ARROW AUTOMOTIVE INDUSTRIES, INC.
FOURTH AMENDMENT AND WAIVER TO REVOLVING
CREDIT AND TERM LOAN AGREEMENT
THIS FOURTH AMENDMENT AND WAIVER (this "Amendment"), dated as of March
30, 1996, by and between Arrow Automotive Industries, Inc. (the "Borrower")
and The First National Bank of Boston (the "Bank") as parties to a certain
Revolving Credit and Term Loan Agreement, dated as of December 29, 1993, as
amended by the First Amendment to Revolving Credit and Term Loan Agreement,
dated as of March 24, 1995, the Second Amendment to Revolving Credit and Term
Loan Agreement, dated as of June 24, 1995, and the Third Amendment to
Revolving Credit and Term Loan Agreement, dated as of December 30, 1995, (the
"Credit Agreement"). Capitalized terms not otherwise defined herein shall
have the same meanings ascribed thereto in the Credit Agreement.
WHEREAS, the Borrower has requested the Bank to make certain amendments
to the Credit Agreement;
WHEREAS, the Borrower has informed the Bank that for the fiscal quarter
ended March 30, 1996, the Borrower has failed to comply with the financial
covenant set forth in Section 11.2 of the Credit Agreement and has requested
that the Bank waive to the limited extent necessary to permit such non-
compliance as of March 30, 1996, the provisions of Section 11.2 of the Credit
Agreement; and
WHEREAS, the Bank is willing to make such amendments to, and grant such
waiver of, the Credit Agreement subject to the terms and conditions set forth
herein.
NOW THEREFORE, the Borrower and the Bank hereby covenant and agree as
follows:
1. AMENDMENT TO CREDIT AGREEMENT. The Credit Agreement is hereby
amended by:
(a) The definition of Borrowing Base contained in Section 1.1 of the
Credit Agreement is amended by deleting the percentage "55%" contained in
clause (d) of such definition and substituting the percentage "50%" therefor.
(b) The definition of Revolving Credit Loan Maturity Date is amended by
deleting the date "January 31, 1997" contained in such definition and
substituting the date "June 30, 1997" therefor.
(c) Section 1.1 of the Credit Agreement is further amended by adding
the following new definitions in the appropriate alphabetical order:
Adjustment Date. The first day of the fiscal quarter
immediately following the fiscal quarter in which a
certificate of compliance is to be delivered by the Borrower
pursuant to Section 9.4(d).
Applicable Margin. For each period commencing on an
Adjustment Date through the date immediately preceding the
next Adjustment Date (each a "Rate Adjustment Period"), the
Applicable Margin shall be the applicable margin set forth
below with respect to the Borrower's Debt Service coverage
ratio, as determined for the fiscal quarter specified in
the certificate of
compliance delivered by the Borrower
during the fiscal quarter immediately preceding the
applicable Rate Adjustment Period.
Term Revolving
Debt Service Revolving Base Credit/ Term
(Coverage See Credit/Base Rate Eurodollar Eurodollar
LEVEL SECTION 11.2) RATE LOANS LOANS RATE LOANS RATE LOANS
I Less than or
equal to Not Not
0.75:1.00 2.0% 2.25% Available Available
II Greater than or
equal to
0.76:1.00 but
less than Not Not
1.00:1.00 1.0% 1.25% Available Available
III Greater than or
equal to
1.01:1.00 but
less than Not Not
1.25:1.00 0.5% 0.75% Available Available
IV Greater than or
equal to
1.26:1.00 but
less than
1.50:1.00 0.0% 0.25% 2.5% 2.75%
V Greater than or
equal to
1.50:1.00 0.0% 0.25% 2.0% 2.25%
Notwithstanding the foregoing, (a) for Loans
outstanding during the period commencing on May 13, 1996
through the date immediately preceding the first Adjustment
Date to occur after the such date, the Applicable Margin
shall be as set forth in Level II above, and (b) if the
Borrower fails to deliver any certificate of compliance when
required by Section 9.4(d) hereof then, for the period
commencing on the next Adjustment Date to occur subsequent
to such failure through the date immediately following the
date on which such certificate of compliance is delivered,
the Applicable Margin shall be the highest Applicable Margin
set forth above.
(d) Effective as of May 13, 1996, clauses (a) and (b) of Section 2.5 of
the Credit Agreement are amended by deleting such clauses and restating them
in their entirety as follows:
(a) Each Base Rate Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending
on the last day of the interest period with respect thereto
at the rate per annum equal to the Base Rate PLUS the
Applicable Margin;
(b) Each Eurodollar Rate Loan shall bear interest
for the period commencing with the Drawdown Date thereof
and ending on the last day of the Interest Period with
respect thereto at the rate per annum equal to the
Eurodollar Rate PLUS the Applicable Margin;
(e) Effective as of May 13, 1996, clauses (a) and (b) of Section 4.5 of
the Credit Agreement are amended by deleting such clauses and restating them
in their entirety as follows:
(a) To the extent that all or any portion of the
Term Loan bears interest during such Interest Period at
the Base Rate, the Term Loan or such portion shall bear
interest during such Interest Period at the rate per
annum equal to the Base Rate PLUS the Applicable Margin;
(b) To the extent that all or any portion of the
Term Loan bears interest during such Interest Period at
the Eurodollar Rate, the Term Loan or
such portion shall
bear interest during such Interest Period at the rate
per annum equal to the Eurodollar Rate PLUS the Applicable
Margin.
