Exhibit 10.7
MODIFICATION AGREEMENT
This MODIFICATION AGREEMENT entered into at Boston, Massachusetts, as of
December 19, 1997, between Fix-Corp. International, Inc., a Delaware
corporation, with an address of 0000 Xxxxx Xxxxxxx, Xxxxx, Xxxx 00000,
Palletech, Inc., a Delaware corporation, with an address of 0000 Xxxxx Xxxxxxx,
Xxxxx, Xxxx 00000 and Fixcor Industries, Inc., a Delaware corporation, with an
address of 0000 Xxxxx Xxxxxxx, Xxxxx, Xxxx 00000 (collectively, the "Borrowers"
and each a "Borrower") and Xxxxxx Xxxxxxxx Capital, LLC a Delaware limited
liability company with an address of 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000 (the "Lender").
WHEREAS, the Lender has made a loan to the Borrowers in the original
principal amount of $3,500,000 (the "Loan") evidenced by that certain Note,
dated July 9, 1997 (the "Note"), by the Borrowers in favor of the Xxxxxx
Xxxxxxxx Capital Corporation ("GBCC"), the predecessor in interest of the
Lender, in the original principal amount of $3,500,000 which matures on October
31, 1998 (the "Maturity Date"). In addition the Borrowers executed and
delivered to GBCC a certain Loan and Security Agreement, dated July 9, 1997 (the
"Loan Agreement") in connection with the Loan. The Note, the Loan Agreement and
any and all other documents, agreements, instruments, certificates, amendments
or renewals, including without limitation all guarantys, security agreements and
mortgages, executed and delivered to the GBCC or Lender in connection with the
Note are collectively hereinafter referred to as the "Loan Documents".
WHEREAS, to secure the Borrowers' obligations under the Note and the other
Loan Documents, the Borrowers pledged to and granted in favor of the Lender a
security interest and/or mortgage in certain property (hereinafter collectively
referred to as the "Collateral"), all more fully described in the Loan
Documents;
WHEREAS, the Borrowers have requested the Lender increase the amount of the
Loan to $7,000,000 and to modify the terms of the Loan as set forth herein; and
WHEREAS, subject to the terms, and conditions in this Agreement, the Lender
is willing to increase the amount of the Loan to $7,000,000 and to modify the
terms of the Loan as set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lender and the Borrower
mutually agree as follows:
1. RATIFICATION. All of the terms, covenants, provisions,
representations, warranties, and conditions of the Loan Documents, as
amended or modified hereby, are ratified, acknowledged, confirmed, and
continued in full force and effect as if fully restated herein.
2. COLLATERAL. Each Borrower confirms and ratifies its continuing
mortgage, pledge, assignment, and/or grant of security interest in the
Collateral to and in favor of the Lender as set forth in the Loan
Documents.
3. INCREASE AND MODIFICATION. The Borrowers and the Lender hereby agree
to increase the Loan to $7,000,000 and to modify the terms of the Note
in accordance with an amended and restated note (the "Amended Note")
in the form attached hereto as Exhibit A. The Amended Note shall be
secured by the same collateral to the same extent and with the same
priority as the Note.
4. MODIFICATION OF LOAN AGREEMENT. The Borrowers and the Lender hereby
agree to modify the terms of the Loan Agreement as follows:
(a) Section 1 of the Loan Agreement is hereby deleted and replaced
with the following:
1.1 LOAN. Lender agrees to lend to Borrowers at Lender's
discretion upon any Borrower's request up to Seven Million
Dollars and Zero Cents ($7,000,000) (the "Revolving Loan Amount")
or such other amounts as may from time to time be established by
Lender, subject to the terms and conditions set forth herein, but
in no event more than the Borrowing Base, as such term is
hereinafter defined and as calculated in a borrowing base
certificate in the form of Exhibit A, attached hereto, and
delivered to the Lender prior to each advance under the Revolving
Loan as hereafter defined or as otherwise required by the Lender.
