Credit Agreement

New Credit Agreement

In October, 2019, the Company entered into a Credit Agreement (the "Credit Agreement") with J.P. Morgan Chase Bank, N.A. as administrative agent, and including CIBC Bank USA and Bank of America, N.A. as other lenders. The Credit Agreement matures on October 11, 2024 and provides for $100.0 million of revolving commitments. The Credit Agreement allows borrowing capacity to increase to $150.0 million subject to meeting certain criteria and additional commitments from its lenders.

The Credit Agreement consists of borrowings as alternate base rate loans, Canadian prime rate loans, Eurodollar loans, and Canadian dollar offered rate loans as the Company requests. The applicable interest rate spread is determined by the type of borrowing used and the Total Net Leverage Ratio as of the most recent fiscal quarter as defined in the Credit Agreement.

The covenants associated with the Credit Agreement restrict the ability of the Company to, among other things: incur additional indebtedness and liens, make certain investments, merge or consolidate, engage in certain transactions such as the disposition of assets and sales-leaseback transactions, and make certain restricted cash payments such as dividends in excess of defined amounts contained within the Credit Agreement. In addition to these items and other customary terms and conditions, the Credit Agreement requires the Company to comply with certain financial covenants as follows:

a) The Company is required to maintain an EBITDA to Fixed Charge Coverage Ratio of at least 1.15 to 1.00 for any period of four consecutive fiscal quarters ending on the last day of any fiscal quarter; and

b) The Company is required to maintain a Total Net Leverage Ratio of no more than 3.25 to 1.00 on the last day of any fiscal quarter. The maximum Total Net Leverage Ratio will be allowed to increase to 3.75 to 1.00 after certain permitted acquisitions.

The Credit Agreement also includes events of default for, among others, non-payment of obligations under the Credit Agreement, change of control, cross default to other indebtedness in an aggregate amount in excess of $5.0 million, failure to comply with covenants, and insolvency.

At December 31, 2019, the Company had $2.3 million outstanding balance under its revolving line of credit facility and additional borrowing availability of $96.7 million. The carrying amount of the Company’s debt at December 31, 2019 approximates its fair value. The weighted average interest rate was 4.59% in 2019. The Company had $1.1 million of outstanding letters of credit as of December 31, 2019.

In addition to other customary representations, warranties and covenants, the results of the financial covenants are provided below:



Quarterly Financial Covenants	Requirement	Actual
EBITDA to fixed charges ratio	1.15 : 1.00	10.76 : 1.00
Total net leverage ratio	3.25 : 1.00	0.00 : 1.00

The Company was in compliance with all covenants as of December 31, 2019.

Previous Credit Agreements

Prior to October 2019, Lawson had a Loan and Security Agreement (“Loan Agreement”) with CIBC Bank USA which consisted of a $40.0 million revolving line of credit facility. The borrowing capacity of the Loan Agreement was subject to certain limitations including the amount of the Company's eligible accounts receivable and inventory value. The interest rate was based on the Prime rate or LIBOR and the Company's debt to EBITDA ratio. The Loan Agreement was secured by a first priority perfected security interest in substantially all existing assets of the Company. Dividends were restricted to amounts not to exceed $7.0 million annually.

Prior to October 2019, Bolt Supply had a Commitment Letter ("Commitment Letter") with BMO Bank of Montreal which allowed Bolt Supply to access up to $5.5 million Canadian dollars in the form of either an overdraft facility or as commercial letters of credit. The Commitment Letter was secured by substantially all of Bolt Supply’s assets and carried an interest rate based on the bank's prime rate.

The new Credit Agreement that was entered into in October 2019 replaced the Loan Agreement and the Commitment Letter. The Company was in compliance with all covenants associated with these agreements at the time of payoff.