EXHIBIT 10.2
EXECUTION COPY
September 23, 2002
Corrpro Companies, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attn: Xxxxxx X. Xxx, CEO
Ladies and Gentlemen:
Reference is made to that certain Note Purchase Agreement, dated as of
January 21, 1998 (as amended from time to time, the "NOTE AGREEMENT"), between
Corrpro Companies, Inc., an Ohio corporation (the "COMPANY"), and The Prudential
Insurance Company of America ("PRUDENTIAL"), pursuant to which the Company
issued and Prudential now holds the Company's Amended and Restated Senior Notes
due January 15, 2008 in an aggregate principal amount of $30,000,000 (the
"NOTES"). Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Note Agreement.
The Company failed to make payments of principal on the Notes which
were due on each of April 15, 2002, May 15, 2002 and June 15, 2002, in each case
in the amount of $857,142.85, and failed to make payments of principal on the
Notes which were due on each of July 15, 2002, August 15, 2002 and September 15,
2002, in each case in the amount of $383,795.31 (the "PAYMENT DEFAULTS"), which
failures are continuing and constitute Events of Default under paragraph 7A(i)
of the Note Agreement. The Company has also advised Prudential that other Events
of Default exist under the Note Agreement as set forth on Annex I hereto (the
Payment Defaults and the other Events of Default listed on Annex I hereto are
referred to collectively herein as the "EXISTING EVENTS OF DEFAULT"). The
Company acknowledges that, as a result of the Existing Events of Default,
Prudential now has the right to cause the entire outstanding principal balance
of the Notes to become immediately due and payable.
The Company has requested that Prudential agree to forbear from
exercising its rights and remedies under the Note Agreement arising as a result
of the occurrence and continuation of the Existing Events of Default and agree
to certain other changes to the Note Agreement, including to defer the date of
certain required payments of principal on the Notes, as more particularly set
forth herein. Subject to the terms and conditions hereof, and effective upon the
satisfaction of the conditions set forth herein, and provided that the Company
agrees to the modifications of the Note Agreement and the Notes set forth below,
Prudential is willing to agree to such request. Accordingly, and in accordance
with the provisions of paragraph 11C of the Note Agreement, the parties hereto
agree as follows:
SECTION 1. FORBEARANCE AND AGREEMENTS OF COMPANY.
1.1 Forbearance. From and after the date hereof, subject to strict
compliance with the terms and conditions set forth herein, Prudential agrees to
forbear from enforcing its rights and remedies based on the Existing Events of
Default while the Company and its consultants
continue to develop and implement their plan for improvement of the Company's
business and financial condition, provided, that such agreement to forbear shall
not create a waiver of any Existing Event of Default or of the right of
Prudential or any other any holder of the Notes, upon the occurrence of a
default hereunder or an Event of Default (other than the Existing Events of
Default) under the Note Agreement, to enforce available rights and remedies at
any time, in their sole discretion, in accordance with the Note Agreement or the
Notes, the Collateral Documents or any documents, instruments or agreements
executed in connection with any of the Note Agreement, the Notes and the
Collateral Documents (collectively with the Note Agreement, the "NOTE
DOCUMENTS"). Absent an earlier default hereunder or an Event of Default (other
than an Existing Event of Default) under the Note Agreement, or the earlier
termination of the Forbearance Period as provided in Section 1.6 hereof, the
period during which Prudential and the other holders of the Notes shall so
forbear is from the date hereof through October 31, 2002 (the "FORBEARANCE
PERIOD").
1.2 Forbearance Conditions and Agreements of the Company. The continued
effectiveness of Prudential's forbearance agreement shall be subject to the
continued satisfaction of each of the terms and conditions specified in this
Section 1.2. All agreements made by the Company in this Section 1.2 shall be
incorporated by reference into the Note Agreement and, unless expressly
otherwise provided therein, shall survive the termination of the Forbearance
Agreement so long as the Notes are outstanding.
(a) The Company shall keep the holders of the Notes and their
consultants apprised of the business and financial operations of the
Company and its Subsidiaries and of any material discussions and
negotiations (other than discussions or negotiations in the ordinary
course of the Company's business) pertaining to lessors, vendors,
suppliers, customers, other creditors, joint venture partners or
potential purchasers of any business segments or significant assets of
the Company or any of its Subsidiaries. Reports on such matters shall
be provided periodically and not less frequently than monthly.
(b) Notwithstanding any prior practice, the Company shall
strictly comply with the financial reporting requirements under the
Note Documents. In addition to the reporting requirements set forth in
paragraph 5A of the Note Agreement, (i) not later than Wednesday of
each week during the Forbearance Period, the Company and its financial
advisors will deliver to the holders of the Notes, in form and detail
satisfactory to the holders of the Notes, weekly updates to the
detailed 13-week rolling cash flow forecast as required under Section
2.4 of this letter agreement; (ii) not later than the twentieth (20th)
day of each month during the Forbearance Period, the Company and its
financial advisors will deliver to the holders of the Notes, in form
and detail satisfactory to the holders of the Notes: (x) a summary of
agings of accounts payable and accounts receivable for the Company as
of the end of the prior month, and (y) a duly-executed Officer's
Certificate demonstrating (with computations in reasonable detail)
compliance by the Company and its Subsidiaries with the cash flow
restrictions set forth in clause (e) of this Section 1.2; (iii) the
Company shall, immediately upon receipt thereof, deliver to the
holders of the Notes copies of any correspondence, letters of intent,
agreements or similar documents pertaining in any manner to any
proposed sale or other disposition of any assets of the Company or its
Subsidiaries other than in the ordinary course of business; and (iv)
the Company shall provide to the holders of the Notes, within five (5)
business days
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following any request by the holders of the Notes, a current listing
of correct names and addresses of account debtors (together with
periodic updates to such listing upon request by the holders of the
Notes). If requested by the holders of the Notes, the Company promptly
shall provide detailed backup for the monthly summary of agings of
accounts payable and accounts receivable.
(c) The Company shall pay when due all amounts owed to the
holders of the Notes under the Note Documents.
(d) All representations and warranties made by the Company under
this letter agreement shall be true and correct.
(e) (i) There shall be no change having a Material Adverse Effect
on the financial performance or condition of the Company as compared
with the projections submitted to and approved by the holders of the
Notes in the Accepted Forecast pursuant to Section 2.4 of this letter
agreement.
(ii) For each "Measuring Period" (defined below) during the
Forbearance Period, the actual cumulative "Net Cash Flow" (defined
below) of the Company and its domestic Subsidiaries on a consolidated
basis during such Measuring Period shall equal or exceed the projected
cumulative Net Cash Flow for such Measuring Period as set forth in the
Accepted Forecast, within a negative variance of no more than the
greater of $500,000 or 10% of projected cumulative Net Cash Flow for
each Measuring Period as set forth in the Accepted Forecast. The term
"NET CASH FLOW" shall mean the excess (if any) of the consolidated
aggregate cash receipts of the Company and its domestic Subsidiaries
during the relevant period (excluding (a) any advances of loans under
the Credit Agreement and (b) the amount of Net Cash Proceeds generated
by any transaction and distributed to the holders of the Notes and the
Banks as required by the Note Agreement and by the Credit Agreement)
compared to the consolidated aggregate cash disbursements of the
Company and its domestic Subsidiaries during such period for operating
expenses, taxes and debt service (but excluding principal repayments
and interest payments to the Banks and to the holders of the Notes and
excluding professional fees incurred in connection with the
investigation of the Company's Australian Subsidiary), all as shown on
the reports required pursuant to Section 2.4 of this letter agreement
and prepared in a manner consistent with the presentation set forth in
the Accepted Forecast. The cumulative Net Cash Flow of the Company and
its domestic Subsidiaries shall be measured as of the end of each
calendar month, for the cumulative period commencing April 1, 2002 and
ending on the last day of each successive month (each a "MEASURING
PERIOD") (i.e., the first Measuring Period shall be a one-month period
commencing April 1, 2002 and ending April 30, 2002, the second
Measuring Period shall be a two-month period commencing April 1, 2002
and ending May 31, 2002, etc.).
