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March 30, 2001
Xx. Xxxxx X. Xxxxxxx
Senior Vice President, Finance
Metatec International, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxxxx, Xxxx 00000
Re: Metatec International, Inc. ("Company") -- Loans ("Loans") from
The Huntington National Bank ("Huntington") and Bank One, NA
("Bank One") with Huntington, as Agent ("Agent")
Dear Xxxxx:
In connection with the Loan Agreement dated as of September 11, 1998
and executed by and among the Company, the Agent, Huntington and Bank One (as
amended, the "Loan Agreement"), it is the understanding of the Agent, Huntington
and Bank One that the Company has failed to comply with each of the following
covenants ("Current Covenant Violations"): (a) the Tangible Net Worth covenant
(set forth in Section 4.12 of the Agreement) for the period ending December 31,
2000; (b) the Leverage Ratio covenant (set forth in Section 4.13 of the
Agreement) for the period ending December 31, 2000; (c) the Interest Coverage
Ratio covenant (set forth in Section 4.14 of the Agreement) for the period
ending December 31, 2000; (d) the "no loss" covenant (set forth in Section 4.20
of the Agreement) for the period ending December 31, 2000; and (e) the minimum
EBITDA covenant (set forth in Section 4.21 of the Agreement) for the periods
ending October 31, November 30 and December 31, 2000. (Capitalized terms used
but not defined herein shall have the meanings ascribed in the Loan Agreement.)
The Company has requested that each of the Current Covenant Violations be waived
by the Agent, Huntington and Bank One.
We have advised you that your agreement to various modifications to the
Loan Documents constitutes an integral part of our consideration of the
Company's request. The modifications under consideration at this time include,
but will not hereafter necessarily be limited to, the following:
(i) the minimum consolidated Tangible Net Worth covenant set forth in
Section 4.12 of the Loan Agreement will be adjusted as follows:
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Period Ending Minimum TNW
------------- -----------
March, 2001 $11,750,000.00
April, 2001 $10,800,000.00
May, 2001 $9,900,000.00
June, 2001 $9,600,000.00
July, 2001 $8,600,000.00
August, 2001 $8,000,000.00
September, 2001 $8,000,000.00
October, 2001 $7,900,000.00
November, 2001 $7,700,000.00
December, 2001 $7,500,000.00
January, 2002 $7,500,000.00
February, 2002 $7,500,000.00
March, 2002 $7,500,000.00
The Tangible Net Worth figures set forth above will be adjusted to
reflect any tax credits realized by the Company during the period
January 1, 2001 through March 31, 2002, such adjustments to be made
immediately prior to the end of the testing period in which such
credits are realized.
(ii) the monthly / quarterly limitation on the Company's expenditures
for fixed or capital assets set forth in Section 4.19 of the Loan
Agreement will be adjusted as follows:
Period Ending Capital Expenditures
------------- --------------------
March, 2001 (Quarter) $1,100,000.00
April, 2001 $350,000.00
May, 2001 $20,000.00
June, 2001 $10,000.00
July, 2001 $175,000.00
August, 2001 $50,000.00
September, 2001 $10,000.00
October, 2001 $25,000.00
November, 2001 $25,000.00
December, 2001 $25,000.00
December, 2001 (Year) $1,790,000.00
January, 2002 $200,000.00
February, 2002 $200,000.00
March, 2002 $200,000.00
Any portion of a monthly or quarterly capital expenditure allowance set
forth above that is not used in the specified month or quarter of 2001
may be used by
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the Company in any subsequent month or quarter of fiscal year 2001, but
no such unused portion may be used by the Company in fiscal year 2002.
