EXHIBIT 10.7
Amendment to Loan and Security Agreement dated April 16, 2002
THIS MODIFICATION AGREEMENT, dated as of April 16, 2002, by and between
BUSINESS ALLIANCE CAPITAL CORP., a Delaware Corporation, with a place of
business at 000 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx 00000, hereinafter
called "BACC," and K-TRONIK N. A. INC. a Nevada corporation, (formerly
known as K-Tronik Int'l Corporation), with its chief executive office at
000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000, hereinafter called
"Borrower."
RECITALS
WHEREAS, BACC and Borrower entered into a Loan and Security
Agreement dated as of September 17, 1998 (as agreement as heretofore
amended and modified from time to time the "Loan Agreement") which sets
forth the terms and conditions of a $1,500,000.00 revolving loan
facility by BACC to Borrower; and
WHEREAS, certain events of default exist under the Loan Agreement
and by letter dated March 19, 2002 BACC notified Borrower of the
existence of Events of Default and reserved its rights and remedies as a
consequence thereof, and Borrower has applied to BACC for a waiver of
said Events of Default and for an extension to June 30, 2003 of the term
of said revolving credit facility, and for other modifications to the
terms set forth in the Loan Agreement; and
WHEREAS, BACC has approved the application of the Borrower on the
terms and condition set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto adopt the above recitals and
agree as follows:
1. Capitalized terms not defined herein but defined in the Loan
Agreement shall have the same meanings ascribed to such terms in the
Loan Agreement.
2. The definition of Termination Date in section 1.1 of the Loan
Agreement is hereby modified to read as follows:
Termination Date means (a) June 30, 2003 unless such date is
extended pursuant to section 3.1 hereof, and if so extended on one or
more occasions the last date of the last such extension, or (b) if
earlier terminated by BACC pursuant to section 9.1 hereof, the date of
such termination.
3. Section 1.1 of the Loan Agreement is hereby modified to add the
following definitions of "Parent", "Stock Offering" and "Stock
Offering Date":
Parent means K-Tronik International Corp., a Nevada
corporation, (formerly known as LMC Capital Corp.), and the owner of
100% of the capital stock of Borrower.
Stock Offering means the sale, after January 1, 2002, of
securities of Parent.
Stock Offering Date means the date on which Parent obtains
funds from a Stock Offering.
4. Sections 2.1(A), 2.7, 3.1 and 3.2 of the Loan Agreement are hereby
modified to read as follows:
2.1 (A) Revolving Advances; Advance Limit. (A) Revolving
Loans. Upon the request of Borrower, made at any time or from time to
time during the Term and so long as no Event of Default has occurred and
is continuing, BACC may, in its sole and absolute discretion, make
Advances in an amount up to (a) (i) eighty percent (80%) of the aggregate
outstanding amount of Eligible Accounts or (ii) eighty five percent (85%)
of the aggregate outstanding amount of Eligible Accounts if Borrower has
in place credit insurance, which BACC in writing deems satisfactory,
covering Borrower's Accounts and BACC is the beneficiary of the
applicable credit insurance policies, plus (b) (i) through the earlier of
(a) September 30, 2002 or (b) the Stock Offering Date, (the earlier of
said dates the "Reduction Date"), the lesser of (1) fifty percent (50%)
of the value of the Eligible Inventory or (2) Five Hundred Thousand
Dollars ($500,000.00); and (ii) from the Reduction Date on the lesser of
(1) twenty five percent (25%) of the value of the Eligible Inventory or
(2) Two Hundred Fifty Thousand Dollars ($250,000.00); provided, however,
that (a) in no event shall the aggregate amount of the outstanding
Advances be greater than, at any time, the amount of One Million Five
Hundred Thousand Dollars ($1,500,000.00) (the Advance Limit) and provided
further that (b) the maximum amount of Advances against Eligible
Inventory shall not through the Reduction Date exceed forty percent (40%)
of the total Advances and from the Reduction Date on not exceed twenty
five percent (25%) of the total Advances.
2.7 Facility Fee. In consideration of BACC's entering into
this Agreement, Borrower shall on each June 30th during the Term,
including any Renewal Term, pay BACC a facility fee (the Facility Fee) of
one percent (1%) of the Advance Limit plus the original principal balance
of any term loans and Advances other than under the Revolving Credit
Facility.