(iii) The Company shall not, absent the prior written
consent of the Required Holder(s), (a) disburse any funds for purposes
other than those set forth in the Accepted Forecast, or (b) disburse
any funds in an amount that would cause a violation of the Net Cash
Flow restrictions set forth above, and shall not in any event disburse
any
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funds in a manner inconsistent with any other restrictions set forth
in this letter agreement or the Note Documents.
(f) The Company will not permit the Consolidated Cash Flow from
Operations of the Company and its Subsidiaries to be less than (i)
$1,901,000 for the three consecutive months ending June 30, 2002, (ii)
$5,279,000 for the six consecutive months ending September 30, 2002,
(iii) $9,594,000 for the nine consecutive months ending December 31,
2002, (iv) $11,009,000 for the twelve consecutive months ending March
31, 2003, or (v) $2,533,000 for the three consecutive months ending
June 30, 2003. The parties hereto acknowledge that Consolidated Cash
Flow from Operations is calculated without regard to extraordinary
gains or losses other than in the ordinary course of business. For the
avoidance of doubt, the parties hereto further acknowledge that, for
purposes of this subparagraph, the term "Consolidated Cash Flow from
Operations" shall be calculated exclusive of (w) commissions related
to asset dispositions, (x) gains or losses recognized upon asset
dispositions, (y) any increase (or decrease) resulting from the
completion of a particular asset disposition in a month that is after
(or before) the projected sale date, and (z) restructuring charges and
professional fees incurred in connection with the investigation of the
Company's Australian subsidiary.
(g) No action or proceeding shall be commenced against the
Company or any Subsidiary that would, if adversely determined, cause a
Material Adverse Effect or prevent, impair or delay the completion of
the Company's business improvement plan. With respect to those actions
or proceedings currently pending (as listed on Schedule 1.2(g)
hereof), there shall be no event that would cause a Material Adverse
Effect or prevent, impair or delay the completion of the Company's
business improvement plan.
(h) Absent prior approval on behalf of the holders of the Notes,
the Company shall not, and will not permit any Subsidiary to, (i) file
with any bankruptcy court or be the subject of any petition under
title 11 of the United States Code (the "Bankruptcy Code"), (ii) be
the subject of any order for relief issued under the Bankruptcy Code,
(iii) file or be the subject of any petition seeking any liquidation,
reorganization, adjustment, protection, arrangement, composition,
dissolution or similar relief under any present or future federal or
state act or law relating to bankruptcy, insolvency, reorganization or
other relief for debtors, (iv) have sought or consented to or
acquiesced in the appointment of any receiver, trustee, conservator,
liquidator, custodian or other similar official, or (v) be the subject
of any order, judgment or decree entered by any court of competent
jurisdiction approving a petition filed against such party for any
liquidation, reorganization, adjustment, protection, arrangement,
composition, dissolution or similar relief under any present or future
federal or state act or law relating to bankruptcy, insolvency,
reorganization or other relief for debtors.
(i) The holders of the Notes or their representatives or
consultants shall be permitted to conduct field examinations of the
Company and its Subsidiaries and audits of any collateral securing the
obligations of the Company to the holders of the Notes. The Company
shall reimburse the holders of the Notes for all costs incurred in
conducting such audits. The foregoing permission to conduct audits
shall not restrict or impair the right of the holders of the Notes to
inspect the collateral and any records pertaining
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thereto at such times and at such intervals as the holders of the
Notes may require. Further, the Company acknowledges and agrees that
the holders of the Notes reserve the right to engage the services of
one or more appraisers to evaluate the properties of the Company and
its Subsidiaries. The Company acknowledges its responsibility to
reimburse the holders of the Notes for the fees and disbursements
incurred by such parties in connection with such engagements.
(j) Neither the Company nor any of its Subsidiaries shall take
any action or fail to take any action within its reasonable control
that would cause a material adverse change in the ability of the
Company and its Subsidiaries to obtain supplies or other assets to
continue their operations. Upon the occurrence of any event not within
the reasonable control of the Company or its Subsidiaries that would
cause a material adverse change in the ability of the Company and its
Subsidiaries to obtain supplies or other assets to continue their
operations, the Company shall immediately initiate and diligently
complete such actions as may be necessary to avoid any impairment or
delay in the operations of the Company and its Subsidiaries.
(k) Notwithstanding anything in the Note Agreement to the
contrary (including without limitation the provisions of paragraph
6B(2) of the Note Agreement), absent the prior written consent of the
Required Holder(s), the Company shall not, and shall not permit or
cause any of its Subsidiaries to, create, incur, assume or suffer to
exist any Debt other than (i) subject to Section 1.2(s)(b) hereof,
Debt outstanding under the Credit Agreement, (ii) Debt of the Company
or any Subsidiary owing to the Company or any of its Subsidiaries,
(iii) Guarantees with respect to the endorsement of instruments for
deposit or collection in the ordinary course of business, Guarantees
relating to Debt which is otherwise permitted under this Section
1.2(k) and Guarantees with respect to performance guaranties given by
the Company with respect to obligations of Subsidiaries under
contracts in the ordinary course of business, (iv) Debt under an
agreement, device or arrangement providing for payments which are
related to fluctuations of interest rates, exchange rates or forward
rates, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency
exchange agreements, interest rate cap or collar protection
agreements, forward rate currency or interest rate options, puts and
warrants, (v) Debt outstanding under the Notes, (vi) Subordinated
Debt, (vii) Debt described on Schedule 1.2(k) attached hereto,
provided that no increase in the commitment or facility amount thereof
shall be permitted, (viii) other Debt provided that, at the time of
the creation, incurrence or assumption of such other Debt and after
giving effect thereto, no Default or Event of Default exists and the
aggregate amount of all such other Debt of the Company and its
Subsidiaries does not exceed an amount equal to $2,000,000, and (ix)
any refunding or refinancing of any Debt referred to in clauses (ii)
through (viii) above, provided that any such refunding or refinancing
of such Debt does not increase the principal amount thereof, shorten
the maturities thereof or make any of the other terms or provisions
thereof materially more onerous on the Company or any of its
Subsidiaries; provided that during the Forbearance Period only Debt
described in clauses (i), (ii), (iii), (iv), (v), (vii) and (viii)
shall be permitted (and with respect to clause (vii), only to the
extent that such Debt is in existence immediately prior to the
Effective Date as described in Schedule 1.2(k), provided that no
increase in the amount thereof shall be permitted).
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(l) Absent the prior written consent of the Required Holder(s),
the Company shall not, and shall not permit or cause any of its
Subsidiaries to, create, incur or suffer to exist any Lien other than
Liens as permitted under paragraph 6B(1) of the Note Agreement.
