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EXHIBIT 10.24
AGREEMENT
This Agreement ("Agreement") is entered into on this 4th day of June,
1997, by and among ELEK-TEK, INC., a Delaware corporation, with its principal
place of business at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxx 00000
("Borrower"), NATIONSCREDIT COMMERCIAL CORPORATION OF AMERICA, a North Carolina
corporation ("Nations"), DEUTSCHE FINANCIAL SERVICES CORPORATION, a Nevada
corporation, in its individual capacity ("DFS"), and DFS as Agent under the
Credit Facility (as defined below) (in such agent capacity, the "Agent") (all
of the foregoing being referred to collectively as the "Parties"). (DFS, in
its individual capacity under the AWF (as defined below), and as a "Lender" and
Agent under the Credit Agreement, and Nations, as a "Lender" under the Credit
Agreement, are sometimes hereinafter referred to individually as a "Lender
Party" and collectively as the "Lender Parties.")
RECITALS
A. The Lender Parties have extended a credit facility to Borrower
pursuant to the terms of (i) a Business Credit and Security Agreement dated as
of October 31, 1996 (as amended, the "Credit Agreement"; capitalized terms used
but not defined herein shall have the meanings given them in the Credit
Agreement), (ii) an Agreement for Wholesale Financing dated on or about October
31, 1996 (as amended, "AWF"), and (iii) the other Loan Documents.
B. The Obligations are secured by the Collateral. There is presently due
and owing: (i) a principal amount of $13,113,298.37 under the Credit Agreement,
and (ii) a principal amount of $12,861,589.26 under the AWF; as well as accrued
interest and fees and expenses incurred by the Lender Parties.
C. As of the date hereof, Borrower is in Default of the following sections
of the Credit Agreement and similar sections of the AWF:
(i) Section 9.3.1(a)(i) and (ii);
(ii) Section 9.3.1(b)(i) and (ii);
(iii) Section 9.3.1(c) with respect to the minimum ratio as of 12/31/96
and 3/31/97;
(iv) Section 9.1.10(a) with respect to the due date for the delivery of
the 12/31/96 financial statements and the requirement for delivery of an
unqualified opinion of its auditors for such period; and
(v) Section 10(f) with respect to certain of Borrower's Subordinated Debt
obligations;
all as more specifically described in a certain letter of even date
herewith from Borrower to Agent (collectively, the "Designated
Defaults").
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D. Borrower hereby acknowledges the Designated Defaults. Rather than
dispute the Designated Defaults, the Parties have elected to resolve this
matter by this Agreement. As a result of the Designated Defaults, Borrower
acknowledges that the Lender Parties can proceed to enforce all rights and
remedies pursuant to the Loan Documents.
E. Borrower has requested that the Lender Parties waive the Designated
Defaults.
F. In exchange for the agreements, representations, covenants, releases
and confirmations of Borrower contained and referenced herein, the Lender
Parties are willing to agree to such waivers.
G. Borrower acknowledges that each of DFS, Agent and each Lender has
performed all obligations on its part to be performed under the Loan Documents
and Borrower has no defenses to the payment of the sums due or to its
performance thereunder.
NOW, THEREFORE, for and in consideration of the above premises, the mutual
promises and covenants contained herein, and for such other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties hereby agree as follows:
1. Waiver. Subject to the terms and conditions set forth herein, the
Lender Parties waive the Designated Defaults.
2. Waiver Terms and Conditions. Notwithstanding the provisions of Section
1 of this Agreement, the agreement to waive the Designated Defaults contained
herein shall be conditioned upon the following terms:
(a) The overall credit facility maximum under the Loan Documents is
hereby reduced from $50,000,000 to $39,000,000, to consist of: (i) a reduction
of the maximum working capital facility under the Credit Agreement from
$35,000,000 to $26,000,000 (including therein, a reduction of the maximum
amount of the Eligible Inventory Availability sublimit from $15,000,000 to
$10,000,000), and (ii) a reduction of the maximum facility available under the
AWF from $15,000,000 to $13,000,000.
(b) An independent appraiser, chosen by Agent, in Agent's sole
discretion, shall perform an appraisal of the Eligible Inventory. To the
extent that the value of the Eligible Inventory, as indicated by the appraisal
recommends a reduction in the advance rate for Eligible Inventory, as the
Lender Parties shall determine, in their absolute discretion, the Lender
Parties may, in their absolute discretion, reduce such advance rate downward
from sixty percent (60%). All fees, charges, and expenses arising from or in
any way relating to any such appraisal shall be the sole responsibility of
Borrower.
