Exhibit 10.2
January 31, 2004
Corrpro Companies, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxx, CEO
Re: Note Purchase Agreement, dated as of January 21, 1998, between Corrpro
Companies, Inc. and The Prudential Insurance Company of America.
Ladies and Gentlemen:
Reference is made to (i) that certain Note Purchase Agreement, dated as
of January 21, 1998 (as amended from time to time, the "Note Agreement"),
between Corrpro Companies, Inc., an Ohio corporation (the "Company"), and The
Prudential Insurance Company of America ("Prudential"), pursuant to which the
Company issued and Prudential now holds the Company's Third Amended and Restated
Senior Notes due January 15, 2008 in an aggregate principal amount of
$25,352,573.00 (the "Notes"), and (ii) that certain Forbearance Agreement, dated
July 31, 2003 (as amended from time to time, the "Forbearance Agreement" and
together with the Note Agreement, the "Agreements") between the Company and
Prudential. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Agreements.
Consistent with the provisions of the Forbearance Agreement, the
Company, with the consent of the holders of the Notes, has entered into a
Securities Purchase Agreement in order to complete the Refinance Transaction (as
hereinafter defined). The Securities Purchase Agreement is under review by the
United States Securities and Exchange Commission, and in connection with such
Refinance Transaction, the Company is not in compliance with the deadlines set
forth in Section 1.2(v) of the Forbearance Agreement (the "Milestone Defaults").
The Company has requested that Prudential agree to forbear from
exercising its rights and remedies under the Agreements arising as a result of
the occurrence and continuation of the Existing Events of Default and the
Milestone Defaults (collectively, the "Existing Defaults") and agree to certain
other changes to the Note Agreement, including to defer the date of certain
required payments of principal on the Notes, as more particularly set forth
herein. Subject to the terms and conditions hereof, and effective upon the
satisfaction of the conditions set forth herein, and provided that the Company
agrees to the modifications of the Agreements and the Notes set forth below,
Prudential is willing to agree to such request. Accordingly, and in accordance
with the provisions of paragraph 11C of the Note Agreement, the parties hereto
agree as follows:
AMENDMENTS TO FORBEARANCE AGREEMENT
-----------------------------------
1. SECTION 1.1. Prudential hereby agrees that the Forbearance Period (the
expiration date of which is currently January 31, 2004) set forth in Section 1.1
of the Forbearance Agreement shall be extended until March 31, 2004.
2. SECTION 1.2(f). Section 1.2(f) of the Forbearance Agreement shall be amended
by deleting the word "or" contained directly after the date "September 30, 2003"
and inserting a comma in its place, and
Corrpro Companies, Inc.
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January 31, 2004
adding the following language after the date "December 31, 2003": "(iv)
$3,433,000 for the four consecutive months ending January 31, 2004 or (v)
$3,553,000 for the five consecutive months ending February 29, 2004".
3. SECTION 1.2(r). Section 1.2(r) of the Forbearance Agreement shall be amended
by deleting it in its entirety and replacing it with the following Section
1.2(r):
"The Company shall pay to Prudential an amendment fee in the
amount of $120,000, payable in installments as follows: $55,000 upon
execution of this letter agreement, and $65,000 not later than March 1,
2004; provided that such $65,000 installment shall not be due if the
Refinance Transaction (defined in Section 1.2(v) below) is completed
prior to March 1, 2004. The first installment of the amendment fee
($55,000) shall not be refundable in whole or in part. In the event
that the Refinance Transaction is completed after February 29, 2004 but
prior to March 31, 2004, then a pro-rated portion of the second
installment of the amendment fee ($65,000) shall be refunded to the
Company in an amount equal to the number of days remaining in March
2004 after the date of closing of the Refinance Transaction divided by
thirty (30)."
4. SECTION 1.2(u). Section 1.2(u) of the Forbearance Agreement shall be amended
by deleting the date "January 31, 2004" contained in the second line thereof and
replacing such date with the date "March 31, 2004".
