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Home My WebLink AboutR12-Redevelopment Agency RE~VELOPMENT AGENCY.~UEST FOR cQMMISSION/COUNCIL ACYkHt . From: ...'....... Glenda Saul, Executive Director Subject: AMENDING FINANCING AGREEMENT - BEST PRODUCTS CO. ""'-Pt: Redevelopment Agency Date: October 28, 1985 Synopsis of Previous Commission/Council ection: 12/17/84 Adopted Resolution 84-546 approving final bond documents 12/19/84 Bond closed in the amount of $4,000,000 Recommended motion: (Mayor and Common Council) -- RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO PROVIDING --.. FOR CERTAIN AMENDMENTS TO A FINANCING AGREEMENT; AND APPROVING SAID AMENDMENTS. ,&&t'~ ~pj Signature Contact person: GLENDA SAUL Phone: 383-5081 1 Supporting data attached: YES Ward: FUNDING REQUIREMENTS: Amount: $ N/A Project: M/CC No adverse Impact on City: Date: November 4, 1985 r'''ncil Notes: --. Agenda Item No. ~ / c1 0716K/RR ClcY OF SAN BERNARD{)O - REQU&::::r FOR COUNCIL AC'\.AN STAFF REPORT '.-- On December 19, 1984, the City of San Bernardino issued an Industrial Development Bond for Best Products Company. Included in the bond documents is the financial agreement which requires a "Net Worth Maintenance" under Subsection 6.8(b). Subsequent to the Agreement, Best Company revised their accounting format. This revised accounting format does not include certain vendor allowances which had the effect of lowering the net worth of the company by approximately $11,000,000. The company has not lost money; it is merely a technical accounting change. The bank and other parties involved have agreed to this technical language change in the bond documents. The company is requesting an amendment to the financing agreement, to avoid a technical default on the bonds. The amendment reflects the new net worth of the company based upon the revised accounting format. Bond counsel will be present to answer any questions you may have. .- 0716K/EB 11/4/85 "- BELOW IS A BRIEF RECAP OF THIS FUNDING: Amount: $4,000,000 Closed: 12/84 Project: 2nd and "G" Streets - Showroom lllercliandising facility 50,000 sq. ft. - containing office and wareliouse space Status: Under construction Reserve & Development Fee: 1% of $4,000,000 = $40,000 Jobs: Aprox 125 ,,"*'.... --- 75.0264 \,..... ......., .j San Bernardino 60,009-57A-2 - RESOLUTION NO. RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO PROVIDING FOR CERTAIN AMENDMENTS TO A FINANCING AGREEMENT; AND APPROVING SAID AMENDMENTS (BEST PRODUCTS CO., INC. PROJECT) WHEREAS, the Mayor and Common Council of the city of San Bernardino (the "Issuer") on December 17, 1984, adopted the following Resolution: ,""""" RESOLUTION NO. 84-546 A RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO, CALIFORNIA, APPROVING A CERTAIN FINANCING PURSUANT TO ORDINANCE NO. 3815 OF THE CITY; AUTHORIZING AND PROVIDING FOR THE ISSUANCE OF ITS CITY OF SAN BERNARDINO, INDUSTRIAL DEVELOPMENT REVENUE BONDS, SERIES 1984A (BEST PRODUCTS CO., INC. PROJECT), FOR THE PURPOSE OF PROVIDING FUNDS FOR THE ACQUISITION AND CONSTRUCTION OF SUCH PROJECT; APPROVING A CERTAIN FINANCING AGREEMENT WHICH MAKES CERTAIN PROVISIONS FOR THE BONDS AND FOR A LOAN OF THE PROCEEDS TO BEST PRODUCTS CO., INC.; APPROVING A FORM OF BOND AND AUTHORIZING ITS EXECUTION; AUTHORIZING SUCH OTHER RELATED DOCUMENTS AND FURTHER ACTION AS MAY BE NECESSARY TO CONCLUDE THE ISSUANCE, SALE AND DELIVERY OF SUCH BONDS; AND MAKING CERTAIN FINDINGS AND DETERMINATIONS IN CONNECTION THEREWITH "- (BEST PRODUCTS CO., INC. PROJECT) /'_' "- 1 JWB507:458.1 10/22/85 (JAS:rr) """'" - /"-,, .--.. - "- - r-.... San Bernardino 60,009-57A-2 '-" '..~,,,, WHEREAS, the Financing Agreement submitted and approved by said Resolution No. 84-546 contained certain financial covenants of Best Products, Co., Inc. (the "Company"); and WHEREAS, the Company has requested certain amendments, attached hereto as Exhibit A (the "Amendments") to said Financing Agreement, as a result in the modification of the Company's accounting procedures. NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: Section 1. The Financing Agreement, dated as of December 1, 1984, between the Company, the Issuer and Sovran Bank, N.A. (the "Purchaser"). is hereby modified by the Amendments. The Amendments, contained in the attached "Exhibit A," are hereby accepted and approved. Section 2. This Resolution shall take effect upon its adoption. 2 JWB507:458.1 10/22/85 (JAS:rr) l.... .-......., San Bernardino 60,009-57A-2 ......... ....,;' '- I HEREBY CERTIFY that the foregoing resolution was duly adopted by the Mayor and Common Council of the city of San Bernardino at a regular meeting thereof, held on the day of following vote, to wit: , 1985, by the AYES: Council Members NAYS: ABSENT: ABSTAIN: City Clerk ,....- '- The foregoing resolution is hereby approved this day of , 1985. Mayor of the City of San Bernardino, California Approved as to form: ~.~~~ .....", '-' 3 JWB507:458.1 10/22/85 (JAS:rr) " '. (" v ..