(m) Notwithstanding anything in the Note Agreement to the
contrary (including without limitation the provisions of paragraph
6B(5) of the Note Agreement), neither the Company nor any of its
Subsidiaries shall agree to or consummate the sale, assignment, lease,
conveyance, transfer or other disposition of any of its assets, except
for (i) sales of inventory in the ordinary course of business, (ii)
the disposition in the ordinary course of business of assets no longer
required for business operations, provided that such assets shall not
have a value exceeding $30,000 per item and $300,000 in the aggregate
on a cumulative basis on or before July 31, 2003, or (iii) the
disposition of other assets under terms approved by the Required
Holder(s) as evidenced by the prior written consent of the Required
Holders (provided that such consent shall require the approval of all
of the holders of the Notes in the event of any proposed disposition
of all or substantially all of the Collateral). With respect to clause
(iii) of the preceding sentence, the Company has designated certain
non-core assets or business units that it intends to list for sale or
otherwise dispose of as soon as practicable. Schedule 1.2(m) attached
hereto sets forth a list of each such designated non-core asset or
business unit (each, a "Targeted Asset Disposition") and the Company's
estimate of the net cash proceeds to be generated from the sale or
other disposition of each such Targeted Asset Disposition (the
"Targeted Asset Cash Proceeds"). A copy of the listing agreement (if
applicable) with respect to each Targeted Asset Disposition shall be
delivered to the holders of the Notes as soon as available. The
Company shall, immediately upon receipt thereof, provide to the
holders of the Notes copies of any written agreements or letters of
intent pertaining to the potential sale of any Targeted Asset
Disposition. With respect to any transaction that is approved by the
Required Holder(s) under the provisions of this letter agreement and
otherwise is permissible under the Note Agreement (as modified
herein), such transaction, if consummated, shall be consummated within
the time parameters and other terms and conditions as disclosed in the
applicable written agreement or letter of intent. Based upon the
Company's request, 100% of the net cash proceeds (after deducting
customary and reasonably commissions and transaction expenses and
after deducting any taxes attributable to the transaction) generated
by each such transaction shall upon closing immediately be applied as
follows: (i) 44% to prepay the principal of the Notes under paragraph
4B of the Note Agreement, and (ii) 56% to prepay the principal of the
Debt outstanding under the Credit Agreement.
(n) Notwithstanding anything in the Note Agreement to the
contrary (including without limitation the provisions of paragraph
6B(3) of the Note Agreement), absent the consent of the Required
Holder(s), neither the Company nor any of its Subsidiaries shall agree
to or consummate, or make or suffer to exist, any Investment or
Acquisition or extend credit to any other Person or enter into any
merger or consolidation, or enter into any similar business
arrangement or combination, except for Investments described in
clauses (i) through (ix) of the definition of "Permitted Investments"
(with respect to Investments described in clauses (ii) and (vi) of the
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definition of "Permitted Investments," only to the extent in existence
immediately prior to the Effective Date).
(o) Notwithstanding anything in the Note Agreement to the
contrary, neither the Company nor any of its Subsidiaries shall
advance any loans or credit to any officer, director, stockholder or
other Affiliate of the Company or any of its Subsidiaries, or
otherwise enter into any similar transaction (provided that the
Company may continue to implement intercompany transactions with its
Wholly-Owned Subsidiaries - other than its Australian Subsidiary -
consistent with past practice), nor shall the Company or any of its
Subsidiaries forgive or defer any payment of principal or interest
with respect to any existing loan or advance to any such officer,
director, stockholder or other Affiliate.
(p) Notwithstanding anything in the Note Agreement to the
contrary (including without limitation the provisions of paragraph
6B(3) of the Note Agreement), absent the prior written consent of the
Required Holder(s), the Company shall not, and shall not permit or
cause any of its Subsidiaries to, declare or pay any dividends or make
any distributions on its capital stock or redeem, repurchase or
otherwise acquire or retire any of its capital stock, provided that
any Subsidiary may continue to declare and pay dividends or make
distributions to the Company or to a Wholly-Owned Subsidiary
consistent with past practice. "Capital stock" includes warrants and
options to purchase capital stock.
(q) Neither the Company nor any of its Subsidiaries shall pay any
discretionary bonus or similar compensation award to any of their
respective officers or employees except pursuant to a comprehensive
plan approved by the Required Holder(s). The preceding sentence shall
not limit the right of the Company or its Subsidiaries to pay any
bonus (i) required under any written employment agreement, incentive
plan or similar "guaranteed" bonus plan in existence immediately prior
to the Effective Date, (ii) under its annual incentive plan for the
fiscal year ending March 31, 2003 (provided that such plan is
satisfactory to the Required Holders) or (iii) negotiated as part of a
recruitment "signing bonus" consistent with past practice. Upon
request, the Company shall deliver to the holders of the Notes copies
of any applicable employment agreements, incentive plans or similar
"guaranteed" bonus plans.
(r) The Company shall pay to Prudential: (i) an amendment fee in
an amount equal to $282,857.14 payable as follows: (x) on or before
September 23, 2002, not less than $141,428.57, and (y) on or before
October 21, 2002, the difference between $282,857.14 and the amount
paid by the Company on or before September 23, 2002 (provided, in each
case, that the Company shall at all times have paid to Prudential a
percentage of such fees which is not less than the percentage of the
fees paid by the Company to the Bank Agent pursuant to Section 1.2(s)
of that certain Sixth Amendment to Credit Agreement dated as of August
15, 2002 by and among the Company, CSI Coating System Inc., the Bank
Agent and the lenders set forth on the signature page thereto), and
(ii) if the entire outstanding principal amount of the Notes has not
been prepaid in full on or before July 31, 2003, on July 31 of each
calendar year (commencing with July 31, 2003), until the Notes have
been prepaid in full, an amendment fee in an amount equal to 1.00% of
the outstanding principal balance of the Notes on such July 31.
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(s) The Company will not (a) reduce the amount of the
"Commitments" under the Credit Agreement or pay any outstanding Debt
under the Credit Agreement if such payment would cause a reduction in
the amount of any of the "Commitments" under the Credit Agreement
unless, in either case, the Company shall concurrently prepay an
outstanding principal amount of the Notes pursuant to paragraph 4B(1)
of the Note Agreement which principal amount bears the same ratio to
the outstanding principal amount of the Notes as the amount of such
reduction bears to the "Aggregate Commitments" under the Credit
Agreement immediately prior to such reduction, (b) permit the
aggregate principal amount of all Debt outstanding under the Credit
Agreement to at anytime exceed $37,500,000, or (c) voluntarily prepay
any other Debt.
(t) Notwithstanding anything in the Note Agreement to the
contrary, the Company shall not, and shall not permit any Subsidiary
to, make any "Capital Expenditures" (as defined below) that exceed in
the aggregate for the Company and its Subsidiaries: (a) $1,750,000
during the fiscal year ending Xxxxx 00, 0000, (x) $500,000 during the
three-month period ending June 30, 2002, (c) $1,000,000 during the
six-month period ending September 30, 2002, (d) $1,300,000 during the
nine-month period ending December 31, 2002, (e) $1,500,000 during the
twelve-month period ending March 31, 2003 or (f) $500,000 during the
three-month period ending June 30, 2003. The term "CAPITAL
EXPENDITURES" shall mean any expenditure for any purchase or other
acquisition of any asset which would be classified as plant, property
or equipment in accordance with GAAP.
(u) On or before the Effective Date, the Company shall employ,
and at all times until at least July 31, 2003, shall continue to
engage, a full-time chief restructuring officer acceptable to the
holders of the Notes. The chief restructuring officer will have
authority that is independent of the authority of other officers of
the Company and will report directly to the Company's board of
directors. The scope of authority of the chief restructuring officer
shall be acceptable to the holders of the Notes. The holders of the
Notes will have unrestricted access to communicate directly with the
chief restructuring officer.
