EXHIBIT 10.15
THIRD MODIFICATION AGREEMENT
THIS THIRD MODIFICATION AGREEMENT (the Agreement) is made and entered into
this 14th day of January, 2004, by and between FIRST KEYSTONE BANK, formerly
known as First Keystone Federal Savings Bank (the Bank), chartered under the
Laws of the United States of America, having its principal office at 00 Xxxx
Xxxxx Xxxxxx, Xxxxx, Xxxxxxxxxxxx, 00000, and TRANSNATIONAL INDUSTRIES, INC., a
Delaware corporation, and SPITZ, INC., a Delaware corporation (hereinafter
collectively, jointly and severally referred to as the Borrower), with an
address of X.X. Xxx 000, Xxxxx 0, Xxxxxx Xxxx, Xxxxxxxxxxxx, 00000.
Background
A. Bank extended to Borrower two credit facilities on June 12, 1997.
Specifically, the Bank extended to Borrower a term credit facility in the
principal sum of Eight Hundred Twenty Thousand ($820,000.00) Dollars evidenced
by that certain Promissory Note (the Term Note) made by Borrower and delivered
to Bank June 12, 1997 (the "Term Loan") The Term Loan is not intended to be
modified. The Bank also extended to Borrower a revolving line of credit not to
exceed the aggregate sum of Eight Hundred Thousand ($800,000.00) Dollars (the
"Line of Credit) to be advanced pursuant to the terms of a Line of Credit
Agreement between Bank and Borrower dated June 12, 1997. The indebtedness to
Bank under the Line of Credit is evidenced by that certain Line of Credit Note
executed by Borrower and delivered to Bank June 12, 1997 (the "Line of Credit
Note"). The Term Loan and the Line of Credit are secured by, among other things,
all of the accounts, inventory, receivables and equipment of Borrower (the
"Collateral") pursuant to that certain Security Agreement, Pledge Agreement and
UCC-1 Financing Statements between Bank and Borrower dated June 12, 1997.
B. Borrower subsequently requested Bank to reduce the rate of interest
charged on the Line of Credit from time to time as set forth in the Line of
Credit Note from the Wall Street Prime Rate plus two (2.0%) percent per annum to
Wall Street Prime Rate plus one-half (0.50%) percent per annum, subject, however
to the interest rate adjustment provisions as set forth in the Line of Credit
Note; and to increase the Line of Credit to One Million One Hundred Thousand
($1,1000,000.00) Dollars. The Bank approved the Borrower's requested
modification to the terms of the Line of Credit as set forth in the Modification
Agreement dated July 7, 2000 (the First Modification Agreement), and evidenced
by that certain Renewal Line of Credit Note (the First Renewal Note), and
secured by, among other things, all of the accounts, inventory, receivables and
equipment of Borrower (the Collateral pursuant to that certain UCC-1 Financing
Statements between Bank and Borrower dated July 7, 2000.
C. Subsequent to the execution and delivery of the First Renewal Note,
Borrower requested that the Line of Credit be further increased to Two Million
($2,000,000.00) Dollars. The Bank approved the Borrower's requested modification
to the terms of the Line of Credit as set forth in the Second Modification
Agreement dated July 18, 2002 (the "Second Modification Agreement), and
evidenced by that certain Second Renewal Line of Credit Note (the "Second
Renewal Note, and secured by, among other things, the Collateral.
D. Subsequent to the execution and delivery of the Second Renewal Note,
Borrower requested that the Line of Credit be further amended to reduce the
Minimum Stockholders' Equity requirement as of the last day of each fiscal year
of Borrower to Three Million ($3,000,000.00) Dollars. The Bank approved the
Borrower's requested modification to the terms of the Line of Credit as set
forth Amendment No. 1 to Second Modified Line of Credit Agreement dated as of
September 15, 2003 (Amendment No 1 to Second Modified Line of Credit
Agreement).
