EXHIBIT 10.20
LOAN AGREEMENT dated as of September 30, 2002 among STRONGHOLD
TECHNOLOGIES, INC., a New Jersey Corporation ("Stronghold NJ") , STRONGHOLD
TECHNOLOGIES, INC., a Nevada Corporation ("Stronghold Nevada") (Stronghold
NJ and Stronghold Nevada individually referred to as a "Borrower" and
together referred to as the "Borrowers") , both having an address at 000'
Xxxxxxx Xxxxxx, Xxxxxxxxx Xxxxxxx, Xxx Xxxxxx 00000, XXXXXXXXXXX X. XXXXX,
residing at 000 Xxxxxxxxx Xxxx, Xxxxxxxxxxxxx, Xxx Xxxxxx 00000 (the
"Guarantor"), and UNITEDTRUST BANK, having an address at 0000 Xxxxx 00
Xxxx, X.X. Xxx 0000, Xxxxxxxxxxx, Xxx Xxxxxx 00000 (the "Bank").
The Borrowers, the Guarantor and the Bank hereby agree as follows:
ARTICLE 1. THE LOAN.
1.01. The Term Loan. Subject to the terms of this Agreement, the Bank shall make
a term loan (the "Loan") to the Borrowers on the date of this Agreement in the
principal amount of $1,500,000.00.
1.02. Note. The Loan shall be evidenced by the Commercial Loan Note (the "Note")
executed and delivered to the Bank contemporaneously with this Agreement, the
terms and provisions of which are incorporated herein by reference.
1.03. Interest Rate and Payments; Default Rate; Late Charge.
(a) Interest Rate. The Borrowers shall pay interest to the Bank on the unpaid
principal amount due under the Loan at the interest rate set forth in the Note.
Interest on the Loan shall be calculated on the basis of the actual number of
days elapsed over a year of 360 days.
(b) Payments. The Borrowers shall pay monthly payments of principal and interest
under the Loan in the amounts and in the manner set forth in the Note. The
Borrowers authorize and direct the Bank to automatically deduct such payments
from Stronghold NJ's account number 65-104-230-0 maintained at the Bank. If the
funds in such account are insufficient to cover any payment the Bank shall not
be obligated to advance funds to cover the payment.
(c) Default Rate. Upon default (whether or not Bank has accelerated payment of
the Note) , or after the maturity of the Note, the unpaid principal of the Loan
shall, at the option of Bank, bear interest at a rate which is five percent (5%)
per annum greater than that which would otherwise be applicable.
(d) Late Charge. If the entire amount of any required principal and/or interest
is not paid in full within ten (10) days after the same is due, Borrowers shall
pay to Bank a late fee equal to five percent (5%) of the required payment. Any
such late charge accrued is immediately due and payable.
1.04. Prepayment of Loan. The Borrowers may prepay the Loan in whole or in part
at any time upon prior notice to the Bank, without fee or penalty. In addition,
the Borrowers shall also pay to the Bank any accrued and unpaid interest and all
other sums due under the terms of the Loan at the time of such payment.
1.05. Collateral. Repayment of the Loan shall be secured by the granting of a
continuing first lien security interest (subject only to liens or encumbrances
permitted pursuant to Section 5.05 of this Agreement) in all of the Borrowers'
rights, title and interest in their assets (the "Collateral") as described and
granted in a Security Agreement by each Borrower in favor of the Bank dated as
of the date hereof (the "Security Agreements") and UCC-1 Financing Statements
(the "Financing Statements") delivered by the Borrowers to the Bank on the date
hereof. The foregoing assets and property securing the Loan shall be referred to
herein as the "Collateral".
1.06. Continuing Perfection. The Borrowers will perform any and all steps
requested by Bank to create and maintain in the Bank's favor a first and valid
and exclusive lien on or security interest in the Collateral or pledges of
Collateral, including, without limitation, the execution and delivery of
financing statements and continuation statements, supplemental security
agreements, mortgages, notes and any other documents necessary, in the opinion
of the Bank, to protect its interest in the Collateral, the Bank having the
responsibility to file any such financing statements and continuation
statements. The Bank and its designated officer are hereby appointed each
Borrower's attorney-in-fact to do all acts and things which the Bank may deem
necessary to perfect and continue perfected the security interests and liens
provided for in this Agreement, including but not limited to, executing
financing statements on behalf of any Borrower if a Borrower fails to do so upon
the request of the Bank.
1.07. Guaranty. Repayment of the Loan shall be supported by the execution of an
absolute and unconditional guaranty (the "Guaranty") by the Guarantor.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES.