(c) The Loan Documents are hereby amended, effective as applicable by
deleting each and every reference therein to the existing Financial Covenants,
and replacing them with the following new Financial Covenants:
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Borrower agrees that it will at all times maintain the following:
(i) a Tangible Net Worth plus Subordinated Debt in the combined amount
of not less than the amount shown below for the period corresponding
thereto:
Period Amount
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Month ending 5/31/97 $7,200,000
Month ending 6/30/97 $7,868,000
Month ending 7/31/97 $7,378,000
Month ending 8/31/97 $7,610,000
Month ending 9/30/97 $8,499,000
Month ending 10/31/97 $7,962,000
Month ending 11/30/97 $8,261,000
Month ending 12/31/97 $9,830,000
and each month thereafter
(ii) a ratio of Debt minus Subordinated Debt to Tangible Net Worth
plus Subordinated Debt of not more than the ratio shown below for the
period corresponding thereto:
Period Ratio
--------------------- -----------
Month ending 5/31/97 9.60 to 1.0
Month ending 6/30/97 8.80 to 1.0
Month ending 7/31/97 9.50 to 1.0
Month ending 8/31/97 9.90 to 1.0
Month ending 9/30/97 9.40 to 1.0
Month ending 10/31/97 9.70 to 1.0
Month ending 11/30/97 9.40 to 1.0
Month ending 12/31/97 7.60 to 1.0
and each month thereafter
(iii) commencing with Borrower's quarter ending June 30, 1997 and for
each fiscal quarter thereafter, a ratio of EBITDA to total interest
expenses of not less than one and one-half to one (1.5 to 1.0)
"EBITDA" as referenced above shall mean "EBIT" as defined currently in
the Loan Documents, further modified to add back into Borrower's
consolidated net income, provisions for depreciation and amortization
of Intangibles.
(iv) The amount of average days at any time Borrower's accounts
payable are outstanding shall at no time exceed 65 days, as determined by
the product resulting from multiplying (x) Borrower's accounts payable
divided by its cost of goods sold, times (y) 365/12.
(d) The Loan Documents are hereby amended to provide that
notwithstanding anything to the contrary, all collections of Borrower's
Accounts from retail sales: (i) attributable to Borrower's Illinois locations
shall be deposited into; and (ii) attributable to Borrower's locations outside
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Illinois shall be swept daily by Agent into; the Lockbox established pursuant
to that certain Lockbox and Blocked Account Agreement with LaSalle National
Bank dated as of October 31, 1996, or to such other account as Agent shall
direct.
(e) Notwithstanding anything to the contrary, Borrower agrees that the
Lender Parties may examine the Collateral and otherwise perform the inspections
described in the Loan Documents, at any time, and from time to time, during
normal business hours, as frequently as deemed necessary.
(f) From and after the date hereof, Borrower shall at all times maintain
excess availability under the Credit Facility under the Credit Agreement of at
least One Million Dollars ($1,000,000).
(g) The Loan Documents are hereby amended to provide that
notwithstanding anything therein to the contrary, the financing programs
extended thereunder shall have a term expiring on January 2, 1998, with no
"automatic" renewals thereof, and that termination for any reason, prior to
such date shall require, among other things, Borrower's payment to Agent, for
the pro rata benefit of DFS and Nations, of a termination fee of $50,000. The
foregoing termination fee is in lieu of that set forth in Section 4.1 of the
Credit Agreement.
(h) The Loan Documents are hereby amended to provide that
notwithstanding anything to the contrary, Borrower shall not permit the balance
in its operating account(s) to exceed, at any time, $750,000.
(i) The Loan Documents are hereby amended to provide that
notwithstanding anything to the contrary, Borrower shall no longer be permitted
to make principal or interest payments on the Subordinated Debt owing to Xxxxxx
Xxxxxxx and the Estate of Xxx Xxxxxxx.
(j) The Loan Documents are hereby amended to provide that
notwithstanding anything to the contrary, Borrower shall be required to deliver
a Borrowing Base Certificate on a daily basis.
(k) Section 3.2(a) of the Credit Agreement is hereby deleted in its
entirety and replaced with the following new such section:
"(a) Interest. Borrower hereby agrees to pay interest to Agent, on
behalf of the Lenders, on the Daily Contract Balance (as defined below)
owed under Borrower's Loans at a rate that is two and one half
percentage points (2.5%) per annum above the Prime Rate. Interest on the
Loans prior to maturity shall be payable monthly and at maturity."
(l) The definition of "Subordinated Debt" in clause (v) of Section 9.3.1
of the Credit Agreement is hereby deleted in its entirety and replaced with the
following new definition thereof:
"(v) 'Subordinated Debt' means all of Borrower's Debt (including accrued
interest thereon) which is subordinated to the payment of Borrower's
liabilities to the Lenders by an agreement in form and substance
satisfactory to the Required Lenders."
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3. Conditions Precedent. The effectiveness of this Agreement is subject
to the satisfaction, in Agent's sole discretion, of the following conditions:
(a) Execution and delivery to Agent of an original counterpart(s) of
this Agreement by Borrower and Nations on or before 5:00 p.m. Chicago, IL time
on June 5, 1997.
(b) The accuracy of the 12/31/96 and 3/31/97 financial statements and
other historical information submitted by Borrower.
(c) Borrower's payment in good funds to Agent, for the pro rata
benefit of DFS and Nations, of a waiver and amendment fee in the amount of
$100,000, which fee shall be payable as follows: (i) $35,000 upon Borrower's
execution of this Agreement, (ii) $32,500 within 30 days of such date of
execution, and (iii) $32,500 within 60 days of such date of execution;
provided, that the timing for payment of the fees set forth in items (ii) and
(iii) above shall be accelerated upon a Default.
4. Representations and Warranties. Borrower represents and warrants to
the Lender Parties that:
(a) Borrower's execution, delivery and performance of this Agreement is
not subject to the prior consent or approval of any third party or governmental
authority.
(b) Except for the representation made in the last sentence of Section
8.1 of the Credit Agreement with respect to material adverse changes in the
financial or business condition of Borrower subsequent to the date of
Borrower's submission of the financial statements referenced in Section 8.1 of
the Credit Agreement, all the obligations, representations and warranties
contained in the Loan Documents remain in full force and effect, are hereby
restated and reaffirmed as of the date hereof, as amended hereby, and no
Default or Unmatured Default has occurred or is continuing except for the
Designated Defaults.
(c) The execution, delivery and performance of this Agreement by
Borrower does not violate, contravene, or conflict with any statute, rule,
regulation, agreement or instrument or order binding upon Borrower or to which
Borrower is subject.
(d) This Agreement constitutes the valid and binding obligation of
Borrower and is enforceable in accordance with its terms.
5. Covenants. Borrower agrees and covenants that:
(a) Borrower is bound by the covenants and agreements set forth in the
Loan Documents, as amended hereby, and hereby restates and reaffirms each and
every such covenant on and as of the date hereof, as amended hereby.
(b) Borrower hereby grants DFS an irrevocable license to have an
employee on site during business hours at Borrower's business premises to
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monitor Borrower's compliance with this Agreement and the Loan Documents, and
for such other purposes permitted under the Loan Documents. Borrower
acknowledges and agrees that the presence of any such personnel on Borrower's
premises shall be for purposes of protecting each Lender Party's' interest in
the Collateral and never deemed as any Lender Party's' exercise of control over
Borrower, the Collateral or Borrower's business.
(c) Borrower shall deliver all of the documents and instruments
requested by the Lender Parties in conjunction with this Agreement and the Loan
Documents to maintain, confirm and protect the security interest in the
Collateral, and otherwise to effectuate the transactions contemplated hereby
and thereby.
(d) Borrower shall promptly notify Agent of (i) any adverse change in
the financial condition or business of Borrower; (ii) any default under any
agreement, contract or other instrument to which Borrower is a party, whereby
any of Borrower's properties are bound, or any acceleration of the maturity of
any indebtedness owing by Borrower; (iii) any material adverse claim against or
affecting Borrower or any of Borrower's property; (iv) any material litigation,
arbitration or other claim or controversy which might become the subject of
litigation against Borrower or affecting any of Borrower's properties; and (v)
any bankruptcy proceeding filed by or against the Borrower under the Federal
Bankruptcy Code, any state insolvency law or any similar law.
(e) Time shall be of the essence with respect to Borrower's obligations
under this Agreement.
