EXHIBIT 10.1
Loan and Security Agreement with Business Alliance Capital Corp.
This LOAN AND SECURITY AGREEMENT is entered into as of
September 17, 1998 between BUSINESS ALLIANCE CAPITAL CORP., a Delaware
corporation (BACC), with its chief executive office located at 000
Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx 00000 and K-TRONIK INT'L
CORPORATION, a Nevada corporation authorized to do business in the State
of New Jersey (Borrower), with its chief executive office located at 000
Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000.
The parties agree as follows
1. DEFINITIONS AND CONSTRUCTION
1.1 Terms. As used in this Agreement, the following
terms shall have the following meanings:
Accounts, means in addition to the definition of accounts in
the Code, all presently existing and hereafter arising accounts
receivable, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods or the rendition of
services by Borrower, whether or not earned by performance, all credit
insurance, guaranties, and other security therefore, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing.
Advances means all loans, advances and other financial
accommodations by BACC to or on account of the Borrower under Section
2.1 hereof.
Agreement means collectively this Loan and Security Agreement,
any concurrent or subsequent rider to this Loan and Security Agreement,
and any extensions, supplements, amendments, addenda or modifications to
or in connection with this Loan and Security Agreement or any such rider.
Authorized Officer means any officer or other representative
of Borrower authorized in a writing delivered to BACC to transact
business with BACC.
BACC means Business Alliance Capital Corp., its successors and
assigns.
BACC Expenses means all of the following: costs and expenses
(whether taxes, assessments, insurance premiums or otherwise) required
to be paid by Borrower under any of the Loan Documents which are paid or
advanced by BACC; filing, recording, publication, appraisal and search
fees paid or incurred by BACC in connection with BACC's transactions
with Borrower; costs and expenses incurred by BACC in the disbursement
or collection of funds to or from Borrower; charges resulting from the
dishonor of checks; costs and expenses incurred by BACC to correct any
default or enforce any provision of the Loan Documents, or in gaining
possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or
any portion thereof, irrespective of whether a sale is consummated; and
costs and expenses incurred by BACC in enforcing or defending the Loan
Documents, including, but not limited to, costs and expenses incurred in
connection with any proceeding, suit, enforcement of judgment, or
appeal; and BACC's reasonable attorneys' fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing, defending, or otherwise representing BACC
concerning the Loan Documents or the Obligations.
Borrower's Books means all of Borrower's books and records
including all of the following: ledgers; records indicating,
summarizing, or evidencing Borrower's assets or liabilities, or the
Collateral; all information relating to Borrower's business operations
or financial condition; and all computer programs, disk or tape files,
printouts, runs, or other computer prepared information, and the
facilities containing such information.
Business Day means any day which is not a Saturday, Sunday, or
other day on which banks in the State of New Jersey are authorized or
required to close.
Chattel Paper shall have the same meaning ascribed to such
term in the Code.
Code means the New Jersey Uniform Commercial Code, as amended
from time to time.
Collateral means all of the following: the Accounts; the
Equipment; the General Intangibles; the Chattel Paper; the Inventory;
the Negotiable Collateral; any money, deposit accounts or assets of
Borrower which hereafter come into the possession, custody, or control
of BACC; all proceeds and products, whether tangible or intangible, of
any of the foregoing, including proceeds of insurance covering any or
all of the foregoing, and any and all tangible or intangible property
resulting from the sale or other disposition of the foregoing, or any
portion thereof or interest therein, and all proceeds thereof, and any
other assets of Borrower which may be subject to a lien in favor of BACC.
Daily Balance means the amount of the Obligations owed at the
end of a given day.
Eligible Accounts means those Accounts created by Borrower in
the ordinary course of business, which are and at all times shall
continue to be acceptable to BACC in all respects; provided, however,
that standards of eligibility may be fixed and revised from time to time
by BACC in BACC's exclusive judgment. In determining such acceptability
and standards of eligibility, BACC may, but need not, rely on agings,
reports and schedules of Accounts furnished by Borrower, but reliance by
BACC thereon from time to time shall not be deemed to limit BACC's right
to revise standards of eligibility at any time as to both Borrower's
present and future Accounts. In general, an Account shall not be deemed
eligible unless: (a) the Account debtor on such Account is and at all
times continues to be acceptable to BACC, and (b) such Account complies
in all respects with the representations, covenants and warranties
hereinafter set forth. Except in BACC's sole discretion, Eligible
Accounts shall not include any of the following (a) Accounts which the
Account debtor has failed to pay within ninety (90) days of invoice
date, and all Accounts owed by any Account debtor that has failed to pay
twenty-five percent (25%) or more of its Accounts owed to Borrower
within ninety (90) days of invoice date; (b) Accounts with respect to
which goods are placed on consignment or for a guaranteed sale, or which
contain other terms by reason of which payment by the Account debtor may
be conditional; (c) Accounts with respect to which the Account debtor is
not a resident of the United States unless the Account is supported by
foreign credit insurance or a letter of credit, in both instances
satisfactory to and assigned to BACC; (d) Accounts with respect to which
the Account debtor is the United States or any department, agency or
instrumentality of the United States, any State of the United States or
any city, town, municipality or division thereof unless all filings have
been made under the Federal Assignment of Claims Act or comparable state
or other statute; (e) Accounts with respect to which the Account debtor
is an officer, employee or agent of, or subsidiary of, related to,
affiliated with or has common shareholders, officers or directors with
Borrower; (f) Accounts with respect to which Borrower is or may become
liable to the Account debtor for goods sold or services rendered by the
Account debtor to Borrower; (g) Accounts with respect to an Account
debtor whose total obligations to Borrower exceed twenty-five percent
(25%) of all Accounts; (h) Accounts with respect to which the Account
debtor disputes liability or makes any claim with respect thereto, or is
subject to any insolvency proceeding, or becomes insolvent, fails or
goes out of business; (i) the Account arises out of a contract or
purchase order for which a surety bond was issued on behalf of Borrower;
(j) Accounts in which BACC does not have first priority and exclusive
perfected security interest; or (k) Accounts where the Account Debtor is
in a jurisdiction for which Borrower is required to file a notice of
business activities or similar report and Borrower has not filed such
report within the time period required by applicable law.
Eligible Inventory means Inventory consisting of first quality
finished goods held for sale in the ordinary course of Borrower's
business and raw materials for such finished goods which are located or
in a warehouse of which Borrower has previously notified BACC and
furnished to BACC a warehouse receipt evidencing same and as to which
BACC has perfected its lien thereon, and the warehouseman has executed
and delivered to BACC a letter agreement in form satisfactory to BACC,
and is acceptable to BACC in all respects: provided, however, that
general criteria for Eligible Inventory may be established and revised
from time to time by BACC in BACC's exclusive judgment. In determining
such acceptability and standards of eligibility, BACC may, but need not,
rely on reports and schedules of Inventory furnished to BACC by
Borrower, but reliance thereon by BACC from time to time shall not be
deemed to limit BACC's right to revise standards of eligibility at any
time. In general, except in BACC's sole discretion, Eligible Inventory
shall not include work in process, components which are not part of
finished goods, spare parts, packaging and shipping materials, materials
used or consumed in Borrower's business, goods returned to, repossessed
by, or stopped in transit by Borrower, Inventory at the premises of
third parties except as set forth above or subject to a security
interest or lien in favor of any third party, xxxx and hold goods,
Inventory which is not subject a perfected security interest in favor of
BACC, returned and/or defective goods, "seconds", items BACC deems to be
slow moving items, and Inventory purchased on consignment. Eligible
Inventory shall for the purposes of this Agreement be valued at the
lower of cost or wholesale market value.
