EXHIBIT 10.39
April 13, 2001
PSC, Inc.
PSC Scanning, Inc.
000 Xxxxxx Xxxx
Xxxxxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx Xxxxx, President and
Chief Executive Officer
Xxxxxxxxx X. XxXxxxxx, Vice President and
Corporate Counsel
Re: PSC Scanning, Inc.
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Ladies and Gentlemen:
Reference is hereby made to the Credit Agreement dated as of July 12,
1996 (as amended, the "Credit Agreement") by and among PSC Scanning, Inc. ("PSC
Scanning"), PSC Inc., as guarantor ("PSC"), the lenders party thereto (the
"Lenders") and Fleet Bank, N.A. as administrative agent (the "Administrative
Agent"). Capitalized terms used but not defined herein shall be given the
meanings accorded to such terms in the Credit Agreement.
Attached hereto as Annex 1 is a term sheet (the "Term Sheet") setting
forth our agreement on the terms of an amendment to or amendment and restatement
of the Credit Agreement. The parties hereto agree to promptly prepare and
execute all documentation required in connection with such amendment or
amendment and restatement. Such documentation will not contain any economic
terms with respect to principal, interest, fees or financial covenants more
restrictive than those set forth in the Term Sheet. The Lenders and the
Administrative Agent hereby waive the Specified Events of Default (as defined in
the Waiver dated as of April 1, 2001). This letter agreement shall be
superceded and replaced upon completion of documentation in connection with the
amendment or amendment and restatement to the Credit Agreement referred to
above.
By each parties' signature below, each such party acknowledges that it
is duly authorized to approve the Term Sheet and agrees that the terms of the
Credit Agreement shall be deemed to be modified effective as of the date hereof
as set forth in the Term Sheet.
Please return executed counterparts of this letter agreement to Xxxx
Xxxxx at Xxxxx, Xxxxx & Xxxxx (fax no. 000-000-0000).
Very truly yours,
FLEET NATIONAL BANK, as Administrative Agent,
Issuing Bank and Lender
By:________________________________________
CITIZENS BANK OF MASSACHUSETTS, as a Lender
By:________________________________________
HSBC BANK USA, as a Lender
By:________________________________________
KEY BANK, as a Lender
By:________________________________________
THE CHASE MANHATTAN BANK, as a Lender
By:________________________________________
M&T BANK, as a Lender
By:________________________________________
ACKNOWLEDGED AND AGREED
PSC INC.
By:_________________
PSC SCANNING, INC.
By:_________________
PSC AUTOMATION, INC.
By:_________________
INSTAREAD CORPORATION
By:_________________
PERCON INCORPORATED
By:_________________
PSC BELGIUM, INC.
By:_________________
PSC SCANNING, INC.
EXTENSION OF EXISTING WAIVER THROUGH APRIL 1, 2002
Summary of Terms and Conditions
April 13, 2001
This Term Sheet sets forth the indicative terms and conditions of an
extension of the waiver granted pursuant to the Amended and Restated Tenth
Amendment and Waiver dated as of December 29, 2000 (the "Amended and Restated
Tenth Amendment") with respect to the Credit Agreement dated as of July 12, 1996
(as amended, the "Credit Agreement"), among PSC Scanning, Inc. (the "Borrower"),
PSC Inc. ("PSC"), the lenders party thereto (the "Lenders") and Fleet National
Bank, as administrative agent (the "Administrative Agent"). Capitalized terms
used but not defined herein shall have the meanings given to them in the Credit
Agreement and the Amended and Restated Tenth Amendment.
Term Loan: $64,694,927.93.
Working Capital Facility: $42,000,000 (inclusive of the Letter of Credit
facility and the $6,000,000 F/X Commitment);
provided, however, that, except as set forth below,
at no time shall Working Capital Advances (inclusive
of Letters of Credit) exceed the aggregate amount of
Working Capital Advances outstanding as of the
Effective Date. For the purpose of the preceding
sentence, the amount of the F/X Commitment (whether
or not used) shall be deemed Working Capital
Advances. Subject to the terms and conditions hereof,
the Borrower shall be permitted, during the
Additional Liquidity Facility Commitment Period (as
defined below), to borrow an aggregate amount not to
exceed $2,000,000 (a sub-facility under the Working
Capital Facility, the "Additional Liquidity
Facility"). "Additional Liquidity Facility Commitment
Period" shall mean the period from the Effective Date
through the earlier of (i) the consummation date of
the second Non-Core Asset Sale (as defined below) or
(ii) September 30, 2001. Advances under the
Additional Liquidity Facility ("Additional Liquidity
Advances") shall (a) be available in increments of
not less than $500,000, (b) bear interest as set
forth under "Current Pay Interest" below and (c)
shall be available to the Borrower upon the payment
to the Administrative Agent for the ratable benefit
of the Lenders in cash of a fee in the aggregate
amount of $50,000 for each $500,000 borrowed.
