EXHIBIT 10.11
Mr. Xxxxx Xxx May 21, 2004
Chief Executive Officer
Galaxy Nutritional Foods, Inc.
0000 Xxxxxxxx Xxx
Xxxxxxx, Xxxxxxx 00000
RE: Loan Agreement dated March 10, 2000, as amended
Dear Mr. New:
SouthTrust Bank (the "Bank") has agreed to the following modifications to the
above mentioned Loan Agreement:
1) The Bank hereby agrees to the modification of the Tangible Net Worth
calculation effective as of December 31, 2003 as follows.
Section 5.01 (a) (j) Tangible Net Worth. The Borrower must maintain a minimum
Tangible Net Worth equal to at least Eleven Million and No/100 Dollars
($11,000,000.00). Preferred stock and any employment contract obligation shall
be excluded for the purpose of calculating Tangible Net Worth.
2) The Bank hereby agrees to the modification of the Maximum Funded Debt to
EBITDA ratio effective as of December 31, 2003 as follows:
Section 5.01 (a) (l) Maximum Funded Debt to EBITDA. The Borrower shall maintain
a ratio of Maximum Funded Debt to EBITDA of not greater than 3.25 to 1. The
Maximum Funded Debt to EBITDA ratio is only measured annually at the Company's
fiscal year end. EBITDA shall be calculated on a rolling four-quarter basis. Any
non-cash compensation income/expense related to stock, options and warrants as
well as any employment contract expense shall be excluded for the purposes of
calculating EBITDA in this ratio.
3) The Bank hereby consents to waive the compliance by the Company with regards
to the Maximum Funded Debt to EBITDA Ratio for March 31, 2004 only.
This letter is not to be construed as a waiver of any other covenant or a
diminution of the Bank's rights under the Loan Agreement. All other terms and
conditions shall remain in full force and effect.
In addition to the above referenced covenant waiver and modifications, the Bank
has agreed to modify the pricing on term loan note number 59190 by implementing
matrix pricing as follows:
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Level Funded Debt/EBITDA Rate
---------- ----------------------------------- ---------------------------------
1 < 2x Prime + 0
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2 >/= to 2x but < 2.5x Prime +1/4%
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3 >/= to 2.5x but < 3x Prime +1/2%
---------- ----------------------------------- ---------------------------------
4 >/= to 3x but < 3.5x Prime +3/4%
---------- ----------------------------------- ---------------------------------
5 >/= to 3.5x but < 4.5x Prime + 1%
---------- ----------------------------------- ---------------------------------
6 >/= 4.5x Prime + 11/4%
---------- ----------------------------------- ---------------------------------
Pricing will be measured on a rolling four-quarter EBITDA basis, beginning on
June 30, 2004. Each pricing change will be effective the 1st day of the 2nd
quarter following the date of measurement. For example, the 1st measurement date
will be June 30, 2004. The new pricing based on the June 30, 2004 Funded Debt to
EBITDA ratio will take effect on October 1, 2004 and will remain in effect until
January 1, 2005, when pricing based on the September 30, 2004 ratio of Funded
Debt to EBITDA takes effect.
A loan modification and covenant waiver and modification fee of $50,000 will be
due and payable based on the following schedule:
June 1, 2004 $20,000
August 1, 2004 $10,000
October 1, 2004 $10,000
December 1, 2004 $10,000
Should you have any questions regarding the above please call me at (407)
000-0000. Otherwise, please acknowledge your concurrence with these
modifications by signing below and returning the original to me no later than
the close of business on May 28, 2004. Your signature indicates that you have
read this letter and that you are authorized by the Borrower to approve it.
Sincerely,
SOUTHTRUST BANK
/s/ Xxxx X. Xxxxx
Xxxx Xxxxx
Group Vice President
Acknowledged and accepted this 11th day of June , 2004.
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Galaxy Nutritional Foods, Inc.
By: /s/ Xxxxxxxxxxx X. New
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Its: Chief Executive Officer
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