(v) The Company has advised the holders of the Notes that the
Company intends to consult with one or more investment banking firms
to explore various strategic alternatives, including the refinancing
of the Notes and the Credit Agreement and the sale of certain assets
or divisions. Subject to the approval requirements set forth below,
the Company will retain an investment banking firm or firms acceptable
to the holders of the Notes not later than September 30, 2002. The
Company shall keep representatives of the holders of the Notes
apprised of all consultations with investment banking firms. The
Company shall not engage any investment banking firm unless the
identity of such firm and the scope of the engagement are acceptable
to the holders of the Notes. The Company agrees to promptly provide to
the holders of the Notes all reports and other information prepared
for or on behalf of the Company by any investment banking firm or
similar consultant. The Company acknowledges and agrees that the
holders of the Notes, their consultants and counsel shall have direct
access to any investment banking firm or similar consultant engaged on
behalf of the Company, and each of such parties is authorized to
discuss information related to the Company with the holders of the
Notes or
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their consultants or counsel. All parties acknowledge that Xxxxx,
Xxxxxxx & Xxxx has been retained by the Company with respect to two
(2) specific asset dispositions, and the holders of the Notes have
approved such retention (which shall not be deemed approval for the
Company to retain such firm for any other engagement).
(w) The Company shall continue to implement the cost savings
measures identified in the report submitted to the holders of the
Notes on May 20, 2002.
(x) Not later than September 30, 2002, the Company shall provide
to the holders of the Notes and their advisors an updated written
report on the current status of all proceedings and investigations
related to the Company's Australian Subsidiary, including without
limitation any interim conclusions, pending or completed actions in
response thereto, and the status of the administration of the business
and assets of such Subsidiary. Until completion of such
administration, further updated status reports on such matters shall
be provided to the holders of the Notes and their advisors not less
frequently than weekly.
(y) Not later than September 30, 2002, the Company shall provide
to the holders of the Notes and their advisors a revised detailed
restructuring plan for its strategy to divest the European Subsidiary
and divest or liquidate its Middle East operations, including a
proposed divestiture and/or liquidation plan and budget for such
operations.
(z) There shall be no other Default or Event of Default under the
Note Agreement or the other Note Documents (except for the Existing
Events of Default).
Notwithstanding the provisions of this Section 1.2, the Notes shall be due and
payable on demand in the discretion of the Required Holder(s) pursuant to
paragraph 7A of the Note Agreement (i) upon any failure of any one or more of
the conditions set forth in this Section 1.2 or (ii) upon expiration or
termination of the Forbearance Period as provided in Sections 1.6 and 6 hereof.
Further, any failure of any one or more of the conditions set forth in this
Section 1.2 shall constitute an Event of Default under the Note Agreement
(without the necessity of any notice or cure period).
1.3 No Course of Dealing; Review of the Company's Business Plan. The
Company and the Guarantors acknowledge and agree that notwithstanding any course
of dealing between the Company and the holders of the Notes prior to the date
hereof, the holders of the Notes shall have no obligation to forbear from
exercising available remedies except as expressly set forth herein.
Notwithstanding any past practice, the Company and the Guarantors agree that the
holders of the Notes shall not be obligated or expected to provide any credit
references on behalf of the Company, and any inquiries in this regard may be
referred back to the Company or their advisors. The holders of the Notes shall
be under no obligation whatsoever to consent to the Company's updated and
revised business plan as the same may be further revised from time to time, and
instead the holders of the Notes consideration of the Company's updated and
revised business plan shall be undertaken by the holders of the Notes in their
sole and absolute discretion. The holders of the Notes consideration of the
Company's updated and revised business plan shall be without prejudice to (i)
the possibility that the holders of the Notes may conclude that such business
plan, as further revised from time to time, does not adequately address the
Company's defaults under the Note Documents and/or the potential erosion of
collateral supporting the
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Company's indebtedness to the holders of the Notes, or (ii) the right of the
holders of the Notes, in accordance with the terms hereof, to exercise rights or
remedies available due to defaults under the Note Documents.
1.4 Defaults. In addition to any Events of Default specified in the
Note Documents, the following shall constitute a default under this letter
agreement and an Event of Default under the Note Documents:
(a) The Company or any Guarantor shall fail to comply with,
perform or observe any term, condition, covenant or agreement set forth in this
letter agreement;
(b) Any representation or warranty of Company or Guarantors
contained in this letter agreement shall be untrue in any material respect when
made or shall, during the term of this letter agreement, become impaired, untrue
or misleading;
(c) the occurrence of any Event of Default other than the
Existing Events of Default (including any new or further violation of the
sections of the Note Agreement implicated by any of the Existing Events of
Default);
(d) The occurrence of any "Default" as defined in the Credit
Agreement; or
(e) Any further change having a Material Adverse Effect shall
occur in business, properties, operations or condition (financial or otherwise)
of the Company or any Guarantor.
1.5 Expiration; No Further Extension Implied. The Company and the
Guarantors acknowledge that the holders of the Notes have no obligation to
extend the term of the Forbearance Period or forbear from enforcing their rights
and remedies before the end of the Forbearance Period in the event of any
failure of any one or more of the terms and conditions expressed herein, that no
course of dealing that would permit arguing for further extensions contrary to
the holders of the Notes wishes exists or is capable of being inferred, and that
nothing contained herein or otherwise is intended to be a promise or agreement
to continue to extend the term of the Forbearance Period beyond October 31, 2002
or to extend any further credit to the Company. Furthermore, no future agreement
by the holders of the Notes to continue to extend the term of the Forbearance
Period beyond October 31, 2002 or any other agreement shall be valid or
enforceable unless it is contained in a final written agreement signed by the
Required Holder(s) (or, to the extent required by paragraph 11C of the Note
Agreement, all of the holders of the Notes). Preliminary understandings or
agreements on one or more issues during the course of any negotiations and prior
to the finalization thereof shall not be binding unless and until such a final
written agreement is executed on behalf of the applicable parties.
1.6 Remedies Upon Default or Termination. The Forbearance Period shall
expire automatically upon the earlier to occur of:
(a) a further Event of Default or a default under this letter
agreement or any document or agreement comprising the Note Documents, and
without notice or an opportunity to cure such Event of Default or default under
this letter agreement, or
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(b) except as provided in a further written agreement (if any)
among the Company and the holders of the Notes pertaining to the repayment of
the Company's obligations, October 31, 2002.
Upon the expiration of the Forbearance Period, if the Company is not then in
full compliance with all provisions of the Note Documents (as amended by this
letter agreement but without the benefit of any waiver of defaults except as set
forth in Section 6 hereof), upon the election of the Required Holder(s) but
without further notice, all of the Company's obligations to the holders of the
Notes shall be immediately due and payable (to the extent not already due and
payable) pursuant to paragraph 7A of the Note Agreement, all undertakings of the
holders of the Notes hereunder, including without limitation the forbearance
under Section 1.1 hereof, shall terminate without notice to the Company and
without the requirement of any further action by or on behalf of the holders of
the Notes, and the holders of the Notes shall have the right to exercise any
remedies provided in this letter agreement or any of the Note Documents, or
under applicable law or in equity. All rights and remedies of the holders of the
Notes shall be cumulative and not exclusive, and the holders of the Notes shall
be entitled to pursue one or more rights and/or remedies simultaneously or
sequentially without the necessity of an election of remedies.
1.7 Reservation of Rights; No Waiver by Conduct. Nothing herein shall
be deemed to constitute a waiver of any Defaults or Events of Default or of any
other provision of any of the documents referred to herein, and nothing herein
shall in any way prejudice the rights and remedies of the holders of the Notes
under any of the documents referred to herein or applicable law. Further, the
holders of the Notes shall have the right to waive any conditions set forth in
this letter agreement and/or such documents, in their sole discretion, and any
such waiver shall not prejudice, waive or reduce any other right or remedy which
the holders of the Notes may have against the Company or the Guarantors. No
waiver of the rights or any condition of this letter agreement and/or any other
document by the holders of the Notes shall be effective unless the same shall be
contained in a writing signed by authorized representatives of the holders of
the Notes, as the case may be, in the manner required by paragraph 11C of the
Note Agreement. No course of dealing on the part of the holders of the Notes,
nor any delay or failure on the part of the holders of the Notes in exercising
any right, power or privilege hereunder shall operate as a waiver of such right,
power or privilege, nor shall any single or partial exercise thereof preclude
any further exercise thereof or the exercise of any other right, power or
privilege.
