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THE CIT GROUP/BUSINESS CREDIT, INC.
000 Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Dated as of
March 29, 2001
Xx. Xxxxx Xxxxxxxx
Xx. Xxxx Xxxxxxxx
Xx. Xxxx Xxxxxxxx
Xx. Xxxx Xxxxxxxx
Xx. Xxxxx Xxxxxxxx
c/o Twin Laboratories Inc.
000 Xxxxx Xxxxxxx
Xxxxxxxxx, XX 00000
Re: $15,000,000 Aggregate Letters of Credit
Gentlemen:
This letter agreement (the "Agreement") sets forth the agreement among you
(collectively, the "Blechmans") and us ("Agent") with respect to the one or more
irrevocable standby letters of credit in the aggregate amount of $15,000,000
(the "LCs") to be provided in support of our credit facility to Twin
Laboratories Inc. and its affiliates (the "Companies") to be extended by Agent
and the Lenders thereunder pursuant to that certain Financing Agreement, dated
of even date herewith (the "Financing Agreement"). This Agreement is the
Blechmans Agreement Regarding Letters of Credit as defined in the Financing
Agreement.
1. General Terms of LCs. The LCs shall be one or more irrevocable
standby letters of credit issued by Citibank, N.A. or such other issuing or
confirming bank as may be acceptable to Agent, in its discretion. The aggregate
face amount of the LCs shall be at least $15,000,000, subject to reduction as
hereinafter set forth. Each LC may provide that, on notice to the issuing bank
executed by Agent and the account party (a "Reduction Notice"), the amount of
such LC will be reduced as provided in such notice.
2. Draws.(a) The LCs shall provide that Agent may draw on the LCs by
presentation to the issuing bank of a statement, executed by Agent, that it is
entitled under this Agreement to draw against the subject LC in an amount set
forth in such statement.
(b) Agent may draw on the LCs upon the occurrence of any of
the following (the "Drawing Conditions"): (1) if all of the Obligations (as
defined in the Financing Agreement) shall have been declared accelerated and due
and owing and such Obligations shall not have been satisfied in full 90 days
after such declaration, Agent may draw against the LCs an amount equal to the
lesser of the amount of such Obligations and the aggregate amount of the LCs;
(2) if Twin Laboratories Inc. ("TLI") or any subsidiary of TLI that is a
significant subsidiary (as such term is defined in Regulations S-X under the
Securities Act of 1933) of TLI shall commence any bankruptcy, insolvency or
similar proceeding under any federal or state law
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March 29, 2001
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(or if any bankruptcy, insolvency or similar proceeding under any federal or
state law shall be commenced against TLI or any significant subsidiary of TLI by
creditors of TLI or any such significant subsidiary and such proceeding shall
not have been dismissed or vacated within 60 days of commencement), Agent may
draw against the LCs an amount equal to the lesser of the amount of such
Obligations and the aggregate amount of the LCs; or (3) if an LC is to expire
within 30 days and has not been replaced by an LC in an amount at least equal to
that of the expiring LC, issued by a bank acceptable to Agent, in its
discretion, then Agent may draw against such LC.
(c) Agent shall have the right, but no obligation, to make
any draw upon the occurrence of a Drawing Condition, and Agent may make partial
drawings upon the LCs in such amounts as it may determine, in its discretion,
subject to the Drawing Conditions. Agent agrees that it will draw pro rata
(based upon the relative amounts of the LCs) against the LCs in the event Agent
draws for less than the full, aggregate amount of the LCs (other than drawings
contemplated by clause (3) of the preceding sentence). Agent agrees that the
proceeds of all drawings against the LCs will be applied to the Obligations
pursuant to the terms of the Financing Agreement.
3. Reductions. Agent agrees that the aggregate amount of the LCs will
be reduced as follows:
(a) For the period beginning September 1, 2001 through March
1, 2002, on the first day of each month, the LCs shall be reduced by the amount
that the "Average Daily Excess Availability" (as defined below) exceeds
$10,000,000; provided however, in no event shall the LCs be reduced more than
$2,000,000 in any single month or more than $7,500,000 in the aggregate pursuant
to this sentence. For the purposes hereof, "Average Daily Excess Availability"
shall mean, as of the date of determination, the average daily excess
availability under the Financing Agreement as calculated by Agent in accordance
with the terms of the Financing Agreement for the immediately prior 60 calendar
days.
(b) For the period after March 1, 2002, no reductions in the
LCs will be permitted until Agent receives Twinlab Corporation's audited
December 31, 2001 financial statements. Upon receipt of such year-end financial
statements, the Financing Agreement provides for a reserve against availability
of $5,000,000. If EBITDA (as defined in the Financing Agreement) as reported in
such December 31, 2001 audited year-end financial statements is greater than
$15,000,000, the LCs shall be reduced one-time by the amount that excess
availability as calculated by Agent in accordance with the terms of the
Financing Agreement (which requires that all of the Companies' debts and
obligations are current, and that all of the Companies' payables are being
handled in the normal course of the Companies' business, consistent with their
past practice), as of the date of delivery to Agent of such audited December 31,
2001 financial statements (after giving effect to the $5,000,000 reserve against
availability referred to in the second sentence of this paragraph) exceeds
$10,000,000; provided however, in no event shall the LCs be reduced more than
$4,000,000 pursuant to this paragraph.
