EXHIBIT 10
April 1, 2008
Elk Associates
Funding Corporation
747 Third Avenue
New York, NY 10017
Re: $16,000,000 line of credit
Gentlemen or Ladies:
Citibank, N.A. (“Citibank”) is pleased
to advise you it holds available for Elk Associates Funding
Corporation (the “Borrower”), a corporation organized
and in good standing under the laws of the State of New York,
a line of credit (the “Line”) in the amount of
$16,000,000, subject to the following terms and conditions:
1.
Description of the Line :
Loans provided under the Line shall be evidenced by
Citibank’s Master Note (the “Note”) in the amount
of the Line. Each advance thereunder shall bear interest at a rate
to be elected by the Borrower at the time of each request for an
advance equal to either:
(i)
Prime Rate Option : A rate of interest equal
to ½% below the prime rate of interest as published in the
Money Rates column of the Wall Street Journal from time to time
(the “Prime Rate”). Any change in the Prime Rate
shall take effect on the date of the change in the Prime Rate,
or
(ii)
LIBOR Rate Option : A rate of interest equal
to the LIBOR Rate, as such term is defined in the Note, plus a
margin of 150 basis points for interest periods of 30, 60 or 90
days.
Interest on the unpaid principal balance of the
Note from time to time outstanding shall be payable monthly in
arrears commencing on the first day of the month following the date
of the first advance under the Note. Any advance under the
Line made by Citibank in its discretion shall be in an amount not
less than $100,000 for Prime Rate advances and $250,000 for LIBOR
Rate advances.
In the case of a Prime Rate advance, such advance
may be prepaid, in whole or in part; in increments of not less than
$100,000, without premium or penalty.
The Borrower agrees to indemnify Citibank and hold
Citibank harmless from any loss or expense that Citibank may
sustain or incur, as more particularly described in the Note should
the Borrower make any prepayment of the principal of an advance
hereunder bearing interest at the LIBOR Rate or in the event of a
default by the Borrower in the payment or performance of any terms
of the Note or this line letter.
No advance may be converted to or continued as a
LIBOR Rate advance on the Maturity Date, nor shall any advance be
converted to or continued as a LIBOR Rate if the interest period
would extend more than thirty (30) days beyond the Maturity
Date.
Notwithstanding anything to the contrary contained
herein, availability under the Line shall be subject to such
limitations as may be imposed by the U.S. Small Business
Administration (the “SBA”) from time to time pursuant
to a borrowing base formula established and monitored by the
SBA.
In addition, availability under the Line shall be
reduced by the greater of (a) a $119,000 assumed. exposure
under the $5,000,000 swap agreement between the Borrower and
Citibank due October 14, 2008, plus the assumed exposure on any
hereafter created swap agreements or (b) the Bank’s
actual liability or obligations in connection with such swap
agreement.
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The Borrower acknowledges and agrees that the
Line is uncommitted and requests for advances or extensions of
credit thereunder shall be approved in the discretion of
Citibank, which may refuse to make an extension of credit under
the Line at any time without prior notice to the Borrower, and
that the performance or compliance by the Borrower of the
agreements contained in this letter, or in any other document or
agreement evidencing or securing such advances or extensions of
credit, shall not obligate Citibank to make an advance or
provide an extension of credit thereunder.
Subject to the terms and conditions hereof and the
Note, the Line shall be available for advances until
December 31, 2008 (the “Maturity Date”). The
Borrower shall pay to the Bank on or before the Maturity Date, the
aggregate unpaid principal amount of all advances, extensions of
credit and financial accommodations under the Line, together with
interest and costs thereon, provided, however, that with respect to
any LIBOR Rate advances outstanding on the Maturity Date, the
Borrower shall pay to the order of the Bank the unpaid principal
amount of such LIBOR Rate advances, together with interest and
costs thereon, on or before the last day of the Interest Period
with respect thereto, provided further however, that in no event
shall such interest Period extend more than thirty (30) days beyond
the Maturity Date.
2.
Purpose of the Vine :
The purpose of the Line shall be to support a
portion of the loan portfolio of the Borrower.
3.
Guarantors :
Repayment of all loans, extensions of credit and
financial accommodations provided under the Line together with
interest and costs thereon shall be guaranteed, jointly and
severally, by Ameritrans Capital Corporation
(“Ameritrans”), EAF Holding Corporation and Elk Capital
Corporation (the “Guarantors”) pursuant to
Citibank’s Guarantee of All Liability.
4.
Security for the Line :
The Line shall be secured by a first priority
security interest in all assets am personal property of the
Borrower and the Guarantors pursuant to Citibank’s General
Security Agreement and duly filed UCC-1 Financing Statements.
