EXHIBIT 10.1
Loan and Security Agreement with Business Alliance Capital Corp.
This LOAN AND SECURITY AGREEMENT is entered into as of
September 17, 1998 between BUSINESS ALLIANCE CAPITAL CORP., a
Delaware corporation (BACC), with its chief executive office located
at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ and K-TRONIK
INT'L CORPORATION, a Nevada corporation authorized to do business in
the State of New Jersey (Borrower), with its chief executive office
located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
The parties agree as follows
1. DEFINITIONS AND CONSTRUCTION
1.1 Terms. As used in this Agreement, the following terms shall have the
following meanings:
Accounts, means in addition to the definition of accounts in
the Code, all presently existing and hereafter arising accounts
receivable, contract rights, and all other forms of obligations owing
to Borrower arising out of the sale or lease of goods or the
rendition of services by Borrower, whether or not earned by
performance, all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by
Borrower and Borrower's Books relating to any of the foregoing.
Advances means all loans, advances and other financial
accommodations by BACC to or on account of the Borrower under Section
2.1 hereof.
Agreement means collectively this Loan and Security
Agreement, any concurrent or subsequent rider to this Loan and
Security Agreement, and any extensions, supplements, amendments,
addenda or modifications to or in connection with this Loan and
Security Agreement or any such rider.
Authorized Officer means any officer or other
representative of Borrower authorized in a writing delivered to BACC
to transact business with BACC.
BACC means Business Alliance Capital Corp., its successors and assigns.
BACC Expenses means all of the following: costs and
expenses (whether taxes, assessments, insurance premiums or
otherwise) required to be paid by Borrower under any of the Loan
Documents which are paid or advanced by BACC; filing, recording,
publication, appraisal and search fees paid or incurred by BACC in
connection with BACC's transactions with Borrower; costs and expenses
incurred by BACC in the disbursement or collection of funds to or
from Borrower; charges resulting from the dishonor of checks; costs
and expenses incurred by BACC to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated; and
costs and expenses incurred by BACC in enforcing or defending the
Loan Documents, including, but not limited to, costs and expenses
incurred in connection with any proceeding, suit, enforcement of
judgment, or appeal; and BACC's reasonable attorneys' fees and
expenses incurred in advising, structuring, drafting, reviewing,
administering, amending, terminating, enforcing, defending, or
otherwise representing BACC concerning the Loan Documents or the Obligations.
Borrower's Books means all of Borrower's books and records
including all of the following: ledgers; records indicating,
summarizing, or evidencing Borrower's assets or liabilities, or the
Collateral; all information relating to Borrower's business
operations or financial condition; and all computer programs, disk or
tape files, printouts, runs, or other computer prepared information,
and the facilities containing such information.
Business Day means any day which is not a Saturday, Sunday,
or other day on which banks in the State of New Jersey are authorized
or required to close.
Chattel Paper shall have the same meaning ascribed to such
term in the Code.
Code means the New Jersey Uniform Commercial Code, as
amended from time to time.
Collateral means all of the following: the Accounts; the
Equipment; the General Intangibles; the Chattel Paper; the Inventory;
the Negotiable Collateral; any money, deposit accounts or assets of
Borrower which hereafter come into the possession, custody, or
control of BACC; all proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance
covering any or all of the foregoing, and any and all tangible or
intangible property resulting from the sale or other disposition of
the foregoing, or any portion thereof or interest therein, and all
proceeds thereof, and any other assets of Borrower which may be
subject to a lien in favor of BACC.
Daily Balance means the amount of the Obligations owed at
the end of a given day.
Eligible Accounts means those Accounts created by Borrower
in the ordinary course of business, which are and at all times shall
continue to be acceptable to BACC in all respects; provided, however,
that standards of eligibility may be fixed 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 agings, reports and schedules of Accounts furnished by
Borrower, but reliance by BACC thereon from time to time shall not be
deemed to limit BACC's right to revise standards of eligibility at
any time as to both Borrower's present and future Accounts. In
general, an Account shall not be deemed eligible unless: (a) the
Account debtor on such Account is and at all times continues to be
acceptable to BACC, and (b) such Account complies in all respects
with the representations, covenants and warranties hereinafter set
forth. Except in BACC's sole discretion, Eligible Accounts shall not
include any of the following (a) Accounts which the Account debtor
has failed to pay within ninety (90) days of invoice date, and all
Accounts owed by any Account debtor that has failed to pay twenty-
five percent (25%) or more of its Accounts owed to Borrower within
ninety (90) days of invoice date; (b) Accounts with respect to which
goods are placed on consignment or for a guaranteed sale, or which
contain other terms by reason of which payment by the Account debtor
may be conditional; (c) Accounts with respect to which the Account
debtor is not a resident of the United States unless the Account is
supported by foreign credit insurance or a letter of credit, in both
instances satisfactory to and assigned to BACC; (d) Accounts with
respect to which the Account debtor is the United States or any
department, agency or instrumentality of the United States, any State
of the United States or any city, town, municipality or division
thereof unless all filings have been made under the Federal
Assignment of Claims Act or comparable state or other statute; (e)
Accounts with respect to which the Account debtor is an officer,
employee or agent of, or subsidiary of, related to, affiliated with
or has common shareholders, officers or directors with Borrower; (f)
Accounts with respect to which Borrower is or may become liable to
the Account debtor for goods sold or services rendered by the Account
debtor to Borrower; (g) Accounts with respect to an Account debtor
whose total obligations to Borrower exceed twenty-five percent (25%)
of all Accounts; (h) Accounts with respect to which the Account
debtor disputes liability or makes any claim with respect thereto, or
is subject to any insolvency proceeding, or becomes insolvent, fails
or goes out of business; (i) the Account arises out of a contract or
purchase order for which a surety bond was issued on behalf of
Borrower; (j) Accounts in which BACC does not have first priority and
exclusive perfected security interest; or (k) Accounts where the
Account Debtor is in a jurisdiction for which Borrower is required to
file a notice of business activities or similar report and Borrower
has not filed such report within the time period required by
applicable law.
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 or in a warehouse of which Borrower has previously
notified BACC and furnished to BACC a warehouse receipt evidencing
same and as to which BACC has perfected its lien thereon, and the
warehouseman has executed and delivered to BACC a letter agreement in
form satisfactory to BACC, 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, ▇▇▇▇ 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.
Equipment means all of Borrower's present and hereafter
acquired equipment, machinery, machine tools, motors, furniture,
furnishings, fixtures, motor vehicles, rolling stock, processors,
tools, pans, dies, jigs, goods (other than consumer goods or farm
products) and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing, wherever
located.
ERISA means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
ERISA Affiliate means each trade or business (whether or
not incorporated and whether or not foreign) which is or may
hereafter become a member of a group of which Borrower is a member
and which is treated as a single employer under ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇(▇)( ▇), ▇▇ ▇▇▇ Section 414.
