Exhibit 10(p)(ii)
[TYCO CAPITAL LETTERHEAD]
November 12, 2001
Xxxxxx X. Xxxxxxx
Chief Financial Officer
Cold Metal Products
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000-0000
Dear Xx. Xxxxxxx:
In reference to the Loan and Security Agreement dated November 22, 1996
("Agreement") between Cold Metal Products, Inc., ("Cold Metal") and The CIT
Group/Equipment Financing, Inc. ("CIT"), Cold Metal has informed CIT that it was
not compliant with certain terms under the Agreement, as it did not comply with
its Tangible Net Worth and Cash Flow Coverage Ratio covenants for the period
ending September 30, 2001. Cold Metal requested that CIT waive such instances of
non-compliance and reset the covenants.
Therefore, as of November 9, 2001, CIT approves Cold Metal's request that the
covenant requirements be reset as follows:
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QUARTERLY MEASUREMENT DATE ENDING REVISED TANGIBLE NET WORTH
--------------------------------- --------------------------
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December 31, 2001 $15,250,000
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March 31, 2002 $15,750,000
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June 30, 2002 $16,500,000
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September 30, 2002 $17,000,000
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December 31, 2002 $21,659,000
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March 31, 2003 $22,159,000
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Each quarterly measurement date thereafter Increase by $500,000
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QUARTERLY MEASUREMENT DATE ENDING REVISED RATIO LIABILITIES TO TANGIBLE NET WORTH
--------------------------------- -----------------------------------------------
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December 31, 2001 6.5
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March 31, 2002 6.5
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June 30, 2002 6.5
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September 30, 2002 6.25
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December 31, 2002 4.71
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March 31, 2003 4.46
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Each quarterly measurement date thereafter Reduce by .25
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In connection with the measurements of each of the aforementioned covenants, the
Financial Accounting Standards Board (FASB) issued, in June 2001, Statement of
Financial Accounting Standard (SFAS) No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB No. 17, "Intangible
Assets." It changes the accounting for goodwill from an amortization method to
an impairment only approach. At this time, Cold Metal is still evaluating the
effect of adopting this pronouncement on its financial statements, which would
not be required until at the earliest, the quarter ending June 30, 2002.
Accordingly, Cold Metal has requested that future measurements of compliance be
based on pre-SFAS No. 142 accounting guidance to avoid the need for further
adjusting the covenants at this time to reflect the accounting change. CIT is
agreeable to this request.
With respect to Section 8.10 (c) "Cash Flow Coverage Ratio", we request that the
covenant be reset for each quarterly measurement date, as follows:
------------------------------------- ---------------------------------- ----------------------------------
Quarterly Measurement Date ending: Cash Flow Coverage Ratio (as REVISED CASH FLOW COVERAGE RATIO
currently written) (AS REQUESTED)
------------------------------------- ---------------------------------- ----------------------------------
December 31, 2001 .80 0.001
March 31, 2002 1.15 0.20
June 30, 2002 1.25 0.40
September 30, 2002 1.25 1.00
December 31, 2002 1.25 1.25
March 31, 2003 1.25 1.25
Subsequent to March 31, 2003 1.25 1.25
CIT hereby waives, as of this date, the non-compliance with the financial
covenants under the Agreement and agrees to reset the covenants as stated above,
subject to the following conditions:
1. An appraisal on the machinery, equipment, building and real estate at the
Cold Metal Products facility located at 000 Xxxxxxxxxxxx Xxxx, Xxxxxx, Xxxx
is performed before December 31, 2001. Appraisal to be completed on an
Orderly Liquidation and Distress Value basis and to be paid by Cold Metal.
2. Processing Fee in the amount of $50,000.00.
In addition to the above, CIT would also like to begin discussing entering into
an inter-creditor agreement with Cold Metal's revolver lenders.
Except as set forth in this letter, the terms and conditions of the Agreement,
together with all schedules, attachments and amendments thereto shall remain in
full force and effect. Please note that CIT's willingness to waive these
covenant violations should not be interpreted as CIT's agreement or willingness
to waive any future breach or violation of the Agreement, or affect or diminish
our rights to demand strict compliance and performance thereof.
Sincerely,
Xxxxxx X. Xxxxx
Vice President, Credit
COLD METAL PRODUCTS
By:
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Title:
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