(iii) the minimum monthly consolidated EBITDA covenant set forth in
Section 4.21 of the Loan Agreement will be restated as a minimum
monthly (cumulative)/ quarterly consolidated EBITDA covenant and
adjusted as follows:
Period Ending Minimum EBITDA
------------ --------------
March, 2001 (Quarter) $885,000.00
April, 2001 $970,000.00
May, 2001 $1,200,000.00
June, 2001 $2,000,000.00
June, 2001 (Quarter) $1,300,000.00
July, 2001 $2,200,000.00
August, 2001 $2,700,000.00
September, 2001 $3,700,000.00
September, 2001 (Quarter) $1,600,000.00
October, 2001 $4,500,000.00
November, 2001 $5,300,000.00
December, 2001 $6,000,000.00
December, 2001 (Quarter) $2,300,000.00
January, 2002 $6,700,000.00
February, 2002 $7,500,000.00
March, 2002 $8,100,000.00
March, 2002 (Quarter) $2,300,000.00
(iv) a minimum monthly (cumulative) / quarterly EBITDA covenant will be
instituted for the Silicon Valley operation as follows:
Period Ending Minimum EBITDA
------------- --------------
March, 2001 (Quarter) ($300,000.00)
April, 2001 ($400,000.00)
May, 2001 ($500,000.00)
June, 2001 ($600,000.00)
June, 2001 (Quarter) ($300,000.00)
July, 2001 ($700,000.00)
August, 2001 ($800,000.00)
September, 2001 ($900,000.00)
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Period Ending Minimum EBITDA
------------- --------------
September, 2001 (Quarter) ($275,000.00)
October, 2001 ($950,000.00)
November, 2001 ($1,000,000.00)
December, 2001 ($1,050,000.00)
December, 2001 (Quarter) ($250,000.00)
January, 2002 ($1,050,000.00)
February, 2002 ($1,050,000.00)
March, 2002 ($1,050,000.00)
March, 2002 (Quarter) $100,000.00
(v) the financial covenants set forth in Sections 4.12, 4.13, 4.14,
4.19, 4.20, and 4.21 of the Loan Agreement will be suspended during the
period January 1, 2001 through March 31, 2002; provided, however, that
all terms defined in those Sections and all methods of financial
covenant calculation set forth in those Sections (to the extent that
such terms and methods of calculation are applicable to the financial
covenants set forth in items (i) through (iv) above and to the extent
such terms and methods of calculation are not modified by the terms of
items (i) through (iv) above) will remain as currently written; and
provided, further, however, that for purposes of EBITDA covenant
compliance calculation and Tangible Net Worth covenant compliance
calculation, EBITDA will be modified to permit the Company to add back
(as and when paid) the $500,000.00 of fees hereinafter described that
are payable by the Company to Huntington and Bank One and the fees that
are payable by the Company to a "turnaround" consultant and to an
appraiser as hereinafter set forth.
(vi) effective March 31, 2001, interest will accrue on the outstanding
principal balances of the Loans at a per annum rate of interest that is
2.00% in excess of the Prime Rate, and the Commitment Fee will accrue
at a per annum rate of 0.50% (all provisions in the Loan Agreement
concerning calculations, payments and the like with respect to the
foregoing otherwise to remain in effect as currently written);
(vii) a borrowing base requirement (with daily borrowing base reports
and monitoring by Xxxxxxxxxx's asset based lending division) will be
instituted with respect to Revolving Loan advances; Revolving Loan
advance availability to be limited by outstanding Sub-Facility Letters
of Credit (which Sub-Facility will hereafter be limited to
$2,050,000.00) and by a formula based upon 80% of eligible domestic
accounts, 80% of eligible insured foreign accounts, 30% of eligible
domestic inventory and 20% of domestic machinery and equipment at net
book value ("eligibility" to be determined by Huntington and Bank One
in their sole discretion); as to eligible domestic accounts and
eligible insured foreign accounts, such formula may be adjusted by
Huntington and Bank One in their sole discretion following the
completion of an asset-based-lending-type audit of the
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accounts and inventory of the Company (the fees and expenses associated
with such audit to be borne by the Company), any such adjustment to be
effective as of July 15, 2001 and to be based upon the Company's
dilution experience concerning such accounts during the period April 1,
2001 through June 30, 2001; all accounts (domestic and foreign)
securing the Loans will be collected through lockbox arrangements to be
entered into between the Company and the Agent (and any necessary
foreign entities); and cash collateral and controlled disbursement
account arrangements also to be entered into between the Company and
the Agent;
(viii) quarterly financial reporting requirements will be changed to
monthly (30 days after month end for monthly reports and 90 days after
fiscal year end for annual reports) (presentations to include
year-to-date results), with reporting by site and on a consolidated
basis for income statements and with reporting as either "domestic" or
"foreign" and on a consolidated basis for balance sheets, and
period/prior-year comparisons and comparisons to budget will be
required; the Company will provide cash receipts and disbursement
reports to Huntington and Bank One on a daily basis; and within 15 days
of month end, the Company will submit to the Agent and to each of the
Banks reports concerning accounts receivable and payable agings,
accounts receivable reconciliations and inventory listings;
(ix) the definition of Net Cash Flow set forth in Section 1.4 (f) of
the Loan Agreement will be modified to refer to "cash taxes" and the
reference to "50%" in that Section will be changed to "100%"; and
(x) the Revolving Loan Termination Date and the Term Loan Termination
Date will be re-set to April 1, 2002.
