CONSENT AND AMENDMENT NO. 4
Dated as of March 31, 1994 to
RESTATED AND AMENDED CREDIT AGREEMENT
Dated as of July 27, 1992
This Consent and Amendment No. 4 ("Amendment") dated as
of March 31, 1994 is entered into among VSI Corporation, a
Delaware corporation, Fairchild Industries, Inc., a Delaware
corporation, and the undersigned "Senior Lenders" (as defined in
the Credit Agreement identified below). Capitalized terms used
herein without definition are used herein as defined in the
Credit Agreement.
PRELIMINARY STATEMENT. VSI Corporation, a Delaware
corporation, Fairchild Industries, Inc., a Delaware corporation,
RHI Holdings, Inc., a Delaware corporation, the Senior Lenders,
the Agents, and the Administrative Agent are parties to that
certain Restated and Amended Credit Agreement dated as of July
27, 1992, as amended (the "Credit Agreement"). VSI has requested
the amendment of the Credit Agreement in certain respects as more
particularly described in the letter dated March 4, 1994, a copy
of which is attached hereto as Exhibit 1 and made a part hereof
(the "Amendment Request") and FII and VSI have requested the
consent of the Requisite Senior Lenders of FII and VSI,
respectively, to the transfer of the capital stock of Fairchild
Data Corporation by FII to VSI as more particularly described in
the Amendment Request.
Subject to the terms and conditions stated herein, the
undersigned Senior Lenders of VSI comprising at least the
Requisite Senior Lenders of VSI and VSI have agreed to further
amend the Credit Agreement as set forth in Section 1 hereof and
the Senior Lenders of VSI comprising at least the Requisite
Senior Lenders of VSI and the Senior Lenders of FII comprising at
least the Requisite Senior Lenders of FII have agreed to consent
to certain matters as described in Section 2 hereof.
SECTION 1. Amendments to the Credit Agreement.
Effective as of March 31, 1994, subject to the satisfaction of
the conditions precedent set forth in Section 3 hereof, the
Credit Agreement is hereby amended as follows:
1.1 Section 1.01 is amended to (i) delete the
definition of "Consolidated EBITDA" in its entirety and
substitute the following therefor:
"Consolidated EBITDA" shall mean, with respect to any
Borrower, for any period, such Borrower's Consolidated
Net Income for such period, plus without duplication,
the sum of the amounts for such period (to the extent
deducted in the determination of such Consolidated Net
Income) of such Borrower's (i) Consolidated Cash
Interest Expense, (ii) accreted interest on retiree
medical benefit obligations, (iii) charges against
income for federal, state and local income taxes, (iv)
depreciation expense, (v) amortization expense, (vi)
other non-recurring non-cash charges and expenses not
now or hereafter requiring the use of Cash, (vii) any
losses arising other than in the ordinary course of
business which have been included in the determination
of Consolidated Net Income, (viii) any increases in the
LIFO reserve, (ix) if such Borrower is VSI, charges and
expenses allocated to such Borrower in accordance with
the Allocation Memorandum in an amount not exceeding
the fair market value of the related services so
allocated, (x) with respect to Fiscal Years ending June
30, 1993 and June 30, 1994, an aggregate amount of
$10,000,000 in cash restructuring expenses, and (xi)
with respect to Fiscal Years ending June 30, 1993 and
June 30, 1994, $10,000,000 in the aggregate of non-cash
inventory writeoffs for both such Fiscal Years, minus
(in each case, to the extent included in the
determination of such Consolidated Net Income) (A) any
gains arising other than in the ordinary course of
business, (B) any decreases in the LIFO reserve, and
(C) other non-recurring credits and income not now or
hereafter generating Cash, all as determined on a
consolidated basis for such Borrower and its
Subsidiaries in conformity with GAAP; provided,
however, that for purposes of determining compliance
with Article XII the amount of losses (whether cash or
non-cash) with respect to application of insurance
deductibles and incurrence of non-reimbursable expenses
incurred as a result of earthquake not to exceed
$4,000,000 in the aggregate shall not be included in
the calculation of the covenants set forth therein with
respect to fiscal quarters designated Third Quarter,
1994, Fourth Quarter, 1994, First Quarter, 1995, and
Second Quarter, 1995."
and (ii) delete clause (ii) of the definition of "Excluded
Dispositions" in its entirety and substitute the following
therefor:
"(ii) the sale, transfer, or other disposition by FII
or VSI of all or any part of the capital stock or of
the assets of Fairchild Data Corporation,".