1.8 Survival. All representations, warranties, covenants, agreements,
releases and waivers made by or on behalf of the Company or any Guarantor under
this letter agreement shall survive and continue after the expiration or
termination of the Forbearance Period.
SECTION 2. COVENANTS OF THE COMPANY. The Company shall:
2.1 Promptly perform and observe, and cause each Guarantor to perform
and observe, its respective obligations set forth in this letter agreement.
2.2 Cause each of the Guarantors to execute the Consent attached
hereto as Exhibit B.
2.3 Upon request by the holders of the Notes, promptly prepare and
deliver to the holders of the Notes an updated and
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detailed business plan (which may consist of updates and revisions to the plan
submitted to the holders of the Notes in May, 2001, September, 2001 and May,
2002), viability analysis and financial strategy to improve the Company's
business operations and financial condition, which plan and strategy shall cover
the period at least through July 31, 2003 and shall address, inter alia,
repayment of the Notes in their entirety.
2.4 On or before September 30, 2002, promptly prepare and deliver to
the holders of the Notes an updated and detailed budget forecast for the
remainder of the Forbearance Period and thereafter through July 31, 2003,
including financial and cash flow projections based upon the Company's business
improvement plan, and such budget forecast and projections shall be acceptable
to the Required Holder(s) (upon such acceptance, such budget forecast and
projections shall be referred to as the "ACCEPTED FORECAST"). The cash flow
projections shall be based on a rolling thirteen (13) week period through
September 30, 2002 and on a monthly basis thereafter. Projected capital
expenditures shall be shown in the projections as a separate line item. Not
later than Wednesday of each week (commencing September 18, 2002), the Company
shall update all applicable line items of the Accepted Forecast and cash flow
projections to reflect actual results from the prior week and on a cumulative
basis, and shall prepare and deliver to the holders of the Notes such update and
a report of any variances between actual results and the Accepted Forecast
originally approved by the Required Holder(s).
2.5 Promptly deliver to the holders of the Notes such information as
has previously been requested in writing by the holders of the Notes or their
financial consultant.
2.6 To the extent requested by the holders of the Notes and to the
extent not cost prohibitive (as determined by the holders of the Notes),
promptly (within five (5) days after such request) cause each of its Foreign
Subsidiaries to execute and deliver to the holders of the Notes one or more
guarantees (in form and substance satisfactory to the holders of the Notes) of
the Company's indebtedness in favor of the holders of the Notes.
2.7 To the extent requested by the holders of the Notes and to the
extent not cost prohibitive (as determined by the holders of the Notes),
promptly (within five (5) days after such request) cause each of its Foreign
Subsidiaries to complete the execution and delivery of the Collateral Documents
as required by the holders of the Notes.
2.8 Upon the request of any holder of the Notes, promptly complete all
matters required by such holder for the implementation of a dominion of funds
arrangement between the Company, the Guarantor and the Collateral Agent and
otherwise cooperate with the implementation of such arrangement.
2.9 Promptly execute and deliver, and cause each Guarantor to execute
and deliver, such other documents as the holders of the Notes may reasonably
request.
SECTION 3. AMENDMENTS TO THE NOTE AGREEMENT. From and after the
Effective Date (as defined in Section 5 hereof), Prudential and the Company
agree that the Note Agreement shall be amended as follows:
3.1 Paragraph 1 of the Note Agreement is amended by deleting the phrase
"a rate per annum equal to 10.60% plus the Applicable Margin" and by replacing
such phrase with the
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phrase "the rate of 11.35% per annum until July 31, 2003 and the rate of 11.85%
per annum after July 31, 2003."
3.2 Paragraph 4A of the Note Agreement is amended and restated in its
entirety to read as follows:
"4A. REQUIRED PREPAYMENTS. Until the Notes shall be prepaid in
full, the Company shall prepay, without Yield-Maintenance Amount, the
sum of (i) $7,560,768 on July 31, 2003, and (ii) $383,795.31 on the
15th day of each month, commencing August 15, 2003 and continuing to
and including December 15, 2007, in each case together with accrued and
unpaid interest thereon, and such principal amount of the Notes shall
become due on such prepayment dates. Any unpaid principal balance of
the Notes, together with any accrued and unpaid interest thereon, shall
become due on January 15, 2008, the maturity date of the Notes.
Interest on the Notes at the rate described in the Notes for each day
on which the principal amount thereunder is outstanding shall be paid
monthly on the 15th day of October, 2002, and continuing on the 15th
day of each month thereafter until the Notes have been paid in full."
3.3 Paragraph 4B of the Note Agreement is amended and restated in its
entirety to read as follows:
"4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The
Notes shall be subject to prepayment, in whole at any time or from time
to time in part, at the option of the Company, at 100% of the principal
amount so prepaid plus interest thereon to the prepayment date and the
Yield-Maintenance Amount, if any, with respect to each Note. Any
partial prepayment of the Notes pursuant to this paragraph 4B shall be
applied against the principal amount of the Notes scheduled to become
due in the inverse order of maturity thereof."
3.4 Paragraph 5A of the Note Agreement is amended by deleting the word
"and" at the end of clause (iv) thereof, by renumbering clause (v) thereof as
clause (vi), and by adding the following thereto as a new clause (v):
(v) within thirty (30) days after the end of each month, the
consolidated balance sheet of the Company and its Subsidiaries as of
the end of such month, and the related consolidated statements of
income and cash flows of the Company and its Subsidiaries for such
month and for the period commencing at the end of the previous fiscal
year and ending with the end of such month, in form and detail
reasonably acceptable to the holders of the Notes, setting forth in
each case in comparative form the corresponding figures for the
corresponding date or period of the preceding fiscal year and the
variances, if any, from the most recent budget and forecast delivered
to the holders of the Notes pursuant to that certain letter agreement
dated as of September 23, 2002 by and between the Company and
Prudential, together with a duly executed Officer's Certificate
demonstrating compliance by the Company with the provisions thereof;
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3.5 Paragraph 6A of the Note Agreement is amended and restated in its
entirety to read as follows:
"6A. MINIMUM CONSOLIDATED NET WORTH. The Company will not
permit Consolidated Net Worth to be less than (i) at any time during
the period beginning September 23, 2002 through and including September
29, 2002, $28,482,000, and (ii) at any time after September 29, 2002,
$28,471,000.
3.6 Paragraph 7A of the Note Agreement is amended by adding the
following thereto as new clauses (xvi) and (xvii):
"(xvi) on or before July 31, 2003, the Company and each holder
of the Notes fail for any reason to enter into a modification of this
Agreement satisfactory to the holders of the Notes providing for
financial covenants for the fiscal periods of the Company ending on and
after July 31, 2003;
(xvii) on or before October 31, 2002, the Company fails to
obtain approval of any applicable stock exchange, or other public
trading market, of the listing of additional securities of the Company
issueable upon exercise of any warrant made by Company in favor of
Prudential;"
3.7 The definition of "Applicable Margin" in paragraph 10B of the Note
Agreement is deleted in its entirety.
