing to grant the
Borrower's requests pursuant to the terms and conditions set forth herein.
Accordingly, in consideration of the premises and of the
mutual covenants and agreements herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Amendment
which are defined in the Credit Agreement shall have the same meanings as
defined therein, unless otherwise defined herein. In addition, Section 1.1 of
the Credit Agreement is amended by adding or amending, as the case may be, the
following definitions:
"'Base Rate' - deleted."
"`Borrowing Base' means, at any time, the lesser of:
(a) the aggregate Revolving Facility Amounts of the
Lenders, or
(b) subject to change from time to time in the sole
discretion of all the Lenders, the sum of:
(i) eighty-five percent (85%) of Eligible Accounts, plus
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(ii) the lesser of $4,000,000 or sixty percent (60%) of
Eligible Raw Materials Inventory, plus
(iii) the lesser of $4,000,000 or fifty percent (50%) of
Eligible Finished Goods Inventory, plus
(iv) the lesser of $2,000,000 or twenty percent (20%) of
Eligible Other Inventory, less
(v) the Liquidity Reserve."
"`Fourth Amendment' means the Fourth Amendment to Credit and
Security Agreement by and among the Borrower, the Lenders and the Agent
dated as of November 12, 1999."
"`Fourth Amendment Effective Date' means the date all
conditions set forth in Section 6 of the Fourth Amendment are
satisfied."
"'Liquidity Reserve' means the amount of $2,500,000."
"`Prime Rate' means the rate publicly announced from time to
time by Xxxxx Fargo Bank, N.A. as its "prime rate" or, if such bank
ceases to announce a rate so designated, any similar successor rate
designated by the Lender."
"`Revolving Floating Rate' means, effective as of October 1,
1999, an annual rate equal to the Prime Rate plus two percent (2.0%),
which rate shall change when and as the Prime Rate changes."
"`Term Floating Rate' means, effective as of October 1, 1999,
an annual rate equal to the Prime Rate plus two percent (2.0%), which
rate shall change when and as the Prime Rate changes."
2. Financial Covenants. Sections 6.18, 6.19, 6.20, 6.21, and
7.12 of the Credit Agreement are amended to read as follows:
"Section 6.18 Minimum Cash Flow Available for Debt Service.
The Borrower will achieve Cash Flow Available for Debt Service,
determined as at the end of each fiscal quarter, at not less than the
amount set forth opposite such quarter:
Fiscal Quarter Ending on Minimum Cash Flow
------------------------ -----------------
or about Available for Debt
-------- -----------------
Service
-------
11/30/99 $3,410,000
2/29/00 $6,673,000
5/31/00 $9,247,000
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Fiscal Quarter Ending on Minimum Cash Flow
------------------------ -----------------
or about Available for Debt
-------- -----------------
Service
-------
8/31/00 $13,765,000
"Section 6.19 Minimum Debt Service Coverage Ratio. The
Borrower will maintain its Debt Service Coverage Ratio, determined as
at the end of each quarter, at not less than the ratio set forth
opposite such quarter:
Fiscal Quarter Ending Minimum Debt Service
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on or about Coverage Ratio
----------- --------------
11/30/99 0.95 to 1.00
2/29/00 0.95 to 1.00
5/31/00 0.95 to 1.00
8/31/00 0.95 to 1.00
"Section 6.20 Minimum Pre-tax Net Income. The Borrower will
achieve Pre-tax Net Income, determined as of the end of each fiscal
quarter described below, of not less than the amount set forth opposite
such fiscal quarter:
Fiscal Quarter Ending Minimum Pre-tax Net
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on or about Income
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11/30/99 $(1,855,000)
2/29/000 $(3,207,000)
5/31/00 $(4,488,000)
8/31/00 $(4,235,000)
"Section 6.21 Minimum Net Worth. The Borrower will maintain
its Net Worth, determined as at the end of each fiscal quarter
described below, of not less than the amount set forth opposite such
fiscal quarter:
Fiscal Quarter Ending Minimum Net Worth
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on or about
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11/30/99 $63,477,000
2/29/000 $62,125,000
5/31/00 $60,844,000
8/31/00 $61,097,000
The determination of Borrower's Net Worth will not consider the expense
associated with accruing for preferred dividends, nor the payment of
preferred dividends in common stock."