The Revolving Loan made pursuant to this Agreement (the
"Revolving Loan") shall be evidenced by that certain Revolving
Term Note, dated as of December 19, 1997 (the "Note") in the
amount of the Revolving Loan Amount. This Agreement, the Note,
and any and all other documents, amendments or renewals executed
and delivered in connection with any of the foregoing are
collectively hereinafter referred to as the "Loan Documents".
1.2 LOAN ACCOUNT. At the option of the Lender, an account shall
be opened on the books of Lender which shall be designated on
Lender's books and records as Borrowers' "Loan Account" in which
account a record will be kept of all loans and other advances
made by Lender to Borrowers under or pursuant to this Agreement,
and all payments thereon and other appropriate debits and credits
as provided by this Agreement. Each advance made hereunder may
be credited by Lender to any deposit account of any Borrower with
Lender or with any other Lender with which any Borrower maintains
a deposit account, or may be paid to any Borrower or may be
applied to any Obligations, as Lender may in each instance elect.
1.3 INTEREST. Interest will be charged to Borrower on the
principal amount from time to time outstanding at the rate
specified in the Note in accordance with the terms of the Note.
If not specified in the Note interest will be charged at the
highest rate per annum charged by Lender to Borrower on any other
Obligation based on a 360-day year.
1.4 ADDITIONAL LOANS. Any loans, advances and credits to the
Borrowers that are made in excess of the Revolving Loan Amount
for the line of credit established hereunder shall not affect the
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obligations of Borrowers or any of the Lender's rights or
remedies hereunder or under the Loan Documents or otherwise, such
loans and all loans hereunder to be secured by the Collateral, as
hereinafter defined, and to be due and payable to the Lender upon
the same terms as the Revolving Loan pursuant to the Note, and
shall bear interest at the rate set forth in the Note. All
checks or other items paid by Lender which cause an overdraft in
any deposit account maintained by Borrowers with Lender shall
constitute an advance to Borrowers pursuant to this Agreement,
repayable on demand, and shall be secured by all Collateral at
any time pledged by Borrowers to Lender.
1.5 AUTHORIZED PERSONS. Any person duly authorized by a general
borrowing resolution of any Borrower, or in the absence of such a
resolution, the President, Treasurer or any Vice President of any
Borrower, may request discretionary loans hereunder, either
orally or otherwise, but the Lender at its option may require
that all requests for loans hereunder shall be in writing. The
Lender shall incur no liability to the Borrowers in acting upon
any request referred to herein which the Lender believes in good
faith to have been made by an authorized person or persons.
1.6 MONTHLY STATEMENT. At the option of the Lender, after the
end of each month, Lender will render to Borrowers a statement of
Borrowers' Loan Account with Lender, showing all applicable
credits and debits. Each statement shall be considered correct
and to have been accepted by each Borrower and shall be
conclusively binding upon each Borrower in respect of all
charges, debits and credits of whatsoever nature contained
therein under or pursuant to this Agreement, and the closing
balance shown therein, unless any Borrower notifies Lender in
writing of any discrepancy within twenty (20) days from the
mailing by Lender to Borrowers of any such monthly statement.
(b) The following definitions shall be added to Section 2.2 of the Loan
Agreement:
"Accounts Receivable" means all each Borrower's accounts,
accounts receivable, contract rights, notes, bills, drafts,
acceptances, instruments, documents, chattel paper and all other
debts, obligations and liabilities in whatever form owing to such
Borrower from any Person (as defined below) for goods sold by it
or for services rendered by it, or however otherwise established
or created, all guaranties and security therefor, all right,
title and interest of each Borrower in the goods or services
which gave rise thereto, including rights to reclamation and
stoppage in transit and all rights of any unpaid seller of goods
or services; whether any of the foregoing be now existing or
hereafter arising, now or hereafter received by or owing or
belonging to such Borrower.
"Borrowing Base" as used in this Agreement means the sum of the
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following (as shown on Lender's records at any time) and as
reported by Borrower at the time of each loan request and at
least monthly in a Borrowing Base Certificate as required by this
Agreement:
(i) 80% of the unpaid face amount of all Eligible Accounts (as
defined herein), PLUS
(ii) 50% of the cost or market value, which ever is lower, of
all Eligible Inventory (as such term is defined herein), PLUS
(iii) 70% of the appraised orderly liquidation value of
Equipment, as determined in an appraisal acceptable to Lender in
its sole discretion, PLUS
(iv) 100% of cash on deposit in any account subject to a blocked
account agreement in favor of Lender and in form acceptable to
Lender in its sole discretion.