Additional Liquidity Advances can not be reborrowed
and shall be repaid with the Borrower's share of the
net proceeds of (x) sale of PSC's Webster, New York
facility and (y) sale of PSC's Automation division
(the "Non-Core Assets"); it being understood that net
proceeds of Non-Core Assets shall be applied and
shared as provided in the Amended and Restated Tenth
Amendment. Additional Liquidity Advances shall be
paid in cash in full on September 30, 2001.
Maturity: The Term Loan and the Working Capital Facility shall
mature on April 1, 2002 (the "Maturity Date").
Amortization: The Borrower shall, on the first Business Day of each
calendar month beginning September 3, 2001, make
principal payments on the Term Loan in an amount equal to
$833,333.33.
Current-Pay Interest: Interest shall be payable upon Advances under the Term
Loan and the Working Capital Facility at the rates per
annum set forth below:
April 1 - September 30, 2001 Prime Rate plus 2.25%
October 1 - December 31, 2001 Prime Rate plus 2.50%
January 1 - April 1, 2002 Prime Rate plus 3.50%
Interest shall continue to be payable on a monthly basis
in arrears.
Deferred Interest: All interest that has accrued at the default rate and is
unpaid as of the Effective Date on the Advances (the
"Deferred Default Spread") shall be payable upon the
Maturity Date; provided, however, that if the Borrower
shall, on or before March 24, 2002, pay in full all
Advances under the Term Loan and the Working Capital
Facility, and otherwise satisfy all of its obligations
under the Credit Agreement, the Deferred Default Spread
shall be waived. It is understood that, as of the
Effective Date, the Lenders shall no longer accrue
default rate interest on the Advances with respect to the
Specified Events of Default (as defined in the Amended
and Restated Tenth Amendment).
Financial Covenants: Minimum EBITDAR. The Borrower shall maintain cumulative
Minimum EBITDAR (as defined below) for the periods set
forth below as follows:
January 1, 2001 - April 27, 2001 $2,100,000
January 1, 2001 - May 25, 2001 $4,100,000
January 1, 2001 - June 29, 2001 $6,700,000
January 1, 2001 - July 27, 2001 $8,500,000
January 1, 2001 - August 24, 2001 $11,300,000
January 1, 2001 - September 28, 2001 $14,900,000
January 1, 2001 - October 26, 2001 $17,000,000
January 1, 2001 - November 23, 2001 $21,100,000
January 1, 2001 - December 31, 2001 $24,600,000
According to the Borrower's Business Plan, EBITDAR for Q1
2002 is projected to be $7,000,000. Prior to December 31,
2001, the Administrative Agent shall reasonably
determine, in consultation with the Borrower, the
appropriate Minimum EBITDAR levels for January and
February 2002 and shall deliver a written schedule of
such amounts to the Borrower. The Borrower shall not
permit EBITDAR for such months to be less than the
amounts set forth on such schedule.
"Minimum EBITDAR" shall mean, for any period, EBITDA for
such period, plus (a) non-recurring employee severance
and stay-bonus expenses which are charged to operating
expenses when and as charged,
in an aggregate amount not to exceed $1,200,000, (b) non-
recurring expenses incurred as a result of the transition
from the Borrower's Webster, New York facility to its
Eugene, Oregon facility which are charged to operating
expenses when and as charged, in an aggregate amount not
to exceed $500,000, (c) expenses related to the financial
restructuring of the Borrower which are charged to
operating expenses when and as charged, including, (i)
fees to legal and financial advisors and (ii)
modification fees and other similar financing costs, (d)
any gain or loss on the sale of assets which are charged
to operating expenses when and as charged and (e) non-
cash expenses which are charged to operating expenses
when and as charged resulting from the re-pricing of
stock warrants and options.
Maximum Capital Expenditures. Neither PSC, the Borrower
nor their Subsidiaries shall make or commit to make any
Capital Expenditure that would cause the aggregate of all
Capital Expenditures made in any period set forth below
exceed the amount set forth below for such period:
January 1, 2001 - April 27, 2001 $4,000,000
January 1, 2001 - May 25, 2001 $4,500,000
January 1, 2001 - June 29, 2001 $5,500,000
January 1, 2001 - July 27, 2001 $6,000,000
January 1, 2001 - August 24, 2001 $7,000,000
January 1, 2001 - September 28, 2001 $7,500,000
January 1, 2001 - October 26, 2001 $7,500,000
January 1, 2001 - November 23, 2001 $8,000,000
January 1, 2001 - December 31, 2001 $8,187,000
According to the Borrower's Business Plan, Capital
Expenditures for Q1 2002 are projected to be $2,500,000.