Equipment means all of Borrower's present and hereafter
acquired equipment, machinery, machine tools, motors, furniture,
furnishings, fixtures, motor vehicles, rolling stock, processors, tools,
pans, dies, jigs, goods (other than consumer goods or farm products) and
any interest in any of the foregoing, and all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to
any of the foregoing, wherever located.
ERISA means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
ERISA Affiliate means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter
become a member of a group of which Borrower is a member and which is
treated as a single employer under XXXXX Xxxxxxx 0000(x)( 0), xx XXX
Section 414.
Event of Default means the events specified in Section 8, below.
General Intangibles means all of Borrower's present and future
general intangibles and other personal property (including choses or
things in action, goodwill, patents, trade names; trademarks, service
marks, blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, route lists, infringement claims,
computer programs, computer discs, computer tapes, Borrower's Books,
literature, reports, catalogs, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims) other than goods and
Accounts.
Guarantor means each person or entity which guarantees the
Obligations or pledges or agrees to pledge any assets as security for
the Obligations.
Insolvency Proceeding means any proceeding commenced by or
against any person or entity under any provision of the federal
Bankruptcy Code, as amended, or under any other state or federal
insolvency law, including assignments for the benefit of creditors,
formal or informal moratoria, compositions, or extensions generally with
its creditors.
Inventory means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to
be furnished under a contract of service, Borrower's present and future
raw materials, work in process, finished goods, tangible property, stock
in trade, wares, and materials used in or consumed in Borrower's
business, goods which have been returned to, repossessed by, or stopped
in transit by Borrower, packing and shipping materials, wherever
located, any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing.
IRC means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
Loan Documents means, collectively, this Agreement, any Note
or Notes, any security agreements, pledge agreements, mortgages, deeds
of trust or other encumbrances or agreements which secure the
Obligations, and any other agreement entered into between Borrower and
BACC or by Borrower or a Guarantor in favor of BACC relating to or in
connection with this Agreement or the Obligations.
Multiemployer Plan means a multiemployer plan as defined in
ERISA Sections 3(37) or 4001(a)(3) or IRC Section 414(f).
Negotiable Collateral means all of Borrower's present and
future letters of credit, notes, drafts, instruments, documents, leases,
and Chattel Paper.
Note means any promissory note made by Borrower to the order
of BACC concurrently herewith or at any time hereafter.
Obligations means all loans, advances, debts, liabilities
(including all interest and amounts charged to the Obligations pursuant to
any agreement authorizing BACC to charge the Obligations), obligations,
lease payments, guaranties, covenants, and duties owing by Borrower to
BACC of any kind and description (whether pursuant to or evidenced by the
Loan Documents or by any other agreement between BACC and Borrower, and
irrespective of whether for the payment of money), whether made or
incurred prior to, on, or after the Termination Date, direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising, including any debt, liability or obligation owing from Borrower
to others which BACC may obtain by assignment or otherwise, and all
interest thereon and all BACC Expenses.
Plan means any plan described in ERISA Section 3(2) maintained
for employees of Borrower or any ERISA Affiliate, other than a
Multiemployer Plan.
Prime Rate means that rate designated by First Union National
Bank, or any successor thereof, from time to time as its prime rate,
which shall not necessarily constitute its lowest available rate.
Slow Moving Inventory means those items of Inventory that would
constitute Eligible Inventory except that such items are slow moving
items of Inventory, in accordance with the definition of Eligible
Inventory.
Term means the period from the date of the execution and
delivery by BACC of this Agreement through and including the later of (a)
the Termination Date and (b) the payment and performance in full of the
Obligations.
Termination Date means (a) September 30, 2000 (the period
through such date the "Initial Term"), 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.
1.2 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular and to
the singular include the plural. The words hereof, herein, hereby,
hereunder, and similar terms in this Agreement refer to this Agreement as
a whole and not to any particular provision of this Agreement. Section,
subsection, clause and exhibit references are to this Agreement unless
otherwise specified. Words importing a particular gender mean and
include every other gender.
1.3 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles (GAAP) as in effect from time to time. When used
herein, the term financial statements shall include the notes and
schedules thereto.
1.4 Exhibits. All of the exhibits, addenda or riders attached
to this Agreement shall be deemed incorporated herein by reference.
1.5 Code. Any terms used in this Agreement which are defined
in the Code shall be construed and defined as set forth in the Code,
unless otherwise defined herein.
2. ADVANCES AND TERMS OF PAYMENT
2.1 Revolving Advances; Advance Limit. 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)
eighty percent (80%) of the aggregate outstanding amount of Eligible
Accounts, plus (b) the lesser of (1) fifty percent (50%) of the aggregate
value of the Eligible Inventory plus ten percent (10%) of the aggregate
value of the Slow Moving Inventory or (2) initially 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 Five Hundred Thousand Dollars ($500,000.00)
(the Advance Limit) and provide further that (b) the maximum amount it
Advances against Eligible Inventory and Slow Moving Inventory shall not
exceed initially sixty percent (60%) of the total Advances and which
percentage will reduce two percent (2%) per month commencing on October
1, 1998 and by 2% on the first day of each month thereafter until the
percentage equals thirty six percent (36%) and (c) the maximum dollar
amount of Advances against Eligible Inventory and Slow Moving Inventory
shall decrease by Five Thousand Dollars ($5,000.00) per month commencing
on October 1, 1998 and on the same day of each month thereafter until the
maximum amount is reduced to One Hundred Seventy Five Thousand Dollars
($175,000).
2.2 Overadvances. All Advances shall be added to and be deemed
part of the Obligations when made. If, at any time and for any reason,
the aggregate amount of the outstanding Advances exceeds the dollar or
percentage limitations contained in Section 2.1 (an Overadvance) then
Borrower shall, upon demand by BACC, immediately pay to BACC, in cash, the
amount of such Overadvance. Without affecting Borrower's obligation to
immediately repay to BACC the amount of each Overadvance, Borrower shall
pay BACC a fee (the Overadvance Fee) in an amount equal to $250.00 per
occurrence of an Overadvance, plus interest on the Overadvance amount at
the Default Rate set forth below.
2.3 Authorization to Make Advances. BACC is hereby authorized
to make the Advances based upon telephonic or other instructions received
from anyone purporting to be an Authorized Officer, or, at the discretion
of BACC, if such Advances are necessary to satisfy any Obligations. All
requests for Advances shall specify the date on which such Advance is to
be made (which day shall be a Business Day) and the amount of such
Advance. Requests received after 12:00 p.m. Eastern time on any day shall
be deemed to have been made as of the opening of business on the
immediately following Business Day. All Advances made under this
Agreement shall be conclusively presumed to have been made to, at the
request of, and for the benefit of Borrower when deposited to the credit
of Borrower or otherwise disbursed in accordance with the instructions of
Borrower or in accordance with the terms and conditions of this Agreement.
