WAIVER AND FIRST AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
THIS WAIVER AND FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") is entered into as of November 20, 2001, by
and between AUTO-GRAPHICS, INC., a California corporation ("Borrower"),
and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
A. Borrower is currently indebted to Bank pursuant to the terms
and conditions of that certain Amended and Restated Credit Agreement dated
as of August 1, 2000 between Borrower and Bank as such agreement may have
been amended or modified from time to time (the "Agreement"). Capitalized
terms used herein without definition shall have the meanings ascribed to
them in the Agreement.
B. Borrower is indebted to Bank under the terms of the Agreement
for a line of credit (the "Prior Line of Credit"), which is evidenced by
that certain Reducing Revolving Note dated August 1, 2000 in the maximum
principal amount of Three Million Dollars ($3,000,000.00) (the "Prior Note").
C. By letter dated November 14, 2001 from Borrower to Bank, Borrower
requested that Bank waive certain Events of Default under the Agreement and
modify certain requirements of the Agreement. Bank has agreed to waive such
Events of Default and modify the Agreement, subject to the terms and
conditions set forth herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree that the Agreement
shall be amended as follows; provided, however, that nothing herein shall
terminate any security interest granted in favor of Bank and all such
security interests shall remain in full force and effect; and Bank and
Borrower further agree as follows:
1. Amendment to Section 1.1(a). Section 1.1(a) of the Agreement is hereby
deleted and replaced in its entirety with the following:
"(a) Line of Credit. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make advances to Borrower from time to time up to and
including June 3, 2002, not to exceed at any time the aggregate principal
amount of One Million Six Hundred Thousand Dollars ($1,600,000.00) ("Line of
Credit"), the proceeds of which shall be used for working capital requirements.
Borrower's obligation to repay advances shall be evidenced by a promissory
note substantially in the form of Exhibit A attached hereto (the "Note"),
all terms of which shall be incorporated by this reference."
The foregoing change shall become effective upon the execution and delivery
to Bank of a promissory note substantially in the form of Exhibit A attached
hereto (which promissory note shall replace the Prior Note and be deemed the
Note defined in and made pursuant to the Agreement) and all other contracts,
instruments and documents required by Bank to evidence such change; provided,
however, that outstanding advances under the Prior Line of Credit theretofore
provided Borrower by Bank in connection with the Prior Note shall be deemed
outstanding advances under the Note in effect hereby.
2. Amendment to Section 1.1(d). Section 1.1(d) of the Agreement is hereby
deleted in its entirety.
3. Amendment to Section 4.8. Section 4.8 of the Agreement is hereby deleted
and replaced in its entirety with the following:
"SECTION 4.8 FINANCIAL CONDITION. Maintain Borrower's consolidated
financial condition as follows using generally accepted accounting
principles consistently applied and used consistently with prior practices
(except to the extent modified by the definitions herein), with compliance
determined commencing with Borrower's financial statements for the period
ending December 31, 2001:
(a) Intentionally Omitted.
(b) Tangible Net Worth as of the end of each calendar quarter set forth
below of not less than the amount set forth opposite such date:
Quarter Ending Tangible Net Worth
----------------- ------------------
December 31, 2001 $2,000,000
March 31, 2002 $2,000,000
"Tangible Net Worth" is defined as the aggregate of total stockholders'
equity plus subordinated debt less any intangible assets. For purposes of
this Agreement, capitalized software development and acquisition cost is
considered a tangible asset.
(c) Total Liabilities divided by Tangible Net Worth not at any time
greater than 2.0 to 1.0 as of the last day of each calendar quarter, with
"Total Liabilities" defined as the aggregate of current liabilities and non-
current liabilities less subordinated debt.
Attached hereto as Schedule 4.8 is a letter from Daniel E. Luebben to Darryl S.
Hallie dated August 9, 2000 that Bank and Borrower agree accurately describes
the calculations to be made pursuant to this Section 4.8."
4. Amendment and Waiver Fee. In consideration of the amendments and
waivers set forth herein and as a condition to the effectiveness hereof,
immediately upon signing this Amendment, Borrower shall pay to Bank a non-
refundable fee of $3,000.00, which shall be deemed fully earned (the
"Amendment Fee").