Event of Default means the events specified in Section 8,
below.
General Intangibles means all of Borrower's present and
future general intangibles and other personal property (including
choses or things in action, goodwill, patents, trade names;
trademarks, service marks, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route
lists, infringement claims, computer programs, computer discs,
computer tapes, Borrower's Books, literature, reports, catalogs,
deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims) other than goods and Accounts.
Guarantor means each person or entity which guarantees the
Obligations or pledges or agrees to pledge any assets as security for
the Obligations.
Insolvency Proceeding means any proceeding commenced by or
against any person or entity under any provision of the federal
Bankruptcy Code, as amended, or under any other state or federal
insolvency law, including assignments for the benefit of creditors,
formal or informal moratoria, compositions, or extensions generally
with its creditors.
Inventory means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or
to be furnished under a contract of service, Borrower's present and
future raw materials, work in process, finished goods, tangible
property, stock in trade, wares, and materials used in or consumed in
Borrower's business, goods which have been returned to, repossessed
by, or stopped in transit by Borrower, packing and shipping
materials, wherever located, any documents of title representing any
of the above, and Borrower's Books relating to any of the foregoing.
IRC means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
Loan Documents means, collectively, this Agreement, any
Note or Notes, any security agreements, pledge agreements, mortgages,
deeds of trust or other encumbrances or agreements which secure the
Obligations, and any other agreement entered into between Borrower
and BACC or by Borrower or a Guarantor in favor of BACC relating to
or in connection with this Agreement or the Obligations.
Multiemployer Plan means a multiemployer plan as defined in
ERISA Sections 3(37) or 4001(a)(3) or IRC Section 414(f).
Negotiable Collateral means all of Borrower's present and
future letters of credit, notes, drafts, instruments, documents,
leases, and Chattel Paper.
Note means any promissory note made by Borrower to the
order of BACC concurrently herewith or at any time hereafter.
Obligations means all loans, advances, debts, liabilities
(including all interest and amounts charged to the Obligations pursuant
to any agreement authorizing BACC to charge the Obligations),
obligations, lease payments, guaranties, covenants, and duties owing by
Borrower to BACC of any kind and description (whether pursuant to or
evidenced by the Loan Documents or by any other agreement between BACC
and Borrower, and irrespective of whether for the payment of money),
whether made or incurred prior to, on, or after the Termination Date,
direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, including any debt, liability or
obligation owing from Borrower to others which BACC may obtain by
assignment or otherwise, and all interest thereon and all BACC Expenses.
Plan means any plan described in ERISA Section 3(2)
maintained for employees of Borrower or any ERISA Affiliate, other than
a Multi-employer Plan.
Prime Rate means that rate designated by First Union National
Bank, or any successor thereof, from time to time as its prime rate,
which shall not necessarily constitute its lowest available rate.
Slow Moving Inventory means those items of Inventory that
would constitute Eligible Inventory except that such items are slow
moving items of Inventory, in accordance with the definition of
Eligible Inventory.
Term means the period from the date of the execution and
delivery by BACC of this Agreement through and including the later of
(a) the Termination Date and (b) the payment and performance in full of
the Obligations.
Termination Date means (a) September 30, 2000 (the period
through such date the "Initial Term"), 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.
1.2 Construction. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the
singular and to the singular include the plural. The words hereof,
herein, hereby, hereunder, and similar terms in this Agreement refer to
this Agreement as a whole and not to any particular provision of this
Agreement. Section, subsection, clause and exhibit references are to
this Agreement unless otherwise specified. Words importing a
particular gender mean and include every other gender.
1.3 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles (GAAP) as in effect from time to time. When used
herein, the term financial statements shall include the notes and
schedules thereto.
1.4 Exhibits. All of the exhibits, addenda or riders
attached to this Agreement shall be deemed incorporated herein by reference.
1.5 Code. Any terms used in this Agreement which are
defined in the Code shall be construed and defined as set forth in the
Code, unless otherwise defined herein.
2. ADVANCES AND TERMS OF PAYMENT
2.1 Revolving Advances; Advance Limit. 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) eighty percent (80%) of the aggregate outstanding amount of
Eligible Accounts, plus (b) the lesser of (1) fifty percent (50%) of
the aggregate value of the Eligible Inventory plus ten percent (10%) of
the aggregate value of the Slow Moving Inventory or (2) initially 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 Five Hundred Thousand
Dollars ($500,000.00) (the Advance Limit) and provide further that (b)
the maximum amount it Advances against Eligible Inventory and Slow
Moving Inventory shall not exceed initially sixty percent (60%) of the
total Advances and which percentage will reduce two percent (2%) per
month commencing on October 1, 1998 and by 2% on the first day of each
month thereafter until the percentage equals thirty six percent (36%)
and (c) the maximum dollar amount of Advances against Eligible
Inventory and Slow Moving Inventory shall decrease by Five Thousand
Dollars ($5,000.00) per month commencing on October 1, 1998 and on the
same day of each month thereafter until the maximum amount is reduced
to One Hundred Seventy Five Thousand Dollars ($175,000).
2.2 Overadvances. All Advances shall be added to and be
deemed part of the Obligations when made. If, at any time and for any
reason, the aggregate amount of the outstanding Advances exceeds the
dollar or percentage limitations contained in Section 2.1 (an
Overadvance) then Borrower shall, upon demand by BACC, immediately pay
to BACC, in cash, the amount of such Overadvance. Without affecting
Borrower's obligation to immediately repay to BACC the amount of each
Overadvance, Borrower shall pay BACC a fee (the Overadvance Fee) in an
amount equal to $250.00 per occurrence of an Overadvance, plus interest
on the Overadvance amount at the Default Rate set forth below.
2.3 Authorization to Make Advances. BACC is hereby
authorized to make the Advances based upon telephonic or other
instructions received from anyone purporting to be an Authorized
Officer, or, at the discretion of BACC, if such Advances are necessary
to satisfy any Obligations. All requests for Advances shall specify
the date on which such Advance is to be made (which day shall be a
Business Day) and the amount of such Advance. Requests received after
12:00 p.m. Eastern time on any day shall be deemed to have been made as
of the opening of business on the immediately following Business Day.
All Advances made under this Agreement shall be conclusively presumed
to have been made to, at the request of, and for the benefit of
Borrower when deposited to the credit of Borrower or otherwise
disbursed in accordance with the instructions of Borrower or in
accordance with the terms and conditions of this Agreement. Unless
otherwise requested by Borrower, all Advances shall be made by a wire
transfer to the deposit account of Borrower designated on schedule 2.3
annexed hereto, or such other account as Borrower shall notify BACC in
writing. Borrower shall pay to BACC a funds transfer fee of $25.00 for
each Advance. Said fees shall be payable on the first day of each
month of the Term for all Advances made during the preceding month.