Unless otherwise requested by Borrower, all Advances shall be made by a
wire transfer to the deposit account of Borrower designated on schedule
2.3 annexed hereto, or such other account as Borrower shall notify BACC in
writing. Borrower shall pay to BACC a funds transfer fee of $25.00 for
each Advance. Said fees shall be payable on the first day of each month
of the Term for all Advances made during the preceding month.
2.4 Interest.
A. Except where specified to the contrary in the Loan
Documents, the aggregate outstanding balances of the Obligations shall
accrue interest at the per annum rate of Two (2) percentage points (2%)
above the Prime Rate. The Obligations shall bear interest from and after
written notice by BACC to Borrower of the occurrence of an Event of
Default, and without constituting a waiver of any such Event of Default,
at the per annum rate of Seven percentage points (7%) above the Prime
Rate (the "Default Rate"). All interest payable under the Loan Documents
shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed on the Daily Balance. Interest as
provided for herein shall continue to accrue until the Obligations are
paid in full.
B. The interest rate payable by Borrower under the terms of
this Agreement shall be adjusted in accordance with any change in the
Prime Rate from time to time on the date of any such change. All
interest payable by Borrower shall be due and payable on the first day of
each calendar month during the Term. BACC may, at its option, add such
interest and all BACC Expenses to the Obligations, and such amount shall
thereafter accrue interest at the rate then applicable under this
Agreement. Notwithstanding anything to the contrary contained in the
Loan Documents, the minimum interest payable by Borrower on the Advances
shall be calculated on a minimum daily average loan balance of $200,000.00.
(c) In no event shall interest on the Obligations exceed the
highest lawful rate in effect from time to time. It is not the intention
of the parties hereto to make an agreement which violates any applicable
state or federal usury laws. In no event shall Borrower pay or BACC
accept or charge any interest which, together with any other charges upon
the principal or any portion thereof, exceeds the maximum lawful rate of
interest allowable under any applicable state or federal usury laws.
Should any provision of this Agreement or any existing or future Notes or
Loan Documents between the parties be construed to require the payment of
interest or any other fees or charges which could be construed as
interest which, together with any other charges upon the principal or any
portion thereof and any other fees or charges which could be construed as
interest, exceeds the maximum lawful rate of interest, then any such
excess shall be applied to the remaining principal balance of the
Obligations, if any, and the remainder refunded to Borrower.
(d) Notwithstanding the foregoing, for purposes of this
Agreement, it is the intention of Borrower and BACC that "interest" shall
mean, and be limited to, any payment to BACC which compensates it for
extending credit to Borrower, for making available to Borrower a line of
credit during the term of this Agreement and for any default or breach by
Borrower of a condition upon which credit was extended. Borrower and
BACC agree that, for the sole purpose of calculating the "interest" paid
by Borrower to BACC, it is the intention of Borrower and BACC that
interest shall mean and include, and be expressly limited to, any
interest accrued on the aggregate outstanding balance of the Obligations
during the term hereof pursuant to Sections 2.4(A) and 2.4(B); and any
Overadvance Fee, Origination Fee, and late fees charged to Borrower
during the term hereof. Borrower and BACC further agree that it is their
intention that the following fees shall not constitute "interest": any
Servicing Fee, any attorney fees incurred by BACC, any premiums or
commissions attributable to insurance guaranteeing repayment, finders'
fees, credit report fees, appraisal fees or fees for document preparation
or notarization. To the extent, however, that New Jersey law excludes
from the calculation of "interest" any fees defined herein as interest,
or includes as interest any fees or other sums which are intended not to
constitute interest New Jersey law shall supersede and prevail and all
such interest shall be subject to paragraph 2.4(C) above.
2.5 Collection of Accounts. BACC or a BACC designee may, at
any time, with or without notice to Borrower, notify customers or Account
debtors that the Accounts have been assigned to BACC, and that BACC has a
security interest in them and collect the Accounts directly, and add the
collection costs and expenses to the Obligations, but, unless and until
BACC does so or gives Borrower other written instructions, Borrower shall
notify all Account debtors to remit payments on Accounts to a lockbox to
be designated by BACC. All such payments remitted to the lockbox shall
be credited to a deposit account of BACC and into which account
remittances from account debtors of other clients of BACC may be
credited. If notwithstanding said notice Borrower obtains payment on any
Account, Borrower shall receive all payments on Accounts and other
proceeds, including cash, of Collateral in trust for BACC and immediately
deliver said payments to BACC in their original form as received from the
Account debtor, together with any necessary endorsements.
2.6 Crediting Payments. The receipt of any item of payment by
BACC shall, subject to final payment of such item, be provisionally
applied to reduce Obligations on the date of receipt of such item by
BACC, but the receipt of such an item of payment shall for the purpose of
calculation of interest on the Obligations not be deemed to have been
paid to BACC until five (5) Business Days after the date of BACC's actual
receipt of such item of payment. Notwithstanding anything to the
contrary contained herein, payments received by BACC after 11:00 a.m.
Eastern time shall be deemed to have been received by BACC as of the
opening of business on the immediately following Business Day.
2.7 Origination Fee. In consideration of BACC entering into
this Agreement, Borrower shall pay BACC an origination fee of Five
Thousand Dollars ($5,000.00), which shall be paid simultaneous with the
execution hereof and thereafter an origination fee of Five Thousand
Dollars ($5,000.00) on each annual anniversary of the date hereof.
2.8 Servicing Fee. Borrower shall pay BACC a fee in an
amount equal to one half of one percent (.5%) of the daily average
outstanding balance of the Advances during each month on or before the
first (1st) day of each calendar month in respect of BACC's services for
the preceding calendar month, during the Term, including each Renewal
Term, or so long as the Obligations are outstanding.
2.9 Field Examination Fee. Borrower shall pay BACC a fee
in an amount equal to Five Hundred Dollars ($500.00) per day per
examiner, plus out-of-pocket expenses for each examination of Borrower's
Books or the other Collateral performed by BACC or its designee.
2.10 Late Reporting Fee. Borrower shall pay to BACC a fee
in an amount equal to Twenty Five Dollars ($25.00) per document per day
for each Business Day any report, financial statement or schedule
required by this Agreement to be delivered to BACC is past due.
2.11 Monthly Statements. BACC may render monthly statements
to Borrower of all Obligations, including statements of all principal,
interest and BACC Expenses, and Borrower shall have fully and
irrevocably waived all objections to such statements and the contents
thereof unless, within thirty (30) days after receipt, Borrower shall
deliver to BACC, by registered, certified or overnight mail as set forth
in Section 12 hereof, written objection to such statement specifying the
error or errors, if any, contained therein.