In connection with the foregoing, you need to be aware of several other
matters. First, the Company must pay (a) to each of Huntington and Bank One a
fee of $50,000.00 on April 2, 2001, a fee of $75,000.00 on or before July 31,
2001, and a fee of $75,000.00 on or before November 30, 2001, (b) to Bank One a
fee of $100,000.00 on or before March 31, 2002, and (c) the fees and expenses of
counsel for the Agent not later than 10 days after receipt of each statement
submitted by counsel for the Agent. Second, on April 2, 2001, all funds of the
Company currently on deposit with Huntington Capital Investment Company in
Account No. OHE495484 (in the approximate amount of $4,600,000.00) must be paid
to the Agent, for the ratable benefit of Huntington and Bank One, such funds to
be applied to the outstanding balance of the Revolving Loan. Third, on or before
April 20, 2001, the Company will engage a "turnaround" consultant to review,
prepare and analyze (as applicable) the Company's financial condition including,
without limitation, the Company's going concern and break-up values, the
Company's operating, cashflow and capital budgets and the Company's management
of working capital. The consultant will also prepare "hold/merge/liquidate"
recommendations for each business location concerning the Company operations.
All reports prepared by the consultant for the Company will also be
simultaneously delivered by the consultant to the Agent, Huntington
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and Bank One, and the Agent, Huntington and Bank One will have the right to
discuss such reports directly with the consultant. The consultant will be
selected and paid by the Company; provided, however, that the Agent, Huntington
and Bank One will have the right to approve the consultant selected by the
Company and the scope and cost of the engagement. Attached hereto as Schedule 1
is nonexclusive list of approved consultants. Fourth, the Agent will obtain an
appraisal (at fair market and orderly liquidation values) of the domestic
machinery and equipment of the Company (a schedule of such fixed assets by
location must be provided to the Agent on or before April 10, 2001), and the
fees and expenses associated with such appraisal will be borne by the Company.
Fifth, the Company (and its subsidiaries, as applicable) will not only reaffirm
existing security interests granted to secure the Loans and related fees, costs
and expenses, but will also provide additional security for the Loans, which
additional security will relate to the rights of the Company, as the sole member
of Meta Management, LLC, to receive distributions from Meta Management, LLC.
Sixth, the perfection and priority of the security interest of the Agent in the
pledged shares of Metatec International B.V. must be confirmed (to the
satisfaction of the Agent and its counsel) in an opinion of Netherlands counsel
to be delivered to the Agent by not later than April 30, 2001. Finally, a
guaranty secured by a first priority perfected security interest in the accounts
of Metatec International B.V. (which accounts must be insured to the
satisfaction of the Agent) must be delivered to the Agent and the validity and
enforceability of such guaranty and related security agreement, as well as the
perfection and priority of the security interest of the Agent in such accounts,
must be confirmed (to the satisfaction of the Agent and its counsel) in an
opinion of Netherlands counsel to be delivered to the Agent by not later than
April 30, 2001.
