SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT (this "Amendment") dated as of September 27, 1996,
amends and modifies that certain Credit Agreement, dated as of October 1, 1990,
as amended pursuant to Amendments dated as of June 12, 1992, December 31, 1992,
November 8, 1993, February 8, 1994, and April 10, 1995 (as so amended, the
"Credit Agreement"), between GRACO INC., a Minnesota corporation (the "Company")
and FIRST BANK NATIONAL ASSOCIATION (the "Bank"). Terms not otherwise expressly
defined herein shall have the meanings set forth in the Credit Agreement.
FOR VALUE RECEIVED, the Company and the Bank agree that the Credit
Agreement is amended as follows:
ARTICLE 1 - AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Defined Terms. Section 1.01 is amended as follows:
(a) The definition of "Applicable Margin" is amended to read as follows:
"'Applicable Margin': For each CD loan shall mean 0.75%, for each
Reference Rate Loan shall mean 0% and for each Eurocurrency loan shall
mean 0.625%."
(b) The definition of "Maturity Date" is amended to read as follows:
"'Maturity Date': June 30, 1997."
(c) The following new definition are added:
"'EBIT': for any period of determination, Consolidated Net
Earnings of the Company and its Subsidiaries before provision for
income taxes and Interest Expenses, all as determined in accordance
with generally accepted accounting principles, excluding therefrom (to
the extent included during any period) the net total of the following,
to the extent that such net total is less than or equal to $2,000,000:
(a) non-operating (including, without limitations, extraordinary or
nonrecurring gains, gains from discontinuance of operations and gains
arising from the sale of assets other than inventory) during the
applicable period; and (b) similar non-operating losses during such
period."
"'EBITDA': for any period of determination, EBIT, plus to the
extent deducted in Consolidated Net Earnings, depreciation and
amortization."
"'Interest-bearing Indebtedness': all interest-bearing
indebtedness of the Company and its Subsidiaries for borrowed money,
determined in accordance generally accepted accounting principles."
"'Interest Expense'" for any period of determination, all
interest accrued on indebtedness of the Company and its Subsidiaries
determined in accordance with generally accepted accounting
principals, including without limitation implicit interest expense on
capitalized leases."
1.2 Deleted Sections. The following Sections are amended to read as follows
(and definitions only used in such Sections shall be deemed deleted):
"7.11 Intentionally omitted."
"7.12 Intentionally omitted."
"7.15 Intentionally omitted."
"7.16 Intentionally omitted."
1.3 Consolidated Tangible Net Worth. Section 7.13 is amended to read as
follows:
"7.13 Consolidated Tangible Net Worth. Not at any time permit
Consolidated Tangible Net Worth to be less than $75,000,000 plus 50%
of Consolidated Net Earnings after December 31, 1995."
1.4 Leverage Ratio. Section 7.14 is amended to read as follows:
"7.14 Leverage Ratio. Not permit the ratio of Interest-bearing
Indebtedness as of the last day of any fiscal quarter to EBITDA for
the period of four consecutive fiscal quarters then ending to be more
than 2.5 to 1.00."
1.5 Interest Coverage Ratio. New Section 7.18 is added following Section
7.17 and shall read as follows:
"7.18 Interest Coverage Ratio. Not permit the ratio of EBIT to
Interest Expense, each measured for each period of four consecutive
fiscal quarters, to be less than 4.00 to 1.00."
1.6 Exhibit G. Exhibit G to the Credit Agreement is replaced by Exhibit G
attached to this Amendment.
1.7 Note. The Loans shall continue to be evidenced by Note dated April 10,
1995 in the principal amount of $25,000,000.
1.8 Construction. All references in the Credit Agreement to "this
Agreement", "herein" and similar references shall be deemed to refer to the
Credit Agreement as amended by this Amendment.
