L.J.(Jim) Blattman
Senior Manager
Technology Banking Group
Royal Bank of Canada
90 Sparks Street
Ottawa, Ontario K1P 5T6
Tel: 613-564-4898
Fax: 613-564-4527
jimblattman@royalbank.e-mail.com
February 7, 1997
Private & Confidential
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Gandalf Technologies Inc.
130 Colonnade Road South
Nepean, Ontario
K2E 7M4
Attention: Mr. Walter R. MacDonald
Vice-President, Finance & CFO
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Dear Sirs:
We refer to the letter agreement date June 11, 1996 detailing a Credit Facility
made available to Gandalf Technologies Inc. by Royal Bank of Canada (the
"Agreement"). All capitalized terms and references herein have the same meaning
as those in the Agreement. We also refer to a letter agreement dated November
18, 1996 between the Bank and the Borrower which waived certain defaults of the
Borrower pursuant to the Agreement and detailed related amendments to the
Agreement (the "Amending Agreement").
The Bank and the Borrower hereby acknowledge the breach by the Borrower of the
Agreement and the Amending Agreement in relation to Sections 23(a), 23(b) and
24(h) for the reporting period ended December 28, 1996. The Bank hereby waives
its rights in respect of such breaches for the period December 28, 1996 to March
31, 1997. This waiver is granted only in respect of the aforementioned breaches
and only for the aforementioned period and is subject to and conditional upon
the following:
i. The Borrower will provide to the bank, within 5 days hereof, a forecast
of cash flow and Margin Requirement, prepared in a weekly format to
March 31, 1997 inclusive. The forecast will be delivered in both
consolidated and non-consolidated versions.
ii. The Borrower will provide to the Bank, by Tuesday of each week
commencing February 4, 1997, with evidence of compliance with the Margin
Requirements together with supporting documentation as required.
iii. The Borrower will provide to the Bank, within 15 calendar days of each
month end, consolidated, rolling sales forecast for the current fiscal
quarter with comparisons to the previous fiscal quarter.
iv. The Borrower will provide to the Bank, within 5 days hereof, evidence
satisfactory to the Bank of the engagement of an investment banking
firm, chosen by the Borrower, together with a related schedule of
activities targeted to provide the Borrower with a cash infusion of not
less than CDN $20 million by no later than March 31, 1997 (the "Funding
Arrangement"). If, in the Bank's sole opinion, there is material adverse
change in the scope or timing of the Funding Arrangement, the Bank may,
at its option, declare Borrowings in default, notwithstanding any other
terms herein.
v. The borrowing spreads detailed in Section 6 (2) (a), (b) and (d) of the
Agreement are increased to 1.75% pending full compliance with the
Agreement.
vi. The Borrower will pay to the Bank a risk premium equal to 1% per annum,
calculated and payable monthly in arrears, of the amount committed under
Segment 2(a) of the Agreement, until the earlier of Tangible Net Worth
exceeding US $40,000,000 or the company recording net after tax profit
of $1,000,000 or more in any fiscal quarter.
vii. Acceptance of similar terms and conditions (with the specific exception
of (iv) above) by GDCL with respect to a credit facility extended to
GDCL by the Bank's office in London, England.
viii. Suspension of Segment (1) of the Agreement with respect to FEF
Contracts.
All other terms and conditions of the Agreement remain unchanged.
Please confirm your acceptance by signing and returning the enclosed copy of
this letter no later than February 19, 1997.
Yours truly,
S/J.L. (JIM) BLATTMAN
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J.L. (Jim) Blattman