The Borrowers and the Guarantor hereby represent and warrant to the Bank that:
2.01. Organization. Stronghold NJ is duly organized and validly existing as a
corporation under the laws of the State of
New Jersey, is in good standing therein, and duly qualified to transact business
in all places where such qualification is necessary or advisable, except that it
has not yet qualified to do business in Virginia but will do so prior to June
30, 2003 if such qualification is necessary or advisable. Stronghold Nevada is
duly organized and validly existing as a corporation under the laws of the State
of Nevada, is in good standing therein, and duly qualified to transact business
in all places where such qualification is necessary or advisable. Stronghold
(Nevada) is the parent holding company and owns 100% of the outstanding stock of
its operating subsidiary, Stronghold (NJ).
2.02. Authorization, No Conflict. The execution and delivery by the Borrowers
and the Guarantor of this Agreement, the Note and all other documents
contemplated hereunder (this Agreement, the Note, the Security Agreements, the
Guaranty, and all other documents executed in connection with the Loan
hereinafter called the "Loan Documents"), and the performance of the
transactions contemplated by the Loan Documents, are within the Borrowers'
powers, have been duly authorized by all necessary action and do not and will
not violate any provision of law or of the Borrowers' Certificates of
Incorporation or By-laws or result in the breach of, or constitute a default or
require any consent under any indenture or other agreement or instrument to
which the Borrowers are parties or by which the Borrowers or their property may
be bound or affected, or cause any of such property to become subject to any
lien, claim or encumbrance. Each of the Loan Documents constitutes the legal,
valid and binding obligation of the Borrowers (or the Guarantor as to the
Guaranty), enforceable in accordance with its terms.
2.03. Financial Condition. The financial statements of the Borrowers heretofore
furnished to the Bank (together, the "Financial Statements") , are complete and
correct, were prepared in
accordance with generally accepted accounting principles consistently applied
and accurately present the financial condition of the Borrowers as of the dates
of such statements and the results of its operations for the periods then ended.
Since June 30, 2002, there has been no material adverse change in the Borrowers'
business, condition or prospects, financial or otherwise.
2.04. Litigation. There are no judgments or orders outstanding against the
Borrowers or the Guarantor and there are no suits, investigations or proceedings
pending, or, to the knowledge of the Borrowers and Guarantor, threatened,
against or affecting the Borrowers or Guarantor which, if adversely determined,
would by itself or in the aggregate have a material adverse effect on the
financial condition, business or properties of the Borrowers or the Guarantor.
2.05. Purpose. The proceeds of the Loan only will be used solely to refinance
the existing indebtedness of Stronghold NJ to the Bank. No part of the proceeds
of the Loan will be used to purchase or carry margin stock as such terms are
defined in Regulation U of the Board of Governors of the Federal Reserve System
or to extend credit to others for the purpose of purchasing or carrying margin
stock, and the use of such proceeds shall not result in any violation of
Regulations G, T, U or X of said Board.
2.06. Properties. The Borrowers have good and marketable title to all of the
assets reflected in the Financial Statements, including the Collateral (to the
extent same is reflected as owned by a Borrower) , free and clear of all liens,
claims, encumbrances, and security interests (as defined in the Uniform
Commercial Code), except as permitted hereunder or as disclosed in such
statements.
2.07. Taxes. The Borrowers and the Guarantor have filed all tax returns required
to be filed and paid all taxes due or assessed, including interest and
penalties, except as specifically disclosed to the Bank, in writing, with
respect to taxes being contested in good faith and by appropriate proceedings,
provided adequate reserves-have been made.
2.08. Consents. No consent or approval from, or notice to or filing with, any
federal, state or other regulatory authority is required in connection with the
execution of, or performance under, the Loan Documents by the Borrowers.
2.09. ERISA. Each employee pension benefit plan ("Plan"), as defined in the
Employee Retirement Income Security Act of 1974, as amended from time to time,
including its rules and regulations ("ERISA"), is in compliance with the
applicable provisions of ERISA, the Internal Revenue Code of 1986 (as amended,
from time to time) and any other applicable Federal or state law, and no event
or condition is occurring or exists with respect to any such Plan concerning
which the Borrowers would be under an obligation to furnish a report to the Bank
in accordance with Article 4 hereof.
2.10. Trademarks, Patents, Licenses, Etc. To their knowledge, the Borrowers
possess all trademarks, patents, licenses, permits, trade names, copyrights,
proprietary rights and approvals required to conduct their business as now
constituted without conflict with the rights or claimed rights of others.
2.11. No Misrepresentations or Material Nondisclosure. The Borrowers have not
made and will not make to the Bank, in this Agreement or otherwise, an untrue
statement of a material fact, nor has omitted to state a material fact necessary
to make any statement made not misleading.
