WAIVER,FOURTH AMENDMENT
AND ASSUMPTION AGREEMENT
WAIVER, FOURTH AMENDMENT AND ASSUMPTION AGREEMENT ("Fourth Amendment")
dated as of August 29, 1997 to Amended and Restated Revolving Credit, Term Loan
and Security Agreement among LASALLE BUSINESS CREDIT, INC. ("Lender"), a
Delaware corporation, QUALITY AUTOMOTIVE COMPANY (as successor-in-interest to
QUAC Acquisition Corp.) ("Quality"), a Delaware corporation and US AUTOMOTIVE
FRICTION, INC. (f/k/a U.S. Automotive Manufacturing, Inc.) ("US Auto" and
together with Quality, each a "Borrower and jointly and severally, the
"Borrowers"), a Delaware corporation.
BACKGROUND
On December 30, 1992, Lender, Quality and US Auto entered into that certain
Amended and Restated Revolving Credit, Term Loan and Security Agreement, as
amended by a First Amendment dated as of March 9, 1993, a Second Amendment dated
as of May 26, 1994 and a Third Amendment dated as of December 26, 1995 (as so
amended and further amended, modified, restated or supplemented from time to
time, the "Loan Agreement") whereby Lender agreed to make certain financial
accommodations to Quality Automotive Company, predecessor of Quality ("Old
Quality") and US Auto.
Old Quality has entered into an Agreement and Plan of Merger with RT
Industries, Inc. ("RTIC"), QUAC Acquisition Corp. ("QUAC"), and the Subordinated
Lenders (as hereinafter defined) dated as of June 6, 1997 (as amended, modified,
restated or supplemented from time to time, the Merger Agreement") pursuant to
which Old Quality will merge with and into QUAC (the "Merger"), with QUAC being
the surviving corporation and changing its name to "Quality Automotive Company."
Old Quality has requested that Lender consent to the Merger Agreement and Lender
is willing to do so on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, the parties hereto hereby agree as follows:
1. Waiver. Subject to satisfaction of the conditions precedent set forth in
Section 15 below, Lender hereby waives the following Events of Default which
have occurred as a result of Borrowers' non-compliance with Sections 6.15, 6.16
and 6.17 of the Loan Agreement on or prior to the date hereof.
2. The following definitions are hereby added to Section 1 of the Loan
Agreement in their appropriate order:
"Junior Participation Agreement" means that certain Agreement of Junior
Participation dated as of August __, 1997 executed by Lender and accepted and
agreed to by each of the Subordinated Lenders.
"Merger" means the merger of Quality Automotive Company with and into QUAC
Acquisition Corp.
"Permitted Payments" means any mandatory prepayment of any Subordinated
Promissory Note made solely out of the proceeds of an Equity Infusion (as such
term is defined in the Subordinated Promissory Note) in excess of $3,000,000.
"Pledge Agreement" means that certain Pledge Agreement dated August __,
1997 executed by RTIC in favor of Lender, as same may be amended, modified,
supplemented or restated from time to time.
"Subordinated Lenders" means, collectively, each of Xxxxxx Xxxxxxxxx,
Xxxxxxx X. Xxxxxxxxx, Xxxx X. Xxxxx and Xxxxx X. Ram.
"Subordinated Pledge Agreements" shall mean the Pledge Agreements executed
by RTIC in favor of each Subordinated Lender.
"Subordinated Promissory Notes" shall mean, collectively, the Promissory
Notes executed by Quality in favor of the Subordinated Lenders in the aggregate
original principal amount of $4,500,000, each dated as of August __, 1997.
"Subordinated RTIC Note" shall mean the Subordinated Promissory Note
executed by Quality in favor of RTIC in the original principal amount of
$1,000,000 dated as of August __, 1997.
"Pledged Stock" means all of the capital stock of Quality now owned or
hereafter acquired by RTIC.
"RTIC" means RT Industries, Inc., a Delaware corporation, together with its
successors and assigns.
3. Section 1.12 "(Collateral") is hereby amended in its entirety as
follows:
(a) The term "Collateral" means and includes each and all of the
following: the Accounts; the Equipment; the General Intangibles; the
Real Estate Collateral; the Negotiable Collateral; the Inventory; the
Pledged Stock; any money, deposit accounts or other assets of Borrower
or of any guarantor in which Lender receives a security interest or
lien or which hereafter comes into the possession, custody or control
of Lender; and the proceeds of any of the foregoing, including, but
not limited to, proceeds of insurance covering the Collateral and any
and all Accounts, Equipment, General Intangibles, Real Estate
Collateral, Negotiable Collateral, Inventory, Pledged Stock, money,
deposit accounts or other tangible and intangible property of Borrower
or of any guarantor resulting from the sale or other disposition of
the Collateral, and the proceeds thereof. It is agreed that the
Collateral, whether owned and/or controlled by either Quality or US
Auto, shall act as security for the entire obligation of the Borrower
under this Agreement.