Prior to December 31, 2001, the Administrative Agent
shall reasonably determine, in consultation with the
Borrower, the appropriate Maximum Capital Expenditure
levels for January and February 2002 and shall deliver a
written schedule of such amounts to the Borrower. The
Borrower shall not permit Capital Expenditures for such
months to be greater than the amounts set forth on such
schedule.
Collateral Covenants: Minimum Eligible Accounts Receivable and Minimum Eligible
Inventory covenants consistent with the Amended and
Restated Tenth Amendment except that, in addition, the
Borrower shall maintain, as at the end of each fiscal
quarter, Eligible Receivables having a value equal to at
least $32,000,000.
Cash Management System: Weekly repatriation of cash of foreign
subsidiaries.
Otherwise consistent with the Amended and
Restated Tenth Amendment
Retention of Professionals;
Reimbursement of Costs: Consistent with the Amended and Restated Tenth
Amendment.
Limitation on Dividends: Consistent with the Amended and Restated Tenth
Amendment.
Sharing of Certain Asset
Sale Proceeds: Except with respect to the Additional Liquidity
Facility, consistent with the Amended and
Restated Tenth Amendment.
Reporting: The Borrower shall, on a monthly basis, provide
a rolling three-month cash flow forecast which
shall detail forecasted amounts on a weekly and
monthly basis. The Borrower shall, on a weekly
basis, provide a variance report with respect to
the prior week.
Otherwise consistent with the Amended and
Restated Tenth Amendment.
Foreign Collateral: In the event the Lenders determine to obtain and
perfect security interests and guarantees with
respect to the Borrower's foreign subsidiaries,
the Borrower shall assist the Administrative
Agent in such efforts and shall reimburse the
Administrative Agent for all costs and out-of-
pocket expenses incurred in connection
therewith.
Modification Fee: The Borrower shall pay to the Administrative
Agent, for the account of each Lender on a pro
rata basis, an extension fee (the "Modification
Fee") payable (and subject to being waived) as
follows: (i) $150,000 on the Effective Date,
(ii) $250,000 on June 24, 2001, (iii) $350,000
on September 24, 2001, (iv) $750,000 on December
24, 2001 (the "December Installment"), (v)
$750,000 on January 14, 2002 (the "January
Installment") and (vi) $2,250,000 on March 24,
2002 (the "March Installment"); provided,
however, that if the Borrower shall at any time
before December 24, 2001 consummate a Capital
Event (as defined below), $250,000 of the
December Installment shall be waived and the
entire amount of the January Installment shall
be waived; provided, further, that if the
Borrower shall at any time before March 24,
2002, pay in full all Advances under the Term
Loan and the Working Capital Facility, and
otherwise satisfy all of its obligations under
the Credit Agreement, the March Installment
shall be waived. The aggregate amount of the
Modification Fee shall be deemed to be earned on
the Effective Date. This is in addition to the
Extension Fee (as defined in the Amended and
Restated Tenth Amendment) referred to below.
"Capital Event" shall mean any issuance or sale
of equity securities or junior debt securities
or instruments on terms and conditions
satisfactory to the Administrative Agent and the
Lenders, the proceeds of which are applied by
the Borrower to the prepayment of at least
$20,000,000 of Term Loans.
Monthly Agency Fee: Consistent with the Amended and Restated Tenth
Amendment.
Conditions Precedent: The effectiveness of the Extension shall be
conditioned upon satisfaction of, among other
customary conditions, the following:
Receipt of a fully executed amendment and waiver
to the Securities Purchase Agreement dated as of
July 12, 1996, as amended, in form and substance
satisfactory to the Administrative Agent.
Payment of the Extension Fee (as defined in the
Waiver dated April 1, 2001).
Payment of that portion of the Modification Fee
due on the Effective Date.
Receipt by the Administrative Agent of all
documents requested in respect of Collateral.
Payment in full in cash of its invoiced and
unpaid fees and out-of-pocket expenses incurred
in connection with the Credit Agreement,
including, without limitation, the reasonable
fees and disbursements of counsel to the
Administrative Agent.
Events of Default: Standard and customary as deemed appropriate by
the Lenders, including, without limitation, the
receipt by the Borrower of a "qualified" opinion
from its auditor.
Governing Law and Forum: State of New York.
Counsel to Administrative
Agent: Xxxxx, Xxxxx & Xxxxx (Xxxxx Trust, Esq. and Xxxx
Xxxxx, Esq.)