2.12. Permits. The Borrowers represent that they have, and will continue to
have, all necessary federal, state, and local licenses, certificates, and
permits relating to the Borrowers and their facilities, business, operations,
premises, and leaseholds, and they are in compliance with all applicable
federal, state, and local laws, rules, and regulations relating to air
emissions, water discharges, noise emissions, solid or liquid storage disposal,
hazardous or toxic waste or substances and other environmental, health, and
safety matters.
ARTICLE 3. CONDITIONS OF LENDING.
3.01. Preconditions to the Loan. The Bank shall not be obligated to make the
Loan hereunder unless all legal matters incident to the transactions hereby
contemplated shall be satisfactory to the Bank and its counsel, and it shall
have received properly executed, as of the closing date, and in a form it deems
satisfactory, the following:
(a) This Agreement;
(b) The Note;
(c) Certified resolutions/consents of the Borrowers authorizing the execution
and delivery of the Loan Documents, arid the Borrowers' performance under those
documents;
(d) A certificate by each Borrower's secretary specifying the name and titles
and including the specimen signatures, of the officers authorized to sign the
Loan Documents and certifying as true an attached copy of each Borrower's
by-laws;
(e) A copy of each Borrower's Certificate of Incorporation and any amendments
thereto, and a long form certificate of good standing from the appropriate state
official in the jurisdiction of formation;
(f) An opinion of counsel to the Borrowers in form and substance satisfactory to
the Bank and its counsel, except that the Borrowers also agree that they shall
provide the Bank with a supplemental opinion letter, from an attorney admitted
to practice
in the State of Nevada, opining on the enforceability of the Loan Documents as
to Stronghold (Nevada), in a form reasonably acceptable to the Bank, prior to
March 1, 2003;
(g) Subordination Agreements executed by the Guarantor subordinating all
indebtedness of any Borrower to the Guarantor to the Loans, in a form acceptable
to the Bank;
(h) The Security Agreements, Guaranty, and other loan documents in form and
substance satisfactory to the Bank;
(i) A certificate of a reliable insurance company, Licensed to conduct
business in New Jersey, of appropriate insurance under Section 4.02 hereunder;
(j) Such additional documents as the Bank may reasonably request.
ARTICLE 4. AFFIRMATIVE COVENANTS.
The Borrowers and the Guarantor agree that, while any amount is outstanding
under the Loan, they shall comply with the following covenants:
4.01. Financial Statements. The Borrowers and/or the Guarantor shall furnish to
the Bank:
(a) As requested by the Bank, an aging report, in form satisfactory to the Bank
in its sole discretion, of all accounts receivable of the Borrowers;
(b) Within ninety (90) days after the end of each fiscal year of the Borrowers,
supply financial statements of the Borrowers prepared in accordance with
generally accepted principles and practices of accounting consistently applied,
audited by and with the opinion of an independent certified public accountant
satisfactory to the Bank, such opinion not being adverse, limited or qualified
because of such accountant's restricted or limited examination of records;
(c) Within 30 days after the end of each calendar quarter, supply the Bank with
quarterly financial statements of the Borrowers, prepared and Certified by the
chief financial officer of the Borrowers.
(e) Within 15 days after filing thereof, supply complete signed copies of
federal and state tax returns of the Borrowers and the Guarantor.
(f) Within 30 days after the end of each calendar year, supply the Bank with
annual personal financial statements of the Guarantor on forms supplied by the
Bank.
(g) Promptly, such further information regarding the business affairs and
financial condition of the Borrowers or the Guarantor as the Bank may require.
(h) Promptly after preparation or receipt: (1) upon the request of the Bank,
copies of all reports and notices which the Borrowers filed with or received
under ERISA or any occupational safety, pension or retirement, or environmental
statute or regulation, and (2) copies of all proxy statements, financial
statements, and reports which the Borrowers send to shareholders and copies of
all reports and registration statements which it files with, or receives from,
any national securities exchange or Federal regulatory agency.
4.02. Insurance. The Borrowers shall keep the following insurance in effect:
(a) All insurance policies required hereby which shall be (i) issued by
companies which shall have an A.M. Best Rating Guide Stability Rating of A- or
better, and a Financial Rating of VI or better, (ii) on forms, in amounts, and
with deductibles, all of which are acceptable to the Bank and (iii) maintained
throughout the term of the Loan, without cost to the Bank. All policies shall be
deposited with the Bank (if required by the Bank), and shall contain such
provisions as the Bank deems necessary or desirable to protect its interest,
including, without limitation, a provision that such policy shall not be
cancelled, altered or in any way limited in coverage or reduced in amount unless
the Bank is given thirty (30) days prior written notice or ten (10) days prior
written notice of non-payment of premium.