5. Conditions Precedent. Provided that each of the following conditions
is satisfied on or before December 5, 2001, this Amendment shall become
effective on the first business day that each of the following conditions
have been met to Bank's satisfaction (the "Effective Date"):
(a) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following:
(i) This Amendment executed by Borrower;
(ii) Revolving Note executed by Borrower; and
(iii) Such other documents as Bank may require under any other
Section of this Amendment.
(b) Amendment Fee. Borrower shall have paid the Amendment Fee to Bank
by authorizing Bank to debit Borrower's demand deposit account no. 4644631202
with Bank.
(c) Other Fees and Charges. In addition to Borrower's obligations under the
Credit Agreement and the other Loan Documents, Borrower shall reimburse Bank
immediately upon demand for all costs and expenses, including attorneys'
fees (including the allocated costs of bank's in-house counsel) expended or
incurred by Bank in connection with the negotiation and preparation of this
Amendment. Borrower authorizes Bank to debit its demand deposit account no.
4644631202 with Bank for all such costs and expenses.
If all of the conditions set forth in this Section 5 have not been satisfied
to Bank's satisfaction on or before December 5, 2001, then this Amendment
shall be null and void.
6. Waiver of Defaults. Bank hereby waives its default rights with
respect to the following Events of Default:
(a) failure to reduce the outstanding balance under the Prior Note
to a maximum of $2,250,000.00 on October 1, 2001;
(b) failure to maintain a Coverage Ratio of 1.25 or more in
accordance with Section 4.8(a) of the Agreement for the Measuring Period
ended September 30, 2001;
(c) failure to maintain Tangible Net Worth in excess of $3,000,000.00
in accordance with Section 4.8(b) of the Agreement as of September 30, 2001;
(d) failure to maintain a Quick Ratio of not less than 0.40 to 1.00
in accordance with Section 4.8(d) of the Agreement; and
(e) permitting loans, advances and investments to employees and
affiliates to exceed the $350,000.00 maximum at any time outstanding in
accordance with Section 5.6 of the Agreement.
This waiver applies only to the defaults specified above and only for the
dates specified in this Section 6. It is not a waiver of any subsequent
breaches of the same provisions of the Agreement, nor is it a waiver of any
breach of any other provision of the Agreement.
7. General Release. In consideration of the benefits provided to Borrower
under the terms and provisions hereof, Borrower and each guarantor hereunder
hereby agree as follows ("General Release"):
(a) Borrower and each guarantor hereunder, for itself and on behalf of
its respective successors and assigns, do hereby release, acquit and forever
discharge Bank, all of Bank's predecessors in interest, and all of Bank's past
and present officers, directors, attorneys, affiliates, employees and agents,
of and from any and all claims, demands, obligations, liabilities, indebtedness,
breaches of contract, breaches of duty or of any relationship, acts, omissions,
misfeasance, malfeasance, causes of action, defenses, offsets, debts, sums of
money, accounts, compensation, contracts, controversies, promises, damages,
costs, losses and expenses, of every type, kind, nature, description or
character, whether known or unknown, suspected or unsuspected, liquidated
or unliquidated, each as though fully set forth herein at length (each, a
"Released Claim" and collectively, the "Released Claims"), that Borrower or
any guarantor hereunder now has or may acquire as of the later of: (i) the
date this Amendment becomes effective through the satisfaction (or waiver
by Bank) of all conditions hereto; or (ii) the date that Borrower and each
guarantor hereunder have executed and delivered this Amendment to Bank
(hereafter, the "Release Date"), including without limitation, those
Released Claims in any way arising out of, connected with or related to
any and all prior credit accommodations, if any, provided by Bank, or any
of Bank's predecessors in interest, to Borrower or any guarantor hereunder,
and any agreements, notes or documents of any kind related thereto or the
transactions contemplated thereby or hereby, or any other agreement or
document referred to herein or therein.
