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:
name:
title:
BUSINESS ALLIANCE CAPITAL CORP.
By:
name:
title:
