EXHIBIT 10.17
November 11, 1998
Top Source Automotive, Inc.
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxx Xxxxxxx, Xxxxxxx 00000
Top Source Instruments, Inc.
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxx Xxxxxxx, Xxxxxxx 00000
Re: Loan and Security Agreement entered into on July 1, 1997, between
NationsCredit Commercial Corporation, through its NationsCredit Commercial
Funding Division ("Lender") and Top Source Automotive, Inc. ("TS Auto")
("TS Auto Loan Agreement"); Loan and Security Agreement entered into on
July 1, 1997, between Lender and Top Source Instruments, Inc. ("TS
Instruments") ("TS Instruments Loan Agreement"); Each of TS Auto and TS
Instrument may be referred to herein as a "Borrower" or collectively as
"Borrowers," and each of the TS Auto Loan Agreement and the TS Instrument
Agreement may be referred to herein as a "Loan Agreement" or collectively
as "Loan Agreements." Unless otherwise defined in this letter, all
capitalized terms shall have the same meaning set forth in the TS Auto Loan
Agreement and the TS Instruments Loan Agreement.
Gentlemen:
You have recently notified us of the following:
A. The Borrowers and Top Source Technologies, Inc.'s ("Parent") net
losses for the fiscal year ending September 30, 1998 exceeded $2
million, exclusive of extraordinary gains and extraordinary
losses, which is a violation of Section 5.19 of each of the Loan
Agreements;
B. Pursuant to your counsel's correspondence of November 3, 1998 (a
copy of which is attached), you are proposing to sell $3,500,000
of convertible preferred stock which will be used to pre-pay in
part $3,020,000 of convertible notes, and would be a violation of
Sections 5.18 (viii) and (xiii) of each of the Loan Agreements;
C. Pursuant to the same letter, some of the proceeds of the sale of
preferred stock will be used to partially redeem convertible
preferred stock issued by the Parent and/or the Borrowers in May,
1998, which would also be a violation of Section 5.18 of each of
the Loan Agreements; and
D. On or about August 14, 1998 TS Auto, along with Parent and other
affiliates of TS Auto and TS Instruments, entered into an Asset
Purchase Agreement with NCT Audio Products, Inc. ("Buyer"),
pursuant to which Borrowers (i) proposed to sell substantially all
of their assets to the Buyer ("Asset Purchase Agreement"), the
consummation of which would also be an Event of Default under each
of the Loan Agreements and (ii) have sold 20% of the issued and
outstanding common stock of TS Auto, which is an Event of Default
under the TS Auto Loan Agreement.
In connection with each of the foregoing actions, you have requested
our waiver of any Events of Default and/or, where appropriate, our consent
thereto. In consideration of the matters set forth below and for other good and
valuable consideration, Lender and Borrowers agree as follows:
1. If Borrowers' shareholders approve the Asset Purchase Agreement
and such approval is obtained on or before December 31, 1998,
then:
a) Lender shall be deemed to have waived any Event of Default as
a result of Borrowers' violation of Section 5.19 of each of
the Loan Agreements for Borrowers' fiscal year ending
September 30, 1998;
b) Section 8(e)(i) of Schedule A to each of the Loan Agreements
shall be deemed to be amended as follows:
(i) Maximum Cumulative Pre-tax Net Loss: $1,000,000, exclusive of extraordinary
gains and extraordinary losses, for TST and each of its subsidiaries on a
consolidated basis beginning October 1, 1998.
c) Section 1(d)(i) Schedule A of the TS Auto Loan Agreement shall
be deemed to be amended as follows:
Overall sublimit on advances $250,000
against eligible inventory
d) Borrower shall collaterally assign to Lender a $250,000
certificate of deposit issued by a bank acceptable to Lender
and secured pursuant to documentation acceptable to Lender.
In the event Borrowers' shareholders fail to approve the Asset
Purchase Agreement on or before December 31, 1998, then Lender
will not be deemed to have waived Section 5.19 of each of the Loan
Agreements as set forth above in Section 1(a) or any default that
may result from the issuance of stock under the Asset Purchase
Agreement.
2. Lender hereby waives any Event of Default under Sections 5.18
(viii) and (xiii) of each of the Loan Agreements resulting from
Borrowers' consummation of the sale of $3,500,000 of convertible
preferred stock and using such proceeds to pay $3,020,000 of
convertible notes as set forth in paragraph B above. Borrowers
agree that they may (i) not pay any cash dividends due under such
preferred stock if there is any other Event of Default under
either the TS Automotive Loan Agreement or the TS Instruments Loan
Agreement and (ii) redeem any of their capital stock from the
proceeds of this transaction and not from any proceeds of
financing provided by Lender;
3. Lender does not object to the closing of the Asset Purchase
Agreement so long as there is no Event of Default at the time of
closing of the Asset Purchase Agreement.
4. All proceeds from the closing of the Asset Purchase Agreement will
be first used to satisfy all of Borrowers' Obligations to Lender
including all accrued and/or unpaid interest, charges, fees, loan
fees, Early Termination Fees, Minimum Borrowing Fees, and all
other sums chargeable to Borrowers under the Loan Agreements.
5. Borrowers hereby agree to pay Lender a fee of $25,000. Neither
Lender's acceptance of this fee nor Lender's waivers or consents
herein shall be deemed to be a consent of any other action or
waiver of any other Default, whether prior or subsequent to the
date of this letter, and whether or not similar to the defaults
and actions set forth herein. Borrowers agree Lender may charge
such fee to any of Borrowers' loan accounts maintained by Lender.
Except as set forth herein, each of the Loan Agreements remain
unchanged and in full force and effect.
Very truly yours,
NationsCredit Commercial Corporation,
through its NationsCredit Commercial Funding Division
By: _____________________________
Xxx X. Xxxxxxx
Senior Vice President
Top Source Automotive, Inc.
By: _____________________________
Its: _____________________________
Top Source Instruments, Inc.
By: _____________________________
Its: ______