(b) Borrower and each guarantor hereunder hereby acknowledge, represent
and warrant to Bank as follows:
(i) Borrower and such guarantor understand the meaning and effect
of Section 1542 of the California Civil Code which provides:
"Section 1542. GENERAL RELEASE; EXTENT. A GENERAL RELEASE
DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
(ii) With regard to Section 1542 of the California Civil Code, Borrower
and each such guarantor agree to assume the risk of any and all unknown,
unanticipated or misunderstood defenses and Released Claims which are
released by the provisions of this General Release in favor of Bank, and
Borrower and each such guarantor hereby waive and release all rights and
benefits which they might otherwise have under Section 1542 of the
California Civil Code with regard to the release of such unknown,
unanticipated or misunderstood defenses and Released Claims.
(c) Each person signing below on behalf of Borrower or any guarantor
hereunder acknowledges that he or she has read each of the provisions of
this General Release. Each such person fully understands that this General
Release has important legal consequences, and each such person realizes that
they are releasing any and all Released Claims that Borrower or any such
guarantor may have as of the Release Date. Borrower and each guarantor
hereunder hereby acknowledge that each of them has had an opportunity to
obtain a lawyer's advice concerning the legal consequences of each of the
provisions of this General Release.
(d) Borrower and each guarantor hereunder hereby specifically
acknowledge and agree that:
(i) none of the provisions of this General Release shall be construed
as or constitute an admission of any liability on the part of Bank;
(ii) the provisions of this General Release shall constitute an absolute
bar to any Released Claim of any kind, whether any such Released Claim is
based on contract, tort, warranty, mistake or any other theory, whether
legal, statutory or equitable; and (iii) any attempt to assert a Released
Claim barred by the provisions of this General Release shall subject
Borrower and each guarantor hereunder to the provisions of applicable
law setting forth the remedies for the bringing of groundless, frivolous
or baseless claims or causes of action.
8. Interpretation. Except as specifically provided herein, all terms
and conditions of the Credit Agreement remain in full force and effect,
without waiver or modification. This Amendment and the Credit Agreement
shall be read together, as one document.
9. Reaffirmation; Certification. Borrower hereby remakes all
representations and warranties contained in the Credit Agreement and
reaffirms all covenants set forth therein. Borrower represents and
warrants that the execution and delivery of this Amendment and the Line
of Credit Note have been duly authorized by all necessary corporate action
of Borrower. Borrower further certifies that as of the Effective Date of
this Amendment there exists no Event of Default as defined in the Credit
Agreement, nor any condition, act or event which with the giving of notice
or the passage of time or both would constitute any such Event of Default.
10. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed
to be an original, and all of which when taken together shall constitute
one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
AUTO-GRAPHICS, INC., WELLS FARGO BANK,
a California corporation NATIONAL ASSOCIATION
By: /s/Robert S. Cope By: /s/Darryl S. Hallie
- ----------------------------- ------------------------------
Name: Robert S. Cope Name: Darryl S. Hallie
Title: President Title: Vice President/Principal
GUARANTORS' CONSENT AND REAFFIRMATION
Each of the undersigned guarantors of all indebtedness of
AUTO-GRAPHICS, INC., a California corporation, to Wells Fargo Bank,
National Association hereby:
(i) consents to the foregoing Waiver and First Amendment to Amended
and Restated Credit Agreement (the "Amendment");
(ii) reaffirms its obligations under its respective Continuing Guaranty;
(iii) reaffirms its waivers of each and every one of the defenses to
such obligations as set forth in its respective Continuing Guaranty;
(iv) reaffirms that its obligations under its respective Continuing
Guaranty are separate and distinct from the obligations of any other
party under the Amendment and the other Loan Documents (as defined
therein); (v) agrees to join in and be bound by all of the terms and
provisions of the General Release contained in Section 7 of the Amendment.
GUARANTORS:
A-G CANADA, LTD.
