Exhibit 4.(a)8
Letter Agreement dated May 28, 2003, by and among the Registrant, Inovia
Telecoms Limited, Lightscape Networks Limited, InnoWave ECI Wireless Systems
Limited, ECI Telecom-NGTS Limited, Enavis Networks Limited,
Bank Hapoalim B.M. and Bank Leumi Le-Israel B.M.
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[ECI TELECOM LOGO]
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To: Bank Hapoalim B.M.
00-00 Xxxxxxxxxx Xxxxxxxxx
Xxx Xxxx
Attention: Xxxxx Xxxxxxxx
To: Bank Leumi Le-Israel B.M.
00 Xxxxxx Xxxxxx Xxxxxx
Xxx Xxxx
Xxxxxxxxx: Xx. Xxxxx Xxxxxx
28 May, 2003
Dear Sirs
Facility Agreement dated 5 February, 2001 between, inter alia, ECI Telecom Ltd.,
Bank Leumi Le-Israel B.M. ("BLL") and Bank Hapoalim B.M. ("BP") (as amended)
(the "Facility Agreement")
1. We refer to our recent discussions concerning: (i) an amendment to the
Facility Agreement; and (ii) outstanding short-term loans advanced to us by
BP not pursuant to the Facility Agreement (the "Short Term Loans").
Any capitalised term used but not defined herein shall bear the meaning
ascribed to such term in the Facility Agreement.
The following sets out certain agreements between us which are operative
immediately either as amendments to the Facility Agreement (where
applicable) or otherwise, as well as the agreed principles of certain terms
which, as stated therein, are intended (together with other terms) to be
reflected in an amended and restated Facility Agreement ("the Amendment
Agreement"), such Amendment Agreement to be the subject of negotiations
between us with a view to its execution and closing on or prior to 30 June
2003. All terms herein which do not state that they are conditional on
signature and closing of the Amendment Agreement are operative immediately.
It is intended that the Amendment Agreement would also reflect the
amendments of the Facility Agreement included herein and operative
immediately as aforesaid, but such amendments shall remain operative and in
full force and effect, whether or not the Amendment Agreement is signed and
closed and whether or not such terms are reflected in an Amendment
Agreement which is signed and closed (unless otherwise agreed therein).
2. On May 29, 2003:
(a) we shall make a payment of $38,166,672 (thirty eight million, one
hundred and sixty six thousand, six hundred and seventy two US
Dollars) ($19,083,336 (nineteen million, eighty three thousand, three
hundred and
thirty six US Dollars) to each of BLL and BP) in repayment of
principal of the Loan such that the outstanding principal of the Loan
shall thereupon become $100,000,000 (one hundred million US Dollars)
($50,000,000 (fifty million US Dollars) to each of BLL and BP);
(b) we shall make a payment of $13,000,000 (thirteen million US Dollars),
being the outstanding aggregate principal of the Short Term Loans and
all interest accrued thereon in full and final repayment of the
outstanding Short Term Loans;
(c) in addition to the payment of principal pursuant to paragraph 2(a)
above, we shall pay to BLL and BP the interest due on that payment
under the Facility Agreement for the period up to May 29, 2003 (and
not paid).
3. (a) On June 30, 2003, we shall repay such of the outstanding Loan at
that time in order that the outstanding principal of the Loan shall be
$60,000,000 (sixty million US Dollars) ($30,000,000 (thirty million US
Dollars) to each of BLL and BP).
(b) Further, in addition to the payment of principal pursuant to paragraph
3(a) above, we shall pay on June 30, 2003 the interest due on the Loan
under the Facility Agreement on that date.
