GE Capital
GE CAPITAL COMMERCIAL FUNDING
101 SOUTH MAIN STREET, SUITE 402
HIGH POINT, NC 27260
336 889-7272, FAX 335 889-2020
November 21, 1999
Mark Antonucci, CEO
Method Products Corporation
1301 W. Copans Road
Suite F-1
Pompano Beach, FL 33064
Dear Mr. Antonucci:
In accordance with the information previously provided, GE Capital Commercial
Funding, Inc. ("CF) is pleased to confirm its interest in arranging a credit
facility (the "Facility") as set forth below. Please understand that this letter
is simply an indication of interest and does not constitute a commitment nor an
offer from General Electric Capital Corporation ("Lender") to enter into a
binding contract nor an undertaking to provide financing.
SUMMARY OF PROPOSED TERMS
BORROWER Method Products Corporation, a Florida operating company
("Borrower")
AMOUNT OF FACILITY Up to $600,000.00
LENDING FORMULA Up to 85% on Borrower's eligible accounts. GE Capital would
retain the right from time to time to establish advance
rates, standards of eligibility and reserves against
availability (including reserves for increased dilution.
USEOF PROCEEDS For working capital purposes, refinancing existing
working capital indebtedness owing to NationsBank and trade
payables over 60 days past due and other corporate purposes
to be determined.
INTEREST Prime Rate plus (2%). The Prime Rate would be defined as
the latest month-end published rate which normally appears
In the "Money Rates" column of the Wall Street Journal. The
applicable Prime Rate for the month in which the initial
loan is made shall be the Prime Rate in effect on the last
day of the previous month and the applicable Prime Rate for
each month thereafter shall the Prime Rate in EFFECT ON the
last day of the preceding calendar month. All interest
expense would be payable monthly in arrears calculated on
the basis of a 360 day year and actual days elapsed.
A minimum monthly INTEREST COMPONENT WILL be charged equal
to $4,375.00 and is subject to change according to
flucruations in the Prime Rate. Collections would be
credited four (4) business days following Lender's receipt
of good funds.
DEFAULT RATES Default interest at two percent (2%) above the rate
FEES otherwise applicable. Closing Fee of $6,000.00 payable at
closing.
Unused Facility Fee equal to one half percent ().05%) per
annum (calculated on the basis of a 360-day year and actual
days elapsed) on the average unused daily balance of the
Credit Facility, payable monthiy in arrears.
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EXPENSES
Regardless of whether the Facility is approved or closes, Borrower agrees to pay
upon demand to CF all out-of-pocket expenses (including all legal, and other
consultant costs and fees and expenses) incurred in connection with this
proposal letter and the Facility and a field examination fee of $600 per person
per diem, plus actual out-of-pocket expenses in connection with the conduct of
CF's field audit (collectively, the "Expenses").
DEPOSIT
Upon acceptance of this letter, Borrower will provide an initial underwriting
deposit of $3,000.00 (the "Initial Underwriting Deposit'), against which will be
charged the Expenses. CF may request additional underwriting deposits (such
additional underwriting deposits, together with the Initial Underwriting Deposit
the 'Underwriting Deposif) -against which will be charged any additional
expenses in the event the Initial Underwriting Deposit has been fully utilized
to cover expenses, Any unused balance of the Underwriting Deposit will be:
a) Credited to the loan account of Borrower If the Facility is approved and
closes; or
b) Returned to Borrower if the credit approval for the Facility is not
obtained by Lenderl by reason of circumstances other than those set forth
in clause (d) below; or
c) Retained by Lender if credit approval is obtained for the Facility and the
Faclliy does not close within forty-five (45) days from the date of such
approval, whether as a result of the Borrower's election for any reason not
to do business with Lender or a failure to fulfill any of the conditions of
the proposed Facility as approved by Lender, or
d) Retained by Lender as a fee If at any time during the credit review process
Borrower intentionally misleads Lender or fails to disclose material
infiormation or elects to remain with its existing Lender or obtains a
credit facility from another source or otherwise terminates Lender's
efforts as described herein.
The preceding summary of proposed terms and conditions is not intended to be
all-inclusive. Any terms and conditions Which are not specifically addressed
above would be SUBJECT TO future negotiations. This letter supersedes any and
all discussions and understandings, written or oral, between or among CF. Lender
or their affiliates.