6. Default/Remedies. Upon: (a) the occurrence of a Default or an Unmatured
Default, including but not limited to a default under this Agreement, other
than a Designated Default, or (b) the institution by Borrower or any Person on
behalf of Borrower, of any litigation or other legal action against one or all
of the Lender Parties, seeking to have set aside or otherwise enjoin the
performance of any provision of this Agreement or any other Loan Document; the
Lender Parties shall be entitled to take such action(s) as provided under the
terms of the Loan Documents. Borrower, except where prohibited by law, waives
any notice of default, acceleration, termination of forbearance or other notice
requirements or provisions contained within the Loan Documents, or imposed by
applicable law prior to a Lender Party undertaking any such actions.
7. Borrower's Releases. Borrower and its managers, shareholders,
representatives, parent corporations, subsidiaries, affiliates, agents,
partners, servants, employees, attorneys, heirs, successors and assigns, have
this day RELEASED and by these presents do RELEASE, ACQUIT and FOREVER
DISCHARGE, DFS, each Lender, and Agent, and their respective predecessors,
successors, assigns, managers, shareholders, representatives, parent
corporations, subsidiaries, affiliates, agents, servants, employees, attorneys,
officers, and directors, each in their respective corporate and individual
capacities (collectively, the "Released Parties") from any and all claims or
causes of action, suits, debts, sums of money, accounts, reckonings, covenants,
contracts, controversies, agreements, promises, rights, variances, trespasses,
damages, judgments, executions, claims and demands whatsoever
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which they have, which are based on facts or circumstances which arose or
existed from the beginning of time to the date hereof, whether known or
unknown, asserted or unasserted, equitable or at law, arising under or pursuant
to common or statutory law, rules or regulations, and which arose in the course
of dealings between any of the Released Parties and Borrower, or any of them,
or which are directly or indirectly attributable to any Loan Document, or the
rights, interest, covenants, or agreements evidenced thereby, or any security
therefor, all loan modification documents, this Agreement, any documents or
instruments executed or delivered in connection with the foregoing, or the
negotiation, execution, delivery, administration, management, collection or
enforcement thereof (collectively, the "Applicable Transactions"). The
foregoing release shall relate to any and all claims and causes of action of
any kind or character relating to the Applicable Transactions, growing out of
or in any way connected with or resulting from the acts, actions, or omissions,
of any of the Released Parties, including, without limitation, any loss, costs,
or damage arising or incurred in connection with any usurious interest, breach
of fiduciary duty, breach of any duty of fair dealing, breach of confidence,
undue influence, duress, economic coercion, conflict of interest, negligence,
bad faith, malpractice, intentional or negligent infliction of mental distress,
tortious interference with contractual relations, tortious interference with
corporate or partnership governance or prospective business advantage, breach
of contract, deceptive trade practices, libel or slander (without admitting or
implying that any such claim or cause of action exists or has any validity).
8. Miscellaneous.
(a) Waivers. No failure to exercise, and no delay in exercising, on the
part of any Lender Party, any right under this Agreement or any Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right. The rights of each Lender Party in such documents shall be in
addition to all other rights provided by law. No notice or demand given in any
case shall constitute a waiver of the right to take other action in the same,
similar or other instances without such notice or demand. Nothing herein or in
any Loan Document shall be construed to be a waiver by a Lender Party of any
Default under any Loan Document, other than the Designated Defaults, as
specifically described herein and subject to the terms hereof. The Lender
Parties reserve all of their rights and remedies under the Loan Documents.
Further, no Lender Party has consented to, nor shall anything herein be
construed to imply a Lender Party's consent to, a release of the liens and
security interest in the Collateral granted under the Loan Documents.
(b) Survival of Representations and Warranties. All representations,
warranties, covenants and conditions made in this Agreement and the Loan
Documents, as amended hereby, shall survive the execution and delivery of these
documents.
(c) Severability. Any provision of this Agreement held by an arbitrator
or a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Agreement and the effect
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thereof shall be confined to the provision so held to be invalid or
unenforceable.
(d) Applicable Law. This Agreement shall be deemed to have been made,
and to be performable in Illinois and shall be governed by and construed in
accordance with the laws of the State of Illinois.
(e) Successors and Assigns. This Agreement is binding upon and shall
inure to the benefit of each Lender Party, Borrower, and each of them, and
their respective successors, heirs and assigns, except that Borrower may not
assign or transfer any of its rights or obligations hereunder.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
(g) Notices. Any notice required or permitted to be given by any party
hereunder shall be conclusively deemed to have been given and received if made
in accordance with the relevant provisions of the Loan Documents.