4. Any amounts of the Loan prepaid hereunder, shall be applied pro-rata
against all future repayment instalments due pursuant to clause 5.1 of the
Facility Agreement, provided that upon reduction of the outstanding
principal of the Loan to $60,000,000 (sixty million US Dollars) in
accordance with paragraph 3(a) above, the balance of the principal of the
Loan shall be paid in equal instalments of $7,500,000 (seven million five
hundred thousand US Dollars), at the end of each calendar quarter,
beginning with the calendar quarter ending on March 31, 2004 and ending
with the calendar quarter ending on December 31, 2005. It is expressly
agreed, for the removal of doubt, that the aforegoing provisions of this
paragraph 4 shall not derogate from the rights of BLL and BP under the
Facility Agreement.
5. (a) Subject to full payment by us of the amounts due under paragraphs
2 and 3 above, the following short term cash credit facilities, under
which any credit granted will be repayable by no later than one year
from the date that the outstanding principal of the Loan was reduced
to $60,000,000 (sixty million US Dollars) (i.e., no later than June
30, 2004) (unless extended by the relevant lender), will be provided
to us:
BP: $15,000,000 (fifteen million US Dollars)
BLL: $15,000, 000 (fifteen million US Dollars)
provided that:
(i) the provision of the short term cash credit facilities by each of
BLL and BP shall be subject to agreement on the specific terms
thereof between us and such bank; and
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(ii) the amount of the short term cash credit facility specified above
with respect to BLL (if provided by BLL as aforesaid) ("the BLL
Short Term Amount") shall be reduced by the aggregate amount of
short term cash credit facilities made available to us from time
to time by any bank or financial institution, other than BP or
BLL and we shall advise BLL promptly upon such facilities
becoming available to us, from time to time. Accordingly, for
example, in the event that the First International Bank of Israel
Ltd. ("FIBI") provides us with a short term cash credit facility
of $10,000,000 (ten million US Dollars) (and there shall have
been no previous reduction in the BLL Short Term Amount), then,
without derogating from proviso (i) above, the short term cash
credit facilities to be provided will be as follows (instead of
the amounts specified in this paragraph 5 above):
BP: $15,000,000 (fifteen million US Dollars)
BLL: $5,000,000 (five million US Dollars)
FIBI: $10,000,000 (ten million US Dollars).
(b) Notwithstanding the provisions of proviso (a)(ii) above, but without
derogating from proviso (a)(i) above, in no event shall the BLL Short
Term Amount be reduced to less than the amount of the FIBI Prepayment
(as that term is defined in paragraph 7(d) below) and if the FIBI
Prepayment shall be made after the BLL Short Term Amount has been
reduced below the amount of the FIBI Prepayment, then (subject to the
one-year limit specified in paragraph 5(a) above) the BLL Short Term
Amount shall be increased so as to be equal to the FIBI Prepayment.
(c) It is expressly agreed, for the removal of doubt, that if BLL shall
have actually advanced funds to us within the framework of the said
short term cash credit facility and another bank or financial
institution subsequently makes short term cash credit facilities
available to us, we shall immediately repay to BLL the amount of the
advance made by BLL to the extent necessary to achieve the appropriate
reduction, as determined according to paragraphs (a) and (b) above.
(d) References in proviso (a)(ii) of this paragraph 5 and paragraph 5(c)
above to "short term cash credit facilities" shall mean any cash
credit facilities other than those provided pursuant to the Facility
Agreement (credit provided by FIBI pursuant to paragraph 7(d) below
being deemed facilities provided pursuant to the Facility Agreement).
6. As security for:
(a) the short term cash credit facilities to be provided by BLL, BP and
FIBI (if provided) pursuant to paragraph 5 above, as extended (if
extended) by the relevant lender;
(b) the Loan advanced pursuant to the Facility Agreement (in addition to
the securities already provided for the Loan); and
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(c) all outstanding off-balance sheet items provided by BP and BLL from
time to time (including such items already provided on the date
hereof),
we shall, on signature hereof, create a floating charge in favour of The
Bank Leumi Le-Israel Trust Company Ltd. ("the Trust Company") as Collateral
Agent in the form of Attachment A hereto (the "Floating Charge"). Upon
signature of the Floating Charge, the amount of $20,000 (twenty thousand US
Dollars) specified in clause 10.8 of the Facility Agreement is hereby
increased to $22,000 (twenty-two thousand US Dollars). We understand that a
new intercreditor agreement ("the New Intercreditor Agreement") will have
to be entered into between BP, BLL and the Trust Company to deal with the
Floating Charge and the rights of the creditors secured under the Floating
Charge. The New Intercreditor Agreement shall not contain any provisions
regarding, inter alia, the status of additional creditors entitled to the
benefit of the Floating Charge that conflict with those specifically
provided for in this letter agreement.