(c) "Eligible Account" means an Account Receivable which initially and at
all times until collected in full:
(i) is not more than 90 days from the date of invoice;
(ii) arose in the ordinary course of business from the domestic
performance of services or the outright sale of goods (excluding
conditional sale or sale and return); such services have been
performed or such goods have been shipped to the account debtor;
and in the case of goods, any Borrower has possession of or has
delivered to Lender shipping and delivery receipts evidencing
shipment;
(iii) is not owed by an account debtor who is a supplier,
employee or parent, subsidiary or other affiliate of any
Borrower;
(iv) is not evidenced by a promissory note or other instrument,
is subject to a perfected security interest in favor of Lender
and is not subject to any other lien;
(v) is not owed by an account debtor whose principal place of
business is located outside of the United States of America;
provided, however, that such Account may constitute an Eligible
Account (i) if foreign credit insurance (satisfactory to Lender
in all respects) is obtained for such Account Receivable listing
the Lender as an additional insured, or (ii) if it is supported
by letter(s) of credit issued to any Borrower by financial
institution(s) acceptable to Lender;
(vi) is a non-contingent obligation that is not subject to
set-off, credit, defense, warranty claim, allowance or adjustment
by the account debtor except normal discount allowed in the
ordinary course for prompt payment, and such account debtor has
not complained as to its liability thereon nor returned any of
the subject goods;
(vii) did not arise out of any sale made on an advanced billing,
xxxx
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and hold, dating or delayed shipment basis;
(viii) is owed by an account debtor as to which Borrowers have
received no notice and have no knowledge of Bankruptcy,
insolvency or other facts which make collection doubtful, and has
not been turned over to a collection agency or attorney;
(ix) respecting which the account debtor is not located in the
Sate of New Jersey, or the State of Minnesota or any other state
denying creditors access to its courts in the absence of such
creditor's qualification to conduct business as a foreign
corporation in such state or complying with other filing or
reporting requirements unless Borrowers have filed all legally
required filings and reports, obtained any necessary authorities
or certificates to do business, and paid any applicable taxes
and/or fees to the applicable state agency in such state;
(x) if owed by the United States of America, has upon Lender's
request therefor, been properly assigned to the Lender pursuant
to the Federal Assignment of Claims Act, and is not subject to
any right of offset or other claims; and
(xi) has not been designated by Lender in its reasonable
discretion as unacceptable for any reason by notice to any
Borrower setting forth the reason for such designation; provided,
however, that this subsection shall not apply to any Account
Receivable that is insured by credit insurance.
(d) "Eligible Inventory" means any Borrower's Inventory (including raw
materials or finished goods) which initially and at all times until
sold is:
(i) new and unused (except, with Lender's written approval, used
equipment held for sale or lease), in first-class condition,
merchantable and salable through normal trade channels;
(ii) at a location which has been identified in writing to
Lender;
(iii) subject to a perfected security interest in favor of
Lender and owned by such Borrower free and clear of any lien
except in favor of Lender;
(iv) not obsolete; not scrap, waste, defective goods and the
like;
(v) and has been produced by such Borrower in accordance with
the Federal Fair Labor Standards Act of 1938, as amended, and all
rules, regulations and orders promulgated thereunder;
(vi) not stored with a bailee, warehouseman, processor or
similar party unless Lender has given its prior written consent
thereto and such Borrower has caused each such bailee,
warehouseman, processor or similar party to issue and deliver to
Lender warehouse receipts and lien waivers in Lender's name for
such inventory, and in the case of processors, unless such are
goods segregated and labeled as belonging to such Borrower or
such Borrower has
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perfected its interest therein by retaining a security interest
therein and filing financing statements against such processor
pursuant to the Uniform Commercial Code;
(vii) and has not been designated by Lender in its reasonable
discretion as unacceptable for any reason by notice to such
Borrower provided that such notice shall specify the reason for
such designation;
(viii) and has been since the date of this Agreement valued for
financial reporting purposes on a basis consistent with the basis
applied for prior financial periods; and
(ix) not held on consignment by a customer unless such Borrower
has perfected its interest therein by filing financing statements
against such customer and by prior notification of secured
parties of such customer as required by Section 2-326(3)(c) and
9-114 of the Uniform Commercial Code.