(h) Headings. The headings, captions and arrangements used in this
Agreement are for convenience only and shall not affect the interpretation of
this Agreement.
(i) Full and Independent Knowledge. Each Party hereto represents that
it has been represented by an attorney in conjunction with the preparation and
review of this Agreement, that its representative has specifically discussed
with its attorney the meaning and effect of this Agreement and that its
representative has carefully read and understands the scope and effect each
provision contained herein. Each Party further represents that it does not
rely and has not relied upon any representation or statement made by the other
Party hereto or any of its representatives with regard to the subject matter,
basis or effect of this Agreement. There are no unwritten agreements between
the Parties. This Agreement may only be amended by a writing signed by the
Parties.
(j) Ownership Claims. Each Party hereto warrants and represents to each
of the other that it has not heretofore assigned or transferred, or purported
to assign or transfer, to any person or entity, any claim or any portion
thereof or interest therein, and agrees to indemnify, defend and hold each
other Party harmless from and against any and all claims based on or arising
out of such assignment or transfer purported assignment or transfer of claims
or any portion thereof or interest therein.
(k) Further Assurances. Each of the Parties, without further
consideration, agrees to execute and deliver such other documents and take such
other action as may be necessary to consummate more effectively the subject
matter hereof.
(l) Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement, the relationship resulting in or from this
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Agreement or the breach of any duties hereunder will be settled by Arbitration
in accordance with the provisions of the relevant sections of the Loan
Documents.
(m) Recitals. The above Recitals are true and correct in all respects and
are hereby incorporated into this Agreement.
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This Agreement is EXECUTED as of the date first written above.
ATTEST: ELEK-TEK, INC.
Xxxxxx Xxxxxxxx, Xx. By: Xxxxxxx Xxxxxxxxx
-------------------- ---------------------------
Secretary Name: Xxxxxxx Xxxxxxxxx
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Title: President & CEO
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CORPORATE ACKNOWLEDGMENT
STATE OF Illinois )
) ss:
COUNTY OF Xxxx)
On the 4th day of June, 1997, before me personally came, Xxxxxxx
Xxxxxxxxx, who being by me duly sworn, did depose and say that he is the
President of ELEK-TEK, INC., known to me to be the person who executed the
within Agreement on behalf of said corporation, and acknowledged to me that he
executed the same for the purposes therein stated.
Xxxx Homes (SEAL)
---------------------------------
Notary Public
My commission expires: 3-08-2000
----------------------------------------
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This Agreement is EXECUTED as of the date first written above.
ATTEST: DEUTSCHE FINANCIAL SERVICES
CORPORATION, in its individual
capacity and in its capacity as
Agent and a Lender
Xxxxxx Xxxxxxxx, Xx. By: Xxxxxxx Xxxxxxxxx
-------------------- ----------------------------------
Secretary Name: Xxxxxxx Xxxxxxxxx
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Title: Sr. Regional Vice President
----------------------------------
CORPORATE ACKNOWLEDGMENT
STATE OF Illinois )
) ss:
COUNTY OF Xxxx )
On the 4th day of June, 1997, before me personally came, Xxxxxxx
Xxxxxxxxx, who being by me duly sworn, did depose and say that s/he is the Sr.
Regional Vice President of Deutsche Financial Services Corporation, known to me
to be the person who executed the within Agreement on behalf of said
corporation, and acknowledged to me that s/he executed the same for the
purposes therein stated.
Xxxx Homes (SEAL)
---------------------------------
Notary Public
My commission expires: 3-08-2000
----------------------------------------
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This Agreement is EXECUTED as of the date first written above.
ATTEST: NATIONSCREDIT COMMERCIAL CORPORATION
OF AMERICA
By: Xxxxx Xxxxxxxxxxx
---------------------------- ------------------------------------
Secretary
Name: Xxxxx Xxxxxxxxxxx
------------------------------------
Title: Senior Vice President
------------------------------------
CORPORATE ACKNOWLEDGMENT
STATE OF Texas )
) ss:
COUNTY OF Dallas )
On the 4th day of June, 1997, before me personally came, Xxxxx
Xxxxxxxxxxx, who being by me duly sworn, did depose and say that s/he is the
Senior Vice President of NationsCredit Commercial Corporation of America, known
to me to be the person who executed the within Agreement on behalf of said
corporation, and acknowledged to me that s/he executed the same for the
purposes therein stated.
------------------------------------ (SEAL)
Notary Public
My commission expires:
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