EXHIBIT 10.3
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MR. DAVID HOWELL MR. ALFRED KNIBERG
151 RIVER ROAD 295 PUTTING GREEN RD.
ESSEX, CT 06426 TRUMBULL, CT 06611
June 27, 1995
Aristotle Sub, Inc. The Aristotle Corporation
78 Olive Street 78 Olive Street
New Haven, CT 06511 New Haven, CT 06511
RE: THE STROUSE, ADLER COMPANY
Gentlemen:
Reference is hereby made to that certain Pledge and Escrow Agreement dated
as of April 11, 1994 (the "Pledge Agreement") by and among David Howell and
Alfred Kniberg (collectively the "Pledgees"), in their capacity as collateral
agent for Howell Resource Partners, Alfred Kniberg, Joyce Baran, Paul McDonald,
Richard Sheldon, C. David Goldman, trustee, Louis Musante, John Peterson, Janney
Montgomery Scott, Inc., custodian f/b/o Paul McDonald and Graeme Caulfield (the
"Original Strouse Shareholders") , and Aristotle Sub, Inc. (the "Pledgor").
Initial capitalized terms not defined herein shall have the meaning assigned to
them in the Pledge Agreement.
The Pledgor is the owner of all of the issued and outstanding stock of The
Strouse, Adler Company ("Strouse, Adler") and Strouse, Adler is indebted to
Fleet Bank, N.A. ("Fleet") under the terms of a certain First Amended and
Restated Master Credit Agreement dated November 9, 1994 (the "Credit Agreement")
by and between Strouse, Adler and Fleet. Pursuant to Section 2.1.2 of the
Credit Agreement, Strouse, Adler is entitled to receive from Fleet Overadvances
(as defined therein), subject to certain restrictions as set forth therein, and
provided, further, that as of the first day of Strouse, Adler's fiscal year,
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Strouse, Adler must reduce the amount of Overadvances to zero (0) and maintain
such zero (0) balance for thirty (30) days thereafter. It is the Pledgees'
understanding that (a) the current amount of outstanding Overadvances is
$500,000; (b) Strouse, Adler's fiscal year commences on July 1, 1995; and (c) it
is not anticipated that Strouse, Adler will have sufficient cash available to
reduce the amount of Overadvances to zero (0) on July 1, 1995.
Pursuant to the Pledge Agreement, the Pledgor has deposited $700,000 in the
Account as security for the Future Obligations. Pledgor has requested the
Original Strouse Shareholders to allow Pledgor to loan the cash in the Account
to Strouse, Adler to pay
down the Overadvances, to consent to certain restrictions on the Put Right, and
to allow use of the proceeds of the Account to satisfy certain obligations under
the Put Right.
In connection with the foregoing, this letter will confirm the following:
1. In the event that Strouse, Adler is unable to reduce the amount of
Overadvances to zero (0) on June 30, 1995 and to maintain the balance of the
Overadvance at zero (0) until August 1, 1995, then, the Pledgor shall have the
right (the "Overadvance Withdrawal Right") from time to time to withdraw from
the Account an aggregate amount not in excess of $700,000, which amount shall be
loaned to Strouse, Adler and used to reduce such Overadvances to zero (0) or
otherwise used for Strouse, Adler's working capital . The Overadvance Withdrawal
Right shall terminate and be of no further force and effect after July 31, 1995.
2. Any withdrawal from the Account under the Overadvance Withdrawal Right
must be pursuant to the joint written instruction of the Pledgor and either
Pledgee. Other than pursuant to the Put Withdrawal Right or pursuant to other
writing from the Pledgees, the Pledgor shall have no right to withdraw any sums
from the Account except interest pursuant to Section 5 of the Pledge Agreement,
provided, however, that if the Account is $700,000 or less or would become under
$700,000 as a result of the withdrawal of interest, the Pledgor shall not be
entitled to withdraw any interest from the Account.
3. In the event that (a) the Pledgor exercises the Overadvance Withdrawal
Right and (b) The Aristotle Corporation's ("Aristotle") net cash recovery (after
expenses) from existing claims against its insurance company relating to certain
shareholder litigation and/or federal income tax refund claims involving the
Federal Deposit Insurance Corporation, and dividends or tax sharing payments
hereafter made by Strouse, Adler and/or Pledgor exceed $250,000 in the aggregate
such excess cash recovery and payments will be loaned to Pledgor or otherwise
contributed to Pledgor and Pledgor shall use such loan or contribution to
restore the balance of the Account to $700,000. Aristotle and Aristotle Sub
shall use their best efforts to restore the balance of the Account to $700,000
by August 5, 1995. In any event, no later than April 11, 1996, the balance of
the Account shall not be less than $700,000 and the failure to achieve such a
balance on such date shall be an Event of Default under the Pledge Agreement.
4. Neither Pledgor nor Aristotle shall seek any personal recourse or
liability against either Pledgee for the execution and delivery of this
Agreement whether or not the terms and conditions contained herein are fully
enforceable in accordance with their terms against all of the Original Strouse
Shareholder.
5. The agreements by the Pledgees herein are not, nor shall it be
deemed to be, a waiver or modification by the Pledgees
of any term of the Pledge Agreement or the Pledgor's Certificate of
Incorporation, except to the extent expressly set forth herein, and all of such
terms are and shall remain in full force and effect.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
Please indicate your agreement to the foregoing by executing this letter
agreement in the space provided below. This letter may be executed in
counterpart and the facsimile of the signature of any party shall constitute an
original signature of such party.
/s/ David Howell
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David Howell
/s/ Alfred Kniberg
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Alfred Kniberg
Acknowledged and agreed to:
ARISTOTLE SUB, INC.
/s/ John J. Crawford
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By: John J. Crawford
Its: President
THE ARISTOTLE CORPORATION
/s/ John J. Crawford
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By: John J. Crawford
Its: President