-..., -....I '-' EXHIBIT A ~ '- -; BEST PRODUCTS CO., INC. FIRST AMENDMENT TO FINANCING AGREEMENT (San~Bernardina, CA Project) DATED' AS OF DECEMBER 1, 1984 . , THIS FIRST AMENDMENT, dated as of November 1, 1985, Is made by and among BEST PRODUCTS CO., INC., a Virginia corporation (the "Borrower"), the CITY OF SAN BERNARDINO, CALIFORNIA, a Charter City organized and existing under the Constitution of the State of California and the City Charter of the City of San Bernardino (the "Issuer"}, and SOVRAN BAN,K, N.A., a national banking association (the "Bond Purchase~"). ; , 1. Recitals. The parties hav~ entered into a financing agreement dated as of December 1, 1984 (the Flnan1ling Agreement) pursuant to which the Bond Purchaser has agreed to lend to the Borrower on the terms and conditions set forth therein. The parties desire to amend the Financing Agreement as set forth below. Terms used herein as defined terms will have the same meanings given to such terms In the Financing Agreement. 2. Amendments. Subsection G.8(b) of the Financing Agreement Is hereby amended in Its entirety to read as follows: .....'" . Net Worth Maintenance. Maintain at the end of each fiscal quarter in each fiscal year, Cbnsolidated Tangible Net Worth of at least the sum of: (a) the greater of (i) $320,000,000 or (Ii) $389,000,000 less the aggregate purchase price of all shares of Best Common Stock purchased by Best since the date of this Agreement, (b) fifty percent (5096) of Best's cumulative Consolidated net earnings for fiscal years after January 28, 1984, but without deducting any losses, and (c) seventy-five percent (7596) of the net proceeds received by Best from the sale for cash of additional shares of Common Stock of Best after January 28, 1984." 3. Ratification. Except as exp~essly amended hereby, all of the provisions of the Agreement are ratified and confirmed as In full force and effect.. , 4. Counterparts. This Amendment may be signed In any number of counterparts as if such signatures were upon the same instrument. '- "G.8(b) WITNESS the fOllowing signatures. BEST PRODUCTS CO., INC. SOVRAN BANK, N.A. . I By: James J. Spencer Treasurer Title: - '- 1102/3/5753/2/8 , ',""" , " l......- I ....."...,. '- r"".'" '- I' ..-"- '-" 1 l102/4/5753/2/tJ " " ......"./ CITY OF SAN BERNARDINO, CALIFORNIA By: Title: I , , I . .. - r"",,- . I~,...... ~ -...I '- DRAP~ september xx, .1985 Ms. Elizabeth R. Barris Assistant Vice President Bank of virginia 800 East Main street Richmond, VA 23219 Re: Revolving Credit Agreement, dated as of June 29, 1984. as amended, Section 5.1.1 Dear Whiz: In accordance with the terms of the Revolving Credit Agreement. I am enclosing seven copies of each of the following: Form 10-Q for the quarter ended August 3, 1985 Fiscal 1985 Second Quarter Report to Shareholders Officers Certificate of Complianc~ with the financial covenants 1. 2. . .3. '-" 4. 5. 6. 7. Schedule of Financial Covenants as related to Best Products Fiscal 1985 Quarterly Forecast Pro forma third and fourth quarter covenant calculations Proposed Third Amendment to Credit Agreement Dated as of June 29, 1984 ' Based on the projections contained in Exhibit 5. Best does not curtently forecast sufficient reported earnings during the third quarter to be in compliance with the Consolidated Tangible Net Worth Maintenance covenant as reflected in the pro forma covenant calculations contained in Exhibit 6. This situation is due primarily to the fact that Best has made ~he following changes in its accounting policie~ since the creation of this covenant: '--.. c ~~. I..,....- .'......, .....,I , .....,~ September xx, 1985 _ Page Two ,,- A. In January, 1985, the Company changed its method of accounting for its electronics inventory. The financial statements for fiscal years prior to 1984 have been restated. The effect of this change was a reduction in stockholders equity from the $422.7 million amount reported in our Fiscal 1983 Annual Report to the $415.0 million amount as restated in our Fiscal 1984 Annual Report. The amount of the adjustment being $7,746,000. B. The second change in our accounting policies occurred during the First Quarter of Fiscal 1985 when the Company modified the accounting for the recognition of certain vendor allowances. Although earnings for the entire fiscal year will not be affected by this modification, it will continue to lower the reported earnings during the first three quarters of this and subsequent fiscal years. Based on our current projections the effect of this change will be to lower earnings $3,454,000 through the end of the third quarter. This compares with a net effect through the third quarter of Fiscal 1984 of $4 ,505 ,000. Based on the above, we hereby request that each bank participating in the Revolving Credit Agreement amend the net worth covenant language to reflect the combined $11.0 million effect of the above stated accounting changes. This amendment will bring this covenant back into the same relative position as contemplated at its creation and will position the amended required base of $389.0 million ahead of the $375.0 million and $385.0 million base requirements contained in our major loan agreements which have been closed subsequent to these accounting changes. . To preclude the possibility of Best having to disclose a default under this agreement, we have enclosed copies of the proposed amendment and request that each bank execute and return them prior to November 1, 1985. , If you have any questions concerning any of the enclosed information or the amendment request please do not hesitate to contact me. '- 'very truly yours. BEST PRODUCTS CO., INC. ",- '-' James J. Spencer Secretary and Treasurer Enclosures