3. TERM
3.1 Term and Renewal Date. This Agreement shall become
effective upon execution by BACC and continue in full force through the
Initial Term 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 sixty (60) 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: (a)
Five percent (5.0%) of the Advance Limit if such termination occurs on
or prior to the first (1st) anniversary of the commencement date of the
Initial Term; or (b) four percent (4.0%) of the Advance Limit if such
termination occurs after the first (1st) anniversary of the commencement
date of the Initial Term. 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 after the first year of the Term Borrower
terminates in connection with it obtaining replacement financing from a
commercial bank, which shall not include a commercial finance company or
a commercial finance company owned by a commercial bank, or from funds
obtained through a public offering by its parent corporation, Alexa
Ventures, Inc.
4. CREATION OF CONTINUING SECURITY INTEREST
4.1 Grant of Continuing Security Interest. Borrower hereby
grants to BACC a continuing security interest in all presently existing
and hereafter acquired or arising Collateral in order to secure prompt
repayment of the Obligations and in order to secure prompt performance
by Borrower of each and all of its covenants and Obligations under the
Loan Documents and otherwise. BACC's continuing security interest in
the Collateral shall attach to all Collateral without further act on the
part of BACC or Borrower.
4.2 Negotiable Collateral. In the event that any
Collateral, including proceeds, is evidenced by or consists of
Negotiable Collateral, Borrower shall notify BACC and upon the request
of BACC, immediately endorse and assign such Negotiable Collateral to
BACC and deliver physical possession of such Negotiable Collateral to
BACC.
4.3 Delivery of Additional Documentation Required.
Borrower shall execute and deliver to BACC concurrently with Borrower's
execution and delivery of this Agreement and at any time thereafter at
the request of BACC, all financing statements, continuation financing
statements, fixture filings, security agreements. chattel mortgages,
pledges, assignments, endorsements of certificates of title,
applications for title, affidavits, reports, notices, schedules of
accounts, letters of authority, and all other documents that BACC may
request, in form satisfactory to BACC, to perfect and maintain perfected
BACC's continuing security interests in the Collateral and in order to
fully consummate all of the transactions contemplated under the Loan
Documents.
4.4 Power of Attorney. Borrower hereby irrevocably makes,
constitutes and appoints BACC (and any person designated by BACC) as
Borrower's true and lawful attorney-in-fact with power to sign the name
of Borrower on any of the above described documents or on any other
similar documents to be executed, recorded or filed in order to perfect
or continue perfected BACC's continuing security interest in the
Collateral. In addition, Borrower hereby appoints BACC (and any person
designated by BACC) as Borrower's attorney-in-fact with power to: (a)
sign Borrower's name on verifications of Accounts, and on notices to
Account debtors; (b) send requests for verification of Accounts; (c)
endorse Borrower's name on any checks, notes, acceptances, money orders,
drafts or other forms of payment or security that may come into BACC's
possession; (d) notify the post office authorities to change the address
for delivery of Borrower's mail to an address designated by BACC, to
receive and open all mail addressed to Borrower, and to retain all mail
relating to the Collateral and forward all other mail to Borrower; (e)
make, settle and adjust all claims under Borrower's policies of
insurance, endorse the name of Borrower on any check, draft, instrument
or other item of payment for the proceeds of such policies of insurance
and make all determinations and decisions with respect to such policies
of insurance. The appointment of BACC as Borrower's attorney-in-fact
and each and every one of BACC's rights and powers, being coupled with
an interest, is irrevocable so long as any Accounts in which BACC has a
continuing security interest remain unpaid and until all of the
Obligations have been fully repaid and performed. BACC shall have no
obligation to protect any rights of Borrower against any person
obligated on any Collateral.
4.5 Right To Inspect. BACC shall have the right at any
time or times hereafter during Borrower's usual business hours, or
during the usual business hours of any third party having control over
Borrower's Books to inspect Borrower's Books in order to verify the
amount or condition of, or any other matter relating to, the Collateral
or Borrower's financial condition. BACC also shall have the right at
any time or times hereafter during Borrower's usual business hours to
inspect and examine the Inventory and the Equipment and to check and
test the same as to quality, quantity, value and condition.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to BACC the following and acknowledges:
5.1 No Prior Encumbrances; Security Interests. Borrower has
good and marketable title to the Collateral, free and clear of liens,
claims, security interests or encumbrances, except for the security
interests to be satisfied from the proceeds of the first Advances
hereunder, the continuing security interests granted to BACC by
Borrower, and those disclosed on Schedule 5.1 annexed hereto. Other
than those expressly permitted by this Agreement, Borrower will not
create or permit to be created any security interest, lien, pledge,
mortgage or encumbrance on any Collateral or any of its other assets.
5.2 Bona Fide Accounts. All Accounts represent bona fide
sales or leases of goods and/or services for which Borrower has an
unconditional right to payment. None of the Accounts are subject to any
rights of offset, counterclaim, cancellation or contractual rights of
return.
5.3 Merchantable Inventory. All Eligible Inventory and
Slow Moving Inventory are now and at all times hereafter shall be of
good and merchantable quality, free from defects.
5.4 Location of Inventory and Equipment. The Inventory and
Equipment is not now and shall not at any time or times hereafter be
stored with a bailee, warehouseman, processor, or similar party, except
for the storage of Inventory in warehouses as to which Borrower has
previously notified BACC in writing. Borrower shall keep the Inventory
and Equipment only at the following locations: Borrowers' facilities in
Hackensack, NJ and Inventory at Xxxxx Trucking, Inc. 000 XxXxxxxx Xxxxxx,
Xxxx 0-Xxxxxxxxxxx, Xxxxxxxxx, Xxx Xxxxxx or Lexatech VR Systems, Inc.,
00000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxx 00000.
5.5 Inventory Records. Borrower now keeps and hereafter at
all times shall keep correct and accurate records itemizing and
describing the kind, type, quality and quantity of the Inventory and
Borrower's cost of said items.
5.6 Retail Accounts. No Accounts arise from the sale of
goods for personal, family or household purposes.
5.7 Relocation of Chief Executive Office. The chief
executive office of Borrower is at the address indicated on the first
page of this Agreement and Borrower will not, without thirty (30) days'
prior written notice to BACC, relocate such office.
5.8 Due Incorporation and Qualification. Borrower is and
shall at all times hereafter be a corporation duly organized and existing
under the laws of the state of its incorporation and is qualified and
licensed to do business and is in good standing in any state in which the
conduct of its business or its ownership of assets requires that it be so
qualified.
5.9 Fictitious Name. Borrower is conducting its business
under the following trade or fictitious name(s) and no others: none.
Borrower has complied with the fictitious name laws of all jurisdictions
in which compliance is required in connection with its use of such name(s).
5.10 Permits and Licenses. Borrower holds all licenses,
permits, franchises, approvals and consents required for the conduct of
its business and the ownership and operation of its assets.
5.11 Due Authorization. Borrower has the right and power
and is duly authorized to enter into the Loan Documents to which it is a
party.
5.12 Compliance with Articles; Bylaws. The execution by
Borrower of the Loan Documents to which it is a party does not constitute
a breach of any provision contained in Borrower's Certificate or Articles
of Incorporation or its Bylaws, nor does it constitute an event of
default under any material agreement to which Borrower is now or may
hereafter become a party.