E. Borrower has now requested Bank to extend the maturity date of the Line
of Credit from July 6, 2005, to December 15, 2008, and to increase the Line of
Credit to Three Million ($3,000,000.00) Dollars.
F. As of the date hereof the outstanding balance of the Line of Credit is
Six Hundred Seventy Six Thousand Seven Hundred Seventy Three Dollars and
Seventy Eight Cents. ($676,773.78).
G. Bank has no obligation to extend the maturity date or to increase the
maximum available credit under the Line of Credit. Bank is willing to extend the
maturity date and increase the maximum available credit under the Line of Credit
on the terms and conditions set forth in this Third Modification Agreement and
in the Third Renewal Line of Credit Note of even date herewith (the Third
Renewal Note).
Agreement
NOW THEREFORE, in consideration of the sum of One ($1.00) Dollar and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby covenant and agree as follows:
1. The Background recitals are incorporated herein by reference.
2. Paragraph 1.1 of the Line of Credit Agreement dated June 12, 1997, as
amended by the First Modification Agreement, the Second Modification Agreement,
and Amendment No 1 to Second Modified Line of Credit Agreement (collectively the
Line of Credit Agreement) is deleted in its entirety and the following inserted
in its place and stead:
1.1 Bank will lend to Spitz, Inc. (hereinafter referred to as Spitz), and
Spitz may borrow from Bank, the aggregate sum of Three Million
($3,000,000.00) Dollars (the "Loan"), pursuant to the terms of this
Agreement. The indebtedness to Bank under the Loan is the joint and several
obligation and liability of Spitz and Transnational Industries, Inc.
(hereinafter collectively, jointly and severally referred to as the
Borrower) evidenced by that certain Third Renewal Line of Credit Note
executed by Borrower and delivered to Bank dated January 14, 2002 (the
"Note"), in the full amount of the Loan, due and payable in accordance with
the terms thereof. Bank extended to Borrower a certain other credit
facility in the principal sum of Eight Hundred Twenty Thousand
($820,000.00) Dollars evidenced by that certain Promissory Note (the Term
Note) made by Borrower and delivered to Bank on June 12, 1997 (the Term
Loan)."
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3. Paragraph 1.2 of the Line of Credit Agreement is deleted in its entirety
and the following inserted in its place and stead:
1.2 MAXIMUM REVOLVING CREDIT LIMIT. Provided there exists no Event of
Default hereunder (as hereinafter defined), principal advances of available
funds under the Loan shall be advanced to Spitz at Spitz's written request
from time to time until December 15, 2008, provided, however, the aggregate
amount advanced, less repayments, shall not exceed the sum of Three Million
($3,000,000.00) Dollars at any one time outstanding (the "Maximum Credit
Limit"). Bank shall not be obligated to fund all or any part of a requested
advance under the Loan if such advance would cause the aggregate amount
advanced, less repayments, to exceed the Maximum Credit Limit.