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 Two (2) percentage points
(2%) 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 Seven percentage points (7%)
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.
B. The interest rate payable by Borrower under the terms
of this Agreement shall be adjusted in accordance with any change in
the Prime Rate from time to time on the date of any such change. All
interest payable by Borrower shall be due and payable on the first day
of each calendar month during the Term. BACC may, at its option, add
such interest and all BACC Expenses to the Obligations, and such
amount shall thereafter accrue interest at the rate then applicable
under this Agreement. Notwithstanding anything to the contrary
contained in the Loan Documents, the minimum interest payable by
Borrower on the Advances shall be calculated on a minimum daily
average loan balance of $200,000.00.
(c) In no event shall interest on the Obligations exceed
the highest lawful rate in effect from time to time. It is not the
intention of the parties hereto to make an agreement which violates
any applicable state or federal usury laws. In no event shall
Borrower pay or BACC accept or charge any interest which, together
with any other charges upon the principal or any portion thereof,
exceeds the maximum lawful rate of interest allowable under any
applicable state or federal usury laws. Should any provision of this
Agreement or any existing or future Notes or Loan Documents between
the parties be construed to require the payment of interest or any
other fees or charges which could be construed as interest which,
together with any other charges upon the principal or any portion
thereof and any other fees or charges which could be construed as
interest, exceeds the maximum lawful rate of interest, then any such
excess shall be applied to the remaining principal balance of the
Obligations, if any, and the remainder refunded to Borrower.
(d) Notwithstanding the foregoing, for purposes of this
Agreement, it is the intention of Borrower and BACC that "interest"
shall mean, and be limited to, any payment to BACC which compensates
it for extending credit to Borrower, for making available to Borrower
a line of credit during the term of this Agreement and for any default
or breach by Borrower of a condition upon which credit was extended.
Borrower and BACC agree that, for the sole purpose of calculating the
"interest" paid by Borrower to BACC, it is the intention of Borrower
and BACC that interest shall mean and include, and be expressly
limited to, any interest accrued on the aggregate outstanding balance
of the Obligations during the term hereof pursuant to Sections 2.4(A)
and 2.4(B); and any Overadvance Fee, Origination Fee, and late fees
charged to Borrower during the term hereof. Borrower and BACC further
agree that it is their intention that the following fees shall not
constitute "interest": any Servicing Fee, any attorney fees incurred
by BACC, any premiums or commissions attributable to insurance
guaranteeing repayment, finders' fees, credit report fees, appraisal
fees or fees for document preparation or notarization. To the extent,
however, that New Jersey law excludes from the calculation of
"interest" any fees defined herein as interest, or includes as
interest any fees or other sums which are intended not to constitute
interest New Jersey law shall supersede and prevail and all such
interest shall be subject to paragraph 2.4(C) above.
2.5 Collection of Accounts. BACC or a BACC designee may, at
any time, with or without notice to Borrower, notify customers or
Account debtors that the Accounts have been assigned to BACC, and that
BACC has a security interest in them and collect the Accounts
directly, and add the collection costs and expenses to the
Obligations, but, unless and until BACC does so or gives Borrower
other written instructions, Borrower shall notify all Account debtors
to remit payments on Accounts to a lockbox to be designated by BACC.
All such payments remitted to the lockbox shall be credited to a
deposit account of BACC and into which account remittances from
account debtors of other clients of BACC may be credited. If
notwithstanding said notice Borrower obtains payment on any Account,
Borrower shall receive all payments on Accounts and other proceeds,
including cash, of Collateral in trust for BACC and immediately
deliver said payments to BACC in their original form as received from
the Account debtor, together with any necessary endorsements.
2.6 Crediting Payments. The receipt of any item of payment
by BACC shall, subject to final payment of such item, be
provisionally applied to reduce Obligations on the date of receipt of
such item by BACC, but the receipt of such an item of payment shall
for the purpose of calculation of interest on the Obligations not be
deemed to have been paid to BACC until five (5) Business Days after
the date of BACC's actual receipt of such item of payment.
Notwithstanding anything to the contrary contained herein, payments
received by BACC after 11:00 a.m. Eastern time shall be deemed to have
been received by BACC as of the opening of business on the immediately
following Business Day.
2.7 Origination Fee. In consideration of BACC entering
into this Agreement, Borrower shall pay BACC an origination fee of
Five Thousand Dollars ($5,000.00), which shall be paid simultaneous
with the execution hereof and thereafter an origination fee of Five
Thousand Dollars ($5,000.00) on each annual anniversary of the date hereof.
2.8 Servicing Fee. Borrower shall pay BACC a fee in an
amount equal to one half of one percent (.5%) of the daily average
outstanding balance of the Advances during each month on or before the
first (1st) day of each calendar month in respect of BACC's services
for the preceding calendar month, during the Term, including each
Renewal Term, or so long as the Obligations are outstanding.
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.
2.10 Late Reporting Fee. Borrower shall pay to BACC a
fee in an amount equal to Twenty Five Dollars ($25.00) per document
per day for each Business Day any report, financial statement or
schedule required by this Agreement to be delivered to BACC is past due.
2.11 Monthly Statements. BACC may render monthly
statements to Borrower of all Obligations, including statements of all
principal, interest and BACC Expenses, and Borrower shall have fully
and irrevocably waived all objections to such statements and the
contents thereof unless, within thirty (30) days after receipt,
Borrower shall deliver to BACC, by registered, certified or overnight
mail as set forth in Section 12 hereof, written objection to such
statement specifying the error or errors, if any, contained therein.
3. TERM
3.1 Term and Renewal Date. This Agreement shall become
effective upon execution by BACC and continue in full force through
the Initial Term 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 sixty (60) 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: (a) Five percent (5.0%) of the Advance Limit if such termination
occurs on or prior to the first (1st) anniversary of the commencement
date of the Initial Term; or (b) four percent (4.0%) of the Advance
Limit if such termination occurs after the first (1st) anniversary of
the commencement date of the Initial Term. 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
after the first year of the Term Borrower terminates in connection
with it obtaining replacement financing from a commercial bank, which
shall not include a commercial finance company or a commercial finance
company owned by a commercial bank, or from funds obtained through a
public offering by its parent corporation, Alexa Ventures, Inc.
4. CREATION OF CONTINUING SECURITY INTEREST
4.1 Grant of Continuing Security Interest. Borrower
hereby grants to BACC a continuing security interest in all presently
existing and hereafter acquired or arising Collateral in order to
secure prompt repayment of the Obligations and in order to secure
prompt performance by Borrower of each and all of its covenants and
Obligations under the Loan Documents and otherwise. BACC's continuing
security interest in the Collateral shall attach to all Collateral
without further act on the part of BACC or Borrower.