5.13 Litigation. There are no actions, proceedings or
claims pending by or against Borrower before any court or administrative
agency and Borrower has no knowledge or notice of any pending, threatened
or imminent litigation, governmental investigations, or claims,
complaints, actions, or prosecutions involving Borrower, except for
ongoing collection matters in which Borrower is the plaintiff. If any
such actions, proceedings or claims arise during the Term, Borrower shall
promptly notify BACC in writing.
5.14 No Material Adverse Change in Financial Statements.
All financial statements relating to Borrower which have been or may
hereafter be delivered to BACC (I) have been prepared in accordance with
GAAP; (ii) fairly present Borrower's financial condition as of the date
thereof and Borrower's results of operations for the period then ended;
and (iii) disclose all contingent obligations of Borrower. In addition no
material adverse change in the financial condition of Borrower has
occurred since the date of the most recent of such financial statements.
5.15 Solvency. Borrower is now, and shall be at all times
through the Term, solvent and able to pay its debts (including trade
debts) as they mature.
5.16 ERISA. Neither Borrower or any ERISA Affiliate, nor
any Plan is or has been in violation of any of the provisions of ERISA,
any of the qualification requirements of IRC Section 401(a), or any of
the published interpretations thereof. No lien upon the assets of
Borrower has arisen with respect to any Plan. No prohibited transaction
within the meaning of ERISA Section 406 or IRC Section 4975(c) has
occurred with respect to any Plan. Neither Borrower nor any ERISA
Affiliate has incurred any withdrawal liability with respect to any
Multiemployer Plan. Borrower and each ERISA Affiliate have made all
contributions required to be made by them to any Plan or Multiemployer
Plan when due. There is no accumulated funding deficiency in any Plan,
whether or not waived.
5.17 Environmental Laws and Hazardous Materials. Borrower has
complied, and at all times through the Term will comply, with all
Environmental Laws. Borrower has not and will not cause or permit any
Hazardous Materials to be located, incorporated, generated, stored,
manufactured, transported to or from, released, disposed of, or used at,
upon, under, or within any premises at which Borrower conducts its
business, or in connection with Borrower's business. To the best of
Borrower's knowledge, no prior owner or operator of any premises at
which Borrower conducts its business has caused or permitted any of the
above to occur at, upon, under, or within any of the premises. Borrower
will not permit any lien to be filed against the Collateral or any part
thereof under any Environmental Law, and will promptly notify BACC of
any proceeding, inquiry or claim relating to any alleged violation of
any Environmental Law, or any alleged loss, damage or injury resulting
from any Hazardous Material. BACC shall have the right to join and
participate in, as a party if it so elects, any legal or administrative
proceeding initiated with respect to any Hazardous Material or in
connection with any Environmental Law. "Hazardous Material" includes
without limitation any substance, material, emission, or waste which is
or hereafter becomes regulated or classified as a hazardous substance,
hazardous material, toxic substance or solid waste under any
Environmental Law, asbestos, petroleum products, urea formaldehyde,
polychlorinated biphenyls (PCBs), radon, and any other hazardous or
toxic substance, material, emission or waste. Environmental Law means
the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, the Resource Conservation and Recovery Act of
1976, the Hazardous Materials Transportation Act, the Toxic Substances
Control Act, the regulations pertaining to such statutes, and any other
safety, health or environmental statutes, laws, regulations or
ordinances of the United States or of any state, county or municipality
in which Borrower conducts its business or the Collateral is located.
5.18 Tax Compliance. Borrower has filed all tax returns
required to be filed by it and has paid all taxes due and payable on
said returns and on any assessment made against it or its assets.
5.19 Reliance by BACC; Cumulative. Each warranty,
representation and agreement contained in this Agreement shall be
automatically deemed repeated by Borrower with each request for an
Advance and shall be conclusively presumed to have been relied on by
BACC regardless of any investigation made or information possessed by
BACC. The warranties, representations and agreements set forth herein
shall be cumulative and in addition to any and all other warranties,
representations and agreements which Borrower shall now or hereafter
give, or cause to be given, to BACC.
6. AFFIRMATIVE COVENANTS
Borrower covenants and acknowledges that during the Term
Borrower shall comply with all of the following:
6.1 Collateral and Other Reports. Borrower shall on each
Business Day report to BACC all Accounts arising since its most recent
report to BACC and shall execute and deliver to BACC, no later than the
fifteenth (15th) day of each month during the Term, a detailed aging of
the Accounts, a reconciliation statement and a summary aging, by vendor,
of all accounts payable of Borrower and any book overdraft. Borrower
shall deliver to BACC, as BACC may from time to time require, collection
reports, sales journals, invoices, original delivery receipts,
customers' purchase orders, shipping instructions, bills of lading and
other documentation respecting shipment arrangements. Absent such a
request by BACC, copies of all such documentation shall be held by
Borrower as custodian for BACC.
6.2 Returns. Returns and allowances, if any, as between
Borrower and any Account debtors, shall be permitted on the same basis
and in accordance with the usual customary practices of Borrower as they
exist at the date of the execution and delivery of this Agreement. If
at any time prior to the occurrence of an Event of Default any Account
debtor returns any Inventory to Borrower, Borrower shall promptly
determine the reason for such return and, if Borrower accepts such
return, issue a credit memorandum (with a copy to be sent to BACC) in
the appropriate amount to such Account debtor. Borrower shall promptly
notify BACC of all returns and recoveries and of all disputes and claims.
6.3 Designation of Inventory. Borrower shall
contemporaneous with the execution hereof and from time to time
hereafter, but not less frequently than daily, execute and deliver to
BACC a designation of Inventory specifying the cost and the wholesale
market value of Borrower's raw materials, work in process and finished
goods, and further specifying such other information as BACC may
reasonably request.
6.4 Financial Statements, Reports, Certificates. Borrower
shall deliver to BACC: (a) as soon as available, but in any event
within thirty (30) days after the end of each month during the Term, a
balance sheet and profit and loss statement prepared by Borrower
covering Borrower's operations during such period; and (b) as soon as
available, but in any event within ninety (90) days after the end of
each of Borrower's fiscal years, financial statements of Borrower for
each such fiscal period, audited on an unqualified basis by independent
certified public accountants acceptable to BACC. Such financial
statements shall include a balance sheet and profit and loss statement,
and the accountants' management letter. Together with the above,
Borrower shall also deliver Borrower's Form 10-Qs,, 10-Ks or 8-Ks, if
any, as soon as the same become available, and any other report
reasonably requested by BACC relating to the Collateral and the
financial condition of Borrower and a certificate signed by its chief
financial officer to the effect that all reports, statements or computer
prepared information of any kind or nature delivered or caused to be
delivered to BACC under this Section 6.4 fairly present its financial
condition and that there exists on the date of delivery of such
certificate to BACC no condition or event which constitutes an Event of
Default.
6.5 Tax Returns, Receipts. Borrower shall deliver to BACC
copies of each of its future federal income tax returns, and any
amendments thereto, within thirty (30) days of the filing thereof.