The priority of Citibank’s security interest shall be
ranked equally with the security interest in favor of Israel
Discount Bank of New York (“IDB”) and Bank Leumi USA
(“Bank Leumi”) pursuant to an intercreditor agreement
among the banks satisfactory to Citibank.
5.
Conditions Precedent :
Prior to the Borrower’s initial request for
an advance under the Line, it shall have provided to Citibank, if
it has not already done so:
(i)
A copy of the resolutions passed by the Borrower’s
Board of Directors certified by its Secretary as being in full
force and effect authorizing the borrowing described herein and the
execution of all documents and agreements required by Citibank to
evidence and secure the Line;
(ii)
Copies of the resolutions passed by the Guarantors Board
of Directors, certified by their Secretary, as being in full force
and effect authorizing the delivery of the guarantee described
herein; and
(iii)
A copy of the certificate of incorporation of the
Borrower.
6.
Financial Reporting :
The Borrower shall provide to Citibank:
(i)
As soon as available, but in any event within one hundred
twenty (120) days after the last day of each fiscal year, a balance
sheet of the Borrower, as of such last day of the fiscal year,
and
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statements of income and retained earnings and cash
flows for such fiscal year prepared in accordance with generally
accepted accounting principles consistently applied, in reasonable
detail, such statements to be audited by a firm of independent
certified public accountants satisfactory to Citibank.
(ii)
As soon as available, but in any event within one hundred
twenty (120) days after the last day of each fiscal year, copies of
Form 10-K of Ameritrans, filed or to be filed with the Securities
and Exchange Commission, which shall include consolidated and
consolidating balance sheets and consolidated and consolidating
statements of income and retained earnings and cash flows for such
fiscal year, each prepared in accordance with generally accepted
accounting principles consistently applied, in reasonable detail,
such statements to be audited by a firm of independent certified
public accountants satisfactory to Citibank.
(iii)
As soon as available, but in any event within seventy
five (75) days after the end of the Borrower’s first, second
and third fiscal quarter, a balance sheet of the Borrower, and
statements of income and retained earnings and cash flows of the
Borrower for such quarters, and the portion of the fiscal year
through such date, all in reasonable detail, such statements to be
prepared by the Borrower in accordance with generally accepted
accounting principles consistently applied.
(iv)
As soon as available, but in any event within ninety (90)
days after the end of each fiscal quarter, copies of Form 10-Q of
Ameritrans, filed or to be filed with the Securities and Exchange
Commission, which shall include consolidated and consolidating
balance sheets and consolidated and consolidating statements of
income and retained earnings and cash flows for such quarter, each
prepared in accordance with generally accepted accounting
principles consistently applied, in reasonable detail, such
statements to be audited by a firm of independent certified public
accountants satisfactory to Citibank.
Each of the financial statements specified in
Sections (i), (ii), (iii) and (iv) above shall be accompanied
by a certificate signed by the president or chief financial officer
of the Borrower to the effect that such statements fairly present
the financial condition of the Borrower and Ameritrans as of the
balance sheet date and results of the operations of the Borrower
and Ameritrans for the period(s) then ended in accordance with
generally accepted accounting principles consistently applied.
(v)
As soon as available, but in any event within sixty (60)
days after the end of each calendar quarter, (a) copies of the
Borrowing Base Certificates submitted quarterly by the Borrower to
the SBA demonstrating compliance with the SBA borrowing formula and
(b) copies of the Borrowers loan lists and copies of custodian
reports generated by IDB, all in form and substance satisfactory to
Citibank.
(vi)
As soon as available, but in any event within thirty (30)
days after the end of each calendar month, copies of the
Borrower’s delinquency reports, all in form and substance
satisfactory to Citibank.
(vii)
Such other financial or additional information as
Citibank may from time to time request.
7.
Special Requirements :
a.
The Borrower agrees to maintain at all times:
(i)
a tangible net worth (the sum of capital surplus, earned
surplus, capital stock and such other items as are allowable under
generally accepted accounting principles minus deferred charges,
intangibles, receivables due from stockholders, officers or
affiliates and treasury stock) in an amount not less than
$12,500,000.
(ii)
a maximum leverage ratio (the ratio of total
unsubordinated liabilities to “capital base”) of not
greater than 2.0 to 1.0. Capital Base shall mean the sum of
capital surplus, earned surplus, capital stock and such other items
as are allowable under generally accepted accounting principles and
subordinated
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liabilities minus deferred charges, intangibles,
receivables due from stockholders, officers or affiliates and
treasury stock.
b.