With respect to the lease ("Lease") between the Company and Banc One
Leasing Company ("BOLC") described in Schedule 4.5 of the Loan Agreement, BOLC
will be granted a security interest in the Collateral, which security interest
will be junior in priority to that of the Agent. Additionally, as additional
security for the Lease, BOLC will be granted an assignment of the Company's
interest under a certain "foreign exchange contract" with Bank One in the
original amount of $5,000,000.00. If the Lease does not currently so provide,
the Lease will be cross-defaulted to the Events of Default set forth in the Loan
Documents.
The foregoing terms and modifications will be set forth in one or more
formal amendments and/or supplemental documents which will be executed by the
parties on or before April 6, 2001.
Based upon our understanding that you are in agreement with the
foregoing, the Agent, Huntington and Bank One agree to waive the Current
Covenant Violations, the terms of which waiver are more fully set forth in a
Limited Waiver of Covenants 4.12, 4.13, 4.14, 4.20 and 4.21, a copy of which is
attached hereto as Exhibit A.
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The Agent, Huntington and Bank One are under no obligation with respect
to any other waiver, modification, suspension, standstill or forbearance and no
commitment is hereby made or implied regarding the same.
Very truly yours,
THE HUNTINGTON NATIONAL BANK,
AS AGENT
/s/ Xxx Xxxx
---------------------------------
Xxx Xxxx
Senior Vice President
It is the intention of each of the parties executing this letter
agreement that this letter agreement is binding upon and enforceable by and
against each of the parties irrespective of the execution of formal
documentation setting forth the terms and conditions hereof; provided, however,
that it is the intention of the parties that formal documentation setting forth
the terms and conditions hereof will be prepared and executed by the parties on
or before April 6, 2001.
Xxxxxxxxxxxx and agreed as of March 30, 2001:
METATEC INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Its: Senior Vice President, Finance
---------------------------------
METATEC WORLDWIDE, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Its: Vice President, Finance
---------------------------------
THE HUNTINGTON NATIONAL BANK
By: /s/ Xxx Xxxx
---------------------------------
Its: Senior Vice President
---------------------------------
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BANK ONE, NA
By: /s/ X. Xxxxx Xxxxxx
---------------------------------
Its: Vice President
---------------------------------
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SCHEDULE 1
Nonexclusive List of Approved Consultants
1. Xxxxx, Xxxxxxxx & White, LLC -- Xx Xxxxx -- Skokie, Illinois
000-000-0000
2. Development Specialists, Inc. -- Xxxx X. Xxxxxx -- Chicago,
Illinois 000-000-0000
3. Glass & Associates - Xxxxx Xxxxx -- Canton, Ohio
000-000-0000
4. Xxxxxx, Xxxxx & Xxxxxxx, LLP -- Xxxxxxxx X. Xxxxxxxx --
Columbus, Ohio 000-000-0000
5. The Meridian Group -- Xxxxxx Xxxx -- Pittsburgh, Pennsylvania
000-000-0000
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EXHIBIT A
LIMITED WAIVER OF COVENANTS 4.12, 4.13, 4.14,
4.20 AND 4.21 OF LOAN AGREEMENT DATED
AS OF SEPTEMBER 11, 1998
This Limited Waiver of Covenants 4.12, 4.13, 4.14, 4.20 and 4.21 of
Loan Agreement Dated as of September 11, 1998 (this "Waiver") is dated as of the
31st day of December, 2000, and is executed by and among (a) Metatec
International, Inc. (successor by merger to Metatec Corporation), an Ohio
corporation (the "Company"), as borrower, (b) The Huntington National Bank
("Huntington"), Bank One, NA ("Bank One") and all other financial institutions
from time to time party to a certain Loan Agreement dated as of September 11,
1998 (as amended by a First Amendment to Loan Agreement dated as of December 23,
1998, by a Second Amendment to Loan Agreement dated as of March 8, 1999, by a
Third Amendment to Loan Agreement dated as of March 22, 2000 and by a Fourth
Amendment to Loan Agreement dated as of August 14, 2000, the "Loan Agreement"),
whether by execution of the Loan Agreement or an assignment and acceptance
acceptable to the Administrative Agent (collectively, the "Banks" and
individually a "Bank"), as lenders, and (c) Huntington, as Administrative Agent
for the Banks (Huntington in such capacity, the "Administrative Agent").
RECITALS:
WHEREAS, the Banks, the Administrative Agent and the Company executed
the Loan Agreement in connection with the Company's execution and delivery to
(i) Huntington of a certain term note of even date therewith in the original
principal amount of $18,000,000.00, which term note was amended and restated as
of March 22, 2000 in the principal amount of $12,750,000.00; (ii) Bank One of a
certain term note of even date therewith in the original principal amount of
$12,000,000.00, which term note was amended and restated as of March 22, 2000 in
the principal amount of $8,500,000.00; (iii) Huntington of a certain revolving
note of even date therewith in the original principal amount of $15,000,000.00,
which revolving note was amended and restated as of December 23, 1998 in the
principal amount of $12,000,000.00, and which revolving note was further amended
and restated as of March 22, 2000 in the principal amount of $7,800,000.00; and
(iv) Bank One of a certain revolving note of even date therewith in the original
principal amount of $10,000,000.00, which revolving note was amended and
restated as of December 23, 1998 in the principal amount of $8,000,000.00, and
which revolving note was further amended and restated as of March 22, 2000 in
the principal amount of $5,200,000.00 (capitalized terms used but not defined
herein shall have the meanings ascribed in the Loan Agreement); and
WHEREAS, Section 4.12 of the Loan Agreement requires the Company to
maintain a minimum consolidated Tangible Net Worth in excess of certain levels
during various periods (the "Section 4.12 Covenant"); and
WHEREAS, Section 4.13 of the Loan Agreement prohibits the Company from
maintaining Leverage Ratios in excess of certain levels during various periods
(the "Section 4.13 Covenant"); and
WHEREAS, Section 4.14 of the Loan Agreement prohibits the Company from
maintaining Interest Coverage Ratios of less than certain levels during various
periods (the "Section 4.14 Covenant"); and
WHEREAS, Section 4.20 of the Loan Agreement prohibits the Company from
having net income before taxes for any calendar quarter of less than zero
dollars (the "Section 4.20 Covenant"); and
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WHEREAS, Section 4.21 of the Loan Agreement requires the Company to
maintain minimum EBITDA on both a monthly and a quarterly basis (the "Section
4.21 Covenant"); and
WHEREAS, the Company has requested the Banks and the Administrative
Agent to waive the Company's non-compliance with the Section 4.12 Covenant, the
Section 4.13 Covenant, the Section 4.14 Covenant, the Section 4.20 Covenant and
the Section 4.21 Covenant for certain periods hereinafter specified; and
WHEREAS, the Banks and the Administrative Agent are willing to waive
the Company's non-compliance with the Section 4.12 Covenant, Section 4.13
Covenant, the Section 4.14 Covenant, the Section 4.20 Covenant and the Section
4.21 Covenant for certain periods hereinafter specified, subject to the terms
and conditions hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound hereby, the parties hereto agree as
follows:
1. The Banks and the Administrative Agent hereby (a) waive the
Company's non-compliance with the Section 4.12 Covenant, the Section 4.13, the
Section 4.14 Covenant and the Section 4.20 Covenant for the period ending
December 31, 2000, and (b) waive any Event of Default associated therewith or
occasioned thereby.
2. The Banks and the Administrative Agent hereby (a) waive the
Company's non-compliance with the Section 4.21 Covenant for the periods ending
October 31, November 30 and December 31, 2000, and (b) waive any Event of
Default associated therewith or occasioned thereby.