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"Section 7.12 Capital Expenditures. The Borrower will not, and
will not permit any Subsidiary to, expend or contract to expend, in the
aggregate, for Capital Expenditures during any fiscal year, amounts in
excess of $7,000,000. This limitation will not apply to the conversion
of any existing operating leases to capital leases."
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. New Compliance Certificate. Exhibit F to the Credit
Agreement is hereby amended in its entirety and replaced with Exhibit A to the
Fourth Amendment.
5. Waiver of Defaults. For the Borrower's fiscal quarter
ending on or about August 31, 1999, the Borrower is in default of the following
provisions of the Credit Agreement (collectively, the "Defaults"):
Covenant Required Actual
-------- --------- ------
Section 6.18 Cash Flow Available for Debt Service Not less than $11,796,000
$15,000,000
Section 6.19 Minimum Debt Service Coverage Ratio Not less than 0.82 to 1.00
0.90 to 1.00
Section 6.20 Minimum Pre-tax Net Income Not less than $(12,487,000)
$(9,400,000)
Section 6.21 Minimum Net Worth Not less than $74,332,000
$76,500,000
Upon the terms and subject to the conditions set forth in this Amendment, the
Agent hereby waives the Defaults.
These waivers shall be effective only in this specific instance and for the
specific purpose for which they are given, and these waivers shall not entitle
the Borrower to any other or further waiver in any similar or other
circumstances.
6. Amendment Fee. The Borrower shall pay the Lenders as of the
date hereof a fully earned, non-refundable fee in the amount of $120,000 in
consideration of the Lenders' execution of this Amendment.
7. Conditions Precedent. This Amendment, and the waiver set
forth in Paragraph 5 hereof, shall be effective when the Agent shall have
received an executed original hereof, together with each of the following, each
in substance and form acceptable to the Agent in its sole discretion:
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(a) Payment of the fee described in Paragraph 6.
(b) Such other matters as the Lender may require.
8. Representations and Warranties. The Borrower hereby
represents and warrants to the Lenders 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 constitute 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.
9. 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.
10. No Other Waiver. Except as set forth in Paragraph 5 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 Lenders, whether or not known to the
Lenders and whether or not existing on the date of this Amendment.
11. Release. The Borrower hereby absolutely and
unconditionally releases and forever discharges the Lenders, 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
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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. Costs and Expenses. The Borrower hereby reaffirms its
agreement under the Credit Agreement to pay or reimburse the Lenders on demand
for all costs and expenses incurred by the Lenders 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 Lenders
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 Lenders 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. 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 BANK MINNESOTA, XXXXXXXX, INC.
NATIONAL ASSOCIATION, as Agent
By /s/ Xxxxx X. Xxxxxxx By /s/ Xxxx Xxxxxxxx
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Xxxxx X. Xxxxxxx Xxxx Xxxxxxxx
Its Vice President Its Chief Financial Officer
NORWEST BANK MINNESOTA, XXXXXX TRUST AND SAVINGS BANK
NATIONAL ASSOCIATION
By /s/ Xxxxx X. Xxxxxxx By /s/ Xxxxx Xxxxxx
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Xxxxx X. Xxxxxxx Xxxxx Xxxxxx
Its Vice President Its Vice President
NBD BANK THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By By /s/ Xxxxx Xxxxxxx
--------------------- ------------------------------
Xxxxxx Xxxxxxx Xxxxx Xxxxxxx
Its First Vice President Its Assistant Vice President
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Exhibit A to Fourth Amendment to
Credit and Security Agreement
COMPLIANCE CERTIFICATE
TO: Xxxxx X. Xxxxxxx
Norwest Bank Minnesota, National Association
DATE: ,
SUBJECT: Financial Statements
Dear Xx. Xxxxxxx:
I am the duly qualified and acting Chief Financial Officer of
Xxxxxxxx, Inc. (the "Borrower") and I am familiar with the financial statements
and financial affairs of the Borrower. I am authorized to execute this
Compliance Certificate on behalf of the Borrower.