4.2 Negotiable Collateral. In the event that any
Collateral, including proceeds, is evidenced by or consists of
Negotiable Collateral, Borrower shall notify BACC and upon the request
of BACC, immediately endorse and assign such Negotiable Collateral to
BACC and deliver physical possession of such Negotiable Collateral to BACC.
4.3 Delivery of Additional Documentation Required.
Borrower shall execute and deliver to BACC concurrently with
Borrower's execution and delivery of this Agreement and at any time
thereafter at the request of BACC, all financing statements,
continuation financing statements, fixture filings, security
agreements. chattel mortgages, pledges, assignments, endorsements of
certificates of title, applications for title, affidavits, reports,
notices, schedules of accounts, letters of authority, and all other
documents that BACC may request, in form satisfactory to BACC, to
perfect and maintain perfected BACC's continuing security interests in
the Collateral and in order to fully consummate all of the
transactions contemplated under the Loan Documents.
4.4 Power of Attorney. Borrower hereby irrevocably
makes, constitutes and appoints BACC (and any person designated by
BACC) as Borrower's true and lawful attorney-in-fact with power to
sign the name of Borrower on any of the above described documents or
on any other similar documents to be executed, recorded or filed in
order to perfect or continue perfected BACC's continuing security
interest in the Collateral. In addition, Borrower hereby appoints
BACC (and any person designated by BACC) as Borrower's attorney-in-
fact with power to: (a) sign Borrower's name on verifications of
Accounts, and on notices to Account debtors; (b) send requests for
verification of Accounts; (c) endorse Borrower's name on any checks,
notes, acceptances, money orders, drafts or other forms of payment or
security that may come into BACC's possession; (d) notify the post
office authorities to change the address for delivery of Borrower's
mail to an address designated by BACC, to receive and open all mail
addressed to Borrower, and to retain all mail relating to the
Collateral and forward all other mail to Borrower; (e) make, settle
and adjust all claims under Borrower's policies of insurance, endorse
the name of Borrower on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and make all
determinations and decisions with respect to such policies of
insurance. The appointment of BACC as Borrower's attorney-in-fact and
each and every one of BACC's rights and powers, being coupled with an
interest, is irrevocable so long as any Accounts in which BACC has a
continuing security interest remain unpaid and until all of the
Obligations have been fully repaid and performed. BACC shall have no
obligation to protect any rights of Borrower against any person
obligated on any Collateral.
4.5 Right To Inspect. BACC shall have the right at any
time or times hereafter during Borrower's usual business hours, or
during the usual business hours of any third party having control over
Borrower's Books to inspect Borrower's Books in order to verify the
amount or condition of, or any other matter relating to, the
Collateral or Borrower's financial condition. BACC also shall have
the right at any time or times hereafter during Borrower's usual
business hours to inspect and examine the Inventory and the Equipment
and to check and test the same as to quality, quantity, value and condition.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to BACC the following and acknowledges:
5.1 No Prior Encumbrances; Security Interests. Borrower
has good and marketable title to the Collateral, free and clear of
liens, claims, security interests or encumbrances, except for the
security interests to be satisfied from the proceeds of the first
Advances hereunder, the continuing security interests granted to BACC
by Borrower, and those disclosed on Schedule 5.1 annexed hereto.
Other than those expressly permitted by this Agreement, Borrower will
not create or permit to be created any security interest, lien,
pledge, mortgage or encumbrance on any Collateral or any of its other assets.
5.2 Bona Fide Accounts. All Accounts represent bona
fide sales or leases of goods and/or services for which Borrower has
an unconditional right to payment. None of the Accounts are subject
to any rights of offset, counterclaim, cancellation or contractual
rights of return.
5.3 Merchantable Inventory. All Eligible Inventory and
Slow Moving Inventory are now and at all times hereafter shall be of
good and merchantable quality, free from defects.
5.4 Location of Inventory and Equipment. The Inventory
and Equipment is not now and shall not at any time or times hereafter
be stored with a bailee, warehouseman, processor, or similar party,
except for the storage of Inventory in warehouses as to which Borrower
has previously notified BACC in writing. Borrower shall keep the
Inventory and Equipment only at the following locations: Borrowers'
facilities in Hackensack, NJ and Inventory at ▇▇▇▇▇ Trucking, Inc. ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇-▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ or Lexatech
VR Systems, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
5.5 Inventory Records. Borrower now keeps and hereafter
at all times shall keep correct and accurate records itemizing and
describing the kind, type, quality and quantity of the Inventory and
Borrower's cost of said items.
5.6 Retail Accounts. No Accounts arise from the sale of
goods for personal, family or household purposes.
5.7 Relocation of Chief Executive Office. The chief
executive office of Borrower is at the address indicated on the first
page of this Agreement and Borrower will not, without thirty (30)
days' prior written notice to BACC, relocate such office.
5.8 Due Incorporation and Qualification. Borrower is
and shall at all times hereafter be a corporation duly organized and
existing under the laws of the state of its incorporation and is
qualified and licensed to do business and is in good standing in any
state in which the conduct of its business or its ownership of assets
requires that it be so qualified.
5.9 Fictitious Name. Borrower is conducting its business
under the following trade or fictitious name(s) and no others: none.
Borrower has complied with the fictitious name laws of all
jurisdictions in which compliance is required in connection with its
use of such name(s).
5.10 Permits and Licenses. Borrower holds all licenses,
permits, franchises, approvals and consents required for the conduct
of its business and the ownership and operation of its assets.
5.11 Due Authorization. Borrower has the right and power
and is duly authorized to enter into the Loan Documents to which it is
a party.
5.12 Compliance with Articles; Bylaws. The execution by
Borrower of the Loan Documents to which it is a party does not
constitute a breach of any provision contained in Borrower's
Certificate or Articles of Incorporation or its Bylaws, nor does it
constitute an event of default under any material agreement to which
Borrower is now or may hereafter become a party.
5.13 Litigation. There are no actions, proceedings or
claims pending by or against Borrower before any court or
administrative agency and Borrower has no knowledge or notice of any
pending, threatened or imminent litigation, governmental
investigations, or claims, complaints, actions, or prosecutions
involving Borrower, except for ongoing collection matters in which
Borrower is the plaintiff. If any such actions, proceedings or claims
arise during the Term, Borrower shall promptly notify BACC in writing.
5.14 No Material Adverse Change in Financial Statements.
All financial statements relating to Borrower which have been or may
hereafter be delivered to BACC (I) have been prepared in accordance
with GAAP; (ii) fairly present Borrower's financial condition as of
the date thereof and Borrower's results of operations for the period
then ended; and (iii) disclose all contingent obligations of Borrower.
In addition no material adverse change in the financial condition of
Borrower has occurred since the date of the most recent of such
financial statements.
5.15 Solvency. Borrower is now, and shall be at all times
through the Term, solvent and able to pay its debts (including trade
debts) as they mature.