5. RELEASE OF LENDER. Each Borrower further acknowledges that the Note
is a valid and legal binding obligation of such Borrower, enforceable
in accordance with its terms, and is not subject to any defenses,
counterclaims, or offsets of any kind, and to the extent any such
defenses, counterclaims or offsets exist, notwithstanding the
representation to the contrary contained in this paragraph, such
defenses, counterclaims and offsets are hereby waived by such Borrower
and all other parties obligated to the Lender on account of the Note
or the Loan Documents.
6. FACILITY FEE. The Borrowers agree to pay the Lender a monthly
facility fee in the amount of $17,500 payable monthly in addition to
all amounts due respecting the Note.
7. EXIT FEE. In addition to all other amounts due respecting the Loan,
the Borrower shall pay to the Lender an exit fee at the time (the
"Payoff Time") all amounts outstanding respecting the Loan are paid in
full equal to the greater of (i) $600,000; or (ii) an amount
calculated by multiplying (x) the average daily balance of the amount
outstanding respecting the Loan from the date of this Agreement until
the Payoff time, as calculated by Lender in its reasonable discretion,
by (y) the number of actual days from the date of this Agreement until
the Payoff time, and by (z) a percentage equal to twenty (20%) percent
divided by 360.
8. SET-OFF. Any deposits, balances or other sums credited by or due from
the Lender or any of its affiliates to any Borrower may, at any time,
whether or not an event of default has occurred or demand has been
made, without notice to any Borrower, or compliance with any other
condition precedent now or hereafter imposed by statute, rule of law
or otherwise (all of which are hereby expressly waived), be set off,
appropriated and applied by Lender against any and all of the
obligations of Borrowers to the Lender in such manner as the Lender in
its sole discretion may determine.
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9. COUNSEL FEES AND EXPENSES. Each Borrower will, upon demand, pay all
counsel fees and expenses reasonably incurred by the Lender in
connection with this Agreement, as well as fees and expenses of
counsel which the Lender may hereafter incur in revising,
interpreting, protecting or enforcing any of the Lender's rights as
against any Borrower, any security held by the Lender or which result
from any claim or action by any third person against the Lender that
would not have been asserted were it not for the Lender's relationship
with Borrowers hereunder. Each Borrower specifically authorizes the
Lender to pay all such fees and expenses and charge the same to its
loan account with the Lender.
10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which
shall constitute but one agreement.
11. BINDING EFFECT OF AGREEMENT. All covenants, agreements,
representations and warranties contained herein shall bind and inure
to the benefit of the respective successors and assigns of the parties
hereto, whether expressed or not; provided that Borrowers may not
assign or transfer its rights hereunder.
12. FURTHER ASSURANCES. Each Borrower will from time to time execute and
deliver to the Lender, and take or cause to be taken, all such other
further action as the Lender may request in order to effect and
confirm or vest more securely in the Lender all rights contemplated
hereunder.
13. AMENDMENTS AND WAIVERS. This Agreement may be amended and any
Borrower may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, if such Borrower shall
obtain the Lender's prior written consent to each such amendment,
action or omission to act. No delay or omission on the part of Lender
in exercising any right hereunder shall operate as a waiver of such
right or any other right and waiver on any one or more occasions shall
not be construed as a bar to or waiver of any right or remedy of
Lender on any future occasion.
