EXHIBIT 10.17
The CIT Group/Business Credit, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
000 000-0000
February 14, 2002
XXXXX-XXXXXXX, INC.
0000 Xxxxxx Xxxxxxx
Xxxxxx, XX 00000
Gentlemen:
Reference is made to the (A) Financing Agreement between us dated August 7,
1997, as supplemented and amended (the "Financing Agreement") and (B) Inventory
Security Agreement between us dated March 10, 2000, as supplemented and amended
(the "Security Agreement") and together with the Financing Agreement, the
"Financing Documents"). Capitalized terms used and not otherwise defined herein
shall have the same meanings given them in the Financing Documents.
You have requested that we amend certain provisions of the Financing Documents,
including but not limited to: (I) increase the Line of Credit to $28,000,000.00,
(II) increase the sub-line within the Line of Credit for advances against
Eligible Inventory (as set forth in the Security Agreement from $6,000,000 to
$11,000,000) and (III) extend the term of the Financing Agreement to April 30,
2005, and we have agreed to such amendments subject to, and in accordance with
the terms, provisions and conditions hereof:
Effective immediately, pursuant to mutual agreement, the Financing Documents
shall be, and hereby are, amended as follows:
1. The definitions of "Anniversary Date", "Early Termination Date" and
"Early Termination Fee" (as set forth in Section 1 of the Financing
Agreement) shall be, and each hereby is amended entirely to read as
follows:
"ANNIVERSARY DATE shall mean April 30, 2005 and the same date in every
year thereafter."
"EARLY TERMINATION DATE shall mean the date on which the Company
terminates this Financing Agreement or the Line of Credit which date is
prior to an Anniversary Date."
"EARLY TERMINATION FEE shall: (a) mean the fee CITBC is entitled to
charge the Company in the event the Company terminates the Line of
Credit or this Financing Agreement on a date prior to an Anniversary
Date; and (b) be determined by multiplying the Line of Credit by (x)
two percent (2%) if the Early Termination Date occurs on or before
April 30, 2003, (y) one percent (1%) if the Early Termination Date
occurs after April 30, 2003 but on or before April 30, 2004 and (z)
zero percent (0%) if the Early Termination Date occurs after April 30,
2004 but prior to an Anniversary Date."
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2. The following definitions of "EBITDA" and "Fixed Charge Coverage Ratio"
shall be and hereby are added to Section 1 of the Financing Agreement
in the proper alphabetical order:
"EBITDA shall mean in any period, all earnings of the Company before
all (i) interest and tax obligations, (ii) depreciation and (iii)
amortization for said period, all determined in accordance with GAAP on
a consistent basis with the latest audited financial statements of the
Company, but excluding the effect of extraordinary and/or
non-reoccurring gains or losses for such period."
"FIXED CHARGE COVERAGE RATIO shall mean, for the relevant period, the
ratio determined by dividing the sum of EBITDA minus non-financed
Capital Expenditures by the sum of (a) all interest obligations paid or
due, (b) the amount of principal repaid or scheduled to be repaid on
Indebtedness, and (c) all federal, state and local income tax actually
paid."
3. The definition of "Line of Credit" (as set forth in Section 1 of the
Financing Agreement) shall be, and hereby is amended by increasing the
$24,000,000.00 amount as set forth therein to $28,000,000.00; and
4. The maximum dollar amount of advances against Eligible Inventory as set
forth in Section 1 of the Security Agreement shall be and hereby is
increased from $6,000,000 to $11,000,000.
5. Section 11 of the Financing Agreement shall be, and hereby is amended
in its entirety to read as follows:
"SECTION 11. TERMINATION
Except as otherwise permitted herein, CIT may terminate this Financing
Agreement only as of the initial or any subsequent Anniversary Date and then
only by giving the Company at least sixty (60) days prior written notice of
termination. Notwithstanding the foregoing CIT may terminate the Financing
Agreement immediately upon the occurrence of an Event of Default, provided,
however, that if the Event of Default is an event listed in Paragraph 10.1(c) or
(d) of Section 10 of this Financing Agreement, this Financing Agreement shall
terminate in accordance with Paragraph 10.2 of Section 10. This Financing
Agreement, unless terminated as herein provided, shall automatically continue
from Anniversary Date to Anniversary Date. The Company may terminate this
Financing Agreement at any time upon sixty (60) days' prior written notice to
CIT, provided that the Company pays to CIT immediately on demand an Early
Termination Fee, if applicable. All Obligations shall become due and payable as
of any termination hereunder or under Section 10 hereof and, pending a final
accounting, CIT may withhold any balances in the Company's account (unless
supplied with an indemnity satisfactory to CIT) to cover all of the Obligations,
whether absolute or contingent, including, but not limited to, cash reserves for
any contingent Obligations, including an amount of 110% of the face amount of
any outstanding Letters of Credit with an expiry date on, or within thirty (30)
days of the effective date of termination of this Financing Agreement. All of
CIT's rights, liens and security interests shall continue after any termination
until all Obligations have been paid and satisfied in full.