5.16 ERISA. Neither Borrower or any ERISA Affiliate, nor
any Plan is or has been in violation of any of the provisions of
ERISA, any of the qualification requirements of IRC Section 401(a),
or any of the published interpretations thereof. No lien upon the
assets of Borrower has arisen with respect to any Plan. No
prohibited transaction within the meaning of ERISA Section 406 or IRC
Section 4975(c) has occurred with respect to any Plan. Neither
Borrower nor any ERISA Affiliate has incurred any withdrawal
liability with respect to any Multiemployer Plan. Borrower and each
ERISA Affiliate have made all contributions required to be made by
them to any Plan or Multiemployer Plan when due. There is no
accumulated funding deficiency in any Plan, whether or not waived.
5.17 Environmental Laws and Hazardous Materials. Borrower
has complied, and at all times through the Term will comply, with all
Environmental Laws. Borrower has not and will not cause or permit
any Hazardous Materials to be located, incorporated, generated,
stored, manufactured, transported to or from, released, disposed of,
or used at, upon, under, or within any premises at which Borrower
conducts its business, or in connection with Borrower's business. To
the best of Borrower's knowledge, no prior owner or operator of any
premises at which Borrower conducts its business has caused or
permitted any of the above to occur at, upon, under, or within any of
the premises. Borrower will not permit any lien to be filed against
the Collateral or any part thereof under any Environmental Law, and
will promptly notify BACC of any proceeding, inquiry or claim
relating to any alleged violation of any Environmental Law, or any
alleged loss, damage or injury resulting from any Hazardous Material.
BACC shall have the right to join and participate in, as a party if
it so elects, any legal or administrative proceeding initiated with
respect to any Hazardous Material or in connection with any
Environmental Law. "Hazardous Material" includes without limitation
any substance, material, emission, or waste which is or hereafter
becomes regulated or classified as a hazardous substance, hazardous
material, toxic substance or solid waste under any Environmental Law,
asbestos, petroleum products, urea formaldehyde, polychlorinated
biphenyls (PCBs), radon, and any other hazardous or toxic substance,
material, emission or waste. Environmental Law means the
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended, the Resource Conservation and Recovery Act of
1976, the Hazardous Materials Transportation Act, the Toxic
Substances Control Act, the regulations pertaining to such statutes,
and any other safety, health or environmental statutes, laws,
regulations or ordinances of the United States or of any state,
county or municipality in which Borrower conducts its business or the
Collateral is located.
5.18 Tax Compliance. Borrower has filed all tax returns
required to be filed by it and has paid all taxes due and payable on
said returns and on any assessment made against it or its assets.
5.19 Reliance by BACC; Cumulative. Each warranty,
representation and agreement contained in this Agreement shall be
automatically deemed repeated by Borrower with each request for an
Advance and shall be conclusively presumed to have been relied on by
BACC regardless of any investigation made or information possessed by
BACC. The warranties, representations and agreements set forth herein
shall be cumulative and in addition to any and all other warranties,
representations and agreements which Borrower shall now or hereafter
give, or cause to be given, to BACC.
6. AFFIRMATIVE COVENANTS
Borrower covenants and acknowledges that during the Term
Borrower shall comply with all of the following:
6.1 Collateral and Other Reports. Borrower shall on
each Business Day report to BACC all Accounts arising since its most
recent report to BACC and shall execute and deliver to BACC, no later
than the fifteenth (15th) day of each month during the Term, a
detailed aging of the Accounts, a reconciliation statement and a
summary aging, by vendor, of all accounts payable of Borrower and any
book overdraft. Borrower shall deliver to BACC, as BACC may from
time to time require, collection reports, sales journals, invoices,
original delivery receipts, customers' purchase orders, shipping
instructions, bills of lading and other documentation respecting
shipment arrangements. Absent such a request by BACC, copies of all
such documentation shall be held by Borrower as custodian for BACC.
6.2 Returns. Returns and allowances, if any, as between
Borrower and any Account debtors, shall be permitted on the same basis
and in accordance with the usual customary practices of Borrower as
they exist at the date of the execution and delivery of this
Agreement. If at any time prior to the occurrence of an Event of
Default any Account debtor returns any Inventory to Borrower, Borrower
shall promptly determine the reason for such return and, if Borrower
accepts such return, issue a credit memorandum (with a copy to be sent
to BACC) in the appropriate amount to such Account debtor. Borrower
shall promptly notify BACC of all returns and recoveries and of all
disputes and claims.
6.3 Designation of Inventory. Borrower shall
contemporaneous with the execution hereof and from time to time
hereafter, but not less frequently than daily, execute and deliver to
BACC a designation of Inventory specifying the cost and the wholesale
market value of Borrower's raw materials, work in process and finished
goods, and further specifying such other information as BACC may
reasonably request.
6.4 Financial Statements, Reports, Certificates.
Borrower shall deliver to BACC: (a) as soon as available, but in any
event within thirty (30) days after the end of each month during the
Term, a balance sheet and profit and loss statement prepared by
Borrower covering Borrower's operations during such period; and (b) as
soon as available, but in any event within ninety (90) days after the
end of each of Borrower's fiscal years, financial statements of
Borrower for each such fiscal period, audited on an unqualified basis
by independent certified public accountants acceptable to BACC. Such
financial statements shall include a balance sheet and profit and loss
statement, and the accountants' management letter. Together with the
above, Borrower shall also deliver Borrower's Form 10-Qs,, 10-Ks or 8-
Ks, if any, as soon as the same become available, and any other report
reasonably requested by BACC relating to the Collateral and the
financial condition of Borrower and a certificate signed by its chief
financial officer to the effect that all reports, statements or
computer prepared information of any kind or nature delivered or
caused to be delivered to BACC under this Section 6.4 fairly present
its financial condition and that there exists on the date of delivery
of such certificate to BACC no condition or event which constitutes an
Event of Default.
6.5 Tax Returns, Receipts. Borrower shall deliver to
BACC copies of each of its future federal income tax returns, and any
amendments thereto, within thirty (30) days of the filing thereof.
Borrower further shall promptly deliver to BACC, upon request,
satisfactory evidence of Borrower's payment of all withholding and
other taxes required to be paid by it.
6.6 Guarantor Reports. Borrower agrees to cause the
Guarantor ▇▇▇▇▇▇ ▇▇▇ to deliver its annual financial statements and
copies of all federal income tax returns as soon as the same are
available and in any event no later than thirty (30) days after the
same are required to be filed by law.
6.7 Title to Equipment. Upon BACC's request, Borrower
shall immediately deliver to BACC, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for
title to any items of Equipment.
6.8 Maintenance of Equipment. Borrower shall keep and
maintain the Equipment in good operating condition and repair, and
shall make all necessary replacements thereto so that its value and
operating efficiency shall at all times be maintained and preserved.
Borrower shall not permit any item of Equipment to become a fixture to
real estate or an accession to other property, and the Equipment is
now and shall at all times remain Borrower's personal property.