(f) Clause (g) of Section 9.4 of the Credit Agreement is amended by
adding the following words at the end of such clause (g):
and within seven (7) days after the end of each two (2)
week period (the first such period commencing on June
10, 1996) or, after the occurrence and during the
continuance of a Default or an Event of Default at such
earlier time as the Bank may reasonably request, an
Accounts Receivable and sales report substantially in the
form set forth in the Borrowing Base Report with respect
thereto setting forth an accounting of Accounts Receivable
and sales at the end of such two (2) week period or other
date as requested by the Bank during the continuance of a
Default or Event of Default.
(g) Section 11.1 of the Credit Agreement is amended by deleting such
Section 11.1 and restating it in its entirety as follows:
Section 11.1 Capital Expenditures. The Borrower will not
make Capital Expenditures that exceed in the aggregate,
(a) $125,000 during the fiscal quarter ending on June 29,
1996, and (b) $500,000 during any fiscal year thereafter.
(h) Section 11.2 of the Credit Agreement is amended by deleting such
Section 11.2 and restating it in its entirety as follows:
Section 11.2 Debt Service. The Borrower will not permit,
as at the end of each fiscal period described in the table
set forth below, the ratio of (a) the sum of (i) Net
Income, plus (ii) Total Interest Expense, plus (iii)
depreciation, plus (iv) amortization to (b) Total Debt
Service to be less than the ratio set forth opposite such
period in such table:
FISCAL PERIOD RATIO
Q4, 1996 0.8:1.0
3 month period: Q1, 1997 1.2:1.0
6 month period: Q1, 1997 through
Q2, 1997 1.2:1.0
9 month period: Q1, 1997 through
Q3, 1997 1.2:1.0
12 month period: Q1, 1997 through
Q4, 1997 1.2:1.0
Each period of four consecutive
fiscal quarters thereafter,
commencing with the four
consecutive fiscal quarters
ending on the last day of
Q1, 1998 1.2:1.0
2. BORROWING BASE REPORT. Notwithstanding Section 9.4(g) as amended
by this Amendment, if the Borrower determines that for any two (2) week period
described in Section 9.4(g) as amended by this Amendment (the "Non-Compliance
Period") it can not deliver an Accounts Receivable and sales report, failure
to deliver such Accounts Receivable and sales report for such period shall not
constitute a Default or Event of Default under Section 9.4 so long as during
the Non-Compliance Period the Borrower maintains excess availability under the
Borrowing Base of $1,500,000 as set forth in the monthly Borrowing Base Report
delivered pursuant to Section 9.4 of the Credit Agreement.
3. WAIVER. The Bank hereby waives the provisions of Section 11.2 of
the Credit Agreement solely to the extent necessary to permit non-compliance
with such Section 11.2, and only for the fiscal quarter ended March 30, 1996.
4. CONDITIONS TO EFFECTIVENESS. This Amendment shall be effective as
of March 30, 1996, upon satisfaction of the following conditions:
(a) This Amendment shall have been duly and properly executed and
delivered to the Bank by the Borrower;
(b) All corporate action necessary for the valid execution,
delivery and performance by the Borrower of this Amendment and the Credit
Agreement as amended hereby shall have been duly and effectively taken, and
evidence thereof satisfactory to the Bank shall have been provided to the
Bank; and
(c) The Borrower shall have paid to the Bank an amendment fee of
$25,000.
5. REPRESENTATIONS AND WARRANTIES. The Borrower, hereby represents
and warrants to the Bank as follows:
(a) REPRESENTATIONS AND WARRANTIES IN CREDIT AGREEMENT. The
representations and warranties of the Borrower contained in the Credit
Agreement (i) were true and correct in all material respects when made, and
(ii) except to the extent such representations and warranties by their terms
are made solely as of a prior date, continue to be true and correct in all
material respects on the date hereof.
(b) RATIFICATION, ETC. Except as expressly provided by this
Amendment, the Credit Agreement and all documents, instruments and agreements
related thereto, including, but not limited to the Security Documents, are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. The Credit Agreement and this Amendment shall be read and
construed as a single agreement. All references in the Credit Agreement or
any related agreement or instrument to the Credit Agreement shall hereafter
refer to the Credit Agreement as amended hereby.
(c) AUTHORITY, ETC. The execution and delivery by the Borrower
of this Amendment and the performance by the Borrower of all of its agreements
and obligations under the Credit Agreement as amended hereby are within the
corporate authority of the Borrower and have been duly authorized by all
necessary corporate action on the part of the Borrower.
(d) ENFORCEABILITY OF OBLIGATIONS. This Amendment and the Credit
Agreement as amended hereby constitute the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance
with their terms.
(e) NO DEFAULT. After giving effect to this Amendment, no
Default or Event of Default has occurred and is continuing.
6. NO OTHER AMENDMENTS OR WAIVERS. Except as expressly provided in
this Amendment, all of the terms and conditions of the Credit Agreement and
the other Loan Documents remain in full force and effect.
7. EXPENSES. Pursuant to Section 16 of the Credit Agreement, all
costs and expenses incurred or sustained by the Bank in connection with this
Amendment, including the fees and disbursements of
legal counsel for the Bank
in producing, reproducing and negotiating the Amendment, will be for the
account of the Borrower whether or not the transactions contemplated by this
Amendment are consummated.
8. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
number of counterparts, each of which shall be deemed an original, but which
together shall constitute one instrument.
9. MISCELLEANOUS. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT
UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH
OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF
LAW). The captions in this Amendment are for the convenience of reference
only and shall not define or limit the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
under seal as of the date first set forth above.
ARROW AUTOMOTIVE INDUSTRIES, INC.
By: /S/ JAMES F. FAGAN
Name: James F. Fagan
Title: Executive Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /S/ MATT A. ROSS, VP
Matthew A. Ross, Vice President