By: /s/Robert S. Cope
- ------------------------------
Name: Robert S. Cope
Title: President
By: /s/Daniel E. Luebben
- ------------------------------
Name: Daniel E. Luebben
Title: Chief Financial Officer
With reference to that certain Guarantee dated
October 31, 1997
DATAQUAD, INC., a Nevada corporation
By: /s/Robert S. Cope
- ------------------------------
Name: Robert S. Cope
Title: President
DATACAT, INC., a California corporation
By: /s/Robert S. Cope
- ------------------------------
Name: Robert S. Cope
Title: President
THE LIBRARYCARD, INC., a Nevada corporation
By: /s/Robert S. Cope
- ------------------------------
Name: Robert S. Cope
Title: President
REVOLVING NOTE
- --------------------------------------------------------------------------
$1,600,000.00 Los Angeles, California
November 20, 2001
FOR VALUE RECEIVED, the undersigned AUTO-GRAPHICS, INC., a California
corporation ("Borrower"), promises to pay to the order of WELLS FARGO BANK,
NATIONAL ASSOCIATION ("Bank") at its office at 333 South Grand Avenue, Los
Angeles, California, or at such other place as the holder hereof may
designate, in lawful money of the United States of America and in immediately
available funds, the principal sum of One Million Six Hundred Thousand
Dollars ($1,600,000.00), or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the
date of its disbursement as set forth herein. Capitalized terms used herein
without definition shall have the meanings assigned to such terms in that
certain Amended and Restated Credit Agreement dated as of August 1, 2000
(as amended, modified, supplemented or restated from time to time) between
Borrower and Bank.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall bear
interest (computed on the basis of a 360-day year, actual days elapsed) at
a rate per annum of one percent (1.00%) above the Prime Rate in effect from
time to time. The "Prime Rate" is a base rate that Bank from time to time
establishes and which serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto. Each
change in the rate of interest hereunder shall become effective on the date
each Prime Rate change is announced within Bank.
(b) Payment of Interest. Interest accrued on this Note shall be payable
on the last day of each month, commencing November 30, 2001.
(c) Default Interest. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable
by acceleration or otherwise, the outstanding principal balance of this
Note shall bear interest until paid in full at an increased rate per annum
(computed on the basis of a 360-day year, actual days elapsed) equal to
four percent (4%) above the rate of interest from time to time applicable
to this Note.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of any document executed in connection with or
governing this Note; provided, however, that the total outstanding
borrowings under this Note shall not at any time exceed the principal amount
set forth above or such lesser amount as shall at any time be available
hereunder. The unpaid principal balance of this obligation at any time
shall be the total amounts advanced hereunder by the holder hereof less
the amount of principal payments made hereon by or for Borrower, which
balance may be endorsed hereon from time to time by the holder. The
outstanding principal balance of this Note shall be due and payable in
full on June 3, 2002.
(b) Equity Proceeds. Borrower shall prepay the Line of Credit in an
amount equal to ten percent (10%) of Excess Equity Proceeds not more than
two (2) business days after any Excess Equity Proceeds are received, and
the Line of Credit shall be permanently reduced on such date by the amount
of prepayment required by this sentence. "Equity Proceeds" shall mean the
gross amount of new equity received by the Borrower and its Subsidiaries
from and after April 1, 2000. "Excess Equity Proceeds" shall mean Equity
Proceeds in excess of $5,000,000.00.
(c) Advances. Advances hereunder, to the total amount of the principal
sum stated above, may be made by the holder at the oral or written request
of (i) Robert S. Cope or Daniel E. Luebben, any one acting alone, who are
authorized to request advances and direct the disposition of any advances
until written notice of the revocation of such authority is received by the
holder at the office designated above, or (ii) any person, with respect to
advances deposited to the credit of any deposit account of Borrower, which
advances, when so deposited, shall be conclusively presumed to have been made
to or for the benefit of Borrower regardless of the fact that persons other
than those authorized to request advances may have authority to draw against
such account. The holder shall have no obligation to determine whether any
person requesting an advance is or has been authorized by Borrower.
(d) Application of Payments. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of
that certain Waiver and First Amendment to Amended and Restated Credit
Agreement between Borrower and Bank dated as of even date herewith. Any
default in the payment or performance of any obligation under this Note, or
any defined event of default under the Credit Agreement, shall constitute an
"Event of Default" under this Note.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal
and interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder
shall immediately cease and terminate. Borrower shall pay to the holder
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of the holder's in-house counsel),
expended or incurred by the holder in connection with the enforcement of
the holder's rights and/or the collection of any amounts which become due
to the holder under this Note, and the prosecution or defense of any action
in any way related to this Note, including without limitation, any action
for declaratory relief, whether incurred at the trial or appellate level,
in an arbitration proceeding or otherwise, and including any of the
foregoing incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or motion
brought by Bank or any other person) relating to Borrower or any other
person or entity.