ARTICLE II - WAIVER
The Borrower has informed the Bank that with respect to its fiscal year
ended December 31, 1995, it may not have complied with certain provisions of
ERISA, as required by Section 7.17 of the Credit Agreement. The Borrower has
requested that the Bank waive such failure to comply. Effective as provided
below, the Bank waives the Borrower's compliance with Section 7.17 of the Credit
Agreement as applied to such fiscal year, on the further condition that fines
and charges resulting from any such non-compliance shall not exceed $50,000.
Except as expressly provided herein, all provisions of the Credit Agreement
remain in full force and effect and this waiver shall not apply to any other or
subsequent failure to comply with such Section or any other provision of the
Credit Agreement.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Amendment and to make and maintain
the Loans under the Credit Agreement as amended hereby, the Company hereby
warrants and represents to the Bank that it is duly authorized to execute and
deliver this Amendment, and to perform its obligations under the Credit
Agreement as amended hereby, and that this Amendment constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms.
ARTICLE III - CONDITIONS PRECEDENT
This Agreement shall become effective on the date first set forth above,
provided, however, that the effectiveness of this Amendment is subject to the
satisfaction of each of the following conditions precedent:
3.1 Warranties. Before and after giving effect to this Amendment, the
representations and warranties in Section 6 of the Credit Agreement shall be
true and correct as thought made on the date hereof, except for changes that are
permitted by the terms of the Credit Agreement. The execution by the Company of
this Agreement shall be deemed a representation that the Company has complied
with the foregoing condition.
3.2 Defaults. Before and after giving effect to this Amendment, no Event of
Default and no Unmarred Event of Default shall have occurred and be continuing
under the Credit Agreement. The execution by the Company of this Agreement shall
be deemed a representation that the Company has complied with the foregoing
condition.
3.3 Documents. The Company shall have delivered this Amendment and
certified copies of resolutions of the Board of Directors of the Company
authorizing or ratifying the execution, delivery and performance, respectively,
of this Amendment, together with an incumbency certificate of officers executing
this Amendment.
ARTICLE IV - GENERAL
4.1 Expenses. The Company agrees to reimburse the Bank upon demand for all
reasonable expenses, including reasonable fees of attorneys (who may be
employees of the Bank) and legal expenses incurred by the Bank in the
preparation, negotiation and execution of this Amendment and any other document
required to be furnished herewith, and in enforcing the obligations of the
Company hereunder, and to pay and save the Bank harmless from all liability for,
any taxes which may be payable with respect to the execution or delivery of this
Agreement, which obligations of the Company shall survive any termination of the
Credit Agreement.
4.2 Counterparts. This Agreement may be executed in as many counterparts as
may be deemed necessary or convenient, and by the different parties hereto on
separate counterparts, each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
instrument.
4.3 Severability. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition of unenforceablility without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
4.4 Law. This Amendment shall be a contract made under the laws of the
State of Minnesota, which laws shall govern all the rights and duties hereunder.
4.5 Successors; Enforceability. This Amendment shall be binding upon the
Company and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Company and the Bank and the successors and assigns
of the Bank. Except as hereby amended, the Credit Agreement shall remain in full
force and effect and is hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed at Minneapolis, Minnesota by their respective officers thereunto duly
authorized as of the date first written above.
GRACO INC.
By:/S/David M. Lowe
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Title: Treasurer
FIRST BANK NATIONAL ASSOCIATION
By:/S/Michael S. Harter
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Title: Commercial Banking Officer
EXHIBIT G
SUBSIDIARIES OF
GRACO INC.
Percentage of Voting
Jurisdiction of Securities Owned by
Subsidiary Incorporation The Company
- ---------- ------------- --------------------
Graco N.V. Belgium 100%
Graco Canada Incorporated Canada 100%
Graco Chile Limitada Chile 100%
Graco Europe N.V. Belgium 100%
Graco Gmbh Germany 100%
Graco Hong Kong Limited Hong Kong 100%
Graco K.K. Japan 100%
Graco Korea Inc. Korea 100%
Graco A.S. Norway 100%
Graco S.A. France 100%
Graco S.r.l. Italy 100%
Graco Limited England 100%
Graco Barbados FSC Limited Barbados 100%