MERCHANT FINANCIAL CORPORATION
0000 XXXXXXXX
XXX XXXX, XX 00000
TEL (000) 000-0000
FAX (000) 000-0000
July 11, 2000
Xxxxxx Xxxxxxxx Corp.
00 Xxxxxxx Xxxxx
Xxxx Xxxxxxxx, XX 00000
ATTN: Xxxxxx Xxxxxx, President
Dear Xx. Xxxxxx:
Merchant Financial Corporation ("Merchant") has approved a financing arrangement
for Xxxxxx Xxxxxxxx Corp. ("Borrower"), on the following terms and conditions:
REVOLVING CREDIT LINE.
1. Credit Line
During the term of this Agreement, Merchant hereby agrees, subject to the
terms and conditions set for the herein and the Security Agreements
referred to herein, to make loans, advances and/or extensions of credit
("Advances") to or for Borrowers' benefit up to a sum which will not in the
aggregate, exceed the lesser of $400,000 (Four Hundred Thousand Dollars) or
the sum of the amount available as per paragraph #3 below.
2. Term
One year from closing, subject to renewal and terminates as per the terms
of the Security Agreement referred to herein, ("Security Agreement").
3. Advance Formula
Advances shall be made on a revolving basis with the following collateral
and advance rates:
a) Up to 75% (Seventy Five percent) of eligible commercial accounts
receivable. Ineligible accounts receivable are defined in the Security
Agreement including, but not limited to, those that are older than 90
(ninety) days from invoice date and/or other receivable deemed to be
ineligible by Merchant in its sole discretion, including cross-aging
and a concentration cap of 30% (Thirty percent) of eligible accounts
receivable; plus
b) Up to 40% (Forty percent) of eligible inventory, up to a maximum
advance of $100,000 (One Hundred Thousand Dollars). Advances on
inventory may not exceed 50% (Fifty percent) of total advances
outstanding at any time, however, for presold inventory Merchant may,
at its sole discretion, increase this percentage.
4. Charges
a) Facility Fee
In consideration of Xxxxxxxx's agreement to extend financial
accommodations to Borrower hereunder, Xxxxxxxx agrees to pay
Merchant an annual Facility Fee of $4,000 (Four Thousand Dollars),
which shall be paid to Merchant upon the signing of this agreement
or as a charge to the loan account in conjunction with receipt of
the first assignment schedule of sales. For each subsequent year
thereafter the agreement remains in effect, the fee which shall be
1% (one percent) of the maximum credit line will be charged
directly to the Borrower's loan account on or about the
anniversary date of the signing of this agreement. In any event,
the fee is non-refundable to the Borrow.
b) Interest
As set forth in the Security Agreement.
c) Usual wire transfer fees, currently $30 (Thirty dollars).
d) Letter of Credit Fees
As set forth in Letter of Credit Agreement
e) Minimum Annual Income
The minimum annual income (defined as the annual credit line fee
plus interest earned above prime rate plus Letter of Credit Fees)
payable to Merchant shall be $15,000 (Fifteen Thousand Dollars).
COLLATERAL AND OTHER REQUIREMENTS.
In no event shall Merchant be obligated to provide any financing to the Borrower
until the following conditions precedent have been fulfilled to Merchant's
satisfaction:
a) Merchant shall have a first priority perfected security interest in all
assets of the Borrower, which assets would be subject to no other liens
or security interests, excluding fixed assets subject to other liens,
as per Security Agreements in form and substance satisfactory to
Merchant.
b) Personal unlimited guarantees of Xxxxxx Xxxxxxxxxxx, Xx. and Xxxxxx
Xxxxxx, in form and substance satisfactory to Merchant, guaranteeing
all the obligations of Borrower under this agreement.
c) In addition to items specified in the Security Agreement, Merchant
shall receive: (i) all personal guarantors' financial statements
annually, or within 60 days of renewals, in any; (ii) copies of federal
tax returns of Borrower and The Xxxxx Group, Inc. all within 30 days of
filing; (iii) annual projections in a form satisfactory to Merchant, at
least 60 days prior to renewal date; (iv) monthly accounts receivable
agings, prepared on an invoice date basis; accounts payable aging by
not later than the 10th day of the following month; and detailed
inventory listings as requested by Merchant.
d) Corporate Guarantee of The Xxxxx Group, Inc. ("Xxxxx")
Borrower covenants that the Tangible Net Worth (including subordinated loans and
net of intangibles and loans to related parties) of Borrower shall be at least
$500,000 (Five Hundred Thousand Dollars) at all times.
Xxxxx covenants that it is Tangible Net Worth (as defined above) shall be at
least $400,000 (Four Hundred Thousand Dollars) and that it shall be in
compliance with all Securities and Exchange Commission regulations, at all
times.
Borrower further covenants not to make any payments to or enter into
transactions with Xxxxx, related parties and affiliates outside the ordinary
course of business without prior written consent of Merchant.
By signing below, Guarantors and Xxxxx consent to the terms and conditions
hereof.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be executed
by their officers thereunto duly authorized.
Very truly yours,
MERCHANT FINANCIAL CORPORATION
/s/ Xxxxxxx Xxxxx
--------------------------
Executive Vice President
Read, Xxxxxx & Acknowledged:
XXXXXX XXXXXXXX CORP. THE XXXXX GROUP, INC.
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxxxxxxx, Xx.
----------------------------- ------------------------------------
XXXXXX XXXXXX, President XXXXXX XXXXXXXXXXX, XX, President
------------------------------------------------------------
XXXXXX XXXXXX, Personally
/s/ Xxxxxx Xxxxxx
------------------------------------------------------------
XXXXXX XXXXXXXXXXX, XX., Personally
/s/ Xxxxxx Xxxxxxxxxxx, Xx.
------------------------------------------------------------