CONFIDENTIALITY
Except as required by law, neither this letter nor its contents will be
disclosed by the Borrower publicly or privately except to those individuals who
are the Borrower's officers, employees or advisors who have a need to know as a
result of being involved in the Credit Facility and then only on the condition.
that such matters may not, be further disclosed. No one shall, except as
required by law, use the name of, or refer to, CF, Lender or any of their
affiliates in any correspondence, discussions, advertisement or disclosure made
in connection with the Facility without the prior consent of CF or Lender.
<PAGE>
INDEMNITY
Regardless of whether the Facility is approved or closes, Borrower agrees to
Indemnify and hold CF and Lender, their affiliates and the directors, officers,
employees, and representatives of any of them, harmless from and against all
claims, expenses (including, but not limited to, attomeys' fees), damages, and
liabilities of any kind which may be incurred by, or asserted against, any such
person in connection with, or arising out of, this proposal letter, the
Facility, any other related financing, documentation, dispute's or environmental
liabilities, or any related investigation, litigation, or proceeding. Under no
circumstances shall CF, Lender or any of their affiliates be liable for any
punitive, exemplary, consequential or indirect damages which may be alleged to
result in connection with this letter, or the Facility or any other financing.
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Collateral Monitoring Fee of $12,600.00 per annum, payable
monthly in twelve equal installments beginning the last of
the month of the closing date and on each anniversary
thereof.
Field Examination Fee of $750 per person per diem plus out
of pocket expenses in connection with the conduct of our
initial and ongoing field examinations.
TERM AND TERMINATION One (1) year with an automatic renewal annually thereafter
unless earlier terminated (a) by GE Capital at any time
upon sixty (60) days written notice or without notice upon
default or (b) by the Borrower at any time upon sixty (60)
days written notice and the Payment of the Early
Termination Fee. Early Termination Fee equal to the amount
of the Facility times two percent ( 2 %) within the first
year or any renewal year. If terminationoccurs at the end
of the original one year term or any annual renewal, no
such early termination fee is payable.
SECURITY Fully perfected first priority lien and security, interest
in all existing and hereafter-acquired assets of Borrower.
GUARANTOR Mark Weitsman, Michael Beaubien and Mark Antonucci would
provide payment guarantees.
FINANCIAL REPORTING Monthly: Internally prepared financial statements.
Yearly: Audited financial statements (including any
management letter) prepared by an accounting firm
acceptable to Lender, as well as an annual approved
operating plan Including monthly cash flow projections and
excess borrowing availability for the following. year.
AS REQUIRED: Borrowing Base Certificate, collateral
reports, and such other information and reports requested
by and acceptable to Lender.
OTHER TERMS AND CONOITIONS (All to be acceptable to Lender)
- Cash Management System, including the establishment of lockbox account
arrangements with daily sweeps of cash to Lender.
- Satisfactory completion of all business, environmental and legal due
diligence and Lendees Internal approval process (including collateral
audit).
- Commercially reasonable insurance protection for the Borrower's industry.
size and risk and the collateral protection with Lender named as loss payee
(property / casualty) and additional Insured Liability); and
non-renewal/cancellation/amendment riders to provide 30 days advance notice
to Lender.
- General and collateral releases from prior lenders; customary corporate and
estoppel certificates; landlord/mortgagee/ bailee waivers/, and consignment
or similar filings.
- Limitations on commercial transactions, management agreements' service
agreements, and borrowing transactions between Borrower and its officers,
directors, employees and affiliates.
- Limitations on, or prohibitions of, cash dividends, other distributions to
equity holders, payments in respect of subordinated debt payment of
management fees to affiliates and redemption common or preferred stock. .
Prohibition of a direct or indirect change in control of Borrower.
Acceptable final documentation. satisfactory completion of a GE Capital
"Year 2000 Customer Survey" prior to closing.
- Governing law: North Carolina
- Financial covenants to include without limitation a fixed charge coverage
ratio and maximum capital expenditures limitation. . Clean up of all
accounts payable in excess of 60 days beyond terms at closing.
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So that we may begin our due diligence and field audit
please sign and return this letter, along with your Initial
Underwriting Deposit before November 19, 1999.
Sincerely,
GE CAPITAL COMMERCIAL FUNDING, INC.
By: Doug Misner
TITLE: VICE PRESIDENT
AGREED AND ACCEPTED THIS 22 day of November, 1999
METHOD PRODUCTS CORP.
Name: Mark Antonucci
Title: CEO
