EXHIBIT 10.8
July 12, 2001
Xxxxxxx Xxxxxx
Galaxy Nutritional Foods, Inc.
Suite 136
0000 Xxxxx Xxx
Xxxxxxx, XX 00000
Dear Xx. Xxxxxx:
Galaxy Nutritional Foods, Inc. (the "Company") has requested that FINOVA
Mezzanine Capital, Inc. ("FMC") waive certain defaults and modify certain
covenant requirements contained in that certain Loan Agreement dated September
30, 1999, and as amended August 3, 2000, by and between the Company as Borrower
and FMC as Lender (the "wan Agreement"). Unless otherwise defined, all
capitalized terms herein shall have the meaning given by the Loan Agreement.
Based upon the representation and agreement of the Company to 1) amend and
restate its existing promissory notes in the principal amounts of $4,000,000.00
and $815,000.00, respectively, to provide that interest on each note shall
accrue at 3 rate of 13. 5% per annum and further provide that the maturity of
the $4,000,00000 note shall be August 1, 2003; and 2) pay a waiver fee of
$20,000.00 to FMC no later than December 31, 2001 (collectively the "Waiver
Conditions"), FMC hereby agrees:
1. FMC hereby waives the existing Events of Default under
Sections 3.22 and 3.23 of the Loan Agreement related to Funded Debt to EBITDA
Ratio Requirements (3.22) and Debt Service Coverage Ratio Requirements (3.23)
for the quarters ended March 31, 2001 and June 30, 2001.
2. FMC hereby consents that there shall not be deemed to exist an
Event of Default under the Funded Debt 10 EBUDA Ratio Requirements contained in
Section 3.22 of the Loan Agreement so long as the Company's Funded Debt to
EBITDA Ratio on September 30,2001, calculated on three-month trailing basis,
shall not exceed 26 to 1; such Ratio on December 31. 2001, calculated on a
six-month trailing basis, shall not exceed 10 to 1; such Ratio on March 31,
2001, calculated on a nine-month trailing basis, shall not exceed 5.8 to 1; and
such Ratio for all quarters ending thereafter, calculated on a twelve-month
trailing basis, shall not exceed 4.5 to 1.
3. FMC hereby consents that there shall not deemed to exist an
Event of Default under the Debt Service Coverage Ratio Requirements of Section
3.23 of the Loan Agreement so long as the Company permits its Debt Service
Coverage Ratio on September 30, 2001, calculated on a three-month trailing
basis, to be no less then .80 to 1; such Ratio on December 31, 2001, calculated
on a six-month trailing basis, to be no less then .90 to I; such Ratio on March
31, 2002, calculated on a nine-month trailing basis to be no less than 1.2 to 1;
and such Ratio for all quarters ending thereafter, calculated on a 12-month
trailing basis, to be no less than 1.4 to 1.
Xxxxxxx Xxxxxx
July 12, 2001
Page 2
FMC's waivers, consents, and agreements herein are expressly conditioned upon
the Company's satisfaction of each of the Waiver Conditions.
Except as specifically waived hereby, the Loan Agreements and other entered
into, executed or delivered in connection therewith (collectively, the "Loan
Documents") shall remain in full force and effect and are hereby ratified and
confirmed, and the execution, delivery and performance of this limited waiver
and consent shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of the undersigned under the Loan Documents.
Without limiting the generality of the foregoing, the waiver set forth above
shall be limited precisely as set forth above, and nothing in this limited
waiver and consent shall be deemed (i) to constitute a waiver of compliance by
Borrower with respect to any other provision of the Loan Agreement or other Loan
Documents, or (ii) to prejudice any right or remedy that the undersigned may now
have in the future under or in connection with the Loan Agreement or any other
Loan Documents.
If you have any questions, please do not hesitate to contact me.
Very truly yours,
/s/ Xxxxx XxxXxxxxx
Xxxxx XxxXxxxxx
Vice president
