EXHIBIT 10.7
Amendment to Loan and Security Agreement dated April 16, 2002
THIS MODIFICATION AGREEMENT, dated as of April 16, 2002, 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 N. A. INC. a Nevada
corporation, (formerly known as K-Tronik Int'l 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 agreement as heretofore
amended and modified from time to time the "Loan Agreement") which
sets forth the terms and conditions of a $1,500,000.00 revolving loan
facility by BACC to Borrower; and
WHEREAS, certain events of default exist under the Loan
Agreement and by letter dated March 19, 2002 BACC notified Borrower
of the existence of Events of Default and reserved its rights and
remedies as a consequence thereof, and Borrower has applied to BACC
for a waiver of said Events of Default and for an extension to June
30, 2003 of the term of said revolving credit facility, 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 definition of Termination Date in section 1.1 of the Loan
Agreement is hereby modified to read as follows:
Termination Date means (a) June 30, 2003 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. Section 1.1 of the Loan Agreement is hereby modified to add the
following definitions of "Parent", "Stock Offering" and "Stock
Offering Date":
Parent means K-Tronik International Corp., a Nevada
corporation, (formerly known as LMC Capital Corp.), and the owner of
100% of the capital stock of Borrower.
Stock Offering means the sale, after January 1, 2002, of
securities of Parent.
Stock Offering Date means the date on which Parent obtains
funds from a Stock Offering.
4. Sections 2.1(A), 2.7, 3.1 and 3.2 of the Loan Agreement are
hereby modified to read as follows:
2.1 (A) 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) (i) through the
earlier of (a) September 30, 2002 or (b) the Stock Offering Date, (the
earlier of said dates the "Reduction Date"), the lesser of (1) fifty
percent (50%) of the value of the Eligible Inventory or (2) Five
Hundred Thousand Dollars ($500,000.00); and (ii) from the Reduction
Date on the lesser of (1) twenty five percent (25%) of the value of the
Eligible Inventory or (2) 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 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 through
the Reduction Date exceed forty percent (40%) of the total Advances and
from the Reduction Date on not exceed twenty five percent (25%) of the
total Advances.
2.7 Facility Fee. In consideration of BACC's entering into
this Agreement, Borrower shall on each June 30th during the Term,
including any Renewal Term, pay BACC a facility fee (the Facility Fee)
of one percent (1%) of the Advance Limit plus the original principal
balance of any term loans and Advances other than under the Revolving
Credit Facility.
3. TERM
3.1 Term and Renewal Date. This Agreement shall become
effective upon execution by BACC and continue in full force through
June 30, 2003 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 Stock Offering. 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.
5. Section 7.7 of the Loan Agreement is hereby modified to read as
follows:
7.7 Change in Ownership. (A). Allow Parent to own less than
100% of the capital stock of Borrower.
(B) Allow Xxxxxx Xxx to own less than 19% of the outstanding
capital stock of Parent.
(C) Allow ETIFF Holdings, LLC. to own less than 31% of the
outstanding capital stock of Parent.
(D) Allow Eiger Technologies, Inc. to own less than 100% of
the outstanding equity interests of ETIFF Holdings, LLC.
6. Article VIII of the Loan Agreement is hereby modified to add
Section 8.16 as follows:
8.16 Change in Management. If Xxxxxx Xxx ceases to be engaged
as president and chief executive officer of Borrower.
7. Borrower acknowledges it has no defense, set-off or counterclaim
against payment of any sums owing under the Loan Documents or the
enforcement of any of the terms of the Loan Agreement or other Loan
Documents.
8. 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,
(e) No Default or Event of Default exists under the Loan
Agreement except as waived as set forth below, and
(f) Exhibit A annexed hereto fully and accurately describes
the corporate structure and ownership of Borrower, the Parent, and
the holders of stock or equity interests of the Parent and ETIFF
Holdings, LLC.
9. 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.
10. In consideration of BACC entering into this Modification
Agreement and in accordance with Section 2.7 of the Loan Agreement
Borrower shall pay to BACC a Facility Fee of $15,000.00, which fee
shall be deemed fully earned on the execution hereof. Said Facility
Fee shall be payable on June 28, 2002. Notwithstanding the foregoing
the unpaid balance of said Facility Fee shall be payable in full on
the earlier of (a) termination of the Loan Agreement or (b) at BACC's
option upon BACC's declaration of an Event of Default. Further in
consideration of BACC entering into this Agreement Borrower shall (A)
cause Parent to execute and deliver to BACC, and to remain in full
force and effect, a guaranty , in form and substance satisfactory to
BACC, of all Obligations of Borrower to BACC, and (B) cause ETIFF
Holdings, LLC. to execute and deliver to BACC, and to remain in full
force and effect, a guaranty, in form and substance satisfactory to
BACC, of an amount equal to the lesser of $250,000 or the amount by
which the Advances exceed 85% of Eligible Accounts.
11. Borrower agrees to pay any and all expenses, including
reasonable counsel fees, including allocated fees of in-house
counsel, and disbursements, incurred by BACC in connection with the
preparation and execution of this Modification Agreement and all
other documents executed in connection herewith.
12. 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.
13. This Modification Agreement shall be construed in
accordance with the substantive laws of the State of New Jersey
without regard to conflict of laws.
14. Borrower acknowledges that certain Events of Defaults as
a consequence of the following, (the "Specific Events of Default"):
(a) Borrower changed its name without obtaining the consent of
Lender, contrary to Section 7.2 of the Loan Agreement; and
(b) There has been a change in ownership of the capital stock
of Borrower without the consent of Lender, contrary to Section
7.7 of the Loan Agreement.
(c) Certain subordinated debt owing by Borrower was "repaid" by
being converted into capital stock of Parent.
(d) Borrower has sold goods on a consignment basis of
approximately $9,000 to a customer located in Canada.
BACC hereby waives the existence of an Event of Default solely
as a consequence of the existence of the Specific Events of Default.
The foregoing waiver shall be limited to the Specific Events 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. In consideration of
BACC granting the aforesaid waiver Borrower shall pay to BACC
contemporaneous with the execution hereof a waiver fee of Fifteen
Thousand Dollars ($15,000.00).
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 N. A. INC.
By: "Xxxxxx Xxx"
Name: Xxxxxx Xxx
Title: President
BUSINESS ALLIANCE CAPITAL CORP.
By: "Xxxxxxx Xxxxxxx"
Name: Xxxxxxx Xxxxxxx
Title: Senior Vice President
Exhibit A
Stock Ownership
Entity Stock Holder Percentage of equity owned
Borrower Parent 100%
Parent ETIFF Holdings, LLC 63.6%
Xxxxxx Xxx 29.7%
Third parties 06.7%
ETIFF Holding, LLC Eiger Technologies, Inc. 100%
