FIRST MODIFICATION TO LOAN AGREEMENT and NOTE among STRONGHOLD
TECHNOLOGIES, INC., a New Jersey Corporation ("Stronghold
NJ"), STRONGHOLD TECHNOLOGIES, INC., a Nevada Corporation
("Stronghold Nevada")(Stronghold NJ and Stronghold Nevada,
together referred to as the "Borrowers"), both having an
address c/o Xxxxxxxxxxx X. Xxxxx, at 000 Xxxxxxxxx Xxxx,
Xxxxxxxxxxxxx, Xxx Xxxxxx 00000, XXXXXXXXXXX X. XXXXX,
residing at 000 Xxxxxxxxx Xxxx, Xxxxxxxxxxxxx, Xxx Xxxxxx
00000 (the "Guarantor"), and UNITEDTRUST BANK, having an
address at 0000 Xxxxx 00 Xxxx, X.X. Xxx 0000, Xxxxxxxxxxx, Xxx
Xxxxxx 00000 (the "Bank").
The Bank, the Borrowers and the Guarantor are parties to a
Loan Agreement dated as of September 30, 2002 (the "Loan Agreement"). In
connection with the Loan Agreement, the Borrowers executed and delivered to the
Bank a Commercial Loan Note in the original principal amount of $1,500,000.00
(the "Note") dated September 30, 2002 evidencing the Loan as described in the
Loan Agreement. As of the date of this Modification Agreement, a principal
balance of $1,291,666.65 was due and owing to the Bank under the Loan. Repayment
of all sums due to the Bank under the Note and Loan Agreement is unconditionally
guaranteed by the Guarantor pursuant to a Guaranty of Payment dated as of
September 30, 2002 (the "Guaranty"). In consideration of the mutual promises and
covenants set forth herein, the Bank, the Borrowers and the Guarantor hereby
agree to modify the terms of the Loan Agreement and Note as follows:
1. All capitalized terms not defined in this Modification
Agreement shall have the same meaning set forth in the Note and/or the Loan
Agreement.
2. Paragraph 4 of the Note is hereby amended to provide that
commencing with the July 2003 payment, the monthly payments of principal and
accrued interest shall be paid to the Bank on the 15th day of each month rather
than on the 1st day of each month. Paragraph 4 of the Note is also revised to
provide that from the date of this Modification Agreement until the Maturity
Date, the following payments shall be made to the Bank under the Note:
(a) On the date hereof and on the 15th day of each month through
December 15, 2003, principal payments of $10,000.00 each, together with accrued
interest, shall be paid by the Borrower;
(b) On January 15, 2004 and on the 15th day of each month through
December 15, 2004, principal payments of $15,000.00 each, together with accrued
interest, shall be paid by the Borrower;
(c) On January 15, 2005 and on the 15th day of each month through
December 15, 2005, principal payments of $20,000.00 each, together with accrued
interest, shall be paid by the Borrower; and
(d) On the Maturity Date of January 1, 2006, a balloon payment equal to
all outstanding principal and accrued interest shall be due and payable.
The monthly payment of principal and interest due on July 1, 2003 has
not been paid by the Borrowers. Accordingly, upon the execution of this
Modification Agreement, the Borrowers shall pay the Bank the principal payment
of $10,000.00 for July together with all interest and late fees accrued under
the Loan through July 15, 2003. Provided such payment is made on the date of
this Modification Agreement, the Bank will waive any Event of Default which may
have existed under the Loan Agreement and Note as a result of the Borrowers'
failure to pay the July 1, 2003 payment when due.
3. To further secure the repayment of the Loan, and in
consideration of the modification of the repayment terms of the Note made
herein, contemporaneously with the execution of this Modification Agreement, the
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Guarantor and his spouse, Xxxx X. Xxxxx, shall execute and deliver to the Bank a
mortgage (the "Mortgage") constituting a second lien on their real property
located at 000 Xxxxxxxxx Xxxx, Xxxxxxxxxxxxx, X.X. and also known as Xxx 0,
Xxxxx 0 on the Tax Map of the Borough of Bernardsville, Somerset County, New
Jersey (the "Property"). The lien of the Mortgage shall be subject and
subordinate only to a first mortgage given to PNC Mortgage Corp. and now held or
serviced by Washington Mutual Federal Savings Bank having a current outstanding
balance of not more than $2,253,000.00 (the "First Mortgage"). Xxxx X. Xxxxx
shall also execute and deliver to the Bank a Limited Guaranty pursuant to which
she shall unconditionally guaranty the repayment of all obligations of the
Borrower to the Bank under the Loan and further providing that her liability
thereunder shall be limited to her interest in the Property (her obligation
shall be non-recourse and foreclosing her interest in the Property shall be the
Bank's sole remedy under her Limited Guaranty). The Guarantor, at the expense of
the Guarantor or the Borrowers, shall cause, as soon as reasonably practicable
after the recording of the Mortgage, a policy of title insurance to be issued in
favor of the Bank inuring that its Mortgage is a valid second lien against the
Property, subject to no liens other than the lien of the First Mortgage.
