Exhibit 10.20
-------------
COMMITMENT LETTER TO AMEND BUSINESS
LOAN AGREEMENT AND MASTER REVOLVING NOTE
March 21, 2002
Xxxxxxx Xxxx
President/CEO
Taitron Components Incorporated
00000 Xxxx Xxxxx
Xxxxx Xxxxxxx, XX. 91355
Dear Xxxxxxx,
Comerica Bank - California ("Comerica") has agreed to make a Fifteen Million
dollar ($15,000,000) Line of Credit available to Taitron Components Incorporated
("Taitron"). Comerica's commitment to fund the Line of Credit is subject to each
of the terms and conditions listed below. As a condition to funding the Line of
Credit, Comerica must be provided with all documents and information required by
Comerica in form and substance satisfactory to Comerica. Comerica must continue
to be satisfied with Xxxxxxx's financial condition, operations, and economic
environment which may be reviewed by Comerica at any time.
LOAN COMMITMENT
Borrower: Taitron Components Incorporated
Amount: $15,000,000
Facility: Revolving Line of Credit
Purpose: Working Capital
Repayment: Interest Only
Maturity: May 18, 2004
Interest: Based on rolling two quarter profitability
Greater than $250,000 per quarter Prime or LIBOR + 200bps
Less than $250,000 per quarter Prime or LIBOR + 235bps
LIBOR rates will be fixed for 30, 90, 180 or 365 days with minimum advances of $500,000.
Formula: Borrowing will be limited to the sum of:
(1) 80% of eligible accounts receivable
(2) 30% of eligible inventory up to a maximum of $9,000,000
Effective 6/30/02: 30% of eligible inventory up to a maximum of $7,000,000.
Effective 12/31/02: 30% of eligible inventory up to a maximum of $5,500,000
(3) An additional amount of $2,940M (70% of appraised amount of building located @00000
X. Xxxxxxxx Xxxxxxx, Xxxxxxxx, XX)
Ineligible accounts receivable will primarily consist of the intercompany accounts, Government
accounts, contra accounts, foreign accounts, 25% cross aging exclusion, COD, 20%
concentration, and accounts over 90 days.
Ineligible inventory will primarily consist of slow moving inventory (non-currently noted),
consignment goods and packaging
Fees: $5,000 Annual Fee
Other Fees: Borrower will pay to Comerica all of Comerica's out of pocket expenses incurred in connection
with the Line of Credit including but not limited to all attorney's, title, and filing fees incurred
in connection with the loans.
Collateral: UCC 1 first security interest on all corporate assets
First deed of trust on 00000 X. Xxxxxxxx Xxxxxxx, Xxxxxxxx, XX
Subordination None
GUARANTEES: None
COVENANTS
The Loan Documents referred to above may contain the following covenants,
among others:
1. Financial Statement. Borrower shall provide monthly company prepared
financial statement to Bank within thirty (30) days from the end of
borrower's fiscal quarter. Further, Borrower shall furnish to Bank 10K and
10Q within 15 days of filing.
2. Borrower shall maintain fire and extended coverage insurance in a form
satisfactory to Bank.
43
3. Borrower will provide monthly accounts receivable, accounts payable agings
and inventory reports within 15 days of month end. The reports will be
submitted along with a borrowing base calculation in a form satisfactory
to Bank.
4. Semi-annual
5. Financial Covenants. Financial covenants shall be determined in accordance
with generally accepted accounting principals. Accounting and other terms
requiring definition will be defined in subsequent Loan Documents.
Proposed financial covenants to be tested quarterly include:
a. Debt to effective tangible net worth ratio no greater than 0.75:1.0
b. Effective tangible net worth no less than $ 24,600,000 commencing
03/31/02, increasing each FYE by 100% of Net Income
c. Current ratio of at least 2.0:1.0.
d. Profitability
For fiscal year 2002:
Quarter 1 loss not to exceed $330,000.
Quarter 2 profit of at least $50,000.
Quarter 3 profit of at least $175,000.
Quarter 4 profit of at least $175,000.
Annual Profit of at least $150,000.
For fiscal year 2003 and each fiscal year thereafter:
Quarterly profit of at least $250,000.
Annual profit of at least $1,000,000.
If the above does meet with you approval, please sign below accepting our
commitment. Acceptance will authorize us to commence documentation and allow us
to issue a 12/31/01 waiver of all covenant violations. This commitment will
expire on March 31, 2002. All documentation satisfactory to Comerica and legal
counsel must be signed and executed by April 20, 2002. This commitment replaces
the previous commitment issued. This letter is also intended for the management
of Taitron Components Incorporated only and not to be shared with other parties
without the prior written consent of the Bank.
Very truly yours,
COMERICA BANK-CALIFORNIA
/s/Xxxx Xxxxxx
Senior Vice President/ Group Manager
/s/Xxxxx X. Xxxxx
Vice President
Above Terms Accepted:
/s/Xxxxxxx Xxxx
Taitron Components Incorporated
44