5. SECTION 1.2(v). Section 1.2(v) of the Forbearance Agreement shall be amended
by deleting in its entirety the language beginning with the words "non-binding
letter of intent..." contained in the twenty-second line thereof through the end
of such paragraph, and replacing it with the following language:
"...Securities Purchase Agreement (the "Purchase Agreement")
and has submitted related proxy materials to the United States
Securities and Exchange Commission. The transaction set forth in the
Purchase Agreement would include refinancing the Company and repayment
in full of all indebtedness owed to the holders of the Notes (the
"Refinance Transaction"). The Refinance Transaction shall be completed
(without any amendment to the Purchase Agreement except for any
amendments that have been approved in advance by the Required Holders,
as evidenced by the written consent of the Required Holders), including
repayment in full of all indebtedness owed to the holders of the Notes,
not later than March 31, 2004. Any proceeds received on account of any
such sale transaction shall be applied to the repayment of the Notes in
accordance with the terms of the Note Agreement. Any termination of the
Purchase Agreement by the purchaser thereunder or any abandonment of
the Refinance Transaction by any party shall constitute a default
hereunder. In the event that the Board of Directors of the Company
elects to pursue any refinancing or sale transaction (an "Alternative
Transaction") other than the Refinance Transaction as set forth in the
Purchase Agreement, (i) definitive agreements pertaining to such
Alternative Transaction shall be executed and delivered by the Company
only with the prior consent of the Required Holders (as evidenced by
the prior written consent of the Required Holders), (ii) if such
Alternative Transaction is approved by the Required Holders, all
definitive agreements and related proxy materials shall be executed and
submitted not later than February 20, 2004, (iii) if such Alternative
Transaction is approved by the Required Holders, the Company shall
immediately remit to Prudential, for the pro-rata benefit of the
Holders, a modification fee in the amount of $500,000.00, which such
fee shall not be refundable in whole or in part, and (iv) if such
Alternative Transaction is approved by the Required Holders, such
Alternative Transaction shall be completed, and all indebtedness owed
to the Holders shall thereby be paid in full, not later than March 31,
2004."
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January 31, 2004
6. SECTION 2.3. Section 2.3 of the Forbearance Agreement shall be amended by
deleting the date "June 30, 2004" contained in the fifth line thereof and
replacing such date with the date "September 30, 2004".
7. SECTION 2.4. Section 2.4 of the Forbearance Agreement shall be amended by
deleting the date "June 30, 2004" contained in the third line thereof and
replacing such date with the date "September 30, 2004".
8. GENERAL AMENDMENT. Each reference to the date "January 31, 2004" contained in
Sections 1.1, 1.5, 1.6(b) and 1.7 of the Forbearance Agreement shall be amended
to be a reference to "March 31, 2004".
AMENDMENTS TO NOTE AGREEMENT
1. PARAGRAPH 4A. Paragraph 4A of the Note Agreement is amended and restated in
its entirety to read as follows:
"4A. REQUIRED PREPAYMENTS. Until the Notes shall be prepaid in
full, the Company shall prepay, without Yield-Maintenance Amount, the
sum of (i) $10,631,130.06 on March 31, 2004, and (ii) $383,795.31 on
the 15th day of each month, commencing April 15, 2004 and continuing to
and including December 15, 2007, in each case together with accrued and
unpaid interest thereon, and such principal amount of the Notes shall
become due on such prepayment dates. Any unpaid principal balance of
the Notes, together with any accrued and unpaid interest thereon, shall
become due on January 15, 2008, the maturity date of the Notes.
Interest on the Notes at the rate described in the Notes for each day
on which the principal amount thereunder is outstanding shall be paid
monthly on the 15th day of April, 2004, and continuing on the 15th day
of each month thereafter until the Notes have been paid in full."