4. Section 1.13 ("Collateral Documents") is hereby amended in its entirety
to provide as follows:
(a) The term "Collateral Documents" means, at any point in time, the
Trademark Assignment, the Mortgage, the Pledge Agreement and all other
agreements, documents, guaranties, instruments or assignments then in
effect which pertain to the Obligations, the Collateral, or any other
aspect of the transactions contemplated by this Agreement.
5. Section 6.3(g) is hereby amended in its entirety to provide as follows:
"(g) Incur any debts outside the ordinary course of Borrower's business
other than (i) the RTIC Subordinated Note in form and substance
satisfactory to Lender; and (ii) the Subordinated Promissory Notes in
form and substance satisfactory to Lender and its counsel, in each
case which notes shall be subordinate to Borrower's obligations to
Lender."
6. A new subsection is hereby added to the end of Section 6.3 of the Loan
Agreement to read as follows:
"(p) make any payments (a) under the Subordinated RTIC Note or (b) under
the Subordinated Promissory Notes (other than any Permitted Payments
so long as an Event of Default has not occurred or would not occur
after giving effect to such payments)."
7. Section 6.4(e) of the Loan Agreement is hereby amended by deleting
"Automotive Holdings, Inc." and inserting "RTIC" in its place and stead.
8. Section 7 of the Loan Agreement is hereby amended by inserting the
following subsection at the end thereof:
"7.18 If a default occurs under the RTIC Subordinated Note, the
Subordinated Promissory Notes or Subordinated Pledge Agreements which
default is not cured or waived within any applicable grace period;
9. Section 7.7 of the Loan Agreement is hereby amended by deleting "thirty
(30) days" and inserting "sixty (60) days" in its place and stead.
10. Subject to the satisfaction of the conditions precedent set forth in
Section 15 of this Fourth Amendment, Lender hereby consents to the Merger and to
the consummation of the transactions contemplated by the Merger Agreement.
11. Quality hereby assumes in full, the payment, discharge, satisfaction
and performance of all obligations of Old Quality under the Loan Agreement and
the Collateral Documents, and Quality hereby adopts all of the provisions, terms
and conditions in the Loan Agreement and the Collateral Documents as if such
agreements had been entered into by Quality.
12. Quality hereby acknowledges that it will from time to time after the
execution hereof, upon request of Lender, execute and deliver to Lender such
further
instruments, agreements and documents and take such further action as Lender may
request in connection with the transactions contemplated herein.
13. Each Borrower hereby represents and warrants as follows:
(a) This Fourth Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of such Borrower and are
enforceable against such Borrower in accordance with their respective
terms.
(b) Upon the effectiveness of this Fourth Amendment, each Borrower hereby
ratifies and reaffirms all covenants, representations and warranties made
in the Loan Agreement to the extent the same are not amended hereby
(Sections 6.15, 6.16 and 6.17 of the Loan Agreement being deemed so
amended) and agree that all such covenants, representations and warranties
shall be deemed to have been remade as of the effective date of this Fourth
Amendment as same have been amended pursuant to the Disclosure Schedule
attached hereto as Exhibit A and made a part hereof.
(c) Other than as set forth in Paragraph 1 hereof, no Event of Default has
occurred and is continuing or would exist after giving effect to this
Fourth Amendment.
(d) Such Borrower has no defense, counterclaim or offset with respect to
the Loan Agreement.
14. Except as expressly amended hereby, the Loan Agreement remains in full
force and effect and this Fourth Amendment does not and shall not be deemed to
constitute a waiver (other than as set forth in Paragraph 1 hereof), forbearance
or release of any claim, demand, action or cause of action arising under the
Loan Agreement or any other instruments, documents or agreements executed and
delivered in connection therewith or herewith.
