Exhibit 10a - Signet Bank letter, dated May 13, 1994,
re: Credit Facilities to AAI - Page 12
[Letterhead of SIGNET BANK]
May 13, 1994
BY HAND DELIVERY
Mr. Richard R. Erkeneff
President
AAI Corporation
P. O. Box 126
Hunt Valley, Maryland 21030
Re: Signet Bank/Maryland Credit Facilities to AAI
Dear Mr. Erkeneff:
By letter to Paul Michaud dated April 4, 1994, the
undersigned memorialized previous conversations held with Mr.
Michaud pursuant to which AAI was advised that the availability
of additional credit under our Amended and Restated Loan
Agreement dated as of August 11, 1992, as amended (the "Loan
Agreement") would terminate on April 30, 1994, and that all
outstanding "Obligations" (as defined in the Loan Agreement)
would be due and payable on such date. As of April 30, the
obligations of AAI to Signet Bank had not been satisfied, and AAI
has requested Signet Bank to continue extending credit under the
Loan Agreement in order to provide sufficient additional time to
arrange for replacement financing.
The purpose of this letter is to advise you of the terms
under which Signet Bank is willing to extend additional credit to
AAI under the Loan Agreement. Capitalized terms used in this
letter without definition which are defined in the Loan Agreement
shall have the same meanings assigned to such terms in the Loan
Agreement.
The Lender hereby consents to an extension of the
Termination Date to August 20, 1994 (the "Termination Date"),
upon the following terms and conditions:
1. From and after the date hereof, the Maximum Loan Amount
shall be $7,500,000.00 minus the face amount of all issued and
outstanding Letters of Credit; provided, however, that for
purposes of determining whether the Maximum Loan Amount has been
exceeded, Letter of Credit S1881 and Letter of Credit S1764 (the
"Excluded Letters of Credit") shall be excluded.
2. From and after the date hereof, the Maximum Letter of
Credit Facility Amount shall be equal to the amount available to
be drawn as of the date of this letter under the currently
outstanding Letters of Credit (other than the Excluded Letters of
Credit).
3. On or before May 20, 1994, pursuant to written
agreements in form and substance satisfactory to the Lender (a)
the Borrower shall grant to the Lender a first priority security
interest in all accounts receivable of the Borrower, and (b) UIC
shall grant to the Lender a first priority security interest in a
certain note receivable with a current outstanding principal
balance of $8,540,000.00 which is further described in footnote 4
to the consolidated financial statements of UIC in the 1993
Annual Report of UIC, together with all rights of UIC under any
and all letters of credit and other collateral securing the
repayment thereof. The foregoing security interests to be
granted to the Lender shall be subject only to the rights of
Principal Mutual Life Insurance Company, The Travelers Insurance
Company and The Travelers Indemnity Company of Rhode Island
(collectively, the "Creditor") under the Inter-Creditor Agreement
dated August 11, 1992, by and among the Lender, the Creditor, the
Borrower and UIC. The Borrower and UIC shall execute and deliver
to the Lender upon the Lender's demand such security agreements,
financing statements and other documents and instruments as the
Lender may reasonably require in order to establish and perfect
the aforementioned security interest.
4. The Borrower shall pay to the Lender, concurrently with
its acceptance hereof, an extension fee in the amount of
$75,000.00 (the "Extension Fee"); provided, however, that the
Borrower shall be entitled to a rebate of such Fee in the event
that all outstanding obligations are satisfied more than thirty
days prior to the Termination Date. The amount rebated to the
Borrower shall equal (a) $50,000.00 if the Obligations are
satisfied more than sixty days prior to the Termination Date, and
(b) $25,000.00 if the Obligations are satisfied more than thirty
(but less than sixty-one) days prior to the Termination Date.
The Obligations of the Borrower with respect to outstanding
Letters of Credit shall not be deemed satisfied unless (i)
replacement letters of credit have been issued by another
institution with the result that the Letters of Credit shall have
been terminated and all of the Lender's obligations thereunder
discharged, or (ii) the Lender shall have been provided, pursuant
to a written agreement or agreements satisfactory to the Lender
and with the concurrence of the Creditor, cash collateral for
such obligations in an amount not less than the maximum potential
reimbursement an other obligations of the Borrower in connection
with such Letter of Credit.
5. Each Letter of Credit currently outstanding or issued
after the Borrower's acceptance hereof shall be subject to the
requirement that if it is to extend beyond the Termination Date,
on or before such Termination Date the Borrower shall (a) have
arranged for the issuance of a replacement letter of credit by
another institution with the result that such Letter of Credit
shall be terminated and all of the Lender's obligations
thereunder discharged, or (b) have provided, pursuant to a
written agreement or agreements satisfactory to the Lender and
with the concurrence of the Creditor, cash collateral in form and
substance satisfactory to the Lender in an amount not less than
the maximum potential reimbursement and other obligations of the
Borrower in connection with such Letter of Credit. The
requirements of this Paragraph 5 are consistent with the terms
and conditions of our letter agreement dated August 2, 1993.
6. The Borrower shall pay on the demand of the Lender all
expenses paid or incurred by the Lender (including the fees and
expenses of its counsel) in connection with (a) the preparation
and negotiation of this letter agreement and all other documents
and agreements referred to herein, and (b) all future matters
arising in connection with the Lender's credit extensions to the
Borrower.
Until the terms under which the Lender is willing to extend
credit to the Borrower have been agreed upon, no additional
credit will be extended to the Borrower. The offer contained in
this letter shall expire on May 16, 1994 unless previously
accepted by the Borrower and UIC. Acceptance shall be indicated
by the Borrower and UIC signing this letter in the space provided
below, and returning this letter, together with payment of the
Extension Fee, to the Lender. An additional copy of this letter
is also enclosed for your records.
In the event the Borrower does not find the proposed terms
of extension as described above to be acceptable, the Borrower
should arrange for the satisfaction of the outstanding
Obligations (including, without limitation, the satisfaction of
the outstanding Letters of Credit on the terms outlined in this
letter) on or before May 16, 1994.
Please call (332-5144) if you should have any further
questions or comments concerning this matter.
Yours truly,
/S/ David A. Bauereis
David A. Bauereis
Vice President
96/nea
Enclosure
cc: Mr. Paul J. Michaud
Kevin G. Gralley, Esquire
ACCEPTED AND AGREED THIS ____
DAY OF MAY, 1994
AAI CORPORATION
AAI ENGINEERING SUPPORT, INC.
AAI MANUFACTURING ASSEMBLY, INC.
AAI SYSTEMS MANAGEMENT, IN.
AAI MEDICAL CORPORATION
SETI, INC.
AAI/ACL TECHNOLOGIES, INC.
AAI MICROFLITE SIMULATION INTERNATIONAL CORPORATION
By: /s/ Richard Ray Erkeneff
Name: RICHARD RAY ERKENEFF
Title:President & CEO AAI
UNITED INDUSTRIAL CORPORATION
By: /s/ Howard M. Bloch
Name: HOWARD M. BLOCH
Title:Vice President -Treasurer