3.8 The definition of "Consolidated Net Worth" in paragraph 10B of the
Note Agreement is amended and restated in its entirety as follows:
""CONSOLIDATED NET WORTH" shall mean as of any time of
determination thereof, total stockholders' equity of the Company and
its Subsidiaries on a consolidated basis determined in accordance with
GAAP. Notwithstanding the foregoing, during the "Forbearance Period"
(as defined in that certain letter agreement dated as of September 23,
2002 by and between the Company and Prudential) "Consolidated Net
Worth" shall be calculated exclusive of (a) gains or losses recognized
upon asset dispositions, and (b) any impairment to goodwill or other
intangible assets to the extent required by new accounting regulations
promulgated after the date of this Agreement."
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to Prudential that:
(a) The Company has all requisite corporate power to execute, deliver
and perform its obligations under this letter agreement, the Warrant and the
Registration Rights Agreement (both as hereinafter defined).
(b) The execution, delivery and performance of this letter agreement,
the Warrant and the Registration Rights Agreement has been duly authorized by
all requisite corporate action, and this Agreement, the Warrant and the
Registration Rights Agreement have been duly executed and delivered by
authorized officers of the Company and are valid obligations of the Company,
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legally binding upon and enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(c) The Company has duly authorized the issuance of 467,126 shares of
the Common Stock upon the exercise of the Warrant, such number of shares of the
Common Stock has been reserved for issuance upon the exercise of the Warrant
and, upon such exercise and payment of the purchase price therefor pursuant to
the Warrant, such shares will be duly authorized and issued, fully paid and
non-assessable.
(d) On the Effective Date, immediately after giving effect to the
transactions contemplated by this letter agreement, (i) the authorized capital
stock of the Company will consist of 41,000,000 shares of capital stock
consisting of 40,000,000 shares of Common Stock, no par value, and 1,000,000
shares of Serial Preferred Stock, no par value, (ii) 8,408,276 shares of Common
Stock will be issued and outstanding and no shares of Serial Preferred Stock
will be issued and outstanding, (iii) the treasury stock of the Company will
consist of 98,611 shares of Common Stock, (iv) 467,126 shares of Common Stock
will be reserved for issuance upon exercise of the Warrant and 467,126 shares of
Common Stock will be reserved for issuance upon exercise of the warrants granted
to the Banks, and (v) other than the Warrant and the warrants granted to the
Banks, there are no other options for, rights to acquire, agreements to issue,
or securities exercisable for or convertible into shares of the Company's
capital stock.
(e) Neither the execution nor delivery of this letter agreement, the
Warrant or the Registration Rights Agreement, nor the offering or issuance of
the Warrant, nor fulfillment of nor compliance with the terms and provisions
hereof and of the Warrant or the Registration Rights Agreement will conflict
with, or result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries pursuant to, the charter or by-laws of the Company or any of
its Subsidiaries, any award of any arbitrator or any agreement (including any
agreement with stockholders), instrument, order, judgment, decree, statute, law,
rule or regulation to which the Company or any of its Subsidiaries is subject.
(f) Neither the nature of the Company or of any Subsidiary, nor any of
their respective businesses or properties, nor any relationship between the
Company or any Subsidiary and any other Person, nor any circumstance in
connection with the offering, issuance, sale or delivery of the Warrant is such
as to require the Company or any Subsidiary to obtain or make any authorization,
consent, approval, exemption or other action by or notice to or filing with any
court or administrative or governmental body (other than notices and filings
with the Securities and Exchange Commission ("SEC"), state Blue Sky authorities,
and any applicable stock exchange or other public trading market) in connection
with the Company's execution and delivery of this letter agreement, the Warrant
or the Registration Rights Agreement, the Company's offering, issuance or
delivery of the Warrant or the Company's fulfillment of or compliance with the
terms and provisions hereof and of the Warrant or the Registration Rights
Agreement; except (i) registration statement filings with the SEC and SEC review
and clearance thereof in connection with any registration of securities under
the Securities Act, (ii) approval of
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any applicable stock exchange, or other public trading market, of the listing
of additional securities of the Company, including those underlying the Warrant,
and (iii) any authorization, consent, approval, exemption or other action,
notice or filing required in connection with the status of any holder of the
Notes as a regulated entity (e.g., under insurance, banking or similar laws that
may apply to the business of any holder of the Notes).
(g) The Company has not paid fees or any other consideration to the
Bank Agent or to any Bank for or with respect to any of the waivers or
amendments set forth in the "Bank Amendment" (as hereinafter defined) or the
defaults referred to therein other than those expressly set forth therein.
(h) After giving effect hereto (i) each representation and warranty set
forth in paragraph 8 of the Note Agreement is true and correct as of the date of
the execution and delivery of this letter by the Company with the same effect as
if made on such date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they were true and correct as
of such earlier date), and (ii) no Event of Default or Default exists (other
than the Existing Events of Default).
SECTION 5. EFFECTIVENESS. This letter agreement shall become effective
on the date (the "EFFECTIVE DATE") when each of the following conditions has
been satisfied in a manner satisfactory in form and substance to Prudential:
(a) Prudential has received the following documents:
(i) counterparts of this letter agreement duly executed by the
Company;
(ii) a second amended and restated Note duly executed by the
Company in the form of Exhibit A attached hereto;
(iii) a consent of guarantors, dated the date hereof, duly
executed by each Guarantor, in the form attached hereto as
Exhibit B;
(iv) a warrant (the "WARRANT") duly executed by the Company, in
the form attached hereto as Exhibit C initially exercisable for
467,126 shares of the common stock of the Company;
(v) counterparts to a registration rights agreement (the
"REGISTRATION RIGHTS AGREEMENT") duly executed by the Company and
Prudential, in the form attached hereto as Exhibit D;
(vi) an amendment to the Credit Agreement (the "Bank
Amendment"), dated the date hereof, duly executed by the Bank
Agent, the Banks, the Company and CSI Coating Systems Inc.,
amending the Credit Agreement in a manner satisfactory to
Prudential, in form and substance satisfactory to Prudential, and
such amendment shall be in full force and effect;
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(vii) a favorable opinion of the Company's counsel satisfactory
in form and substance to Prudential as to such matters as
Prudential may reasonably request;
(viii) a Secretary's Certificate signed by the Secretary or
Assistant Secretary and one other officer of the Company
certifying, among other things (a) as to the name, titles and true
signatures of the officers of the Company authorized to sign this
letter and the other documents to be delivered in connection with
this letter, (b) that attached thereto is a true, accurate and
complete copy of the Articles of Incorporation of the Company,
certified by the Secretary of State of the State of Ohio as of a
recent date, (c) that attached thereto is a true, accurate and
complete copy of the By-laws of the Company which were duly adopted
and are in effect as of the Effective Date, (d) that attached
thereto is a true, accurate and complete copy of the resolutions of
the Board of Directors of the Company, duly adopted at a meeting of
such Board of Directors, authorizing the execution, delivery and
performance of this letter and the other documents to be delivered
in connection with this letter, and of all other documents
evidencing other necessary corporate action and governmental
approvals, if any, with respect to this letter, and (e) that this
letter and the other documents executed and delivered to Prudential
by the Company are in the form approved by its Board of Directors
in the resolutions referred to in clause (d), above; and
(ix) a certificate of good standing for the Company and each
Guarantor from the Secretary of State of the state of incorporation
of the Company and each such Guarantor and of each state in which
the Company or any such Guarantor is required to be qualified to
transact business as a foreign corporation, in each case dated as
of a recent date;
(b) Prudential shall have received payment in immediately
available funds of the difference between (i) the amount of interest
which would have been payable on the Notes during the period from July
15, 2002 to the Effective Date if the Notes had borne interest during
such period at the rate of 13.35% per annum, and (ii) the amount of
interest actually paid by the Company on the Notes for such period;
(c) Prudential shall have received a written confirmation, in
form and substance satisfactory to Prudential, signed by the Bank Agent
and the Banks of the continued effectiveness of the Intercreditor and
Collateral Agency Agreement, dated as of June 9, 2000, as amended by
Amendment No. 1 thereto dated June 29, 2001, notwithstanding this
letter agreement and the amendment to the Credit Agreement referred to
in Section 5(a)(v) hereof;
(d) all corporate and other proceedings in connection with the
transactions contemplated by this letter agreement shall be
satisfactory to Prudential and its counsel, and Prudential shall have
received all such counterpart originals or certified or other copies of
such documents as they may reasonably request; and
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(e) Prudential has received payment of all costs and expenses
of Prudential (including reasonable fees and disbursements of special
counsel to Prudential and of Nightingale & Associates, LLC) in
connection with this letter and the transactions contemplated hereby.
