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EXHIBIT 10.04
THE TRADE BANK 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
XXXXX FARGO HSBC TRADE BANK, N.A. Xxx Xxxxxxx, XX 00000
March 24, 1998
Xx. Xxxxxxxxx X. Xxxxxxx
Jalate, Ltd.
0000 Xxxxxxxx
Xxxx xx Xxxxxxxx, XX 00000
Dear Xxxx:
Reference is made to that certain Credit Agreement by and between Jalate,
Ltd. (the "Borrower") and Xxxxx Fargo HSBC Trade Bank, N.A. (the "Trade Bank")
dated as of January 21, 1998 (the "Agreement"). Capitalized terms used herein
but not defined shall have the meanings set forth in the Agreement. We have
learned of the following breaches of the terms of the Agreement. Pursuant to
Exhibit A - Addendum to Credit Agreement of the Agreement:
1. Borrower will not make any loans or advances to, or investments
in, any person or entity except for accounts receivable created in the ordinary
course of Borrower's business. Pursuant to that certain letter agreement (the
"Letter Agreement") among the Borrower, Xxxxxxxxx Xxxxxxx and Air Shop Ltd.
("Air Shop") dated October 17, 1997 the Borrower has acquired forty (40) shares
of the Common Stock and three thousand (3,000) shares of the Preferred Stock of
Air Shop.
2. Borrower will not guarantee or otherwise become liable for
borrowed money, except to Trade Bank and except for indebtedness subordinated to
the Obligations by an instrument or agreement in form acceptable to Trade Bank.
Borrower is a guarantor under two separate notes issued by Linroz Manufacturing
Company in favor of General Electric Credit Corporation with current outstanding
balances of $313,000, maturing June and November, 2000.
3. Borrower will maintain a Current Ratio from and after December
31, 1997 not at any time less than 1.25 to 1.0. For the period ended December
31, 1997 the Borrower has indicated that the Borrower's Current Ratio will be
approximately 0.80 to 1.0.
4. Borrower will maintain Working Capital from and after December
31, 1997 not at any time less than $750,000. For the period ended December 31,
1997 the Borrower has indicated that the Borrower's Working Capital will be
approximately $(770,000).
5. Borrower will maintain Tangible Net Worth from and after December
31, 1997 not at any time less than $750,000. For the period ended December 31,
1997 the Borrower has indicated that the Borrower's Tangible Net Worth will be
approximately $619,000.
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Jalate, Ltd.
March 24, 1998
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6. Borrower will maintain a ratio of Total Liabilities divided by
Tangible Net Worth from and after December 31, 1997 not at any time greater than
2.25 to 1.0. For the period ended December 31, 1997 the Borrower has indicated
that the Borrower's ratio of Total Liabilities to Tangible Net Worth will be
approximately 7.70 to 1.0.
Subject to the terms and conditions that follow, the Bank has decided to
waive its default rights with respect to these breaches for the period ended
December 31, 1997. Please note, however, that this waiver applies only to the
specific instances described above. It is not a waiver of any subsequent breach
of the same provisions of the Agreement, nor is it a waiver of any breach of any
other provision of the Agreement.
Except as expressly stated in this letter, the Bank reserves all of the
rights, powers and remedies available to it under the Agreement and any other
contracts or instruments signed by the Borrower, including the right to cease
making advances to the Borrower and the right to accelerate any of the
Borrower's indebtedness, if any subsequent breach of the same provisions or any
other provision of the Agreement should occur.
Sincerely,
XXXXX FARGO HSBC
TRADE BANK, N.A.
By: /s/ Xxxx Xxxxxxxxxx
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Xxxx Xxxxxxxxxx
Vice President
