EXHIBIT 10.5
Amendment to Loan and Security Agreement dated May 21, 2000
THIS MODIFICATION AGREEMENT, dated as of May 21, 2000 by and between
BUSINESS ALLIANCE CAPITAL CORP., a Delaware Corporation, with a place
of business at 000 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx 00000,
hereinafter called "BACC," and K-TRONIK INT'L CORPORATION a Nevada
corporation, with its chief executive office at 000 Xxxxxxx Xxxxxx,
Xxxxxxxxxx, Xxx Xxxxxx 00000, hereinafter called "Borrower."
RECITALS
WHEREAS, BACC and Borrower entered into a Loan and Security
Agreement dated as of September 17, 1998 as heretofore modified (the
"Loan Agreement") which sets forth the terms and conditions of a
$750,000.00 revolving loan facility by BACC to Borrower; and
WHEREAS, Borrower has applied to BACC for an extension to March
31, 2001 of the term of said revolving credit facility, for an
increase in maximum amount of said revolving loan facility to
$1,500,000.00 and for other modifications to the terms set forth in
the Loan Agreement; and
WHEREAS, BACC has approved the application of the Borrower on
the terms and condition set forth herein.
NOW, THEREFORE, in consideration of the premises and other good
and valuable consideration, the parties hereto adopt the above
recitals and agree as follows:
1. Capitalized terms not defined herein but defined in the Loan
Agreement shall have the same meanings ascribed to such terms in the
Loan Agreement.
2. The definitions of Eligible Inventory and Termination Date in
section 1.1 of the Loan Agreement are hereby modified to read as follows:
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 at Borrower's premises or in a warehouse of which
Borrower has previously notified BACC and furnished to BACC a
warehouse receipt evidencing same, or are in transit to Borrower and
as to which duplicate bills of lading has been issued in the name of
the Borrower and one of which is in the possession of BACC, and as to
which BACC has perfected its lien thereon, 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.
Termination Date means (a) March 31, 2001 unless such date
is extended pursuant to section 3.1 hereof, and if so extended on one
or more occasions the last date of the last such extension, or (b) if
earlier terminated by BACC pursuant to section 9.1 hereof, the date
of such termination.
3. Sections 2.1(A), 2.4(A),, 2.9, 3.1 and 3.2 of the Loan Agreement
are hereby modified to read as follows:
2.1 Revolving Advances; Advance Limit. (A) Revolving
Loans. Upon the request of Borrower, made at any time or from time to
time during the Term and so long as no Event of Default has occurred
and is continuing, BACC may, in its sole and absolute discretion, make
Advances in an amount up to (a) (i) eighty percent (80%) of the
aggregate outstanding amount of Eligible Accounts or (ii) eighty five
percent (85%) of the aggregate outstanding amount of Eligible Accounts
if Borrower has in place credit insurance, which BACC in writing deems
satisfactory, covering Borrower's Accounts and BACC is the beneficiary
of the applicable credit insurance policies, plus (b) the lesser of (1)
fifty percent (50%) of the value of the Eligible Inventory or (2) Five
Hundred Thousand Dollars ($500,000.00); provided, however, that (a) in
no event shall the aggregate amount of the outstanding Advances be
greater than, at any time, the amount of One Million Five Hundred
Thousand Dollars ($1,500,000.00) (the Advance Limit) and provided
further that (b) the maximum amount of Advances against Eligible
Inventory shall not exceed forty percent (40%) of the total Advances.
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 one and one half of one
percentage points (1.5%) 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 six and one
half of one percentage points (6.5%) 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.
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, provided that so long as no Event of Default exists, the
maximum amount of such fees Borrower shall be obligated to pay for
each year of the Term hereof shall be $1,625.00..
3. TERM
3.1 Term and Renewal Date. This Agreement shall become
effective upon execution by BACC and continue in full force through
March 31, 2001 and from year to year thereafter (a "Renewal Term") if
BACC, at its option, in writing agrees to extend the term for one (1)
year from the then Termination Date, provided that Borrower has not
exercised its termination right in accordance with this section 3.1.
Borrower may terminate the Term on the then Termination Date by giving
BACC at least thirty (30) days prior written notice by registered or
certified mail, return receipt requested. In addition, BACC shall
have the right to terminate this Agreement immediately at any time
upon the occurrence of an Event of Default. No such termination shall
relieve or discharge Borrower of its duties, Obligations and covenants
hereunder until all Obligations have been paid and performed in full,
and BACC's continuing security interest in the Collateral shall remain
in effect until the Obligations have been fully and irrevocably paid
and satisfied in cash or cash equivalent. On the Termination Date of
this Agreement, the Obligations shall be immediately due and payable
in full.