The parties to the New Intercreditor Agreement shall agree a mechanism
whereby a creditor will release its interest in the Floating Charge
provided that all of the outstanding cash credit (long term and short term)
owed to that creditor has been repaid and that the total value of the off
balance sheet items issued by such creditor and outstanding do not exceed
$10,000,000 (ten million US Dollars), provided that we shall provide
alternative securities in the form of pledged cash deposits or bank
guarantees (from banks and in a form acceptable to such creditor) or such
other securities to the full satisfaction of such creditor to secure the
outstanding off balance sheet items and provided always that the creation
by us of any Encumbrance (including the pledging of cash deposits or the
giving of such other securities as aforesaid) in favour of such creditor
shall require the prior written consent of BLL and BP. Should we create
such Encumbrance in favour of BLL or BP, then only the consent of the other
bank shall be required. The provisions of this paragraph 6 do not derogate
from the provisions of paragraph 8 below. For the purpose of this paragraph
6, "off balance sheet items" or "off-balance sheet facilities" shall mean
all banking facilities other than cash credit facilities and the value of
such items or facilities shall be determined according to the exposure of
the issuing bank in connection therewith, as determined by that bank.
7. (a) For the purpose of this letter agreement, the term "additional
credit facilities" shall mean all cash credit facilities and
off-balance sheet facilities provided other than pursuant to the
Facility Agreement.
(b) Any bank (an "Additional Lender") providing us with additional credit
facilities of $8,000,000 (eight million US Dollars) or more, of which
at least $3,000,000 (three million US Dollars) is by way of cash
credit facilities, may (subject to paragraph 7(c) below) take the
benefit of the Floating Charge as security for such additional credit
facilities, subject to such bank becoming a party to the New
Intercreditor Agreement, it being agreed that such additional credit
facilities and cash credit facilities shall include such facilities
provided prior to the Additional Lender becoming a party to the
Floating Charge and still outstanding at that time and it being noted
that the only Additional Lender to date is FIBI.
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(c) The New Intercreditor Agreement will provide, inter alia, that a
creditor secured under the Floating Charge shall only be entitled to:
(i) benefit from the proceeds of any enforcement of the Floating
Charge if we shall at such time have facilities outstanding in
excess of $3,000,000 (three million US Dollars) from such
creditor and the other relevant terms and conditions of the
Intercreditor Agreement shall have been fulfilled; and
(ii) trigger enforcement of the Floating Charge if we shall have at
such time facilities outstanding in excess of $5,000,000 (five
million US Dollars) from such creditor or group of creditors and
such outstanding facilities shall constitute or include either:
(1) 331/3% of the total of the aggregate of the additional credit
facilities held by us at that time as well as 331/3% of the
aggregate cash credit facilities included in the additional
credit facilities held by us at that time; or (2) 331/3% of the
aggregate of all credit facilities held by us at that time.
(d) In the event that FIBI provides us, by no later than August 15, 2003,
with new credit of $5,000,000 (five million US Dollars) or more, upon
the same repayment terms as those provided in the Facility Agreement,
FIBI shall be entitled to share, on a pari passu basis, in the benefit
of the security interests created pursuant to the Facility Agreement
upon becoming a party to the Facility Agreement and to the
intercreditor agreement currently in force between BLL, BP and the
Trust Company and governing, inter alia, the realisation of securities
relating to the Loan. Upon FIBI providing said new credit, we shall
pay such amount to BLL (as a prepayment under the Facility Agreement
which shall be applied pro-rata to all future Repayment Installments
payable thereunder) in prepayment of outstanding principal of the Loan
owing to BLL ("the FIBI Prepayment").