6.9 Taxes. All Federal, state and local assessments and
taxes, whether real, personal or otherwise, due or payable by, or
imposed, levied or assessed against Borrower or any of its assets or
in connection with Borrower's business shall hereafter be paid in
full, before they become delinquent or before the expiration of any
extension period. Borrower shall make due and timely payment or
deposit of all federal, state and local taxes, assessments or
contributions required of it by law, and will execute and deliver to
BACC, on demand, appropriate certificates attesting to the payment or
deposit thereof.
6.10 Insurance. Borrower, at its expense, shall keep and
maintain the Collateral insured against all risk of loss or damage
from fire, theft, vandalism, malicious mischief, explosion,
sprinklers, and all other hazards and risks of physical damage
included within the meaning of the term "extended coverage" in such
amounts as are ordinarily insured against by similar businesses.
Borrower shall also keep and maintain comprehensive general public
liability insurance and property damage insurance, and insurance
against loss from business interruption, insuring against all risks
relating to or arising from Borrower's ownership and use of the
Collateral and its other assets and the operation of its business.
All such policies shall be in such form, with such companies and in
such amounts as may be satisfactory to BACC. Borrower shall deliver
to BACC certified copies of such policies and evidence of the payments
of all premiums therefor. All such policies (except those of public
liability and liability property damage) shall contain a Lender's
Loss Payable endorsement in a form satisfactory to BACC, naming BACC
as sole loss payee thereof, and containing a waiver of warranties.
All proceeds payable under such policies shall be payable to BACC and
applied to the Obligations.
6.11 BACC Expenses. Borrower shall immediately and
without demand reimburse BACC for all BACC Expenses and Borrower
hereby authorizes the payment of such BACC Expenses.
6.12 Compliance With Law. Borrower shall comply, in all
material respects, with the requirements of all applicable laws,
rules, regulations and orders of governmental authorities relating to
Borrower and the conduct of its business.
6.13 Accounting System. Borrower at all times hereafter
shall maintain a standard and modern system of accounting in
accordance with GAAP with ledger and account cards or computer tapes,
disks, printouts and records pertaining to the Collateral containing
such information as may from time to time be requested by BACC.
7. NEGATIVE COVENANT
Borrower covenants and acknowledges that during the Term
Borrower shall not undertake any of the following:
7.1 Extraordinary Transactions and Disposal of Assets.
Enter into any transaction not in the ordinary and usual course of its
business as conducted on the date hereof, including but not limited to
the sale, lease, disposal, movement, relocation or transfer, whether
by sale or otherwise, of any its assets other than sales of Inventory
in the ordinary and usual course of its business as presently
conducted; incur any indebtedness for borrowed money or other
indebtedness outside the ordinary and usual course of its business as
conducted on the date hereof except for renewals or extensions of
existing debts permitted by BACC; or make any advance or loan or
investment in due person or entity, provided that so long as no Event
of Default exists, Borrower may make investments in EPI International
Corp. up to aggregate amount of Nine Hundred Thousand Dollars
($900,000.00).
7.2 Change Name. Change its name, business structure or
identify or add any new fictitious name.
7.3 Merge, Acquire. Merge, acquire, or consolidate with
or into any other business organization.
7.4 Guaranty. Guaranty or otherwise become in any way
liable with respect to the obligations of any third party, except by
endorsement of instruments or items of payment for deposit to the
account of Borrower for negotiation and delivery to BACC.
7.5 Restructure. Make any change in its financial
structure or business operations.
7.6 Prepayments. Prepay any existing indebtedness owing
to any third party other than trade payables.
7.7 Change of Ownership. Cause, permit or suffer any
change, direct or indirect, in the ownership of the capital stock of
Borrower or enter into any agreement with any person or entity which
provides for a payment to such person or entity based upon the income
of Borrower.
7.8 Loans and Advances. Make any loans, advances or
extensions of credit to any officer, director, executive employee or
shareholder of Borrower (or any relative of any of the foregoing), or
to any entity which is a subsidiary of, related to, affiliated with or
has common shareholders, officers or directors with Borrower.
7.9 Capital Expenditures. Make any plant or fixed
capital expenditure, or any commitment therefor, or purchase or lease
any real or personal assets or replacement Equipment in excess of Ten
Thousand Dollars ($10,000.00) for any individual transaction or where
the aggregate amount of such transactions in any fiscal year exceeds
Twenty-Five Thousand Dollars ($25,000.00).
7.10 Consignments of Inventory. Consign any Inventory.
7.11 Distributions. Make any distribution or declare or
pay any dividends (in cash or in stock) on, or purchase, acquire,
redeem or retire any of its capital stock, of any class, whether now
or hereafter outstanding.
7.12 Accounting Methods. Modify or change its method of
accounting or enter into, modify or terminate any agreement presently
existing or at any time hereafter entered into with any third party
for the preparation or storage of Borrower's records of Accounts and
financial condition without said party agreeing to provide BACC with
information regarding the Collateral or Borrower's financial
condition. Borrower waives the right to assert a confidential
relationship, if any, it may have with any such third party in
connection with any information requested by BACC hereunder, and
agrees that BACC may contact any such party directly in order to
obtain such information.