Borrower further shall promptly deliver to BACC, upon request,
satisfactory evidence of Borrower's payment of all withholding and other
taxes required to be paid by it.
6.6 Guarantor Reports. Borrower agrees to cause the
Guarantor Xxxxxx Xxx to deliver its annual financial statements and
copies of all federal income tax returns as soon as the same are
available and in any event no later than thirty (30) days after the same
are required to be filed by law.
6.7 Title to Equipment. Upon BACC's request, Borrower
shall immediately deliver to BACC, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for
title to any items of Equipment.
6.8 Maintenance of Equipment. Borrower shall keep and
maintain the Equipment in good operating condition and repair, and shall
make all necessary replacements thereto so that its value and operating
efficiency shall at all times be maintained and preserved. Borrower
shall not permit any item of Equipment to become a fixture to real
estate or an accession to other property, and the Equipment is now and
shall at all times remain Borrower's personal property.
6.9 Taxes. All Federal, state and local assessments and
taxes, whether real, personal or otherwise, due or payable by, or
imposed, levied or assessed against Borrower or any of its assets or in
connection with Borrower's business shall hereafter be paid in full,
before they become delinquent or before the expiration of any extension
period. Borrower shall make due and timely payment or deposit of all
federal, state and local taxes, assessments or contributions required of
it by law, and will execute and deliver to BACC, on demand, appropriate
certificates attesting to the payment or deposit thereof.
6.10 Insurance. Borrower, at its expense, shall keep and
maintain the Collateral insured against all risk of loss or damage from
fire, theft, vandalism, malicious mischief, explosion, sprinklers, and
all other hazards and risks of physical damage included within the
meaning of the term "extended coverage" in such amounts as are ordinarily
insured against by similar businesses. Borrower shall also keep and
maintain comprehensive general public liability insurance and property
damage insurance, and insurance against loss from business interruption,
insuring against all risks relating to or arising from Borrower's
ownership and use of the Collateral and its other assets and the
operation of its business. All such policies shall be in such form, with
such companies and in such amounts as may be satisfactory to BACC.
Borrower shall deliver to BACC certified copies of such policies and
evidence of the payments of all premiums therefor. All such policies
(except those of public liability and liability property damage) shall
contain a Lender's Loss Payable endorsement in a form satisfactory to
BACC, naming BACC as sole loss payee thereof, and containing a waiver of
warranties. All proceeds payable under such policies shall be payable to
BACC and applied to the Obligations.
6.11 BACC Expenses. Borrower shall immediately and without
demand reimburse BACC for all BACC Expenses and Borrower hereby
authorizes the payment of such BACC Expenses.
6.12 Compliance With Law. Borrower shall comply, in all
material respects, with the requirements of all applicable laws, rules,
regulations and orders of governmental authorities relating to Borrower
and the conduct of its business.
6.13 Accounting System. Borrower at all times hereafter
shall maintain a standard and modern system of accounting in accordance
with GAAP with ledger and account cards or computer tapes, disks,
printouts and records pertaining to the Collateral containing such
information as may from time to time be requested by BACC.
7. NEGATIVE COVENANT
Borrower covenants and acknowledges that during the Term Borrower shall
not undertake any of the following:
7.1 Extraordinary Transactions and Disposal of Assets.
Enter into any transaction not in the ordinary and usual course of its
business as conducted on the date hereof, including but not limited to
the sale, lease, disposal, movement, relocation or transfer, whether by
sale or otherwise, of any its assets other than sales of Inventory in the
ordinary and usual course of its business as presently conducted; incur
any indebtedness for borrowed money or other indebtedness outside the
ordinary and usual course of its business as conducted on the date hereof
except for renewals or extensions of existing debts permitted by BACC; or
make any advance or loan or investment in due person or entity, provided
that so long as no Event of Default exists, Borrower may make investments
in EPI International Corp. up to aggregate amount of Nine Hundred
Thousand Dollars ($900,000.00).
7.2 Change Name. Change its name, business structure or
identify or add any new fictitious name.
7.3 Merge, Acquire. Merge, acquire, or consolidate with or
into any other business organization.
7.4 Guaranty. Guaranty or otherwise become in any way
liable with respect to the obligations of any third party, except by
endorsement of instruments or items of payment for deposit to the account
of Borrower for negotiation and delivery to BACC.
7.5 Restructure. Make any change in its financial
structure or business operations.
7.6 Prepayments. Prepay any existing indebtedness owing to
any third party other than trade payables.
7.7 Change of Ownership. Cause, permit or suffer any
change, direct or indirect, in the ownership of the capital stock of
Borrower or enter into any agreement with any person or entity which
provides for a payment to such person or entity based upon the income of
Borrower.
7.8 Loans and Advances. Make any loans, advances or
extensions of credit to any officer, director, executive employee or
shareholder of Borrower (or any relative of any of the foregoing), or to
any entity which is a subsidiary of, related to, affiliated with or has
common shareholders, officers or directors with Borrower.
7.9 Capital Expenditures. Make any plant or fixed capital
expenditure, or any commitment therefor, or purchase or lease any real
or personal assets or replacement Equipment in excess of Ten Thousand
Dollars ($10,000.00) for any individual transaction or where the
aggregate amount of such transactions in any fiscal year exceeds Twenty-
Five Thousand Dollars ($25,000.00).
7.10 Consignments of Inventory. Consign any Inventory.
7.11 Distributions. Make any distribution or declare or pay
any dividends (in cash or in stock) on, or purchase, acquire, redeem or
retire any of its capital stock, of any class, whether now or hereafter
outstanding.
7.12 Accounting Methods. Modify or change its method of
accounting or enter into, modify or terminate any agreement presently
existing or at any time hereafter entered into with any third party for
the preparation or storage of Borrower's records of Accounts and
financial condition without said party agreeing to provide BACC with
information regarding the Collateral or Borrower's financial condition.
Borrower waives the right to assert a confidential relationship, if any,
it may have with any such third party in connection with any information
requested by BACC hereunder, and agrees that BACC may contact any such
party directly in order to obtain such information.