8. (a) We shall be entitled to pledge cash deposits, notwithstanding the
terms of the Floating Charge, in order to secure buyers' credit
(including, inter alia, interbank lines of credit) and discounting of
receivables, invoices, bills or notes or of other similar financial
assets, provided that:
(i) the extent of the security for any such transaction shall not
exceed thirty per cent (30%) of the value of such transaction;
and
(ii) the aggregate amount secured by such securities pledged by us
shall not exceed $12,000,000 (twelve million US Dollars).
(b) The parties agree that any party may request that the limit specified
in subparagraph (a) (ii) above be renegotiated as part of the
negotiations relating to the Amendment Agreement. If a revised limit
is agreed, it shall be reflected in the Amendment Agreement.
(c) BLL and BP shall procure that the Collateral Agent under the Floating
Charge shall issue notices pursuant to clauses 1.1.3, 1.1.4 and 1.1.12
of the Floating Charge as shall be appropriate, having regard to the
provisions of the Facility Agreement, the Security Documents and this
letter agreement, upon our written request or the written request of
BLL and BP. It is understood that the Encumbrances referred to in
paragraph 6 above and the pledge of cash deposits referred to in
paragraph 8(a) above are intended to be "Excluded Security Interests"
and the liabilities secured thereby are intended to be "Excluded
Liabilities" for the purposes of the Floating Charge. On the written
request of BLL or BP from time to time, we shall furnish the
requesting bank with documentation and information necessary to
ascertain that the pledge of cash
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deposits referred to in paragraph 8(a) above is in accordance with the
provisions and limitations specified in that sub-paragraph. It is
understood further that the Encumbrances created prior hereto to
secure our liabilities under the Facility Agreement are "Excluded
Security Interests" for the purposes of the Floating Charge.
9. (a) Upon signature of this letter agreement the Facility Agreement
shall be deemed amended so as to reflect the provisions hereof which
relate to the subject-matter of the Facility Agreement and are not
conditional on the signature and/or closing of the Amendment Agreement
and so that the Floating Charge shall constitute a "Security Document"
and a "Finance Document", within the meaning of those terms in the
Facility Agreement and all representations, warranties, undertakings
and other provisions of the Facility Agreement relating to Security
Documents and/or Finance Documents shall relate to the Floating
Charge, subject to any disclosures previously made in writing to BLL,
BP or the Collateral Agent.
(b) Our obligations and undertakings hereunder shall be deemed obligations
and undertakings given by us under the Facility Agreement and any
breach of any such obligation or undertaking shall constitute an Event
of Default within the meaning of the term in the Facility Agreement.
10. We undertake that from the date of signature hereof , the accumulated
aggregate amount of all credit facilities provided to us by all banks and
financial institutions and outstanding shall not exceed $250,000,000 (two
hundred and fifty million US Dollars).