(b) Prepaid "Special Perils" (including flood if any property where the
Collateral is located in a special flood hazard zone), Comprehensive Business
Insurance Program, including but not limited to, a multi-peril package policy,
workers' compensation, Commercial automobile, business interruption, extra
expense, loss of rents, employee dishonesty, umbrella liability and professional
liability. The appropriate policies shall cover all personal property and other
assets comprising the Collateral and shall name the Bank as Loss Payee under a
Lender's Loss Payable Clause. All such policies to be written for the full
insurable value of the Collateral (without deduction for depreciation or
obsolescence) . If a blanket policy is issued, a certified copy of said policy
shall be furnished together with an endorsement indicating that the Bank is the
insured under said policy in the proper designated amount. The Borrowers shall
also carry such other insurance as may reasonably be required by the Bank.
(c) Commercial General Liability insurance insuring the Borrowers in the minimum
amounts of $1 million per occurrence and $2 million in the aggregate.
(d) The Borrowers shall maintain Workers' Compensation/ Employer Liability
Coverage as required by applicable law.
4.03. Maintain Business. Each Borrower shall continue to engage in the same type
of business as it is presently engaged in, and shall preserve its existence and
good standing and all the material rights, privileges, franchises and other
properties necessary and desirable in the normal conduct of its business.
Neither Borrower will change its name without furnishing the Bank with at least
thirty (30) days prior written notice thereof. The Borrowers will notify the
Bank in writing prior to utilizing any trade name not previously submitted to
the Bank. Neither Borrower shall change the state of its incorporation without
the prior written consent of the Bank, provided that the Borrowers may merge to
become one entity or reincorporate in the State of Delaware after furnishing the
Bank with prior written notice.
4.04. Taxes and Obligations. Each Borrower shall pay and discharge (a) all
taxes, assessments and governmental charges or levies imposed on it or its
income or profits or any of its properties prior to the date on which penalties
attach thereto and (b) all lawful obligations and claims which, if unpaid, might
cause a lien or charge to be created against any of its properties, except any
such tax, assessment, charge or levy, the payment of which is being contested in
good faith by proper proceedings, provided escrows, satisfactory to the Bank,
have been esta Borrower.
4.05. Compliance with Laws. The Borrowers shall comply with all applicable laws,
regulations and orders of any governmental authority.
4.06. Notices. The Borrowers shall furnish to the Bank, promptly after they
learn thereof:
(a) Written notice of (i) any material threatened or pending litigation or
governmental or administrative proceeding concerning it or its properties or
assets, (ii) any material default under any other agreement to which any
Borrower is a party, (iii) any default or Event of Default hereunder together
with a statement by a responsible officer of the Borrowers describing the
action, if any, which the Borrowers propose to take with respect thereto, (iv)
any material adverse change in its business, prospects or financial condition;
(b) Written notice of any "reportable event" or "prohibited transaction" (as
such terms are defined in ERISA), in connection with any Plan, and a statement
of the action, if any, which the Borrowers propose to take with respect thereto,
and when known, any action taken by the Internal Revenue Service or Department
of Labor with respect thereto. In addition, the Borrowers shall provide the Bank
promptly after filing or receiving thereof, with copies of all reports and
notices which the Borrowers file under ERISA with the Pension Benefit Guaranty
Corporation or the United States Department of Labor or which any Borrower
receives from them;
(c) Any notice of (i) the happening of any event involving the use, spill,
discharge, or cleanup of any hazardous or toxic substance or waste or any oil,
petroleum distillate or pesticide on any property owned or operated by any
Borrower (a "Hazardous Discharge"); or (ii) any complaint, order, citation, or
notice with regard to air emissions, water discharges, noise
emissions, or any other environmental, health, or safety matter affecting any
Borrower (an "Environmental Complaint") from any person or entity, including,
without limitation, the New Jersey Department of Environmental Protection, any
similar governmental agency of any other state or the United States
Environmental Protection Agency, then the Borrowers agree to give oral and
written notice of same to the Bank within twenty-four (24) hours of its receipt
of such notice;
(d) Any change in the name or trade name of any Borrower or Guarantor;
(e) Any material adverse change with respect to the business or financial
condition of any Borrower or any Guarantor;
(f) Any default under this Agreement or any other Loan Document;
(g) Any change in the location of the Collateral; and
(h) Promptly, such additional notices as the Bank may request.
4.07. Inspection. The Borrowers shall permit the Bank to inspect their books,
records and premises during business hours and make abstracts and copies of
documents.