3.2 Early Termination Fee. If the Term is terminated by
BACC upon the occurrence of an Event of Default, or is terminated by
Borrower except as provided in Section 3.1, in view of the
impracticability and extreme difficulty of ascertaining actual damages
and by mutual agreement of the parties as to a reasonable calculation
of BACC's lost profits as a result thereof, Borrower shall pay BACC
upon the effective date of such termination a fee in an amount equal
to four percent (4.0%) of the Advance Limit if such termination occurs
on or prior the expiration of the Termination Date. Such fee shall be
presumed to be the amount of damages sustained by BACC as the result
of an early termination and Borrower acknowledges that it is
reasonable under the circumstances currently existing. The fee
provided for in this Section 3.2 shall be deemed included in the
Obligations. Notwithstanding the foregoing, there shall be no
termination fee if Borrower terminates the facility from funds
obtained through a public offering as to Borrower or its parent
corporation Eiger Technology, Inc. (formerly known as Alexa Ventures,
Inc.). Notwithstanding the foregoing if after the date hereof
Borrower obtains a bonafide commitment or offer of a commitment from a
commercial bank (which shall not include a commercial finance company
owned by a commercial bank) for replacement financing of the revolving
credit facility provided for herein, Borrower shall apply to BACC for
financing on the same terms and conditions of said commitment or offer
and shall furnish to BACC a copy thereof (the "Offer"). BACC shall
have twenty (20) days within which to accept or decline said
application. If BACC declines said application, Borrower may
consummate the financing with the third party who made the Offer on
the same terms as set forth in said Offer and terminate the Term
without payment of a termination fee.
4. Article 6 of the Loan Agreement is hereby modified to add
section 6.14 as follows:
6.14 Inventory Turnover. Borrower shall cause its Inventory
Turnover to average not less than three (3) times on a rolling twelve
month basis, calculated as of the end of each month. Inventory
Turnover shall mean, as the end of each month, the costs of sales for
the twelve (12) month period ending on such month end divided by the
average month end Inventory balance for such twelve month period.
5. Borrower acknowledges that as of the date hereof there is owing
by Borrower to BACC on account of the revolving loan facility
provided for in section 2.1(A) of the Loan Agreement the principal
sum of $__________ plus interest, which sum is owing without defense,
set off or counterclaim.
6. Borrower represents that:
(a) each and every representation heretofore made by Borrower
in the Loan Agreement is true and correct as of the date of this
Modification Agreement,
(b) no consent or approval of, or exemption by any Person is
required to authorize, or is otherwise required in connection with
the execution and delivery of this Modification Agreement and the
other Loan Documents provided for herein, which has not been obtained
and which remains in full force and effect,
(c) Borrower has the power to execute, deliver and carry out
this Modification Agreement and all documents executed in connection
herewith, and this Modification Agreement and such other documents
are valid, binding and enforceable as against Borrower in accordance
with their terms,
(d) no material adverse change in the financial condition of
Borrower has occurred since the date of the most recent financial
statements of Borrower submitted to BACC, and the information
contained in said statements and reports is true and correctly
reflects the financial condition of Borrower and such Obligors as of
the dates of the statements and reports, and such statements and
reports have been prepared in accordance with GAAP and do not contain
any material misstatement of fact or omit to state any facts
necessary to make the statements contained therein not misleading,
and
(e) No Default or Event of Default exists under the Loan
Agreement except as waived as set forth below.
7. Borrower hereby confirms the security interests and liens
granted by Borrower to BACC in and to the Collateral in accordance
with the Loan Agreement and other Loan Documents as security for its
Obligations to BACC.
8. In consideration of BACC entering into this Modification
Agreement Borrower shall pay to BACC contemporaneous with the
execution hereof a fee of $17,500.00. This fee shall be in lieu of
the origination fee due under the Loan Agreement of $7,500.00 due on
September 17, 2000.
9. Borrower has advised BACC that Borrower's investment in K-
Tronik Asia (formerly EPI International Corp.) $2,000,000.00 which is
in excess of the maximum permitted investment of $900,000.00 as set
forth in section 7.1 of the Loan Agreement. BACC hereby waives the
existence of an Event of Default solely as a consequence of said
investment in K-Tronik Asia being in excess of the permitted amount.
The foregoing waiver shall be limited to the specified Event of
Default set forth above and shall not apply to any other Events of
Default, if any so exist, or any future violation of any provisions
of the Loan Agreement or other Loan Documents. Section 7.1 of the
Loan Agreement is hereby modified so that the maximum permitted
investment in K-Tronik Asia shall be $2,000,000.00 plus an additional
$2,000,000.00 if, after the date hereof, Borrower has received
$5,000,000.00 from an initial public offering.
10. Borrower agrees to pay any and all expenses, including
reasonable counsel fees and disbursements, incurred by BACC in
connection with the preparation and execution of this Modification
Agreement and all other documents executed in connection herewith.
11. This Modification Agreement is intended to supplement and modify
the Loan and Security Agreement dated as of September 17, 1998
between BACC and Borrower as heretofore modified and the rights and
obligations of the parties under said Loan and Security Agreement
shall not in any way be vacated, modified or terminated except as
herein provided. All terms and conditions contained in each and
every agreement or promissory note or other evidence of indebtedness
of Borrower to BACC are incorporated herein by reference. If there
is a conflict between any of the provisions heretofore entered into
and the provisions of this Modification Agreement, then the
provisions of this Modification Agreement shall govern.
12. This Modification Agreement shall be construed in accordance
with the substantive laws of the State of New Jersey without regard
to conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this
Modification Agreement to be executed and delivered as of the day and
year first above written.
K-TRONIK INT'L CORPORATION
By: "Xxxxxx Xxx"
Name: Xxxxxx Xxx
Title: President
BUSINESS ALLIANCE CAPITAL CORP.
By: "Xxxxxxx Xxxxxxx"
Name: Xxxxxxx Xxxxxxx
Title: Senior Vice President