3. TERM
3.1 Term and Renewal Date. This Agreement shall become
effective upon execution by BACC and continue in full force through June
30, 2003 and from year to year thereafter (a "Renewal Term") if BACC, at
its option, in writing agrees to extend the term for one (1) year from
the then Termination Date, provided that Borrower has not exercised its
termination right in accordance with this section 3.1. Borrower may
terminate the Term on the then Termination Date by giving BACC at least
thirty (30) days prior written notice by registered or certified mail,
return receipt requested. In addition, BACC shall have the right to
terminate this Agreement immediately at any time upon the occurrence of
an Event of Default. No such termination shall relieve or discharge
Borrower of its duties, Obligations and covenants hereunder until all
Obligations have been paid and performed in full, and BACC's continuing
security interest in the Collateral shall remain in effect until the
Obligations have been fully and irrevocably paid and satisfied in cash
or cash equivalent. On the Termination Date of this Agreement, the
Obligations shall be immediately due and payable in full.
3.2 Early Termination Fee. If the Term is terminated by
BACC upon the occurrence of an Event of Default, or is terminated by
Borrower except as provided in Section 3.1, in view of the
impracticability and extreme difficulty of ascertaining actual damages
and by mutual agreement of the parties as to a reasonable calculation of
BACC's lost profits as a result thereof, Borrower shall pay BACC upon
the effective date of such termination a fee in an amount equal to four
percent (4.0%) of the Advance Limit if such termination occurs on or
prior the expiration of the Termination Date. Such fee shall be
presumed to be the amount of damages sustained by BACC as the result of
an early termination and Borrower acknowledges that it is reasonable
under the circumstances currently existing. The fee provided for in
this Section 3.2 shall be deemed included in the Obligations.
Notwithstanding the foregoing, there shall be no termination fee if
Borrower terminates the facility from funds obtained through a Stock
Offering. Notwithstanding the foregoing if after the date hereof
Borrower obtains a bonafide commitment or offer of a commitment from a
commercial bank (which shall not include a commercial finance company
owned by a commercial bank) for replacement financing of the revolving
credit facility provided for herein, Borrower shall apply to BACC for
financing on the same terms and conditions of said commitment or offer
and shall furnish to BACC a copy thereof (the "Offer"). BACC shall have
twenty (20) days within which to accept or decline said application. If
BACC declines said application, Borrower may consummate the financing
with the third party who made the Offer on the same terms as set forth
in said Offer and terminate the Term without payment of a termination fee.
5. Section 7.7 of the Loan Agreement is hereby modified to read as
follows:
7.7 Change in Ownership. (A). Allow Parent to own less than
100% of the capital stock of Borrower.
(B) Allow Xxxxxx Xxx to own less than 19% of the outstanding
capital stock of Parent.
(C) Allow ETIFF Holdings, LLC. to own less than 31% of the
outstanding capital stock of Parent.
(D) Allow Eiger Technologies, Inc. to own less than 100% of the
outstanding equity interests of ETIFF Holdings, LLC.
6. Article VIII of the Loan Agreement is hereby modified to add Section
8.16 as follows:
8.16 Change in Management. If Xxxxxx Xxx ceases to be engaged as
president and chief executive officer of Borrower.
7. Borrower acknowledges it has no defense, set-off or counterclaim
against payment of any sums owing under the Loan Documents or the
enforcement of any of the terms of the Loan Agreement or other Loan
Documents.
8. Borrower represents that:
(a) each and every representation heretofore made by Borrower in
the Loan Agreement is true and correct as of the date of this
Modification Agreement,
(b) no consent or approval of, or exemption by any Person is
required to authorize, or is otherwise required in connection with the
execution and delivery of this Modification Agreement and the other Loan
Documents provided for herein, which has not been obtained and which
remains in full force and effect,
(c) Borrower has the power to execute, deliver and carry out
this Modification Agreement and all documents executed in connection
herewith, and this Modification Agreement and such other documents are
valid, binding and enforceable as against Borrower in accordance with
their terms,
(d) no material adverse change in the financial condition of
Borrower has occurred since the date of the most recent financial
statements of Borrower submitted to BACC, and the information contained
in said statements and reports is true and correctly reflects the
financial condition of Borrower and such Obligors as of the dates of the
statements and reports, and such statements and reports have been
prepared in accordance with GAAP and do not contain any material
misstatement of fact or omit to state any facts necessary to make the
statements contained therein not misleading,
(e) No Default or Event of Default exists under the Loan
Agreement except as waived as set forth below, and
(f) Exhibit A annexed hereto fully and accurately describes the
corporate structure and ownership of Borrower, the Parent, and the
holders of stock or equity interests of the Parent and ETIFF Holdings,
LLC.