4. If the Property is sold by the Guarantor, the Bank agrees
that it will release the lien of its Mortgage provided no Event of Default as
defined in the Loan Agreement has occurred and substitute collateral, in the
form of readily marketable securities or other liquid assets in an amount and
form satisfactory to the Bank, is given to the Bank. Such substitute collateral
must have a Security Value (determined as set forth below) greater than the
outstanding balance of the Loan. If the substitute collateral consists of a
Savings Account or Certificate of Deposit at the Bank, the Bank will assign a
Security Value for this type of collateral of 98% of its current market value.
If the substitute collateral consists of U.S. Government Obligations, U.S.
Federal Agency Issues or a Savings Account or Certificate of Deposit at a bank
other than the Bank, the Bank will assign a Security Value for this type of
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collateral of 90% of its current market value. If the substitute collateral
consists of obligations of the State of New Jersey or any municipality or
governmental authority in the State of New Jersey, the Bank will assign a
Security Value of 80% of its current market value. If the substitute collateral
consists of stock publicly traded on the New York Stock Exchange, the American
Stock Exchange, NASDAQ, or OTC, such stock must have a per share value of at
least $10.00, and the Bank will assign a Security Value for this type of
collateral of 70% of its current market value. The Bank further agrees that if
the Guarantor subdivides and sells the portion of the Property (comprised of
approximately 10 acres) upon which a guest house is now situated, the Bank will
release such portion of the Property from the lien of its Mortgage provided that
(i) no Event of Default as defined in the Loan Agreement has occurred, (ii) the
Bank's Mortgage continues on the remaining portion of the Property and the Bank
is reasonably satisfied that such remaining portion is a properly subdivided
property upon which the main residence continues to be situated, (iii) the Bank
is reasonably satisfied that the remaining balance then due under the Loan is no
greater than 65% of the value of the remaining portion of the Property not being
released, and (iv) at least 33% of the proceeds from such sale are used to pay
down the amounts due on the First Mortgage (the Bank must be advised of the use
of all sale proceeds). The Borrowers must reimburse the Bank for all reasonable
legal fees and other reasonable expenses which may be incurred by the Bank in
connection with any requested substitution or release of collateral.
5. The Borrowers shall reimburse the Bank for the cost of all
attorney fees and other expenses incurred by the Bank in connection with the
modification of the Loan and the preparation of this Modification Agreement. The
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Borrowers shall also reimburse the Bank for the cost of an appraisal of the
Property in the amount of up to $2,400.00.
6. The Bank presently holds a first lien security interest
against of the assets of the Borrowers pursuant to the terms of a Security
Agreement dated as of September 30, 2002 (the "Security Agreement"). The
Borrowers have advised the Bank that new financing may be obtained by the
Borrowers from another lender and have requested the Bank to subordinate its
lien against the Borrowers' assets to the lien of the new lender. The Bank
agrees that it will subordinate its lien against the assets of the Borrowers to
the lien of a new lender provided: (i) no Event of Default as defined in the
Loan Agreement has occurred; (ii) the total indebtedness of the Borrowers to the
new lender does not exceed $2,000,000.00, and (iii) the Bank is provided with
copies of all documentation evidencing the obligation and security interest
granted to the new lender. The Borrowers must reimburse the Bank for all
reasonable legal fees and other reasonable expenses which may be incurred by the
Bank in connection with any requested subordination of its lien.
7. By executing this Modification Agreement, the Guarantor
hereby ratifies the Guaranty and acknowledges that he has unconditionally
guaranteed the repayment of all sums due under the Note as modified by this
Modification Agreement.
8. Except as expressly modified herein, the Loan Agreement and
Note shall continue in full force and effect. By executing this Modification
Agreement, the Borrowers and the Guarantor hereby acknowledge that the Loan
Agreement, the Note, the Guaranty, the Security Agreement, and all other
documents executed by the Borrowers in connection with the Loan shall continue
in full force and effect, are valid and binding, and they hereby expressly
ratify, confirm and reaffirm all terms and conditions thereof. The Borrowers and
Guarantor hereby represent, warrant and confirm that there are no set-offs,
defenses, rights, claims or causes of action of any nature whatsoever which the
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Borrowers or Guarantor have or may assert against the Bank with respect to the
Loan Agreement, the Note, the Guaranty and the other documents executed in
connection therewith.
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IN WITNESS WHEREOF the parties have executed this Modification
Agreement as of July 31, 2003.
Witnessed or Stronghold Technologies, Inc., a New
Attested by: Jersey corporation, Borrower
/s/ Xxxx Xxxxxxx By: /s/ Xxxxxxxxxxx X. Xxxxx
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Xxxxxxxxxxx X. Xxxxx, President
Witnessed or Stronghold Technologies, Inc., a
Attested by: Nevada corporation, Borrower
/s/ Xxxx Xxxxxxx By: /s/ Xxxxxxxxxxx X. Xxxxx
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Xxxxxxxxxxx X. Xxxxx, President
Witnessed by:
/s/ Xxxx Xxxxxxx By: /s/ Xxxxxxxxxxx X. Xxxxx
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Xxxxxxxxxxx X. Xxxxx, Guarantor
Witnessed by: UNITEDTRUST BANK
/s/ Xxxxx X. Xxxxxxx, Esq. By: /s/ Xxxx X. Xxxxxx
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Xxxxx X. Xxxxxxx, Esq. Xxxx X. Xxxxxx, Vice President
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