4.08. Maintenance of Accounts. Stronghold (NJ) shall maintain its principal
deposit and operating accounts at the Bank.
4.09. Compliance and Environmental Laws. The Borrowers shall, and shall cause
others to, carry on the business and operations on all property owned or
operated by the Borrowers so as to comply and remain in compliance with, all
applicable federal, state, regional, county, or local laws, statutes, rules,
regulations, or
ordinances concerning public health, safety, or the environment, including, but
not limited to, the New Jersey Underground Storage Tank Act, N.J.S.A. 58:10A-21
et seg., the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. 9601 et seq., ISRA, the New Jersey Spill Compensation and
Control Act, N. J. S.A. 58: -10-23. 11 et seq. , and the New Jersey Underground
Storage Tank Act, N.J. S.A. 581OA-21 et seq., and all rules, regulations, and
guidance documents promulgated or published thereunder, and any state, regional,
county, or local statute, law, rule, regulation or ordinance relating to public
health, safety, or the environment, including, without limitation, (i) relating
to releases, discharges, emissions, or disposals to air, water, land, or
groundwater; (ii) to the withdrawal or use of groundwater; (iii) to the use,
handling, or disposal of polychlorinated byphenyls (PCBs) , asbestos or urea
formaldehyde; (iv) to the treatment, storage, disposal, or management of
hazardous substances (including, without limitation, petroleum, its derivatives,
by-products, or other hydrocarbons), and any other solid, liquid, or gaseous
substance, exposure to which is prohibited, limited, or regulated, or may or
could pose a hazard to the health and safety of the occupants of the site and
facility or the property adjacent to or surrounding the site; (v) to the
exposure of persons to toxic, hazardous, or other controlled, prohibited, or
regulated substances; and (vi) to the transportation, storage, disposal
management, or release of gaseous or liquid substances, and any regulation,
order, injunction, judgment, declaration, notice or demand issued.
ARTICLE 5. NEGATIVE COVENANTS.
The Borrowers each agree that, while any amount is outstanding under the Loan,
they shall not:
5.01. Sale of Interest. Sell, assign, transfer or otherwise dispose of any
shares of any class of the stock or other interest in Stronghold (NJ) ;
provided, however, that so long as the Bank is given prior written notice (a)
the Borrowers may merge to become one entity in which case the stock of
Stronghold (NJ) held by Stronghold (Nevada) may be canceled, or (b) Stronghold
(Nevada) may reincorporate in the state of Delaware, in which case the stock of
Stronghold (NJ) held by Stronghold (Nevada) may be transferred to the new
Delaware entity.
5.02. Limitation on Mergers and Sale of Assets. Enter into any transaction of
merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or a
substantial part of its business or assets or acquire all or substantially all
of the business or assets of another person.
5.03. Lease Obligations Become liable for aggregate lease obligations of more
than $100,000.00 for any 12 month period.
5.04. Investments. Make any loan or advance to any person or purchase or
otherwise acquire any capital stock, assets, obligations or other securities of,
make any capital contribution to, or otherwise invest or acquire any interest
in, any person in excess of $10,000.00 for any 12 month period, except: (a)
direct obligations of the United States of America or any agency thereof with
maturities of one year or less from the date of acquisition, (b) commercial
paper of a domestic issuer rated at least A-1 by Standard & Poor's Corporation
or P-1 by Xxxxx'x Inventors Service, Inc., (c) certificates of deposit with
maturities of one year or less from the date of acquisition issued by any
commercial bank, and
(d) for stock, obligations or securities received in settlement of debts
(created in the ordinary course of business) owing to any Borrower or any
subsidiary.
5.05. Limitations on Liens. Create or suffer, or permit any lien, or security
interest on its properties, except: (a) Liens existing on the date hereof and
reflected in the financial statements referred to in Section 4.01 hereof;
(b) Liens for taxes not yet due or which are being contested in good faith and
by appropriate proceedings if adequate escrows, satisfactory to the Bank, have
been established by the Borrowers;
(c) Carriers', warehousemen's, mechanics', materialmen's, repairmen's or other
like liens arising as a matter of law in the ordinary course of business
securing amounts which are not due for a period of more than 30 days; or
(d) Purchase money liens on personal property acquired by the Borrowers in an
amount not in excess of $25,000.00 to secure the purchase price of such
property, provided that such lien shall apply and attach only to the property
originally subject thereto.
5.06. Debt. Create or suffer, any: (a) indebtedness for borrowed money (except
for the subordinated debt owed to the Guarantor as permitted pursuant to
Subordination Agreement; (b) obligations under leases which shall have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; and (c) unfunded vested benefits under plans maintained for
employees of the Borrowers covered by ERISA.