3. Except as expressly set forth herein, nothing contained herein shall
constitute a waiver or forbearance by the Banks or the Administrative Agent of
any other Event of Default, whether now existing or hereafter arising, or waiver
or modification of any other term, condition or covenant set forth in the Loan
Agreement, the Notes or any related documents, instruments or agreements
(collectively, the "Loan Documents"). Additionally, this Waiver shall not be
construed as a commitment on the part of the Banks or the Administrative Agent
to any future amendment, modification or waiver of any term, condition or
covenant set forth in the Loan Documents.
4. The Company represents and warrants that, except for the Company's
non-compliance with the Section 4.13 Covenant, the Section 4.14, the Section
4.20 Covenant and the Section 4.21 Covenant for the periods specified herein, no
Event of Default has occurred and is continuing under the Loan Documents.
5. The Company agrees that, except for the Company's non-compliance
with the Section 4.13 Covenant, the Section 4.14, the Section 4.20 Covenant and
the Section 4.21 Covenant for the periods specified herein, the Company will
perform and observe all of the covenants, agreements, stipulations and
conditions to be performed or observed by the Company under the Loan Documents.
6. This Waiver shall be interpreted, and the rights and liabilities of
the parties hereto determined, in accordance with the laws of the State of Ohio.
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7. This Waiver may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same document.
IN WITNESS WHEREOF, the Company, the Banks and the Administrative Agent
have caused this Waiver to be executed by their duly authorized representatives
as of the day and year first above written.
COMPANY:
METATEC INTERNATIONAL, INC.,
an Ohio corporation
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------
Its: Senior Vice President, Finance
AGENT:
THE HUNTINGTON NATIONAL BANK,
a national banking association,
as Administrative Agent
By: /s/ Xxx Xxxx
-----------------------------------
Its: Senior Vice President
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BANK:
THE HUNTINGTON NATIONAL BANK,
a national banking association
By: /s/ Xxx Xxxx
-----------------------------------
Its: Senior Vice President
BANK:
BANK ONE, NA,
a national banking association
By: /s/ X. Xxxxx Xxxxxx
-----------------------------------
Its: Vice President
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CONSENT OF GUARANTOR
The undersigned, being a guarantor of certain obligations of the
Company to the Banks and the Administrative Agent by virtue of a certain
Unconditional Guaranty of Payment and Performance ("Guaranty") executed and
delivered by it to the Banks and the Administrative Agent, hereby consents to
the terms of the Waiver, agrees that its Obligations (as defined in the
Guaranty) to the Banks and the Administrative Agent shall not be discharged,
limited, impaired or diminished in any way as a result of the execution of the
Waiver by the parties thereto and agrees that its Obligations to the Banks and
the Administrative Agent under its Guaranty shall be continuing as provided
therein. The undersigned, also being a debtor under a Security Agreement (the
"Security Agreement") in favor of the Banks and the Administrative Agent, hereby
reaffirms its grant to the Banks and the Administrative Agent of a security
interest under the Security Agreement, and acknowledges that such security
interest secures its Obligations to the Banks and the Administrative Agent.
The undersigned authorizes any attorney at law to appear in any Court
of Record in the State of Ohio or in any other state or territory of the United
States after the Obligations subject to its Guaranty becomes due, whether by
acceleration or otherwise, to waive the issuing and service of process, and to
confess judgment against it in favor of the Banks and the Administrative Agent
for the amount then appearing due together with costs of suit, and thereupon to
waive all errors and all rights of appeal from the judgments rendered.
WARNING-BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
Metatec Worldwide, Inc.,
an Ohio corporation
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Its: Treasurer
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STATE OF OHIO }
COUNTY OF FRANKLIN: }SS
The foregoing instrument was executed and acknowledged before me this
2nd day of April, 2001, by Xxxxx X. Xxxxxxx, the Treasurer of Metatec Worldwide,
Inc., an Ohio corporation, on behalf of the corporation.
/s/ Xxxxxxxx X. Xxx
--------------------------------
Notary Public
Commission
Expiration: 2-16-04