14. TERMS OF AGREEMENT. This Agreement shall continue in force and effect
so long as any obligation of any Borrower to Lender shall be
outstanding and is supplementary to each and every other agreement
between each Borrower and Lender and shall not be so construed as to
limit or otherwise derogate from any of the rights or remedies of
Lender or any of the liabilities, obligations or undertakings of each
Borrower under any such agreement, nor shall any contemporaneous or
subsequent agreement between any Borrower and the Lender be construed
to limit or otherwise derogate from any of the rights or remedies of
Lender or any of the liabilities, obligations or undertakings of such
Borrower hereunder, unless such other agreement specifically refers to
this Agreement and expressly so provides.
15. NOTICES. Any notices under or pursuant to this Agreement shall be
deemed duly received by each Borrower and Lender and effective if
delivered in hand to any officer or agent of any Borrower or Lender or
if mailed by registered or certified mail, return receipt requested,
addressed to a Borrower or Lender at the
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address set forth above or as any party shall provide by written
notice to the other party.
16. MASSACHUSETTS LAW. This Agreement is intended to take effect as a
sealed instrument and has been executed or completed and is to be
performed in Massachusetts, and it and all transactions thereunder or
pursuant thereto shall be governed as to interpretation, validity,
effect, rights, duties and remedies of the parties thereunder and in
all other respects by the domestic laws of Massachusetts.
17. REPRODUCTIONS. This Agreement and all documents which have been or
may be hereinafter furnished by any Borrower to the Lender may be
reproduced by the Lender by any photographic, photostatic, microfilm,
xerographic or similar process, and any such reproduction shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence
and whether or not such reproduction was made in the regular course of
business).
18. VENUE. Each Borrower irrevocably submits to the nonexclusive
jurisdiction of any federal or state court sitting in Massachusetts,
over any suit, action or proceeding arising out of or relating to this
Agreement. Each Borrower irrevocably waives to the fullest extent it
may effectively do so under applicable law, any objection it may now
or hereafter have to the laying of the venue of any such suit, action
or proceeding brought in any such court and any claim that the same
has been brought in an inconvenient forum. Each Borrower irrevocably
appoints the Secretary of State of the Commonwealth of Massachusetts
as its authorized agent to accept and acknowledge on its behalf any
and all process which may be served in any such suit, action or
proceeding, consents to such process being served (i) by mailing a
copy thereof by registered or certified mail, postage prepaid, return
receipt requested, to such Borrower's address shown above or as
notified to the Lender and (ii) by serving the same upon such agent,
and agrees that such service shall in every respect be deemed
effective service upon such Borrower.
19. JURY WAIVER. THE BORROWERS AND LENDER EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY, AND AFTER AN OPPORTUNITY TO CONSULT
WITH LEGAL COUNSEL, WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING IN CONNECTION WITH THIS AGREEMENT, THE
OBLIGATIONS, ALL MATTERS CONTEMPLATED HEREBY AND DOCUMENTS EXECUTED IN
CONNECTION HEREWITH. EACH BORROWER CERTIFIES THAT NEITHER THE LENDER
NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT IN THE EVENT OF ANY
SUCH PROCEEDING SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.
INTENTIONALLY LEFT BLANK
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Executed under seal as of the date written above.
Witness Borrower:
Fix-Corp. International, Inc.
/s/ Xxxxxx X. Press By: /s/ Xxxx Xxxxxx
----------------------------------- ------------------------------------
Xxxx Xxxxxx, President & CEO
0000 Xxxxx Xxxxxxx
Xxxxx, Xxxx 00000
Witness Borrower:
Palletech, Inc.
/s/ Xxxxxx X. Press By: /s/ Xxxx XxXxxxxxxxxx
----------------------------------- ------------------------------------
Xxxx XxXxxxxxxxxx, President
0000 Xxxxx Xxxxxxx
Xxxxx, Xxxx 00000
Witness Borrower:
Fixcor Industries, Inc.
/s/ Xxxxxx X. Press By: /s/ Xxxx XxXxxxxxxxxx
----------------------------------- ------------------------------------
Xxxx XxXxxxxxxxxx, President
0000 Xxxxx Xxxxxxx
Xxxxx, Xxxx 00000
Accepted: Xxxxxx Xxxxxxxx Capital, LLC
By: /s/ Xxxxxx X. Xxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxx, President
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