9. Borrower hereby confirms the security interests and liens granted
by Borrower to BACC in and to the Collateral in accordance with the Loan
Agreement and other Loan Documents as security for its Obligations to
BACC.
10. In consideration of BACC entering into this Modification Agreement
and in accordance with Section 2.7 of the Loan Agreement Borrower shall
pay to BACC a Facility Fee of $15,000.00, which fee shall be deemed
fully earned on the execution hereof. Said Facility Fee shall be
payable on June 28, 2002. Notwithstanding the foregoing the unpaid
balance of said Facility Fee shall be payable in full on the earlier of
(a) termination of the Loan Agreement or (b) at BACC's option upon
BACC's declaration of an Event of Default. Further in consideration of
BACC entering into this Agreement Borrower shall (A) cause Parent to
execute and deliver to BACC, and to remain in full force and effect, a
guaranty , in form and substance satisfactory to BACC, of all
Obligations of Borrower to BACC, and (B) cause ETIFF Holdings, LLC. to
execute and deliver to BACC, and to remain in full force and effect, a
guaranty, in form and substance satisfactory to BACC, of an amount equal
to the lesser of $250,000 or the amount by which the Advances exceed 85%
of Eligible Accounts.
11. Borrower agrees to pay any and all expenses, including reasonable
counsel fees, including allocated fees of in-house counsel, and
disbursements, incurred by BACC in connection with the preparation and
execution of this Modification Agreement and all other documents
executed in connection herewith.
12. This Modification Agreement is intended to supplement and modify
the Loan and Security Agreement dated as of September 17, 1998 between
BACC and Borrower as heretofore modified and the rights and obligations
of the parties under said Loan and Security Agreement shall not in any
way be vacated, modified or terminated except as herein provided. All
terms and conditions contained in each and every agreement or promissory
note or other evidence of indebtedness of Borrower to BACC are
incorporated herein by reference. If there is a conflict between any of
the provisions heretofore entered into and the provisions of this
Modification Agreement, then the provisions of this Modification
Agreement shall govern.
13. This Modification Agreement shall be construed in accordance
with the substantive laws of the State of New Jersey without regard to
conflict of laws.
14. Borrower acknowledges that certain Events of Defaults as a
consequence of the following, (the "Specific Events of Default"):
(a) Borrower changed its name without obtaining the consent of
Lender, contrary to Section 7.2 of the Loan Agreement; and
(b) There has been a change in ownership of the capital stock of
Borrower without the consent of Lender, contrary to Section 7.7
of the Loan Agreement.
(c) Certain subordinated debt owing by Borrower was "repaid" by
being converted into capital stock of Parent.
(d) Borrower has sold goods on a consignment basis of
approximately $9,000 to a customer located in Canada.
BACC hereby waives the existence of an Event of Default solely as a
consequence of the existence of the Specific Events of Default. The
foregoing waiver shall be limited to the Specific Events of Default set
forth above, and shall not apply to any other Events of Default, if any
so exist, or any future violation of any provisions of the Loan
Agreement or other Loan Documents. In consideration of BACC granting
the aforesaid waiver Borrower shall pay to BACC contemporaneous with the
execution hereof a waiver fee of Fifteen Thousand Dollars ($15,000.00).
IN WITNESS WHEREOF, the parties hereto have caused this
Modification Agreement to be executed and delivered as of the day and
year first above written.
K-TRONIK N. A. INC.
By:
name:
title:
BUSINESS ALLIANCE CAPITAL CORP.
By:
name:
title:
Exhibit A
Stock Ownership
Entity Stock Holder Percentage of equity owned
Borrower Parent 100%
Parent ETIFF Holdings, LLC 63.6%
Xxxxxx Xxx 29.7%
Third parties 06.7%
ETIFF Holding, LLC Eiger Technologies, Inc. 100%