5.07. Limitation on Distributions. Declare or pay any dividends on any shares of
its stock or apply any of its funds, property or assets to, or set apart any
funds, property or assets for, the purchase, redemption or other retirement of,
or make any other distribution, by reduction of capital or otherwise, in respect
of any shares of its stock.
5.08. ERISA Compliance. Engage in any "prohibited transaction" or incur any
"accumulated funding deficiency" whether or not waived (as such terms are
defined in ERISA) or terminate any Plan in a manner which could result in the
imposition of a lien on any property of the Borrowers pursuant to ERISA.
5.09. Use of Property. Engage (or permit any other party to engage in) any
operations which involve the generation, manufacture, refining, transportation,
treatment, storage, or handling of hazardous substances or waste, above or below
the ground, as provided in ISRA, and the regulations adopted pursuant to ISRA,
at any property owned or operated by the Borrowers or Operator (or permit the
operation of) any "Industrial Establishment" as defined in ISRA, on any such
property.
5.10. ISRA Tenants. Permit any portion of any property owned by it to be
occupied by or leased to any person or business that has a major group Standard
Industrial Classification code number between 22 through 39 inclusive, 46
through 49 inclusive, 51 or 76, or by any Industrial Establishment as defined in
ISRA.
ARTICLE 6. DEFAULT.
6.01. Events of Default. Each of the following is an event of default ("Event of
Default") under this Agreement:
(a) Failure by the Borrowers to pay any principal, interest or fee amount on its
due date; or
(b) Any representation, warranty or statement contained in this Agreement (or
any document or instrument furnished in connection with this Agreement) shall
prove to have been false or misleading in any material respect, when made or
deemed made; or
(c) Failure by any Borrower to observe any covenant or agreement contained in
Article 5 hereof; or
(d) Failure by any Borrower to observe any other covenant or agreement contained
in this Agreement and such failure shall continue unremedied for a period of
fifteen (15) days from the occurrence thereof; or
(e) Default by any Borrower or the Guarantor under any other obligation to the
Bank, or any third party, now existing or hereafter arising; or
(f) Default under any other Loan Document which is not cured within any
applicable grace or notice period; or
(g) Entry of a judgment or judgments for an aggregate amount in excess of
$25,000.00 against any Borrower or the Guarantor without satisfaction or stay of
execution, for any period of 30 consecutive days; or
(h) Any Borrower or the Guarantor shall admit its inability to pay its debts, or
shall make a general assignment for the benefit of creditors; or any proceeding
shall be instituted by or against any Borrower or the Guarantor seeking relief
as to a Borrower or Guarantor under the federal Bankruptcy Code (or its
successors)
(the "Bankruptcy Code") or to adjudicate it insolvent, or seeking
reorganization, arrangement, adjustment, or composition of it or its debts or
property under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property; or any
Borrower or any Guarantor shall take any corporate action to authorize any of
the actions set forth above in this subsection; or
(i) All or any substantial part of the properties or assets of any Borrower or
the Guarantor shall have been condemned, seized or otherwise appropriated; or
(j) An event or condition occurs or exists with respect to any Plan concerning
which any Borrower is under any obligation to furnish a report to the Bank in
accordance with Section 4.06 hereof or as a result thereof the Borrowers has
incurred or in the opinion of the Bank is reasonably likely to incur a liability
to a Plan and/or the PBGC which is material in relation to the Borrowers'
financial condition; or
(k) There shall be any material adverse change in the business or financial
condition of any Borrower or the Guarantor; or
(1) The Guarantor shall cease to own, at all times, in excess of 30% of the
shares or ownership interests in Stronghold (Nevada); or
(m) The Guarantor shall cease to be chief executive officer of the Borrowers
involved directly in the day-to-day management of the business of the Borrowers;
or
(n) The death of the Guarantor; or
(o) Any change shall occur in the ownership of Stronghold (NJ) , except as
permitted pursuant to the terms of Section 5.01 hereof; or
(p) The loss of any necessary license or permit for the operation of the
business operated or to be operated by the Borrowers; or
(q) Transfer of title to any portion of, or interest in, the Collateral. 1
6.02. Remedies. If there is an Event of Default, the Bank may, without
presentment, demand, protest, notice or other formality (all of which are waived
by the Borrowers and the Guarantor):
(a) Declare the full unpaid principal amount outstanding hereunder and accrued
interest thereon to be immediately due and payable, whereupon such amounts shall
be immediately due and payable; or
(b) Foreclose or exercise any of its rights with respect to any Collateral
without waiving its rights to proceed against any other Collateral or other
entities or individuals directly or indirectly responsible for payment of the
Loan; or
(c) Exercise any other remedies under applicable law, or under this
Agreement or any other Loan Document, including but not limited to proceeding to
enforce its right by suit in equity, action at law or other appropriate
proceeding, whether for payment or the specific performance of the covenants or
agreements contained in this Agreement or any other Loan Document.