Notwithstanding anything herein to the contrary, Bank shall not be
obligated to fund, and Spitz shall not be permitted to receive, all or any
part of any advance requested under the Loan which advance would cause the
aggregate amount advanced under the Loan and the Term Loan, less
repayments, to exceed the sum of; (i) eighty (80%) percent of the Borrowers
Qualified Accounts Receivable (as hereinafter defined) and (ii) fifty (50%)
percent of Borrowers Qualified Inventory (as hereinafter defined) and (iii)
Five Hundred Two Thousand ($502,000.00) Dollars representing the orderly
liquidation value of the Borrowers machinery and equipment, which figure
may, from time to time, be reduced, but not increased, by the Bank based
upon any reduction in the orderly liquidation value of the Borrowers
machinery and equipment (such a determination to be at the Banks sole and
absolute discretion). Qualified Accounts Receivable shall mean accounts
receivable earned by Borrower in the ordinary course of business for
services rendered and goods sold to customers for which there are no claims
of offset or defense, and which, in the opinion of Bank, are not of
doubtful collectability, and which have been outstanding for one hundred
twenty (120) days or less, as reflected on the most recent, certified
statement of accounts receivable delivered to Bank. Qualified Inventory
shall be valued at the lesser of the cost or present market value
determined in accordance with generally accepted accounting principles,
consistently applied, and shall mean all inventory which is in good
merchantable condition, is not obsolete or discontinued, which would
properly be classified as raw materials, work in process, or finished goods
inventory under generally accepted accounting principles, and which has
been fully paid for from Borrowers own funds and for which no security
interest exists except the security interest to be granted in favor of
Lender as herein contemplated. An account receivable or item of inventory
which is at any time a Qualified Account Receivable or an item of Qualified
Inventory, but which subsequently fails to meet any of the foregoing
requirements, shall cease to be a Qualified Account Receivable or an item
of Qualified Inventory as the case may be, for so long as such failure
continues."
4. Paragraph 6.1 (b) of the Line of Credit Agreement is deleted in its
entirety and the following inserted in its place and stead:
(b) The occurrence of any event of default under the Term Note and/or the
Term Loan Documents or that certain Mortgage Note made and executed by
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Borrower and delivered to Bank dated January 14, 2004, in the original
principal sum of Three Million Two Hundred Thousand ($3,200,000.00) Dollars
(the 2004 Real Estate Loan) or the occurrence of any event of default under
any document executed by Borrower and delivered to Bank in connection with
the 2004 Real Estate Loan;"
5. Paragraph 6.1 (g) of the Line of Credit Agreement is deleted in its
entirety and the following inserted in its place and stead:
(g) In the Banks sole but reasonable discretion, a material adverse change
occurring in the financial condition of Borrower when compared to the
financial condition of the Borrower set forth in the financial statements
included within the Borrowers Annual Report on Form 10-KSB for the fiscal
year ended January 31, 2003."
6. The Security Agreement dated June 12, 1997, as amended by the First
Modification Agreement and the Second Modification Agreement (the Security
Agreement), is further amended as follows:
The term Line of Credit Note as used in the Security Agreement is defined
to mean, identify and designate that certain Line of Credit Note in the
original principal sum of Eight Hundred Thousand ($800,000.00) Dollars made
by Borrower and delivered to Bank on June 12, 1997, as renewed by and
continued in that certain Renewal Line of Credit Note in the original
principal sum of One Million One Hundred Thousand ($1,100,000.00) Dollars
made by Borrower and delivered to Bank July 7, 2000, and any extensions
and/or renewals thereof; and as further renewed by and continued in that
certain Second Renewal Line of Credit Note in the original principal sum of
Two Million ($2,000,000.00) Dollars made by Borrower and delivered to Bank
July 18, 2002, and any extensions and/or renewals thereof; and as further
renewed by and continued in that certain Third Renewal Line of Credit Note
in the original principal sum of Three Million ($3,000,000.00) Dollars made
by Borrower and delivered to Bank dated January 14, 2004, and any
extensions and/or renewals thereof.
7. The Pledge Agreement dated June 12, 1997, as amended by the First
Modification Agreement and the Second Modification Agreement (the Pledge
Agreement), is further amended as follows:
The term Line of Credit Note as used in the Pledge Agreement is defined to
mean, identify and designate that certain Line of Credit Note in the
original principal sum of Eight Hundred Thousand ($800,000.00) Dollars made
by Borrower and delivered to Bank on June 12, 1997, as renewed by and
continued in that certain Renewal Line of Credit Note in the original
principal sum of One Million One Hundred Thousand ($1,100,000.00) Dollars
made by Borrower and delivered to Bank July 7, 2000, and any extensions
and/or renewals thereof; and as further renewed by and continued in that
certain Second Renewal Line of Credit Note in the original principal sum of
Two Million ($2,000,000.00) Dollars made by Borrower and delivered to Bank
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July 18, 2002, and any extensions and/or renewals thereof; and as further
renewed by and continued in that certain Third Renewal Line of Credit Note
in the original principal sum of Three Million ($3,000,000.00) Dollars made
by Borrower and delivered to Bank dated January 14, 2004, and any
extensions and/or renewals thereof.