11. In consideration for our undertakings herein and subject to the full and
timely payment of the amounts due pursuant to paragraphs 2 and 3 above, the
Financial Undertakings shall be amended, in their entirety, as follows
(effective upon June 30, 2003 ):
(a) the ratio of Tangible Equity to Total Liabilities shall continue to be
no less than 1:1;
(b) for the year 2003, there shall be no minimum requirement for the ratio
of EBITDA to Debt Service;
(c) for the first, second and third quarters in the year 2004, the ratio
of EBITDA to Debt Service shall be no less than 1:1, 1.1:1 and 1.15:1
respectively. For each quarter thereafter, commencing the fourth
quarter of the year 2004, the ratio of EBITDA to Debt Service shall be
no less than 1.2:1;
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(d) for the year 2003, there shall be no minimum requirement for the ratio
of EBITDA to Borrowings. Thereafter, on every Ratio Determination
Date, the ratio of EBITDA to Borrowings shall be no less than 1:5;
(e) the ratio of Current Assets to Current Liabilities shall be no less
than 1.5:1;
(f) for the year 2003 and the first three quarters of 2004, we shall
maintain a positive quarterly cash flow (on an accumulated basis
commencing 1 January 2003) from operations, provided that failure to
do so during the year 2004 shall not constitute a default under the
Facility Agreement, if the following condition is fulfilled on the
relevant Ratio Determination Date:
The ratio of A:B shall be at least 1.7:1, where:
A is the total of cash, cash equivalents, short term investments,
inventories and trade receivables; and
B is the total of short term credit (excluding current maturity of
long term debt from banks) plus trade payables;
(g) we shall at all times maintain cash balances (cash, cash equivalents
and short term investments, but excluding pledged cash deposits (other
than the cash deposit in the amount of $8,300,000 (Eight Million Three
Hundred Thousand US Dollars) pledged in favour of BP to secure the
Ji-tong transaction), pledged cash equivalents and pledged short term
investments) at banks and financial institutions in an aggregate
amount of at least (i) $15,000,000 (fifteen million US Dollars) plus
the aggregate of all outstanding cash credit facilities owing by us,
or (ii) 150% of the aggregate of all outstanding cash credit
facilities owing by us, whichever of (i) and (ii) is the lower.
All Financial Undertakings shall be inclusive of us and all entities
included in our consolidated financial statements, except Ectel.
12. It is intended that the Amendment Agreement (if signed) will include a
provision, whereby BLL and BP shall each agree to make available to us up
to an additional $15,000,000 (fifteen million US Dollars) as a supplement
to the existing long term Loan, on the terms and conditions of the Facility
Agreement, provided that we and BLL and BP shall have reached an agreement
on the terms and conditions of such additional financing, including, but
not limited to, the availability period and additional financial covenants
relating thereto and the Amendment Agreement, including such agreement, is
signed and closed. Such additional financing shall be repaid in instalments
to be paid at the same time as the scheduled repayments of the existing
long term Loan under the Facility Agreement.
13. We shall procure that, from 30 June 2003 , our three subsidiaries in
Germany, France and England do not:
(a) borrow from all banks and financial institutions an aggregate amount
in excess of $5,000,000 (five million US Dollars) (including amounts
already borrowed prior to that date) each (i.e., each subsidiary); or
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(Two) pledge assets securing more than $7,500,000 in the aggregate
(seven million five hundred thousand US Dollars) (including amounts
already so secured by that date) (i.e. taking the three subsidiaries
together).
We confirm that, as of the date hereof, the subsidiaries meet the
limits specified in (a) and (b) above. On 30 June, 2003, and
thereafter, at your request from time to time, we shall provide you
with written confirmation of the precise amounts of the borrowings and
of the value of the assets pledged by the subsidiaries, so as to
verify compliance with the limits specified in (a) and (b) above.
14. Subject to the amendments of the Facility Agreement pursuant hereto, the
Facility Agreement as amended previously hereto shall remain valid, binding
and in full force.
15. Paragraphs 10, 11 and 13 of this letter agreement shall no longer apply
following full and final payment of all amounts due under the Facility
Agreement.
Yours faithfully
for and on behalf of
ECI Telecom Ltd.
Agreed.
for and on behalf of
Inovia Telecoms Limited
By: /s/ X. Xxxxxx
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Title:
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for and on behalf of for and on behalf of
Lightscape Networks Limited Innowave ECI Wireless Systems
Limited
By: /s/ X. Xxxxxx By: /s/ X. Xxxxxx
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Title: Title:
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for and on behalf of for and on behalf of
ECI Telecom-NGTS Limited Enavis Networks Limited
By: /s/ X. Xxxxxx By: /s/ X. Xxxxxx
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Title: Title:
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Acknowledged and agreed
/s/ X. Xxxxx /s/ X. Xxxxx /s/ S. Zeitak /s/ Xxxxx Xxxxxxx
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for and on behalf of for and on behalf of
Bank Hapoalim B.M. Bank Leumi Le-Israel B.M.
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