All remedies of the Bank provided for herein are cumulative and shall be in
addition to all other rights or remedies of the Bank. The Borrowers and the
Guarantor shall be liable for all costs, charges and expenses, and other sums
incurred or advanced by the Bank (including reasonable attorney's fees and
disbursements) to preserve the Collateral, collect on the Loan, protect the
Bank's interests in or realize on the Collateral or to enforce the Bank's rights
against the Borrowers or the Guarantor.
6.03. Right of Set-Off; Security Interest. Borrowers and the Guarantor
hereby grant to Bank, a continuing lien, security interest and right of setoff
as security for all liabilities and obligations to Bank, whether now existing or
hereafter arising, upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
the Bank or any entity under the control of United National Bancorporation and
its successors and assigns or in transit to any of
them. At any time after an Event of Default, without demand or notice (any such
notice being expressly waived by Borrowers and the Guarantor), Bank may setoff
the same or any part thereof and apply the same to any liability or obligation
of Borrowers and any Guarantor even though unmatured and regardless of the
adequacy of any other collateral securing the Loan. The Bank agrees to provide
notice of any setoff within five (5) business days after the setoff has
occurred. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES
WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING
ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
BORROWERS OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED. ARTICLE 7. MISCELLANEOUS.
7.01. Cross Default/Cross Collateral. agreements between or among the Bank,
any Borrower and/or the Guarantor are hereby amended so that an Event of Default
under this Agreement is a default under all other agreements and a default under
any one of those agreements is an Event of Default under Agreement. All such
agreements between or among the Bank, any Borrower and/or the Guarantor are
further amended so that the Collateral under this Agreement secures the
obligations now or hereafter outstanding under all other agreements with the
Bank and the collateral which serves as security under any other agreement of
any Borrower or the Guarantor with the Bank secures the obligations under this
Agreement. The Bank, Borrowers, and Guarantor acknowledge that all prior loan
agreements, security agreements, guaranties, notes and other documents relating
to the November 1, 2001 and June 30, 2002 financing arrangements are hereby
superceded by and replaced with this Agreement and the other Loan Documents
executed in connection with this Agreement.
7.02. Indemnification. At all times the Borrowers and the Guarantor shall defend
and indemnify and hold the Bank (which for the purposes of this paragraph shall
include the present or future shareholder, officers, directors, employees, all
other representatives, agents, licensees and assigns of the Bank) harmless from
and against any and all liabilities, claims, demands, suits, proceedings,
actions, causes of action, losses, damages, settlements, judgments, recoveries,
costs and expenses (including reasonable fees and actual disbursements of
counsel) resulting from any breach of the representations, warranties,
agreements or covenants made by any Borrower or any Guarantor in this Agreement
or any other Loan Document, arising from or connected with the transactions
contemplated by this Agreement or any other Loan Document, or any of the rights
and properties assigned or pledged to the Bank, except to the extent arising
from the gross negligence or willful misconduct of the Bank.
7.03. Amendments, Waivers, Etc. No amendment or waiver of any provision in the
Loan Documents or consent to any departure by the Borrowers therefrom, shall be
effective unless the same shall be in writing and signed by the Bank, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given. No failure by the Bank to exercise
in whole or part, and no delay in so exercising, any right hereunder shall
operate as a waiver thereof or preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
7.04. Survival. All representations and warranties made herein or pursuant
hereto shall survive the making of the Loan hereunder.
7.05. Usury. If, at any time, the rate of interest, together with all amounts
which constitute interest and which are reserved, charged or taken by Bank as
compensation for fees, services or expenses incidental to the making,
negotiating or collection of the loan evidenced hereby, shall be deemed by any
competent
court of law, governmental agency or tribunal to exceed the maximum rate of
interest permitted to be charged by Bank to Borrowers under applicable law,
then, during such time as such rate of interest would be deemed excessive, that
portion of each sum paid attributable to that portion of such interest rate that
exceeds the maximum rate of interest so permitted shall be deemed a voluntary
prepayment of principal. As used herein, the term "applicable law" shall mean
the law in effect as of the date hereof; provided, however, that in the event
there is a change in the law which results in a higher permissible rate of
interest, then this Agreement shall be governed by such new law as of its
effective date.