8. It is expressly agreed and understood that except as expressly provided
in this Agreement, the terms, conditions and provisions set forth in the
Security Agreement, Pledge Agreement, the Line of Credit Agreement, the Line of
Credit Note, First Renewal Note, Second Renewal Note, Third Renewal Note and
related Line of Credit documents shall remain in full force and effect in
accordance with their respective terms, conditions and provisions. Without
limiting the generality of the foregoing, nothing in this Agreement shall be
construed to:
(i) impair the validity, perfection or priority of any lien or
security interest securing the Term Loan and/or the Line of Credit;
(ii) waive or impair any rights, powers or remedies of Bank under the
Pledge Agreement, Security Agreement, Line of Credit Agreement as amended
by this Agreement, Line of Credit Note, First Renewal Note, Second Renewal
Note, Third Renewal Note or related Term Loan and/or Line of Credit
documents with respect to any defaults thereunder which may occur;
(iii) require Bank to hereafter amend or extend the term of the Line
of Credit Note, First Renewal Note, Second Renewal Note, Third Renewal
Note, the Line of Credit Agreement as amended by this Agreement, Security
Agreement, Pledge Agreement or the time for payment of the Line of Credit;
(iv) make any loan or other extension of credit to Borrower.
In the event of any inconsistency between the terms of this Agreement and
the Line of Credit Agreement, this Agreement shall govern. Borrower acknowledges
that it has consulted with counsel in connection with the negotiation and
delivery of this Agreement. This Agreement shall be construed without regard to
any presumption or rule requiring that it be construed against the party causing
this Agreement or any part of this Agreement to be drafted.
9. Borrower acknowledges and agrees that its relationship with Bank is one
of the lender and borrower only and is not a partnership or joint venture.
10. Borrower hereby ratifies and affirms all of the terms, conditions and
provisions of the Security Agreement, Pledge Agreement, UCC-1 Financing
Statements, Third Renewal Note and the Line of Credit Agreement, to the extent
the same are not otherwise modified herein.
11. Borrower hereby represents, warrants and covenants that all of the
representations, warranties and covenants set forth in the Security Agreement,
Pledge Agreement, UCC-1 Financing Statements, Third Renewal Note and Line of
Credit Agreement are true and correct as of the date hereof and hereby renews
the same.
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12. The Third Renewal Note is executed and delivered in substitution and
replacement of the Borrowers obligations under and the indebtedness evidenced by
the Line of Credit Note, the First Renewal Note, and the Second Renewal Note.
The Third Renewal Note stands in the place and stead of the Line of Credit Note,
the First Renewal Note and the Second Renewal Note and is not an additional
indebtedness or a satisfaction of the indebtedness evidenced by the Line of
Credit Note, the First Renewal Note, and the Second Renewal Note. The
indebtedness and obligations evidenced by the Line of Credit Note, the First
Renewal Note, and the Second Renewal Note are continued, renewed, extended and
modified by the Third Renewal Note and such indebtedness is and shall continue
to be secured by the Security Agreement, Pledge Agreement, UCC-1 Financing
Statements and Line of Credit Agreement as herein amended without novation or
interruption.
13. Borrower hereby acknowledges and agrees that no setoff or
counterclaim to Borrowers obligations evidenced by the Third Renewal Note
exists, and no agreement has been made with any person under which any deduction
or discount may be claimed, that the outstanding balance of principal and
interest due under the Line of Credit as of January 14, 2004 is Six Hundred
Seventy Six Thousand Seven Hundred Seventy Three Dollars and Seventy Eight Cents
($676,773.78), that to the best of Borrowers knowledge, information and belief,
no Event of Default (as defined in the Third Renewal Note) has occurred which is
continuing and no event has occurred which with the passage of time or the
giving of notice or both, could become an Event of Default under the Third
Renewal Note.