2. PARAGRAPH 5A. Paragraph 5A of the Note Agreement is amended in its entirety
to read as follows:
"(v) within thirty (30) days after the end of each month, the
consolidated balance sheet of the Company and its Subsidiaries as of
the end of such month, and the related consolidated statements of
income and cash flows of the Company and its Subsidiaries for such
month and for the period commencing at the end of the previous fiscal
year and ending with the end of such month, in form and detail
reasonably acceptable to the holders of the Notes, setting forth in
each case in comparative form the corresponding figures for the
corresponding date or period of the preceding fiscal year and the
variances, if any, from the most recent budget and forecast delivered
to the holders of the Notes pursuant to that certain letter agreement
dated as of January 31, 2004 by and between the Company and Prudential,
together with a duly executed Officer's Certificate demonstrating
compliance by the Company with the provisions thereof;"
3. PARAGRAPH 6A. Paragraph 6A of the Note Agreement is amended in its entirety
to read as follows:
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Corrpro Companies, Inc.
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January 31, 2004
"6A. MINIMUM CONSOLIDATED NET WORTH. The Company will not permit
Consolidated Net Worth to be less than (i) $1,212,000, for the period from
October 31, 2003 to and including January 31, 2004, and (ii) thereafter,
$730,000."
4. DEFINITION OF "CONSOLIDATED NET WORTH". The definition of "Consolidated Net
Worth" in paragraph 10B of the Note Agreement is amended and restated in its
entirety as follows:
""CONSOLIDATED NET WORTH" shall mean as of any time of
determination thereof, total stockholders' equity of the Company and
its Subsidiaries on a consolidated basis determined in accordance with
GAAP. Notwithstanding the foregoing, during the "Forbearance Period"
(as defined in that certain letter agreement dated as of January 31,
2004 by and between the Company and Prudential) "Consolidated Net
Worth" shall be calculated exclusive of (a) gains or losses recognized
upon asset dispositions, and (b) any impairment to goodwill or other
intangible assets to the extent required by new accounting regulations
promulgated after the date of this Agreement."
The extension and amendments contained herein shall not become
effective unless and until Prudential shall have received (i) a copy of this
letter agreement executed by the Company and the Required Holders, (ii) a copy
of that certain Eleventh Amendment to Credit Agreement (the "Bank Amendment"),
dated the date hereof, duly executed by the Bank Agent, the Banks, the Company
and CSI Coating Systems Inc., amending the Credit Agreement in a manner
satisfactory to Prudential, in form and substance satisfactory to Prudential,
and such amendment shall be in full force and effect, (iii) payment of the
amendment fee required under Section 1.2(r) of the Forbearance Agreement (as
amended hereby), (iv) a consent of guarantors, dated the date hereof, duly
executed by each Guarantor, in the form attached hereto as Exhibit A, (v) a
favorable opinion of the Company's counsel in form and substance to Prudential
as to such matters as Prudential may reasonably request, (vi) a Secretary's
Certificate signed by the Secretary or Assistant Secretary and one other officer
of the Company certifying, among other things (a) as to the name, titles and
true signatures of the officers of the Company authorized to sign this letter
and the other documents to be delivered in connection with this letter, (b) that
attached thereto is a true, accurate and complete copy of the Articles of
Incorporation of the Company, certified by the Secretary of State of the State
of Ohio as of a recent date, (c) that attached thereto is a true, accurate and
complete copy of the By-laws of the Company which were duly adopted and are in
effect as of the Effective Date, (d) that attached thereto is a true, accurate
and complete copy of the resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this letter and the other
documents to be delivered in connection with this letter, and of all other
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this letter, and (e) that this letter
agreement and the other documents executed and delivered to Prudential by the
Company are in the form approved by its Board of Directors in the resolutions
referred to in clause (d), above, and (vii) a written confirmation, in form and
substance satisfactory to Prudential, signed by the Bank Agent and the Banks of
the continued effectiveness of the Intercreditor and Collateral Agency
Agreement, dated as of June 9, 2000, as amended by Amendment No. 1 thereto dated
June 29, 2001, notwithstanding this letter agreement and the Bank Amendment.