1.2 Section 11.14 is amended to add the word
"Consolidated" immediately preceding "EBITDA" in the proviso at
the end of such provision.
1.3 Section 12.03 is amended to add the following
proviso at the end thereof:
"provided, however, that the amount of losses (whether
cash or non-cash) with respect to application of
insurance deductibles and incurrence of nonreimbursable
expenses incurred as a result of earthquake not to
exceed $4,000,000 in the aggregate shall not be
included in the calculation of Consolidated Net Worth
of VSI."
1.4 Section 12.07 is amended to delete that portion of
the schedule of covenant test dates commencing with Fourth
Quarter, 1994 and ending with Second Quarter, 1997 in its
entirety and substitute the following therefor:
Fourth Quarter, 1994 62,000,000
First Quarter, 1995 68,600,000
Second Quarter, 1995 70,360,000
Third Quarter, 1995 72,120,000
Fourth Quarter, 1995 75,000,000
First Quarter, 1996 76,600,000
Second Quarter, 1996 78,360,000
Third Quarter, 1996 80,120,000
Fourth Quarter, 1996 83,000,000
First Quarter, 1997 84,600,000
Second Quarter, 1997 86,360,000
SECTION 2. Consent. The undersigned Senior Lenders of
VSI and the undersigned Senior Lenders of FII hereby consent to
the transfer of the capital stock of Fairchild Data Corporation
by FII to VSI to be credited as paid-in capital or in exchange
for common stock of VSI, it being understood that any common
stock of VSI issued to FII in exchange for such capital stock of
Fairchild Data Corporation will be subject to a Lien in favor of
the holders of the FII Senior Notes.
SECTION 3. Conditions Precedent to Effectiveness of
this Amendment. This Amendment shall become effective as of
March 31, 1994 if, and only if, (i) the Administrative Agent
shall have received on or before March 31, 1994 a facsimile or
original executed copy of this Amendment executed by FII, VSI,
and Senior Lenders comprising at least the Requisite Senior
Lenders of each of FII and VSI and (ii) the Administrative Agent
shall have received on March 31, 1994, for the benefit of each
Senior Lender executing and delivering this Amendment on or
before such date, payment of a fee in the amount of one-quarter
of one percent (0.25%) of the sum of (a) the Facility G
Commitment of such Senior Lender plus (b) the outstanding
principal balance as of March 31, 1994 of the Series VII Loans
payable to such Senior Lender plus (c) the outstanding principal
balance as of March 31, 1994 of the Series VIII Term Loans
payable to such Senior Lender.
SECTION 4. Representations and Warranties. FII and
VSI hereby represent and warrant as follows:
4.1 This Amendment and the Credit Agreement as
previously executed and amended and as amended hereby constitute
legal, valid and binding obligations of FII and VSI and are
enforceable against FII and VSI in accordance with their terms.
4.2 No Event of Default or Potential Event of Default
exists or would result from any of the transactions contemplated
by this Amendment.
4.3 Upon the effectiveness of this Amendment, FII and
VSI each hereby reaffirms all covenants, representations and
warranties made in the Credit Agreement to the extent the same
are not amended hereby and agrees that all such covenants,
representations and warranties shall be deemed to have been
remade as of the date this Amendment becomes effective (unless a
representation and warranty is stated to be given on and as of a
specific date, in which case such representation and warranty
shall be true, correct and complete as of such date).
SECTION 5. Reference to and Effect on the Credit
Agreement.
5.1 Upon the effectiveness of this Amendment, each
reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import shall
mean and be a reference to the Credit Agreement, as amended
hereby, and each reference to the Credit Agreement in any other
document, instrument or agreement executed and/or delivered in
connection with the Credit Agreement shall mean and be a
reference to the Credit Agreement as amended hereby.
5.2 Except as specifically amended above, the Credit
Agreement, the Notes and all other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.
5.3 The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or
remedy of any Senior Lender or Agent or the Administrative Agent
under the Credit Agreement, the Notes or any of the other Loan
Documents, nor constitute a waiver of any provision contained
therein, except as specifically set forth herein.
SECTION 6. Execution in Counterparts. This Amendment
may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all
of which taken together shall constitute but one and the same
instrument. Delivery of an executed counterpart of this Amendment
by telecopier shall be effective as delivery of a manually
executed counterpart of this Amendment.
SECTION 7. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the
State of New York.
SECTION 8. Headings. Section headings in this
Amendment are included herein for convenience of reference only
and shall not constitute a part of this Amendment for any other
purpose.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized as of the date first above written.
