Exhibit 10.12
Canyon Capital, Inc.
24012 Calle De La Plata, Suite 310
P.O. Box 3710
Laguna Hills, Ca. 92654
Attention: Thomas O'Connor, President
American Commercial Credit Corp.
P.O. Box 13428
Reading, Pa. 19612
Attention: A.A. Haberberger, President
RE: Operating Agreement/Recourse and Remarketing Agreement
Gentlemen:
Background:
Reference is made to a "Recourse and Remarketing Agreement" dated November 14,
1986 ("Remarketing Agreement") and an "Operating Agreement" dated the same date
("Operating Agreement") entered into between Canyon Capital, Inc. ("Canyon") and
Business Cards Tomorrow, Inc. ("BCT"). The Operating Agreement was amended by
letter agreement between Canyon and BCT dated November 20, 1986. For purposes
of this letter agreement, the Remarketing Agreement and the Operating Agreement
shall sometimes be referred to collectively as the "Agreements".
The Agreements relate to equipment purchased by Canyon from BCT ("Equipment"),
which Equipment was purchased for the sole purpose of leasing said Equipment
under full payout finance leases ("Leases") between Canyon and the respective
lessees thereunder ("Lessees"), and concern various matters related to the
purchase of the Equipment. These matters include but are not limited to: the
furnishing of credit information by BCT to Canyon regarding prospective Lessees;
Canyon's agreement to purchase equipment and provide financing to licensees of
BCT, said financing to be provided within the discretion of Canyon;
establishment of a loss reserve pool ("Pool"); procedures for additional funds
to be provided to the Pool both by Canyon and by BCT; procedures to be followed
in the event of a default by a Lessee, including Canyon being entitled to draw
funds from the Pool and having a limited right of indemnification from BCT;
remarketing procedures in the event of Equipment coming off lease at the end of
the term, or Equipment being repossessed, including compensation payable to BCT.
BCT understands that Canyon is about to be purchased by American Commercial
Credit Corp. ("ACCC") and subsequently merged into ACCC, and that ACCC is
requesting the assurance of BCT of its continued performance under the
Agreements, notwithstanding the merger between ACCC and Canyon and any future
termination of the Operating Agreement. BCT has agreed to do so under the terms
and conditions of this letter agreement. Accordingly, subject to the
consummation of the purchase of Canyon by ACCC, it is agreed between BCT, Canyon
and ACCC as follows:
1. Future Purchase of Equipment. ACCC agrees that for a period of no less than
six months after closing of its purchase of Canyon, ACCC and its affiliate, AEL
Leasing Co., Inc., ("AEL") shall purchase Equipment from BCT for purposes of
leasing same under finance leases to franchisees of BCT, in their discretion,
all subject to the credit and business standards (including amounts of
concentration) which were employed by Canyon over the past year in the purchase
of Equipment and furnishing of financing to franchisees of BCT.
2. Acknowledgment of BCT Performance. BCT acknowledges that it shall be bound
by its obligations under the terms of the Agreements with regard to those Leases
(and Equipment subject thereof) existing as of the date of this letter, and/or
entered subsequently to the date of this letter between Canyon, ACCC and AEL and
the Lessees thereunder, in which BCT is the supplier of the Equipment (whether
the Lessee shall be the original user of the Equipment or has assumed the Lease)
notwithstanding any future termination of the "Operating Agreement" between
Canyon/ACCC and BCT.
3. Obligations Accrued as to Existing Lessees. BCT further acknowledges that
the obligations of BCT under the Agreements be deemed to have accrued with
regard to those Leases (and Equipment subject thereof) existing as of the date
of this letter, and/or entered subsequently to the date of this letter between
Canyon, ACCC and AEL and the Lessees thereunder, shall continue to exist in full
force and effect with regard to those Lessees following any termination of the
Operating Agreement by either party, including but not limited to the
obligations of remarketing of Equipment and indemnification of ACCC/AEL in the
event of default by the Lessee, until the obligations of all such Lessees under
said Leases shall have been satisfied in full.
4. AEL and ACCC Obligations and Rights. AEL and ACCC shall be entitled to the
benefits of the Agreement, and shall be bound by the obligations of the
agreement as such obligations applied by Canyon, as if they were original
signatories to the Agreements.
5. No Existing Default by Canyon. BCT hereby acknowledges that Canyon is in
compliance with all of the terms and conditions of the Agreements as of the date
of this letter, and further that there is no event or condition new existing, or
which, if it continued to exist uncured, would constitute a default or event of
default by Canyon under the terms of the Agreements. BCT understands that ACCC
is specifically relying on this paragraph.
6. Pool Amount. The amount of the Pool as of the date hereof is the sum of
$70,283.88. Canyon and BCT agree that this shall be deemed to be the correct
amount of the Pool, and that neither shall owe any additional funds on account
of any amounts that may have been payable prior to the date hereto, and that no
amounts shall be payable except for future contributions payable at the time of
the entry of Leases, or future quarterly contributions by Canyon.
7. Ownership of Pool/Periodic Evaluation of Pool Amount. This will confirm
that the Pool shall at all times by the property of BCT, subject to the security
interest in the Pool in favor of Canyon. Further, this shall confirm that two
years from the date of this letter, and every two year anniversary thereafter of
this letter, the parties shall evaluate the amount of the Pool. It is agreed
that the ratio of outstandings of Leases to the amount of the Pool at the time
of each evaluation shall be no less than the ratio of outstandings on Leases to
the amount of the Pool as of the date of this letter. As of the date of this
letter, the amount of outstandings on Leases is $1,586,331.10, which is a ratio
of 22.57:1 in relation to the current amount of the Pool. To the extent that
the ratio shall be less than 22.57:1, monies will be remitted to BCT such that
the ratio shall become 22.57:1. If the ratio is greater than the current ratio,
then no funds will be remitted.
8. Entire Agreement. Except as expressly modified by the terms of this letter,
the Agreements shall remain in full force and effect. This represents the
entire agreement between the parties with regard to the Agreements, and
supersedes all other discussions, letters, memorandums and other agreements.
If you are in agreement with the terms of this letter, please signify by
countersigning where provided below.
Agreed: May 24, 1993
Canyon Capital, Inc.
BCT International, Inc.
American Commercial Credit Corp.