SECTION 6. EXISTING EVENTS OF DEFAULT. The Company has requested that
the holders of the Notes waive the Existing Events of Default subject to the
terms and conditions set forth herein. Pursuant to such request, the holders of
the Notes hereby waive the Existing Events of Default for the period prior to
the Effective Date and, so long as there is no occurrence of a new Default
hereunder of a new Event of Default under the Note Agreement (for purposes
hereof, a new Default or Event of Default includes a new or further violation of
any of the sections of the Note Agreement implicated in any of the Existing
Events of Default), for the remainder of the Forbearance Period. Such waiver
shall not extend to any period of time after the Forbearance Period except to
the extent expressly provided in a further written agreement among the Company
and the Required Holder(s), provided that such waiver shall automatically
survive the expiration of the Forbearance Period if the Company is then in full
compliance with all provisions of the Note Documents (as amended by this letter
agreement but without the benefit of any waiver of defaults except as set forth
in this Section 6 and other waivers made by the holders of the Notes prior to
the Effective Date). The Company acknowledges and agrees that the waiver
contained herein is a limited, specific and one-time waiver as described above.
Such limited waiver (a) shall not modify or waive any other term, covenant or
agreement contained in any of the Note Documents, and (b) shall not be deemed to
have prejudiced any present or future right or rights which the holders of the
Notes now have or may have under this letter agreement, the Note Agreement (as
modified hereby) or the other Note Documents.
SECTION 7. RELEASE. The Company and each Guarantor represents and
warrants that it is not aware of any claims or causes of action against any
holder of the Notes or any of their successors or assigns, and that it has no
defenses, offsets or counterclaims with respect to the indebtedness owed by the
Company to the holders of the Notes. Notwithstanding this representation and as
further consideration for the agreements and understandings herein, the Company
and Guarantors, on behalf of themselves and their respective employees, agents,
executors, heirs, successors and assigns, hereby release the holders of the
Notes, their respective predecessors, officers, directors, employees, agents,
attorneys, affiliates, subsidiaries, successors and assigns, from any liability,
claim, right or cause of action which now exists or hereafter arises as a result
of acts, omissions or events occurring on or prior to the date hereof, whether
known or unknown, including but not limited to claims arising from or in any way
related to the Note Agreement or the business relationship among the Company,
the Guarantors, the holders of the Notes.
SECTION 8. PERFORMANCE BY HOLDERS OF THE NOTES; NO AGENCY; COMPANY
REMAINS IN CONTROL. The Company and each Guarantor acknowledges and agrees that
the holders of the Notes have fully performed all of their obligations under the
Note Agreement and all documents executed in connection with the Note Agreement,
and that all actions taken by the holders of the Notes are reasonable and
appropriate under the circumstances and within their rights under the Note
Agreement and all other documents executed in connection therewith and otherwise
available. The actions of the holders of the Notes taken pursuant to this letter
agreement and the documents referred to herein are in furtherance of the efforts
of the holders of the Notes as
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secured lenders seeking to collect the obligations owed to the Lenders. Nothing
contained in this Amendment shall be deemed to create a partnership, joint
venture or agency relationship of any nature among the Company and the holders
of the Notes. The Company, the Guarantors, the holders of the Notes agree that
notwithstanding the provisions of this letter agreement, the Company remains in
control of its business operations and determines the business plans (including
employment, management and operating directions) for its business.
SECTION 9. ENTIRE AGREEMENT; SEVERABILITY. The Note Agreement, as
previously amended and as amended by this letter agreement, constitutes the
entire understanding of the parties with respect to the subject matter hereof
and may only be modified or amended by a writing signed by the party to be
charged. If any provision of this letter agreement is in conflict with any
applicable statute or rule of law or otherwise unenforceable, such offending
provision shall be null and void only to the extent of such conflict or
unenforceability, but shall be deemed separate from and shall not invalidate any
other provision of this letter agreement.
SECTION 10. NO OTHER PROMISES OR INDUCEMENTS. There are no promises or
inducements which have been made to any signatory hereto to cause such signatory
to enter into this letter agreement other than those which are set forth in this
letter agreement. The Company and each Guarantor acknowledges that its
authorized officers have thoroughly read and reviewed the terms and provisions
of this letter agreement and are familiar with same, that the terms and
provisions contained herein are clearly understood by the Company or such
Guarantor and have been fully and unconditionally consented to by the Company or
such Guarantor, and that the Company or such Guarantor has had full benefit and
advice of counsel of its own selection, or the opportunity to obtain the benefit
and advice of counsel of its own selection, in regard to understanding the
terms, meaning and effect of this letter agreement, and that this letter
agreement has been entered into by the Company and such Guarantor freely,
voluntarily, with full knowledge, and without duress, and that in executing this
letter agreement, the Company and each Guarantor is relying on no other
representations, either written or oral, express or implied, made by any other
party hereto, and that the consideration hereunder received by the Company has
been actual and adequate.
SECTION 11. SUFFICIENCY OF FORBEARANCE PERIOD. The Company represents
that: (a) it has no intention to file or acquiesce in the filing of any
bankruptcy or insolvency proceeding hereafter, absent approval on behalf of the
holders of the Notes of such proceeding; and (b) the Forbearance Period is
sufficient for the Company to accomplish the commitments they have undertaken
herein.
SECTION 12. RATIFICATION. The Company agrees that the Note Agreement,
the Notes and all other documents and agreements executed by the Company or the
Guarantors in connection with the Note Agreement in favor of Prudential, any
holder of any Note, or the Collateral Agent are ratified and confirmed and shall
remain in full force and effect as amended hereby, and that there is no set off,
counterclaim or defense with respect to any of the foregoing.
SECTION 13. REFERENCE TO AND EFFECT ON NOTE AGREEMENT. Upon the
effectiveness of this letter, each reference in the Note Agreement or any other
document, instrument or agreement to the "Note Agreement" shall mean and be a
reference to the Note Agreement as modified by
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this letter. Except as specifically set forth in Section 1 hereof, the Note
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects.
SECTION 14. EXPENSES. Without limiting the provisions of paragraph 11B
of the Note Agreement, the Company hereby confirms its obligations under the
Note Agreement, whether or not the transactions hereby contemplated are
consummated, to pay, promptly after request by Prudential, all reasonable
out-of-pocket costs and expenses (including attorneys' fees and expenses and the
fees and expenses of Nightingale & Associates, LLC) incurred by Prudential prior
to or after the date of this letter agreement in connection with the Note
Agreement, the Company and the Guarantors, this letter agreement or the
transactions contemplated thereby or hereby, in enforcing any rights under the
Note Agreement or this letter agreement, or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
the Note Agreement, this letter agreement or the transactions contemplated
thereby or hereby. The obligations of the Company under this Section 14 shall
survive transfer by Prudential of any Note and payment of any Note.