[THIS SPACE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
EXECUTED, SEALED AND
DELIVERED IN THE PRESENCE OF:
Witnesses Present: BORROWER:
TRANSNATIONAL INDUSTRIES, INC.
/s/ Xxxxx Xxxxxxx Xxxxx BY: /s/ Xxxxxxxx Xxxx (SEAL)
--------------------------- ---------------------------
ATTEST: /s/ Xxxx Xxxxxx (SEAL)
--------------------------- ---------------------------
Witnesses Present: BORROWER:
SPITZ, INC.
/s/ Xxxxx Xxxxxxx Xxxxx BY: /s/ Xxxxxxxx Xxxx (SEAL)
--------------------------- ---------------------------
ATTEST: /s/ Xxxx Xxxxxx (SEAL)
--------------------------- ---------------------------
BANK:
FIRST KEYSTONE BANK
BY: /s/ A. Xxxxxxx Xxxxxx, (SEAL)
--------------------------- ---------------------------
ATTEST: (SEAL)
--------------------------- ---------------------------
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COMMONWEALTH OF PENNSYLVANIA :
: SS
COUNTY OF XXXXXXX :
On this, the 14th day of January, 2004, before me, the undersigned officer,
appeared Xxxxxxxx X. Xxxx and Xxxx X. Xxxxxx, who acknowledged themselves to be
the President and Executive President of TRANSNATIONAL INDUSTRIES, INC., a
corporation, and that they as such, being authorized to do so, executed the
foregoing instrument and acknowledged that they executed the same for the
purpose therein contained.
IN WITNESS WHEREOF, in hereunto set my hand and official seal.
IN WITNESS WHEREOF, in hereunto set my hand and official seal.
/s/ Xxxxx Xxxxxxx Xxxxx
-------------------------
NOTARY PUBLIC
My Commission Expires:
COMMONWEALTH OF PENNSYLVANIA :
: SS
COUNTY OF XXXXXXX :
On this, the 14th day of January, 2004, before me, the undersigned officer,
appeared Xxxxxxxx X. Xxxx and Xxxx X. Xxxxxx, who acknowledged themselves to be
the President and Executive President of SPITZ, INC., a corporation, and that
they as such, being authorized to do so, executed the foregoing instrument and
acknowledged that they executed the same for the purpose therein contained.
IN WITNESS WHEREOF, in hereunto set my hand and official seal.
/s/ Xxxxx Xxxxxxx Xxxxx
-------------------------
NOTARY PUBLIC
My Commission Expires:
NOTARIAL SEAL
Xxxxx Xxxxxxx Xxxxx, Notary Public
Xxxxxx Twp., Delaware County
My commission expires June 16, 0000
XXXXXXXXXXXX XX XXXXXXXXXXXX :
: SS
COUNTY OF XXXXXXX :
On this, the 14th day of January, 2004, before me, the undersigned officer,
appeared Xxxxxxxx X. Xxxx and Xxxx X. Xxxxxx, who acknowledged themselves to be
the President and Executive President of FIRST KEYSTONE BANK, a corporation, and
that they as such, being authorized to do so, executed the foregoing instrument
and acknowledged that they executed the same for the purpose therein contained.
IN WITNESS WHEREOF, in hereunto set my hand and official seal.
/s/ Xxxxx Xxxxxxx Xxxxx
-------------------------
NOTARY PUBLIC
My Commission Expires:
NOTARIAL SEAL
Xxxxx Xxxxxxx Xxxxx, Notary Public
Xxxxxx Twp., Delaware County
My commission expires June 16, 2007