15. This Fourth Amendment shall become effective when and only when each of
the following conditions shall have been satisfied:
(a) Lender shall have received four (4) copies of this Fourth Amendment
duly executed by each Borrower and each Guarantor;
(b) Each document (including, without limitation, any Uniform Commercial
Code financing statement) required by this Fourth Amendment or under
law or reasonably requested by Lender to be filed, registered or
recorded in order to create, in favor of Lender, a perfected security
interest in or lien upon the Collateral owned by Borrowers shall have
been executed by Borrowers for filing, registration or recordation in
each jurisdiction in which the filing, registration or recordation
thereof is so required or requested;
(c) Lender shall have received a copy of the resolutions in form and
substance reasonably satisfactory to Lender, of the Board of Directors
of (x)
Borrowers authorizing the execution, delivery and performance of this
Fourth Amendment and all documents related thereto, including, without
limitation, a resolution authorizing the granting by Quality of the
Liens upon the Collateral and (y) RTIC authorizing the execution,
delivery and performance of the Pledge Agreement and the Subordination
Agreement, in each case certified by the Secretary or an Assistant
Secretary of Quality, QUAC or RTIC, as the case may be, as of the date
of this Fourth Amendment; and, such certificate shall state that the
resolutions thereby certified and have not been amended, modified,
revoked or rescinded as of the date of such certificate;
(d) Lender shall have received a copy of the Articles or Certificate of
Incorporation of Quality and RTIC, and all amendments thereto,
certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation together with copies of the By-Laws
of Quality and RTIC;
(e) Lender shall have received good standing certificates for Quality
dated not more than thirty (30) days prior to the date of this Fourth
Amendment, issued by the Secretary of State of the State of Delaware
and each jurisdiction where the conduct of Quality's business
activities or the ownership of its properties necessitates
qualification (other than the State of Virginia which shall be
delivered to Lender within thirty (30) days of the date hereof);
(f) Lender shall have received in form and substance satisfactory to
Lender, a Certificate of Insurance and loss payable endorsements on
Lender's standard form of loss payee endorsement naming Lender as loss
payee on Borrowers' casualty insurance policies, and Evidence of
Insurance naming Lender as a co-insured on Borrowers' liability
insurance policies;
(g) Lender shall have entered into a Junior Participation Agreement with
each of Xxxxxx Xxxxxxxxx, Xxxxxxx X. Xxxxxxxxx, Xxxx X. Xxxxx and
Xxxxx X. Ram and received $1,000,000 in connection therewith which
shall not be loaned to Borrowers but shall be applied by Lender to
reduce Lender's exposure under the Loan Agreement;
(h) RTIC shall have made a $1,000,000 subordinated loan to Borrowers
evidenced by the Subordinated RTIC Note and RTIC shall have executed a
Subordination Agreement with Lender, in form and substance acceptable
to Lender;
(i) Lender shall have received evidence from RTIC which shall indicate
that after giving effect to the transactions contemplated herein
(including the subordinated loan and the payment of the purchase price
in connection with the Merger), RTIC has no less than $2,000,000 in
unrestricted cash for use in the RTIC operations, which evidence shall
be acceptable to Lender in all respects and RTIC shall deliver to
Lender a copy of its 8(K) filing within seventy (70) days of the date
hereof which shall also indicate
that such requirement has been met;
(j) Lender shall have entered into a Subordination and Intercreditor
Agreement with each of Xxxxxx Xxxxxxxxx, Xxxxxxx X. Xxxxxxxxx, Xxxx X.
Xxxxx and Xxxxx X. Ram, on terms acceptable to Lender in all respects;
(k) Lender shall have received the Pledge Agreement duly executed by RTIC
in form and substance acceptable to Lender together with stock
certificates and duly executed stock powers endorsed in blank;
(l) Lender shall have received payment of an amendment fee of $24,000 (by
their execution below Borrowers hereby authorize Lender to charge
their loan account in order to pay such fee); and
(m) The Merger shall have been duly consummated in accordance with
applicable law; and
(n) Lender shall have received such other certificates, instruments,
documents and agreements as may reasonably be required by Lender or
its counsel, each of which shall be in form and substance satisfactory
to Lender and its counsel.
16. This Fourth Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
17. This Fourth Amendment may be executed in counterparts, each of which
shall be deemed an original and all of which taken together shall constitute one
agreement.
QUALITY AUTOMOTIVE COMPANY
By: /S/ XXXXXX XXXXXXXXX
---------------------
Name: Xxxxxx Xxxxxxxxx
Title: CEO
US AUTOMOTIVE FRICTION, INC.
By:/S/ XXXXXX XXXXXXXXX
---------------------
Name: Xxxxxx Xxxxxxxxx
Title: President
LASALLE BUSINESS CREDIT, INC.
By:/S/ XXXX XXXXX XXXXX-XXXXX
--------------------------
Name: Xxxx Xxxxx Xxxxx-Xxxxx
Title: V.P.
CONSENT OF GUARANTORS:
US AUTOMOTIVE FRICTION, INC.
By: /S/ XXXXXX XXXXXXXXX
--------------------
Name: Xxxxxx Xxxxxxxxx
Title: President
QUALITY AUTOMOTIVE COMPANY
By:/S/ XXXXXX XXXXXXXXX
---------------------
Name: Xxxxxx Xxxxxxxxx
Title: CEO
/S/ XXXXXX XXXXXXXXX
----------------
Xxxxxx Xxxxxxxxx