7.06. Payment of Fees and Expenses. Borrowers and the Guarantor shall pay on
demand all expenses of Bank in connection with the default, collection, waiver
or amendment of loan terms, or in connection with Bank's exercise, preservation
or enforcement of any of its rights, remedies or options hereunder, including,
without limitation, fees of legal counsel, accounting, consulting, brokerage or
other similar professional fees or expenses, and any fees or expenses associated
with travel or other costs relating to any appraisals or examinations conducted
in connection with the loan or any collateral therefore, and the amount of all
such expenses shall, until paid, bear interest at the rate applicable to
principal hereunder (including any default rate) and be an obligation secured by
any Collateral.
7.07. Governing Law. This Agreement shall be deemed to have been made under,
governed by and construed in accordance with, the laws of the State of New
Jersey (excluding the laws applicable to conflicts or choice of law); provided
that the foregoing is not intended to limit the maximum rate of interest which
may be charged or collected by the Bank hereunder if, under the laws applicable
to it, the Bank may charge or collect such interest at a higher rate than is
permissible under the laws of said State.
Binding Effect. This Agreement shall be binding upon, and shall inure to the
benefit of, the Borrowers, the Bank and their respective successors and assigns
except that the Borrowers may not assign or transfer their rights or obligations
hereunder.
7.09. Notices. Notices under this Agreement shall be delivered personally, by
registered mail or by overnight courier to the address shown on the signature
page hereof. Notice personally delivered shall be effective as of delivery.
Notice sent by registered mail shall be effective on the third business day
after the date of mailing. Notice sent by overnight courier shall be effective
on the first business day after the date of transmittal.
7.10. Subsidiaries. If any Borrower has any subsidiaries (defined as
corporations in which a Borrower owns or controls the majority of the capital
stock with ordinary voting power) all representations, covenants and conditions
referring to a Borrower shall also apply to its subsidiaries, and, all financial
statements and tests shall apply to the Borrowers and their subsidiaries on a
consolidated and consolidating basis.
7.11. Captions. The captions and headings hereunder are for convenience only and
shall not affect the interpretation or construction of this Agreement.
7.12. Severability. The provisions of this Agreement shall be severable; if any
provision shall be held invalid or unenforceable in whole or in part the
determination shall not affect the remaining provisions of the Agreement in any
manner.
7.13. Disclosure. The Bank is hereby authorized to disclose any financial or
other information it may have about the
Borrowers or the Guarantor to any present or future participant or prospective
participant, any regulatory body or agency having jurisdiction over the Bank, or
to any successor to all or any part of the Bank's interest herein.
7.14. Replacement of Note/Loan Documents. Upon receipt of an affidavit of
an officer of Bank or the Borrowers as to the loss, theft, destruction or
mutilation of the Note or any other Loan Document which is not of public record,
and, in the case of any such loss, theft, destruction or mutilation, upon
cancellation of such Note or other Loan Document, Borrowers, the Guarantor,
and/or the Bank, as the case may be, will issue, in lieu thereof, a replacement
note or other Loan Document having identical terms.
7.15. WAIVER OF TRIAL BY JURY. BORROWERS, THE GUARANTOR AND BANK MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN
CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT
LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF
BANK RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THE LOAN
DOCUMENTS, AND AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
EXCEPT AS PROHIBITED BY LAW, BORROWERS HEREBY WAIVE ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. EACH BORROWER AND THE GUARANTOR CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BANK WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS
WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR BANK TO ENTER INTO THIS AGREEMENT
AND MAKE [GRAPHIC OMITTED][GRAPHIC OMITTED]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
Attested by: Stronghold Technologies, Inc., a
New Jersey corporation, Borrower
/s/ Xxxxx Xxxxxxx By: /s/ Xxxxxxxxxxx X. Xxxxx
--------------------------------- -----------------------------------
Xxxxx Xxxxxxx, Asst. Secretary Xxxxxxxxxxx X. Xxxxx, President
Attested by: Stronghold Technologies, Inc., a
Nevada corporation, Borrower
/s/ Xxxxx Xxxxxxx By: /s/ Xxxxxxxxxxx X. Xxxxx
--------------------------------- -----------------------------------
Xxxxx Xxxxxxx, Asst. Secretary Xxxxxxxxxxx X. Xxxxx, President
Witnessed by:
/s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxxxxxxx X. Xxxxx
--------------------------------- -----------------------------------
Xxxxxx X. Xxxxxxxx Xxxxxxxxxxx X. Xxxxx, Guarantor
Witnessed by:
/s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------- -----------------------------------
Xxxxx X. Xxxxxxx, Esq. Xxxxxx X Xxxxxxxx, Vice President