SECTION 15. GOVERNING LAW. THIS LETTER SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS OF SUCH STATE WHICH WOULD OTHERWISE CAUSE THIS
LETTER TO BE CONSTRUED OR ENFORCED OTHER THAN IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.
SECTION 16. COUNTERPARTS; SECTION TITLES. This letter may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument. The section titles contained in this letter are and shall be
without substance, meaning or content of any kind whatsoever and are not a part
of the agreement between the parties hereto.
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Very truly yours,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ Xxxxxx Xxxxxx
-----------------------------------------
Vice President
AGREED AND ACCEPTED:
CORRPRO COMPANIES, INC.
By: /s/ Xxxxxx X. Xxxxx
------------------------------------
Title: Chief Financial Officer
------------------------------
EXHIBIT A
FORM OF SECOND AMENDED AND RESTATED NOTE
See Attached
CORRPRO COMPANIES, INC.
SECOND AMENDED AND RESTATED SENIOR NOTE DUE JANUARY 15, 2008
No. 1998 A-3 September 23, 2002
$28,285,714 Chicago, Illinois
FOR VALUE RECEIVED, the undersigned, CORRPRO COMPANIES, INC., (herein
called the "Company"), a corporation organized and existing under the laws of
the State of Ohio, hereby promises to pay to The Prudential Insurance Company of
America, or registered assigns, the principal sum of TWENTY EIGHT MILLION TWO
HUNDRED EIGHTY FIVE THOUSAND SEVEN HUNDRED FOURTEEN DOLLARS ($28,285,714) on
January 15, 2008, with interest (computed on the basis of a 360-day year--30-day
month) (a) on the unpaid balance thereof at a rate per annum equal to (i) 11.35%
until July 31, 2003, and (ii) 11.85% on and after July 31, 2003, from the date
hereof, payable on the 15th day of each month in each year, commencing on
October 15, 2002, until the principal hereof shall have become due and payable,
and (b) on any overdue payment (including any overdue prepayment) of principal,
any overdue payment of Yield-Maintenance Amount and any overdue payment of
interest, payable quarterly as aforesaid (or, at the option of the registered
holder hereof, on demand), at a rate per annum from time to time equal to the
greater of (i) 13.35% until July 31, 2003 and 13.85% on and after July 31, 2003,
or (ii) 2.00% over the rate of interest publicly announced by The Bank of New
York from time to time in New York City as its Prime Rate.
Payments of principal, Yield-Maintenance Amount, if any, and interest
are to be made at the main office of Bank of New York in New York City or at
such other place as the holder hereof shall designate to the Company in writing,
in lawful money of the United States of America.
This Note is issued pursuant to the Note Purchase Agreement, dated as
of January 21, 1998, as amended (herein called the "Agreement"), between the
Company, on the one hand, and The Prudential Insurance Company of America, on
the other hand, and is entitled to the benefits thereof. As provided in the
Agreement, this Note is subject to prepayment, in whole or from time to time in
part, in certain cases without Yield-Maintenance Amount and in other cases with
the Yield-Maintenance Amount specified in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly execute, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for the then outstanding principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
In case an Event of Default shall occur and be continuing, the
principal of this Note may be declared or otherwise become due and payable in
the manner and with the effect provided in the Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meanings (if any) provided in the Agreement.
This Note is intended to be performed in the State of Illinois and
shall be construed and enforced in accordance with the internal law of such
State.
This Note (i) merely re-evidences the indebtedness previously evidenced
by the Company's Amended and Restated Senior Note due January 15, 2008 dated
April 15, 2001 (the "Existing Note"), (ii) is given in exchange for, and not as
payment of, the Existing Note, and (iii) is in no way intended to constitute a
novation of the Existing Note.
CORRPRO COMPANIES, INC.
By: /s/ Xxxxxx X. Xxx
----------------------------------
Title: President, CEO
----------------------------------
EXHIBIT B
FORM OF CONSENT
See Attached
CONSENT OF GUARANTORS
Each of the undersigned is a guarantor under a subsidiary guaranty (as
amended, the "GUARANTY"), dated as of June 9, 2000, made by each guarantor in
favor of each holder of any Notes (the "NOTEHOLDERS"), and as such hereby
consents to that certain letter dated September 23, 2002, by and between Corrpro
Companies, Inc. and The Prudential Insurance Company of America (the
"MODIFICATION") and the amendments, forbearance and agreements contained
therein, and agrees to all agreements of the Guarantors set forth therein, and
confirms and agrees that, notwithstanding the Modification and the effectiveness
of the amendments, forbearance and agreements contained therein, the Guaranty
is, and shall continue to be, in full force and effect and is hereby confirmed
and ratified in all respects. Nothing herein is intended or shall be deemed to
limit any Noteholder's rights under the Guaranty to take actions without the
consent of the undersigned.
Dated as of September 23, 2002
GOOD-ALL ELECTRIC, INC.
By:
----------------------------------------
Title: Vice President
-------------------------------------
BASS SOFTWARE, INC.
By:
----------------------------------------
Title: Vice President
-------------------------------------
CATHODIC PROTECTION SERVICES COMPANY
By:
----------------------------------------
Title: Vice President
-------------------------------------
OCEAN CITY RESEARCH CORP.
By: /s/ Xxxxxx X. Xxx
----------------------------------------
Title: Vice President
-------------------------------------
CCFC, INC.
By: /s/ Xxxxxx X. Xxx
----------------------------------------
Title: Vice President
-------------------------------------
XXXXXXXX COSASCO SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxx
----------------------------------------
Title: Vice President
-------------------------------------
EXHIBIT C
FORM OF WARRANT
See Attached
EXHIBIT D
FORM OF REGISTRATION RIGHTS AGREEMENT
See Attached
ANNEX I
EXISTING EVENTS OF DEFAULT
1. Events of Default arising as a result of a breach of paragraph 1.3 of
that certain Amendment to Note Agreement dated as of June 29, 2001 by
an between the Company and Prudential (the "June 2001 Amendment") as a
result of accounting irregularities at the Company's Australian
subsidiary as of March 31, 2002 and for any period for which the
Company's restated financial statements (which restatement was due to
such accounting irregularities) would have caused the Company to be in
violation of financial covenants then in effect,
2. Events of Default arising as a result of a breach of paragraph 1.7 of
the June 2001 Amendment as a result of the occurrence of the Events of
Default set forth on this Annex I.
3. Events of Default arising as a result of a breach of paragraph 5A of
the Note Agreement as a result of failure to provide financial
statements timely including for the periods ended March 31, 2002 and
June 30, 2002.
4. An Event of Default arising as a result of a breach of paragraph 5G of
the Note Agreement as a result of securities law violations in
connection with accounting irregularities at the Company's Australian
subsidiary and the late filing of the Company's Form 10-K for the
fiscal year ended March 31, 2002.
5. Events of Default arising as a result of a breach of paragraph 6A(3)
and paragraph 6A(4) of the Note Agreement as a result of failure to
meet each of the financial covenants contained therein for the fiscal
quarter ending March 31, 2001.
6. Events of Default arising as a result of a breach of paragraph 6A of
the Note Agreement as a result of failure to meet each of the financial
covenants contained therein for any period ending March 31, 2002 and
thereafter.
SCHEDULE 1.2(g)
PENDING PROCEEDINGS
[TO BE PROVIDED BY THE COMPANY]
SCHEDULE 1.2(k)
EXISTING DEBT
[TO BE PROVIDED BY THE COMPANY]
SCHEDULE 1.2(m)
TARGETED ASSET DISPOSITIONS
NAME OF NET CASH PROCEEDS OF
TARGETED ASSET DISPOSITIONS TARGETED ASSET DISPOSITIONS
[TO BE PROVIDED BY THE COMPANY]