Additionally, this letter agreement shall not be effective until (x) all
corporate and other proceedings in connection with the transactions contemplated
by this letter agreement shall be satisfactory to Prudential and its counsel,
and Prudential shall have received all such counterpart originals or certified
or other copies of such documents as they may reasonably request, (y) Prudential
has received payment of all costs and expenses of Prudential (including
reasonable fees and disbursements of special counsel to Prudential) in
connection with this letter and the transactions contemplated hereby and (z) the
Company shall have agreed to pay and/or shall
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Corrpro Companies, Inc.
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January 31, 2004
have paid to the Bank Agent and the Banks an amendment fee in connection with
the Bank Amendment in an amount not to exceed $120,000 in its entirety.
The Company acknowledges and agrees that the extension and amendments
contained herein are limited to the specific one-time agreements described
above, that no course of dealing is established hereby, and that there shall be
no obligation on the part of Prudential to further extend the deadline set forth
above or to further amend the Agreements. Such limited extension and such
amendments (a) shall not modify or waive any other term, covenant or agreement
of the Note Documents except to the extent described herein, and (b) shall not
be deemed to have prejudiced any present or future right or rights which
Prudential now has or may have under the Note Documents.
The Company represents and warrants to Prudential that, after giving
effect to the agreements herein contained, (a) the representations and
warranties contained in Paragraph 8 of the Note Agreement and Section 4 of the
Forbearance Agreement are true on and as of the date hereof with the same force
and effect as if made on and as of the date hereof (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they were true and correct as of such earlier date), and (b) other than the
Existing Defaults, no Event of Default or Default exists or has occurred and is
continuing on the date hereof.
The Company agrees that the Forbearance Agreement, the Note Agreement
and all other Note Documents are ratified, confirmed and shall remain in full
force and effect and that it has no set off, counterclaim, defense or other
claim or dispute with respect to any of the foregoing.
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Corrpro Companies, Inc.
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January 31, 2004
This letter may be executed in any number of counterparts, and
facsimile signatures shall be treated as original signatures for all purposes.
Very truly yours,
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By: /s/ Xxxxxxxxx X. Xxxxxx
----------------------------
Vice President
ACCEPTED, ACKNOWLEDGED AND
AGREED TO JANUARY 31, 2004
CORRPRO COMPANIES, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Title: Senior Vice President
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EXHIBIT A
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CONSENT OF GUARANTORS
Each of the undersigned is a guarantor under a subsidiary
guaranty (as amended, the "GUARANTY"), dated as of June 9, 2000, made by each
guarantor in favor of each holder of any Notes (the "NOTEHOLDERS"), and as such
hereby consents to that certain letter dated January 31, 2004, by and between
Corrpro Companies, Inc. and The Prudential Insurance Company of America (the
"MODIFICATION") and the amendments, forbearance and agreements contained
therein, and agrees to all agreements of the Guarantors set forth therein, and
confirms and agrees that, notwithstanding the Modification and the effectiveness
of the amendments, forbearance and agreements contained therein, the Guaranty
is, and shall continue to be, in full force and effect and is hereby confirmed
and ratified in all respects. Nothing herein is intended or shall be deemed to
limit any Noteholder's rights under the Guaranty to take actions without the
consent of the undersigned.
Dated as of January 31, 2004
GOOD-ALL ELECTRIC, INC.
By: /s/ Xxxxxx X. Xxxxx
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Title: Vice President
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BASS SOFTWARE, INC.
By: /s/ Xxxxxx X. Xxxxx
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Title: Vice President
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OCEAN CITY RESEARCH CORP.
By: /s/ Xxxxxx X. Xxxxx
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Title: Vice President
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CCFC, INC.
By: /s/ Xxxxxx X. Xxxxx
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Title: Vice President
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