7.13 Business Suspension. Suspend or go out of business.
8. EVENTS OF DEFAULT
The occurrence of any one or more of the following events
shall constitute an Event of Default by Borrower hereunder:
8.1 Failure to Pay. Borrower's failure to pay when due
and payable, or when declared due and payable, any portion of the
Obligations (whether principal, interest, taxes, BACC Expenses, or
otherwise);
8.2 Failure to Perform. Borrower's or a Guarantor's
failure to perform, keep or observe any term, provision, condition,
representation, warranty, covenant or agreement contained in this
Agreement, in any of the Loan Documents or in any other present or
future agreement between Borrower, and/or a Guarantor and BACC;
8.3 Misrepresentation. Any misstatement or
misrepresentation now or hereafter exists in any warranty,
representation, statement, aging or report made to BACC by, Borrower
and/or a Guarantor or any officer, employee, agent or director
thereof, or if any such warranty, representation, statement, aging or
report is withdrawn by such person;
8.4 Material Adverse Change. There is a material adverse
change in Borrower's, or a Guarantor's, business or financial
condition;
8.5 Material Impairment. There is a material impairment
of the prospect of repayment of the Obligations or a material
impairment of BACC's continuing security interests in the Collateral;
8.6 Levy or Attachment. Any material portion of
Borrower's assets is attached, seized, subjected to a writ or distress
warrant or is levied upon, or comes into the possession of any judicial
officer or assignee;
8.7 Insolvency by Borrower or Guarantor. An Insolvency
Proceeding is commenced by Borrower or a Guarantor;
8.8 Insolvency Against Borrower. An Insolvency
Proceeding is commenced against Borrower or a Guarantor;
8.9 Injunction Against Borrower. Borrower is enjoined,
restrained or in any way prevented by court order from continuing to
conduct all or any material part of its business;
8.10 Government Lien. A notice of lien, levy or
assessment is filed of record with respect to any of Borrower's or a
Guarantor's assets by the United States Government, or any department,
agency or instrumentality thereof, or by any state, county, municipal
or other governmental agency, or any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether
▇▇▇▇▇▇ or otherwise, upon any of Borrower's or a Guarantor's assets
and the same is not paid on the payment date thereof;
8.11 Judgment. A judgment is entered against Borrower or
a Guarantor;
8.12 Default to Third Party. There is a default in any
material agreement to which Borrower or a Guarantor is a party or by
which Borrower or a Guarantor or any of their assets are bound;
8.13 Subordinated Debt Payments. Borrower makes any
payment on account of indebtedness which has now or hereafter been
subordinated to the Obligations, except to the extent such payment is
allowed under any subordination agreement entered into with BACC;
8.14 Termination of Guarantor. A Guarantor dies or
terminates its guaranty; or
8.15 ERISA Violation. A prohibited transaction within
the meaning of ERISA Section 406 or IRC Section 1975(c) shall occur
with respect to a Plan which could have a material adverse effect on
the financial condition of Borrower; any lien upon the assets of
Borrower in connection with any Plan shall arise; Borrower or any
ERISA Affiliate shall completely or partially withdraw from a
Multiemployer Plan and such withdrawal could, in the opinion of BACC,
have a material adverse effect on the financial condition of Borrower.
Borrower or any of its ERISA Affiliates shall fail to make full
payment when due of all amounts which Borrower or any of its ERISA
Affiliates may be required to pay to any Plan or any Multiemployer
Plan as one or more contributions thereto; Borrower or any of its
ERISA Affiliates creates or permits the creation of any accumulated
funding deficiency, whether or not waived; the voluntary or
involuntary termination of any Plan which termination could, in the
opinion of BACC, have a material adverse effect on the financial
condition of Borrower or Borrower shall fail to notify BACC promptly
and in any event within ten (l0) days of the occurrence of an event
which constitutes an Event of Default under this clause or would
constitute an Event of Default upon the exercise of BACC's judgment.
Notwithstanding anything contained in this Section 8 to the
contrary, BACC shall refrain from exercising its rights and remedies
and an Event of Default shall not be deemed to have occurred by reason
of the occurrence of any of the events set forth in Sections 8.6, 8.8,
8.10 or 8.11 hereof if, within ten (10) days from the date thereof,
the same is released, discharged, dismissed, bonded against or
satisfied; provided, however, BACC shall not be obligated to make
Advances to Borrower during such period.
9. BACC'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence of an
Event of Default, BACC may, at its election, without notice of such
election and without demand, do any one or more of the following:
(a) Declare all Obligations, whether evidenced by
the Loan Documents or otherwise, immediately due and payable in full:
(b) Cease advancing money or extending credit to or
for the benefit of Borrower under the Loan Documents or under any
other agreement between Borrower and BACC;
(c) Terminate this Agreement as to any future
liability or obligation of BACC, but without affecting BACC's rights
and security interest in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly
with Account debtors for amounts and upon terms which BACC considers
advisable and, in such cases, BACC will credit the Obligations with
the net amounts received by BACC in payment of such disputed Accounts,
after deducting all BACC Expenses;
(e) Cause Borrower to hold all returned Inventory
in trust for BACC, segregate all returned Inventory from all other
property of Borrower or in Borrower's possession and conspicuously
label said returned Inventory as the property of BACC;
(f) Without notice to or demand upon Borrower or a
Guarantor, make such payments and do such acts as BACC considers
necessary or reasonable to protect its security interest in the
Collateral. Borrower shall assemble the Collateral if BACC so
requires and deliver or make the Collateral available to BACC at a
place designated by BACC. Borrower authorizes BACC to enter any
premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase,
contest or compromise any encumbrance, charge or lien which in BACC's
determination appears to be prior or superior to its security interest
and to pay all expenses incurred in connection therewith;
(g) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale and sell (in
the manner provided for herein) the Collateral. BACC is hereby
granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets,
trade names, trademarks, service marks, and advertising matter, or any
asset of a similar nature, pertaining to the Collateral, in completing
the production of, advertising for sale and sale of the Collateral.
Borrower's rights under all licenses and all franchise agreements
shall inure to BACC's benefit;
(h) Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including Borrower's premises) as BACC determines is commercially
reasonable. It is not necessary that the Collateral be present at any
such sale;
(i) BACC shall give notice of the disposition of
the Collateral as follows:
(1) To the Borrower and each holder of a security
interest in the Collateral who has filed with BACC a written
request for notice, a notice in writing of the time and
place of public sale or, if the sale is a private sale or
some other disposition other than a public sale is to be
made, then the time on or after which the private sale or
other disposition is to be made;
(2) The notice hereunder shall be personally
delivered or mailed, postage prepaid, to Borrower as
provided in Section 12 hereof, at least five (5) calendar
days before the date fixed for the sale, or at least five
(5) calendar days before the date on or after which the
private sale or other disposition is to be made, unless the
Collateral is perishable or threatens to decline speedily in
value. Notice to persons other than Borrower claiming an
interest in the Collateral shall be sent to such addresses
as they have furnished to BACC;
(j) BACC may credit bid and purchase at any public
sale:
(k) Any deficiency which exists after disposition
of the Collateral as provided herein shall be immediately paid by
Borrower. Any excess will be remitted without interest by BACC to the
party or parties legally entitled to such excess; and
(l) In addition to the foregoing, BACC shall have
all rights and remedies provided by law (including those set forth in
the Code) and any rights and remedies contained in any Loan Documents
and all such rights and remedies shall be cumulative.
9.2 No Waiver. No delay on the part of BACC in
exercising any right, power or privilege under any Loan Document shall
operate as a waiver, nor shall any single or partial exercise of any
right, power or privilege under such Loan Documents or otherwise,
preclude other or further exercise of any such right, power or privilege.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL.
If Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums or otherwise) due to third persons or
entities, or fails to make any deposits or furnish any required proof
of payment or deposit, or fails to perform any of Borrower's other
covenants under any of the Loan Documents, then in its discretion and
without prior notice to Borrower, BACC may do any or all of the
following: (a) make any payment which Borrower has failed to pay or
any part thereof; (b) set up such reserves in Borrower's loan account
as BACC deems necessary to protect BACC from the exposure created by
such failure; (c) obtain and maintain insurance policies of the type
described in Section 6.10 hereof and take any action with respect to
such policies as BACC deems prudent; or (d) take any other action
deemed necessary to preserve and protect its interests and rights
under the Loan Documents. Any payments made by BACC shall not
constitute: (a) an agreement by BACC to make similar payments in the
future or (b) a waiver by BACC of any Event of Default. BACC need not
inquire as to, or contest the validity of, any such expense, tax,
security interest, encumbrance or lien and the receipt of notice for
the payment thereof shall be conclusive evidence that the same was
validly due and owing.