7.13 Business Suspension. Suspend or go out of business.
8. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall
constitute an Event of Default by Borrower hereunder:
8.1 Failure to Pay. Borrower's failure to pay when due and
payable, or when declared due and payable, any portion of the Obligations
(whether principal, interest, taxes, BACC Expenses, or otherwise);
8.2 Failure to Perform. Borrower's or a Guarantor's failure
to perform, keep or observe any term, provision, condition,
representation, warranty, covenant or agreement contained in this
Agreement, in any of the Loan Documents or in any other present or future
agreement between Borrower, and/or a Guarantor and BACC;
8.3 Misrepresentation. Any misstatement or
misrepresentation now or hereafter exists in any warranty,
representation, statement, aging or report made to BACC by, Borrower
and/or a Guarantor or any officer, employee, agent or director thereof,
or if any such warranty, representation, statement, aging or report is
withdrawn by such person;
8.4 Material Adverse Change. There is a material adverse
change in Borrower's, or a Guarantor's, business or financial condition;
8.5 Material Impairment. There is a material impairment of
the prospect of repayment of the Obligations or a material impairment of
BACC's continuing security interests in the Collateral;
8.6 Levy or Attachment. Any material portion of Borrower's
assets is attached, seized, subjected to a writ or distress warrant or is
levied upon, or comes into the possession of any judicial officer or
assignee;
8.7 Insolvency by Borrower or Guarantor. An Insolvency
Proceeding is commenced by Borrower or a Guarantor;
8.8 Insolvency Against Borrower. An Insolvency Proceeding
is commenced against Borrower or a Guarantor;
8.9 Injunction Against Borrower. Borrower is enjoined,
restrained or in any way prevented by court order from continuing to
conduct all or any material part of its business;
8.10 Government Lien. A notice of lien, levy or assessment
is filed of record with respect to any of Borrower's or a Guarantor's
assets by the United States Government, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency, or any taxes or debts owing at any time hereafter
to any one or more of such entities becomes a lien, whether xxxxxx or
otherwise, upon any of Borrower's or a Guarantor's assets and the same
is not paid on the payment date thereof;
8.11 Judgment. A judgment is entered against Borrower or a
Guarantor;
8.12 Default to Third Party. There is a default in any
material agreement to which Borrower or a Guarantor is a party or by
which Borrower or a Guarantor or any of their assets are bound;
8.13 Subordinated Debt Payments. Borrower makes any payment
on account of indebtedness which has now or hereafter been subordinated
to the Obligations, except to the extent such payment is allowed under
any subordination agreement entered into with BACC;
8.14 Termination of Guarantor. A Guarantor dies or
terminates its guaranty; or
8.15 ERISA Violation. A prohibited transaction within the
meaning of ERISA Section 406 or IRC Section 1975(c) shall occur with
respect to a Plan which could have a material adverse effect on the
financial condition of Borrower; any lien upon the assets of Borrower in
connection with any Plan shall arise; Borrower or any ERISA Affiliate
shall completely or partially withdraw from a Multiemployer Plan and such
withdrawal could, in the opinion of BACC, have a material adverse effect
on the financial condition of Borrower. Borrower or any of its ERISA
Affiliates shall fail to make full payment when due of all amounts which
Borrower or any of its ERISA Affiliates may be required to pay to any
Plan or any Multiemployer Plan as one or more contributions thereto;
Borrower or any of its ERISA Affiliates creates or permits the creation
of any accumulated funding deficiency, whether or not waived; the
voluntary or involuntary termination of any Plan which termination could,
in the opinion of BACC, have a material adverse effect on the financial
condition of Borrower or Borrower shall fail to notify BACC promptly and
in any event within ten (l0) days of the occurrence of an event which
constitutes an Event of Default under this clause or would constitute an
Event of Default upon the exercise of BACC's judgment.
Notwithstanding anything contained in this Section 8 to the
contrary, BACC shall refrain from exercising its rights and remedies and
an Event of Default shall not be deemed to have occurred by reason of the
occurrence of any of the events set forth in Sections 8.6, 8.8, 8.10 or
8.11 hereof if, within ten (10) days from the date thereof, the same is
released, discharged, dismissed, bonded against or satisfied; provided,
however, BACC shall not be obligated to make Advances to Borrower during
such period.
9. BACC'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence of an Event
of Default, BACC may, at its election, without notice of such election
and without demand, do any one or more of the following:
(a) Declare all Obligations, whether evidenced by the
Loan Documents or otherwise, immediately due and payable in full:
(b) Cease advancing money or extending credit to or
for the benefit of Borrower under the Loan Documents or under any other
agreement between Borrower and BACC;
(c) Terminate this Agreement as to any future
liability or obligation of BACC, but without affecting BACC's rights and
security interest in the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account debtors for amounts and upon terms which BACC considers
advisable and, in such cases, BACC will credit the Obligations with the
net amounts received by BACC in payment of such disputed Accounts, after
deducting all BACC Expenses;
(e) Cause Borrower to hold all returned Inventory in
trust for BACC, segregate all returned Inventory from all other property
of Borrower or in Borrower's possession and conspicuously label said
returned Inventory as the property of BACC;
(f) Without notice to or demand upon Borrower or a
Guarantor, make such payments and do such acts as BACC considers
necessary or reasonable to protect its security interest in the
Collateral. Borrower shall assemble the Collateral if BACC so requires
and deliver or make the Collateral available to BACC at a place
designated by BACC. Borrower authorizes BACC to enter any premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest or
compromise any encumbrance, charge or lien which in BACC's determination
appears to be prior or superior to its security interest and to pay all
expenses incurred in connection therewith;
(g) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale and sell (in the manner
provided for herein) the Collateral. BACC is hereby granted a license
or other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any asset of a
similar nature, pertaining to the Collateral, in completing the
production of, advertising for sale and sale of the Collateral.
Borrower's rights under all licenses and all franchise agreements shall
inure to BACC's benefit;
(h) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower's
premises) as BACC determines is commercially reasonable. It is not
necessary that the Collateral be present at any such sale;
(i) BACC shall give notice of the disposition of the
Collateral as follows:
(1) To the Borrower and each holder of a security
interest in the Collateral who has filed with BACC a written
request for notice, a notice in writing of the time and place
of public sale or, if the sale is a private sale or some other
disposition other than a public sale is to be made, then the
time on or after which the private sale or other disposition is
to be made;
(2) The notice hereunder shall be personally
delivered or mailed, postage prepaid, to Borrower as provided
in Section 12 hereof, at least five (5) calendar days before
the date fixed for the sale, or at least five (5) calendar days
before the date on or after which the private sale or other
disposition is to be made, unless the Collateral is perishable
or threatens to decline speedily in value. Notice to persons
other than Borrower claiming an interest in the Collateral
shall be sent to such addresses as they have furnished to BACC;
(j) BACC may credit bid and purchase at any public sale:
(k) Any deficiency which exists after disposition of
the Collateral as provided herein shall be immediately paid by Borrower.
Any excess will be remitted without interest by BACC to the party or
parties legally entitled to such excess; and
(l) In addition to the foregoing, BACC shall have all
rights and remedies provided by law (including those set forth in the
Code) and any rights and remedies contained in any Loan Documents and
all such rights and remedies shall be cumulative.
9.2 No Waiver. No delay on the part of BACC in exercising
any right, power or privilege under any Loan Document shall operate as a
waiver, nor shall any single or partial exercise of any right, power or
privilege under such Loan Documents or otherwise, preclude other or
further exercise of any such right, power or privilege.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL.
If Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums or otherwise) due to third persons or
entities, or fails to make any deposits or furnish any required proof of
payment or deposit, or fails to perform any of Borrower's other covenants
under any of the Loan Documents, then in its discretion and without prior
notice to Borrower, BACC may do any or all of the following: (a) make
any payment which Borrower has failed to pay or any part thereof; (b) set
up such reserves in Borrower's loan account as BACC deems necessary to
protect BACC from the exposure created by such failure; (c) obtain and
maintain insurance policies of the type described in Section 6.10 hereof
and take any action with respect to such policies as BACC deems prudent;
or (d) take any other action deemed necessary to preserve and protect its
interests and rights under the Loan Documents. Any payments made by BACC
shall not constitute: (a) an agreement by BACC to make similar payments
in the future or (b) a waiver by BACC of any Event of Default. BACC need
not inquire as to, or contest the validity of, any such expense, tax,
security interest, encumbrance or lien and the receipt of notice for the
payment thereof shall be conclusive evidence that the same was validly
due and owing.