The Borrower covenants and agrees not to accept credit
facilities from institutional or other lenders of funds in an
amount in excess of $40,000,000 in the aggregate for all such
credit facilities.
c.
The Borrower agrees that, with the exception of medallion
loans which shall constitute at all times not less than sixty
percent (60%) of the Borrower’s total outstanding loan
portfolio, loan concentrations in any other single industry shall
not exceed twenty live percent (25%) of the Borrower’s total
outstanding loan portfolio. Calculations of the Borrower’s
total outstanding loan portfolio for purposes of the foregoing
sentence shall not include corporate loan participations with
Velocity Capital Advisors. Individual diversified loans shall
not exceed $1,000,000 in the aggregate at any one time outstanding
($2,000,000 if such loans are secured by a first mortgage loan) and
total diversified loans shall not exceed $22,500,000, at any one
time outstanding, in each case including loans to affiliated
borrowers and companies with common ownership and excluding
corporate loan participations with Velocity Capital Advisors.
Corporate loan participations with Velocity Capital Advisors
shall not exceed $15,000,000 at any one time outstanding.
d.
The Borrower agrees that any security interest in its
assets and personal property that it may have previously granted or
may hereafter grant to the SBA will rank junior to the security
interest in favor of Citibank, IDB and Bank Leumi pursuant to a
form of subordination agreement satisfactory to Citibank.
e.
The Borrower agrees that as of September 30, 2008 no
corporate loan participation transactions will be included on the
Borrower’s balance sheet, provided, however, that such
transactions are permitted on the Ameritrans’ balance
sheet.
f.
The Borrower agrees that the Line shall be “cross
defaulted” to the obligations of the Borrower to IDB and Bank
Leumi such that the occurrence of a default or event of default
under any of such obligations shall constitute a default under the
Line and the Note.
g.
The Borrower agrees to permit Citibank or its agents or
representatives to conduct an annual field examination of the
Borrower’s books and records and operations, which field
examination shall disclose no material adverse facts or
circumstances not currently known to Citibank. The Borrower
authorize and direct Citibank to charge any of its accounts
maintained at Citibank for such cost and expense.
h.
The Borrower agrees to operate its business in such a
manner as not to sustain or incur a net loss in any fiscal
year.
8.
XXXXXX :
[Confidential and Proprietary Information redacted]
In the event that the Borrower is not in compliance on
October 1, 2008 with clause 7(e) prohibiting the covenant
prohibiting corporate loan participations on the Borrower’s
balance sheet, the Borrower shall pay XXXXXXXXXXXXXXX at that
time.
9.
Integration :
This letter amends, replaces and supersedes that
certain letter agreement dated December 22, 2006 (the
“Original Letter Agreement”) between the Borrower and
Citibank, which shall be of no further force and effect, The terms
and conditions of this letter agreement and the rights and remedies
of Citibank under this letter agreement shall apply to all of the
obligations incurred prior to the date hereof pursuant to the
Original Letter Agreement, in addition to any obligations incurred
on or after the date hereof. This letter agreement does not
constitute and shall not be construed to evidence a novation of or
a payment and readvance of any all loans, extensions of credit or
financial accommodations, interest or other sums, if any
outstanding under the Line prior to the date hereof, it being the
intention of the Borrower, the Guarantors and Citibank that this
letter agreement, together with the Line, provide for the terms and
conditions of, and evidences, the same loans, extensions of credit
or financial accommodations as was outstanding prior to the date
hereof, in addition to any loans, extensions of credit or financial
accommodation
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incurred on or after the date hereof. The
indebtedness and obligations incurred prior to the date hereof, in
addition to any incurred on or after the date hereof, shall be and
shall continue to be secured as set forth in the Line and the liens
granted to Citibank pursuant to the Line shall continue in full
force and effect during the term of the Line and any renewals
thereof.
10.
Acceptance :
If the foregoing is acceptable, please so indicate
by signing and returning this letter together with the
administration fee before April 15, 2008, the date this letter
will otherwise expire, unless extended in writing by Citibank.
Very truly yours,
CITIBANK, N.A.
By:
/s/ Kel Christensen
Kel Christensen
Vice President
Agreed and Accepted
this
15 th day of April, 2008
ELK ASSOCIATES FUNDING CORPORATION
By:
/s/ Gary C. Granoff
Name: Gary C. Granoff
Title:
President
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CITIBANK MASTER NOTE (Eurodollar/Prime Rate)
1
This Note replaces and supersedes that certain Master Note dated
December 22, 2007 in the principal amount of $16,000,000 from the
undersigned to the Bank.
$16,000,000
Date:
, 2008
FOR VALUE RECEIVED, the undersigned, a New
York Corpo
