(National City Logo appears here) National City Bank
Corporate Banking
P.O. Box 568
Youngstown, OH 44501
000 000-0000
Fax 000 000-0000
Xxxxx X. Xxxxxxxx
Vice President
April 13, 2000
Xxxxxx X. Xxxxxxx
Xxxxx X. Xxxxxx
Valley Drug Company
000 X. Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Re: Valley Drug Company ("borrower")
Limited and conditional forbearance
Reservation of rights
Gentlemen:
"You" or "your" refers sometimes, as applicable, to any one or more of Xxxxxx
X. Xxxxxxx and Xxxxx X. Xxxxxx as guarantor and Valley Drug Company as borrower.
We refer to a loan and credit facility from National City to borrower, all the
obligations of which are unconditional guaranteed by you ("Loan"). You are the
sole shareholders of borrower.
You have asked National City to consent to your proposed merger with
XxxxXxx.xxx. Inc. and its subsidiary ("Merger"). National City is neither
obliged to agree to the Merger or to evaluate the Merger. Further, and in any
event, National City has had inadequate time to conduct any due diligence to
allow it to assess the Merger and its impact upon the Loan and whether National
City would consider consenting to the Merger. The Merger is to take place within
the month of April 2000 and while you acknowledge that National City has no
obligation or commitment to consent to the Merger or to conduct any due
diligence whatsoever, you have asked National City nevertheless to consent to
the Merger and conduct due diligence.
National City agrees to consent to the Merger and conduct due diligence as you
request. During the period in which National City will conduct such due
diligence (as National City in its sole discretion determines is necessary)
National City will forbear from exercising its rights. National City's
forbearance and its agreement to conduct due diligence are expressly conditioned
upon your strict and timely compliance with the following:
1. Deposit by you in a National City account of the sum of no less than
$300,000.00 ("Cash Proceeds") which represents a portion of the proceeds to
you from sale of your shares of borrower to XxxxXxx.xxx, Inc. Immediately
upon your receipt of such funds, you will pledge this amount in support of
your existing guarantees of the Loan. You agree to execute and deliver such
documents as National City determines to be necessary, including
specifically, and without any limitation, assignment(s) of account or
accounts in to which you deposit the Cash Proceeds.
2. Deposit by XxxxXxx.xxx, Inc. in a National City account of the sum of no less
than $500,000.00, ("Cash"), XxxxXxx.xxx, Inc. agrees to execute and deliver
such documents as National City determines to be necessary, including
specifically, and without any limitation, assignment(s) of account or
accounts in to which the Cash is deposited.
3. XxxxXxx.xxx, Inc. will provide an Unlimited and Continuing Guaranty to all of
the outstanding indebtedness of Valley Drug Company.
4. Until such time that the due diligence is completed by National City, Valley
Drug will operate as an independent subsidiary of XxxxXxx.xxx, Inc. such that
there will be no intercompany transfers or guarantys.
5. Your providing such information and documents as National City may determine
in its sole discretion to be necessary to conduct such due diligence as
National City determines appropriate to evaluate the Merger. National City
will provide a written list of necessary information and documents (as
amended and supplemented from time to time, the "Due Diligence List").
National City's forbearance shall terminate immediately with no notice to you
upon the earlier of the following: (i) July 15, 2000, (ii) you fail to fulfill
any requirement of this letter agreement, and, (iii) any material adverse
change, (other than the Merger) as determined by National City in its
discretion, occurs to (a) the property, assets, operations or condition,
financial or otherwise of borrower or guarantors or (b) the recoverable value of
any of the collateral impairing the ability of National City to obtain of full
recovery. At such time, National City may exercise all of its rights and
remedies, including its rights and remedies with respect to the Cash and Cash
Proceeds.
Xxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxx and XxxxXxx.xxx, Inc. each unconditionally
guaranty all the obligations of the borrower to National City, including the
obligation of the Loan. National City specifically reserves the right to proceed
against one or more of you as guarantors and borrower for the full amount of the
Loan, and all other obligations owing to National City. You acknowledge, agree
and understand that only a written specific formal agreement executed by
National City and approved by its counsel (and this letter agreement is not such
an agreement) shall constitute a modification or amendment of any term or
condition of the Loan or any of your obligations to National City under the
Loan.
If upon conclusion of National City's due diligence, National City determines,
in its sole discretion, not to continue to retain the financing relationship,
that decision will be communicated to you and National City will continue to
further forbear for an additional period of 120 days in which you may obtain
replacement financing.
You should understand that National City upon conclusion of due diligence may,
in its sole discretion, not continue to retain the financing relationship. This
letter agreement is not a commitment or understanding on the part of National
City to continue to retain the financing relationship. Your offer and pledge to
National City of the Cash and Cash Proceeds Cash is unlimited and unconditional.
National City reserves all of its rights to the Cash and Cash Proceeds including
their application to your obligations under the Loan and such application will
not waive any other of its rights and remedies and does not limit or preclude
National City from pursuing you for payment in full of the Loan.
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Nothing in this letter is or shall be deemed to be a waiver or abandonment of
any rights or remedies available to National City Bank (whether against you, any
other person or any property) each of which rights and remedies is specifically
reserved, including without limitation the right to seek judgment against any
one or more of you as guarantor and borrower, and/or to proceed against any
property.
Please acknowledge your agreement by signing the attached copy of this letter
agreement and returning it to me. Additionally, please fax back to me a signed
copy of this letter.
Very truly yours,
/s/ Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
Vice President
Corporate Banking
The foregoing is acknowledged, understood and agreed to:
Borrower, Valley Drug Company
By: /s/ Xxxxx X. Xxxxxx
Its: President
/s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
Guarantor: XxxxXxx.xxx, Inc.
By: _________________
Its: _________________
_________________
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