11. WAIVERS
11.1 Demand, Protest. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, and notice of nonpayment at maturity
and acknowledges that BACC may compromise, settle or release, without
notice to Borrower, any Collateral and/or guaranties at any time held by
BACC. Borrower hereby consents to any extensions of time of payment or
partial payment at, before or after the Termination Date.
11.2 No Marshaling. Borrower, on its own behalf and on
behalf of its successors and assigns hereby expressly waives all rights,
if any, to require a marshaling of assets by BACC or to require that BACC
first resort to some portion(s) of the Collateral before foreclosing
upon, selling or otherwise realizing on any other portion thereof.
11.3 BACC's Non-Liability for Inventory or Equipment. So
long as BACC complies with its obligations, if any, under Section 9-207
of the Code, BACC shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Inventory or Equipment; (b)
any loss or damage thereto occurring or arising in any manner or fashion
from any cause; (c) any diminution in the value thereof; or (d) any act
or default of any carrier, warehouseman, bailee, forwarding agency or
other person whomsoever. All risk of loss, damage or destruction of the
Inventory or Equipment shall be borne by Borrower.
12. NOTICES
Unless otherwise provided herein, all consents, waivers,
notices or demands by any party relating to the Loan Documents shall be
in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall
be telecopied (followed up by a mailing), personally delivered or sent
by registered or certified mail, postage prepaid, return receipt
requested, or by receipted overnight delivery service to Borrower or to
BACC, as the case may be, at their addresses set forth below
If to Borrower:
K-Tronik Int'l Corporation.
000 Xxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx Xxx
Fax #(000) 000-0000
If to BACC:
Business Alliance Capital Corp.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxx Xxxxxxxx
Fax # (000) 000-0000
Any party may change the address at it is to receive notices
hereunder by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 12
shall be deemed received on the earlier of the date of actual receipt or
five (5) calendar days after the deposit thereof in the mail or on the
date telecommunicated if telecopied.
13. DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, schedules, invoices, agings or other papers
delivered to BACC may be destroyed or otherwise disposed of by BACC four
(4) months after they are delivered to or received by BACC, unless
Borrower requests, in writing, the return of the said documents,
schedules. invoices or other papers and makes arrangements, at
Borrower's expense, for their return.
14. GENERAL PROVISIONS
14.1 Effectiveness. This Agreement shall be binding and
deemed effective when executed by Borrower and executed and delivered by
BACC.
14.2 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of
the parties; provided, however, that Borrower may not assign this
Agreement or any rights hereunder and any prohibited assignment shall be
absolutely void. No consent to an assignment by BACC shall release
Borrower from its Obligations. Without notice to or the consent of
Borrower, BACC may assign this Agreement and its rights and duties
hereunder and BACC reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest
in BACC's rights and benefits hereunder. In connection therewith, BACC
may disclose all documents and information which BACC now or hereafter
may have relating to Borrower or Borrower's business. Borrower and BACC
do not intend any of the benefits of the Loan Documents to inure to any
third party, and no third party shall be a third party beneficiary
hereof or thereof.
14.3 Section Headings. Headings and numbers have been set
forth herein for convenience only.
14.4 Interpretation. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against
BACC or Borrower, whether under any rule of construction or otherwise.
On the contrary, this Agreement has been reviewed by each party and
shall be construed and interpreted according to the ordinary meaning of
the words used so as to fairly accomplish the purposes and intentions of
the parties hereto.
14.5 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this
Agreement for the purpose of determining the legal enforceability of
such provision.
14.6 Amendments in Writing. This Agreement cannot be
changed or terminated orally. This Agreement is the entire agreement
between the parties with respect to the matters contained herein. This
Agreement supersedes all prior agreements, understandings and
negotiations, if any, all of which are merged into this Agreement.
14.7 Counterparts. This Agreement may be executed in any
number of counterparts each of which, when executed and delivered, shall
be deemed to be an original and all of which, when taken together, shall
constitute but one and the same Agreement.
14.8 Indemnification. Borrower hereby indemnifies,
protects, defends and saves harmless BACC and any member, officer,
director, official, agent, employee and attorney of BACC, and their
respective heirs, successors and assigns (collectively, the "Indemnified
Parties"), from and against any and all losses, damages, expenses or
liabilities of any kind or nature and from any suits, claims or demands,
including reasonable counsel fees incurred in investigating or defending
such claim, suffered by any of them and caused by, relating to, arising
out of, resulting from, or in any way connected with the Loan Documents
and the transactions contemplated therein or the Collateral (unless
caused by the gross negligence or willful misconduct of the Indemnified
Parties) including, without limitation: (a) losses, damages, expenses or
liabilities sustained by BACC in connection with any environmental
cleanup or other remedy required or mandated by any Environmental Law;
(b) any untrue statement of a material fact contained in information
submitted to BACC by Borrower or a Guarantor or the omission of any
material fact necessary to be stated therein in order to make such
statement not misleading or incomplete; (c) the failure of Borrower or a
Guarantor to perform any obligations required to be performed by Borrower
or a Guarantor under the Loan Documents; and (d) the ownership,
construction, occupancy, operations, use and maintenance of any of
Borrower's or a Guarantor's assets. The provisions of this paragraph
14.8 shall survive termination of this Agreement and the other Loan
Documents.
15. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
THE VALIDITY OF THE LOAN DOCUMENTS, THEIR CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO
SHALL BE DETERMINED UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THE LOAN DOCUMENTS SHALL BE TRIED
AND LITIGATED ONLY IN THE STATE COURTS LOCATED IN THE COUNTY OF XXXXXX,
STATE OF NEW JERSEY, THE FEDERAL COURTS WHOSE VENUE INCLUDES THE STATE
OF NEW JERSEY, OR AT THE SOLE OPTION OF BACC, IN ANY OTHER COURT IN
WHICH BACC SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. BORROWER
AND BACC EACH WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE
RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING UNDER THE LOAN DOCUMENTS OR
RELATING TO THE DEALINGS OF BORROWER AND BACC AND ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF "FORUM NON CONVENIENS" OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 15.
Borrower and BACC have executed this Agreement at BACC's place
of business in Princeton, New Jersey as of the date first above written.
K-Tronik Int'l Corporation
a Nevada corporation
Signed by:
Print Name:
Title/Capacity:
BUSINESS ALLIANCE CAPITAL CORP.
a Delaware corporation
Signed by:
Print Name:
Title/Capacity:
Schedule 2.3
Deposit Account of Borrower for Advances
Account #
Bank Name and Wire Transfer Instructions:
Schedule 5.1
EXISTING LIENS WHICH ARE TO CONTINUE
[NONE]