Pursuant to Section 6.1 of the Credit and Security Agreement
dated as of June 19, 1998, by and among the Borrower, Norwest Bank Minnesota,
National Association, as agent ("Norwest"; herein in such capacity, together
with any party which may become the successor Agent under such Credit and
Security Agreement, the "Agent"), and each of the financial institutions which
are now or may hereafter become parties to such Credit and Security Agreement,
as amended by a First Amendment to Credit and Security Agreement dated as of
November 25, 1998, as amended by a Second Amendment to Credit and Security
Agreement dated as of March 31, 1999, as amended by a Third Amendment to Credit
and Security Agreement dated as of April 5, 1999, and as amended by a Fourth
Amendment to Credit and Security Agreement dated as of November , 1999 (as the
same may be further amended, supplemented or restated from time to time, the
"Credit Agreement"), enclosed are an unaudited balance sheet and statements of
income and retained earnings of the Borrower, as of , (the
"Reporting Date"), and for the year-to-date period ending on the Reporting Date.
All terms used in this Compliance Certificate shall have the meanings given in
the Credit Agreement.
The balance sheet and statements of income and retained
earnings fairly present the financial condition of the Borrower as of the date
thereof. They have been prepared in accordance with GAAP.
I hereby certify to the Lenders as follows:
|_| The undersigned does not have knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement.
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|_| 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.
I further certify to the Lenders as follows:
1. Minimum Cash Flow Available for Debt Service. Pursuant to
Section 6.18, as of the Reporting Date, the Borrower's Cash Flow
Available for Debt Service was $ , which |_| satisfies |_|
does not satisfy the requirement that such amount be no less than
$ as set forth in the table below:
Fiscal Quarter Ending Minimum Cash Flow
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on or about Available for Debt Service
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11/30/99 $3,410,000
2/29/00 $6,673,000
5/31/00 $9,247,000
8/31/00 $13,765,000
2. Minimum Debt Service Coverage Ratio. Pursuant to Section
6.19 of the Credit Agreement, as of the Reporting Date, the Borrower's
Debt Service Coverage Ratio was _____ to 1.00 which |_| satisfies |_|
does not satisfy the requirement that such ratio be no less than ______
to 1.00 on the Reporting Date as set forth in table below:
Fiscal Quarter Ending Minimum Debt Service
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on or about Coverage Ratio
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11/30/99 0.95 to 1.00
2/29/00 0.95 to 1.00
5/31/00 0.95 to 1.00
8/31/00 0.95 to 1.00
3. Minimum Pre-tax Net Income. Pursuant to Section 6.20 of the
Credit Agreement, the Borrower's Pre-tax Net Income as of the Reporting
Date, was $ , which " satisfies " does not satisfy the
requirement that such amount be not less than $ during
such period as set forth in table below:
Fiscal Quarter Ending Minimum Pre-tax Net
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on or about Income
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11/30/99 $(1,855,000)
2/29/000 $(3,207,000)
5/31/00 $(4,488,000)
8/31/00 $(4,235,000)
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4. Minimum Net Worth. Pursuant to Section 6.21 of the Credit
Agreement, as of the Reporting Date, the Borrower's Net Worth was $ ,
which |_| satisfies |_| does not satisfy the requirement that the Borrower's
Book Net Worth be not less than $ on the Reporting Date as set
forth in table below:
Fiscal Quarter Ending on or about Minimum Net Worth
--------------------------------- ------------------
11/30/99 $63,477,000
2/29/000 $62,125,000
5/31/00 $60,844,000
8/31/00 $61,097,000
5. Capital Expenditures. Pursuant to Section 7.12 of the
Credit Agreement, for the fiscal quarter ending on the Reporting Date, the
Borrower and its Subsidiaries have expended or contracted to expend for Capital
Expenditures, $ in the aggregate, excluding the conversion of
any existing operating leases to capital leases, which |_| satisfies |_| does
not satisfy the requirement that such expenditures not exceed $7,000,000 in the
aggregate during any fiscal year.
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.
XXXXXXXX, INC.
By
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Xxxx Xxxxxxxx
Its Chief Financial Officer
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