11. WAIVERS
11.1 Demand, Protest. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, and notice of nonpayment at
maturity and acknowledges that BACC may compromise, settle or release,
without notice to Borrower, any Collateral and/or guaranties at any
time held by BACC. Borrower hereby consents to any extensions of time
of payment or partial payment at, before or after the Termination Date.
11.2 No Marshaling. Borrower, on its own behalf and on
behalf of its successors and assigns hereby expressly waives all
rights, if any, to require a marshaling of assets by BACC or to
require that BACC first resort to some portion(s) of the Collateral
before foreclosing upon, selling or otherwise realizing on any other
portion thereof.
11.3 BACC's Non-Liability for Inventory or Equipment. So
long as BACC complies with its obligations, if any, under Section 9-
207 of the Code, BACC shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Inventory or Equipment;
(b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee,
forwarding agency or other person whomsoever. All risk of loss,
damage or destruction of the Inventory or Equipment shall be borne by
Borrower.
12. NOTICES
Unless otherwise provided herein, all consents, waivers,
notices or demands by any party relating to the Loan Documents shall
be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage
prepaid) shall be telecopied (followed up by a mailing), personally
delivered or sent by registered or certified mail, postage prepaid,
return receipt requested, or by receipted overnight delivery service
to Borrower or to BACC, as the case may be, at their addresses set
forth below.
If to Borrower:
K-Tronik Int'l Corporation.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇
Fax # (▇▇▇) ▇▇▇-▇▇▇▇
If to BACC:
Business Alliance Capital Corp.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax # (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change the address at it is to receive notices
hereunder by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 12
shall be deemed received on the earlier of the date of actual receipt
or five (5) calendar days after the deposit thereof in the mail or on
the date telecommunicated if telecopied.
13. DESTRUCTION OF BORROWER'S DOCUMENTS
All documents, schedules, invoices, agings or other papers
delivered to BACC may be destroyed or otherwise disposed of by BACC
four (4) months after they are delivered to or received by BACC,
unless Borrower requests, in writing, the return of the said
documents, schedules. invoices or other papers and makes arrangements,
at Borrower's expense, for their return.
14. GENERAL PROVISIONS
14.1 Effectiveness. This Agreement shall be binding and
deemed effective when executed by Borrower and executed and delivered
by BACC.
14.2 Successors and Assigns. This Agreement shall bind
and inure to the benefit of the respective successors and assigns of
each of the parties; provided, however, that Borrower may not assign
this Agreement or any rights hereunder and any prohibited assignment
shall be absolutely void. No consent to an assignment by BACC shall
release Borrower from its Obligations. Without notice to or the
consent of Borrower, BACC may assign this Agreement and its rights and
duties hereunder and BACC reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or
any interest in BACC's rights and benefits hereunder. In connection
therewith, BACC may disclose all documents and information which BACC
now or hereafter may have relating to Borrower or Borrower's business.
Borrower and BACC do not intend any of the benefits of the Loan
Documents to inure to any third party, and no third party shall be a
third party beneficiary hereof or thereof.
14.3 Section Headings. Headings and numbers have been
set forth herein for convenience only.
14.4 Interpretation. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against
BACC or Borrower, whether under any rule of construction or otherwise.
On the contrary, this Agreement has been reviewed by each party and
shall be construed and interpreted according to the ordinary meaning
of the words used so as to fairly accomplish the purposes and
intentions of the parties hereto.
14.5 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this
Agreement for the purpose of determining the legal enforceability of
such provision.
14.6 Amendments in Writing. This Agreement cannot be
changed or terminated orally. This Agreement is the entire agreement
between the parties with respect to the matters contained herein.
This Agreement supersedes all prior agreements, understandings and
negotiations, if any, all of which are merged into this Agreement.
14.7 Counterparts. This Agreement may be executed in any
number of counterparts each of which, when executed and delivered,
shall be deemed to be an original and all of which, when taken
together, shall constitute but one and the same Agreement.
14.8 Indemnification. Borrower hereby indemnifies,
protects, defends and saves harmless BACC and any member, officer,
director, official, agent, employee and attorney of BACC, and their
respective heirs, successors and assigns (collectively, the
"Indemnified Parties"), from and against any and all losses, damages,
expenses or liabilities of any kind or nature and from any suits,
claims or demands, including reasonable counsel fees incurred in
investigating or defending such claim, suffered by any of them and
caused by, relating to, arising out of, resulting from, or in any way
connected with the Loan Documents and the transactions contemplated
therein or the Collateral (unless caused by the gross negligence or
willful misconduct of the Indemnified Parties) including, without
limitation: (a) losses, damages, expenses or liabilities sustained by
BACC in connection with any environmental cleanup or other remedy
required or mandated by any Environmental Law; (b) any untrue
statement of a material fact contained in information submitted to
BACC by Borrower or a Guarantor or the omission of any material fact
necessary to be stated therein in order to make such statement not
misleading or incomplete; (c) the failure of Borrower or a Guarantor
to perform any obligations required to be performed by Borrower or a
Guarantor under the Loan Documents; and (d) the ownership,
construction, occupancy, operations, use and maintenance of any of
Borrower's or a Guarantor's assets. The provisions of this paragraph
14.8 shall survive termination of this Agreement and the other Loan
Documents.
15. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
THE VALIDITY OF THE LOAN DOCUMENTS, THEIR CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO
SHALL BE DETERMINED UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THE LOAN DOCUMENTS SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE COURTS LOCATED IN THE COUNTY OF
▇▇▇▇▇▇, STATE OF NEW JERSEY, THE FEDERAL COURTS WHOSE VENUE INCLUDES
THE STATE OF NEW JERSEY, OR AT THE SOLE OPTION OF BACC, IN ANY OTHER
COURT IN WHICH BACC SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND
WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY.
BORROWER AND BACC EACH WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, THE RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING UNDER
THE LOAN DOCUMENTS OR RELATING TO THE DEALINGS OF BORROWER AND BACC
AND ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON
CONVENIENS" OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 15.
Borrower and BACC have executed this Agreement at BACC's
place of business in Princeton, New Jersey as of the date first above written.
K-Tronik Int'l Corporation
a Nevada corporation
/s/▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇
President, Director
BUSINESS ALLIANCE CAPITAL CORP.
a Delaware corporation
/s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Senior Vice President
Schedule 2.3
Deposit Account of Borrower for Advances
Account #
Bank Name and Wire Transfer Instructions:
Schedule 5.1
EXISTING LIENS WHICH ARE TO CONTINUE
[NONE]