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6. Section 7, Paragraph 9 of the Financing Agreement shall be and hereby
is amended in its entirety to read as follows:
"9. The Company shall maintain, measured at the end of each quarter
commencing with the fiscal quarter ending on March 31, 2002, a Fixed
Charge Coverage Ratio for the previous four quarters of not less than
1.0 to 1.0."
7. The definition of "Eligible Accounts Receivable" shall be, and hereby
is amended by amending clauses "iii)" and "viii)" thereof in their
entirety to read as follows:
"iii) accounts that remain unpaid more than (x) one hundred and eighty
(180) days from invoice date or (y) sixty (60) days from due date;
viii) all sales to any customer if fifty percent (50%) or more of
either x) all outstanding invoices or y) the aggregate dollar amount of
all outstanding invoices, are unpaid more than the applicable time
periods set forth in clause iii) above;"
8. Section 8, Paragraph 1 of the Financing Agreement shall be, and hereby
is amended by the addition thereto of the following provision:
"Notwithstanding any provision to the contrary contained herein,
subject to compliance with each of the conditions set forth below, the
increment over the Libor as set forth in clause b) above shall be
subject to reduction based upon the Company's Fixed Charged Coverage
Ratio for the twelve (12) month period ending on June 30 and December
31 of each year hereafter commencing with June 30, 2002. The increment
over Libor as set forth in clause b) above shall be subject to
reduction by one quarter of one percent (1/4 of 1%) if the Company's
Fixed Charge Coverage Ratio as determined on any such date is greater
than 1.3 to 1.0, provided that in the event that the Company shall at
any time thereafter fail to maintain the Fixed Charge Coverage Ratio
(as determined and tested above) required to achieve such reduction,
such increment over Libor as set forth in clause b) above shall be
increased by one quarter of one percent (1/4 of 1%). Any rate reduction
hereunder shall be subject to the Company's compliance with each of the
following conditions:
(i) timely receipt of CITBC pf the Company's financial
statements as required by this Financing Agreement;
(ii) the absence of any Default or Event of Default on the
date of receipt by CITBC of such financial statements or the
effective date of any such reduction.
(iii) in no event shall any interest rate adjustments as
set forth above (x) reduce the rate above under clause b) to
less than two and one quarter percent (2 1/4%) plus Libor or
(y) increase the rate above under clause b) to more than two
and one half percent (2 1/2%) above Libor."
9. Notwithstanding any provision to the contrary contained in the
Financing Documents, the Company shall provide to CITBC (i) upon
CITBC's request (in its sole discretion), Inventory appraisals on an
annual basis, such appraisals to be performed by an appraiser engaged
by CITBC but paid for by the Company, (ii) such reports, statements
and/or schedules as CITBC may reasonably require, designating,
identifying and/or describing the Accounts, Inventory and other
collateral together with all supporting documentation as CITBC may,
reasonably request and in form and substance satisfactory to CITBC
(herein "Collateral Reports"), such Collateral Reports to be provided
no less frequently than weekly and (iii) a month end ageing of
Accounts, no later than fifteen (15) days after the end of each month.
This Amendment shall be effective as of the date hereof upon the satisfaction of
the following conditions precedent:
1. receipt by CITBC of (i) a manually signed original copy of
this Amendment, and all other related documents thereto duly
executed and delivered by all parties hereto, and (ii) the
execution and delivery to CITBC of any other documentation
reasonably requested by CITBC (all of which shall be
acceptable to CITBC in its discretion);
2. The absence of (x) any Default and/or Event of Default and (y)
any material adverse change in the financial condition,
business, prospects, profitability, assets or operations of
the Company;
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3. CITBC's receipt of a secretary's certificate certifying Board
of Directors Resolutions authorizing the execution, delivery
and performance by the Company of this agreement and all
documents and transactions contemplated hereby; and
4. Payment by the Company of (i) any Out-of-Pocket Expenses
incurred by CITBC with respect to the preparation, execution,
filing of any financing statements and delivery of this
Amendment, and (ii) in consideration of the preparation by
CITBC's in house legal department of this Amendment, a
Documentation Fee equal to $500. All such amounts may, at
CITBC's option, be charged to your Revolving Loan Account
under the Financing Agreement.
Except as set forth above no other changes in the terms and provisions of the
Financing Documents are intended or implied. If the foregoing is in accordance
with your understanding of our agreement kindly so indicate by signing and
returning to us the enclosed copy of the letter.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC.
By:
-------------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
Read and Agreed to:
XXXXX-XXXXXXX, INC.
By:
---------------------------------
Name:
Title
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