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March 29, 2001
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(c) Beginning on April 1, 2002 and thereafter, on the first
day of each month, the LCs shall be reduced by the amount that the "Average
Daily Excess Availability" exceeds $15,000,000; provided however, in no event
shall the LCs be reduced more than $2,000,000 in any single month pursuant to
this paragraph and for purposes of calculating "Average Daily Excess
Availability" during such period, Agent shall not include the $5,000,000
availability reserve described in the foregoing paragraph.
(d) Notwithstanding the foregoing provisions of this Section
3, in no event shall the LCs be reduced to an amount less than $3,500,000
without Agent's prior written consent.
(e) Agent will execute and deliver such Reduction Notices to
the issuing bank(s), as and when necessary, to effect the reductions described
above. Each reduction of LCs shall be applied to each of the LCs on a pro rata
basis (based upon the relative amounts of the LCs).
4. Reimbursement Agreements. Agent agrees that the Companies may
enter into one or more reimbursement agreements (the "Reimbursement Agreements")
with the Blechmans pursuant to which, among other things, (a) the Companies will
agree to reimburse the Blechmans for their costs and expenses in connection with
obtaining and maintaining the LCs and for any drawings against the LCs and (b)
the obligations of the Companies under the Reimbursement Agreements (but only
such obligations) will be secured by liens on assets of the Companies junior and
subordinate to Agent's liens on such assets as provided in an intercreditor
agreement in form and substance substantially identical to the Intercreditor
Agreement, dated of even date herewith, between Agent and Xxxx and Xxxx
Xxxxxxxx. The terms of the Reimbursement Agreements must be reasonably
satisfactory to Agent.
5. Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by any other parties, or whenever any
of the parties desires to give or serve upon any other parties any communication
with respect to this Agreement, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing and shall be
deemed to have been validly served, given or delivered (a) upon the earlier of
actual receipt and three (3) business days after deposit in the United States
Mail, registered or certified mail, return receipt requested, with proper
postage prepaid, (b) upon transmission, when sent by telecopier or other similar
facsimile transmission (with such telecopy or facsimile promptly confirmed by
delivery of a copy by personal delivery or United States Mail as otherwise
provided in this section), (c) one business day after deposit with a reputable
overnight courier with all charges prepaid, or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number as follows:
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If to Blechmans, to:
c/o Twinlab Corporation
000 Xxxxx Xxxxxxx
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to Agent, to:
The CIT Group/Business Credit, Inc.
000 X. Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Regional Manager
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice.
6. Costs and Attorneys' Fees. If any action, suit or proceeding is
commenced by or between any of the parties in connection with this Agreement,
the prevailing party shall be entitled to recover from the other any costs,
expenses or attorneys' fees incurred in connection therewith.
7. Successors and Assigns. This Agreement shall be binding on, and
shall inure to the benefit of, the parties and their respective successors and
assigns (including, in the case of any bankruptcy or similar proceeding, any
receiver, assignee for the benefit of creditors, trustee or debtor in possession
on behalf of such person), except as otherwise provided herein. This Agreement
is freely assignable at any time by Agent (or any Lender with respect to its
rights hereunder) and is not assignable by the Blechmans, provided that any such
assignment by Agent or such Lender is in conjunction with the assignment in
whole or in part of the Obligations in accordance with the terms of the
Financing Agreement, and that such assignment is subject to the terms of this
Agreement.
8. Integrated Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the matters set forth herein and
may not be modified or amended except in a writing signed by all parties.
9. Interpretation. The captions in this Agreement are for convenience
of reference only, do not constitute a part of this Agreement and are not to be
considered in construing or interpreting this Agreement. All section, preamble,
recital, exhibit, schedule, disclosure
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schedule, annex, clause and party references are to this Agreement unless
otherwise stated. No party, nor its counsel, shall be deemed the drafter of this
Agreement for purposes of construing the provisions of this Agreement, and all
provisions of this Agreement shall be construed in accordance with their fair
meaning, and not strictly for or against any party.
10. Authority. Each of the signatories hereto certifies that such
party has all necessary authority to execute this Agreement.
11. Counterparts. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be deemed an original, but
all of which together shall constitute one instrument.
12. GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT
REGARD TO THE CHOICE OF LAW OR CONFLICT OF LAW PROVISIONS THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
13. WAIVER OF JURY TRIAL. EACH OF THE BLECHMANS AND AGENT WAIVES THE
RIGHT TO A TRIAL BY JURY IN ANY ACTION UNDER THIS AGREEMENT OR ANY ACTION OR
ACTIONS ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHICH
PARTY INITIATES SUCH ACTION OR ACTIONS.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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Please indicate your acceptance of the foregoing by signature below.
Sincerely,
THE CIT GROUP/BUSINESS CREDIT, INC.
By ---------------------------------
Title:
[BLECHMANS SIGNATURES TO BE NOTARIZED]
ACCEPTED AND AGREED:
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Xxxxx Xxxxxxxx
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Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx
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Xxxxx Xxxxxxxx
STATE OF )
)
COUNTY OF )
On ---------, 2001, before me, the undersigned, a notary public in and for said
State, personally appeared known to me to be Xx. Xxxxx Xxxxxxxx, Xx. Xxxx
Xxxxxxxx, Xx. Xxxx Xxxxxxxx, Xx. Xxxx Xxxxxxxx, and Xx. Xxxxx Xxxxxxxx who
executed the within instrument.
WITNESS MY HAND AND OFFICIAL SEAL.
NOTARY PUBLIC