(b) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
AUTO-GRAPHICS, INC., a California corporation
By: /s/Robert S. Cope
-------------------------
Name: Robert S. Cope
Title: President
August 9, 2000
Via Fax
Darryl S. Hallie
Vice President
Loan Adjustment Group
Wells Fargo Bank
333 S. Grand Avenue, Suite 940
Los Angeles, CA 90071
Re: First Amended and Restated Credit
Agreement Dated August 1, 2000
("Credit Agreement")
Dear Darryl:
The purpose of this letter is confirm our mutual understanding of how the
following loan covenant ratios will be calculated under the above referenced
Credit Agreement (and related Loan Documents):
(EBITDA) Coverage Ratio
1. EBITDA is defined as "net profit before taxes plus interest expense,
depreciation and amortization expense". The mechanics of the calculation
would be to begin with quarterly net income/loss and add back the income
tax provision, interest expense (excluding interest income), depreciation
and amortization expense for that same quarter to obtain EBITDA. EBITDA
for a consecutive four quarter period would then be totaled to yield a
rolling four quarter sum for the Measuring Period, a consecutive four
calendar quarter period ending on the last day of the calendar quarter for
which the Coverage Ratio is being calculated. This figure becomes the
numerator of the ratio. The formula would measure Auto-Graphics on a
consolidated basis excluding minority interests measuring only the
ownership interest of Auto-Graphics in the subsidiary(ies) net income/loss.
This is consistent with the Tangible Net Worth covenant below which also
excludes minority interests.
2. Debt Service is defined as "the aggregate of total interest expense
(excluding interest income) plus current maturities of long-term debt as
of the first day of the applicable Measuring Period (above)." The aggregate
interest expense is equal to the interest expense amount included in EBITDA
above for the Measuring Period. Current maturities are defined as the
expected principal payments and/or mandatory debt reduction amounts (due)
on long-term debt in accordance with GAAP accounting as previously reported
in or which will be reported in the Company's financial statements as of
the last day of the calendar quarter immediately prior to the Measuring
Period above (regardless of what may have been actually paid by the Company
during that same four quarter period). This means that the actual current
maturities reported on the Company's historical financial statements will
be used in the calculation of the ratio starting from the third quarter of
1999 through the second quarter of 2000. This figure becomes the denominator
of the ratio.
3. The numerator is divided by the denominator to yield the Coverage Ratio for
the four quarter Measuring Period.
Tangible Net Worth
Tangible Net Worth (TNW) is defined as the aggregate of stockholder's equity
plus subordinated debt (the Company has none) less intangible assets (the
Company has none). Capitalized software development costs are considered
tangible assets for purposes of the Credit Agreement. TNW excludes minority
interests and is measured on a quarterly basis.
Debt to Tangible Net Worth
Debt is defined as total current and non-current liabilities excluding
subordinated debt (the Company has none). TNW is defined above. The ratio
excludes minority interests from either the debt (numerator) or TNW
(denominator). The Debt to TNW Ratio is measured on a calendar quarter
basis.
Quick Ratio
The Quick Ratio is defined as the aggregate of unrestricted cash and cash
equivalents divided by the declining amount of the Line of Credit. At 40%,
the quick ratio establishes a minimum cash balance of $1.2 million at a $3.0
million initial commitment declining every six months to $800,000 at the
conclusion of the two year term of the Credit Agreement. The Quick Ratio
is to be measured on a daily basis through-out the loan term.
Please review the calculation methodologies/definitions above and confirm our
mutual interpretation and application. Assuming that you concur, would you do
me a favor and initial and return a copy of this letter for our loan file; and
also insert a copy in the Bank's loan file so that if we are not the
individuals involved in the implementation of this Credit Agreement, our
respective successors will have the benefit of our understanding. Should you
have any questions or require any additional information, please give me a
call. Your assistance is appreciated.
Regards,
/s/Daniel E. Luebben
- ------------------------
Daniel E. Luebben
Chief Financial Officer
Received/Approved:
/s/Darryl S. Hallie
- ------------------------
Darryl S. Hallie
Vice President