FAIRCHILD INDUSTRIES, INC.
By: Karen L. Schneckenburger
---------------------------
Title: Treasurer
VSI CORPORATION
By: Karen L. Schneckenburger
---------------------------
Title: Treasurer
CITICORP NORTH AMERICA, INC.,
as a Senior Lender
By: Colin M. Cohen
---------------------------
Vice President
THE BANK OF NOVA SCOTIA, as a
Senior Lender
By: F.C.H. Ashby
---------------------------
Title: Senior Manager Loan
Operations
NATIONSBANK OF VIRGINIA, N.A., as
a Senior Lender
By: Robert A. Sharpe, II
---------------------------
Title: Senior Vice President
GENERALE BANK, as a Senior Lender
By: Eddie Matthews & Hans Neukomm
-------------------------------
Title: Senior Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, as a Senior Lender
By: Brady S. Sadek
---------------------------
Title: Vice President &
Deputy General Manager
MITSUBISHI BANK, LTD., as a Senior
Lender
By: Minoru Akimoto
---------------------------
Title: Senior Vice President
& Manager
CANADIAN IMPERIAL BANK OF COMMERCE,
as a Senior Lender
By: Julie Wochos
---------------------------
Title: Authorized Signatory
PILGRIM PRIME RATE TRUST, as a
Senior Lender
By: Kathleen Lenarcic
---------------------------
Title: Senior Credit Analyst
UNION BANK, as a Senior Lender
By: Patrick M. Cassidy
---------------------------
Title: Vice President
WELLS FARGO BANK, N.A., as a Senior
Lender
By: Daniel Pallares
---------------------------
Title: Vice President
EATON VANCE PRIME RATE RESERVES, as
a Senior Lender
By: Jeffrey S. Garner
---------------------------
Title: Vice President
CAISSE NATIONALE DE CREDIT AGRICOLE
as a Senior Lender
By: David Bouhl, F.V.P.
---------------------------
Title: Head of Corporate Banking
Chicago
EXHIBIT 1
to Consent and Amendment No. 4
Dated as of March 31, 1994
Attached
March 4, 1994
Mr. Colin M. Cohen
Vice President
Citicorp North America, Inc.
200 South Wacker Drive
31st Floor
Chicago, IL 60606
Re: Amendment and Waiver for VSI Corporation ("VSI")
Dear Colin,
Pursuant to the Restated and Amended Credit Agreement dated
as of July 27, 1992, as amended, we request the following
covenant changes for VSI:
(i) EBITDA covenant for the quarter ending June 30, 1994
and each of the remaining quarters to be reduced by
$5.0 million.
(ii) Earthquake related losses (insurance deductible and
non-reimbursable expenses) up to $4.0 million in
aggregate to be excluded from EBITDA (whether cash or
non-cash) for covenant calculation purposes for the
1994 Third Fiscal Quarter requirement and each of the
next three quarters; and the same amount to also be
excluded from the net worth covenant calculation.
(iii) Fairchild Data Corporation, a direct subsidiary of
Fairchild Industries, Inc. ("FII"), is to be
contributed to VSI and consolidated from July 1,
1993 for covenant purposes. It has been included as
a discontinued operation at FII but will now be
classified as continuing. Either the transfer of
Fairchild Data Corporation will be credited to paid-
in capital or common stock of VSI will be issued and
transferred to the Collateral Trustee as security for
the FII 12-1/4% Senior Secured Notes. The January 30,
1994 financial statements for Fairchild Data
Corporation are enclosed for your information.
Given the historically volatile earnings of the Aerospace
Fastener Division, we are requesting the $5.0 million adjustment
through the remaining Credit Agreement term. The detailed
projections for fiscal years 1994-1997 will be furnished next
week. They show that the EBITDA covenant will be met comfortably
in fiscal years 1996-1997; however, we believe our request is
still reasonble because, despite all current evidence of
improving AFD earnings, they have been volatile. In our opinion,
this is a conservative approach.
We agree to pay the approving banks a 1/4% upon the
remaining revolver commitment and term loan outstandings
applicable to each bank when the amendment is approved by the
Requisite Senior Lenders.
We request that the waiver be effective on or before April
1, 1994 for the third fiscal quarter of 1994.
Please call me regarding any questions.
Sincerely,
KLS/ss
Enclosure
cc: M. Alcox
M. Carroll
W. Hamilton
D. Huston
M. Smith