FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment") is entered
into by and between KARTS INTERNATIONAL INCORPORATED, a Nevada corporation
("Borrower"), USA Industries, Inc., Xxxx, L.L.C. and Xxxxxxx'x Thunder Karts,
Inc. (collectively the "Guarantors") and KBK FINANCIAL, INC. ("KBK").
WHEREAS, Borrower and KBK entered into that certain Loan Agreement
dated as of September 28, 1998, as amended from time to time (collectively, the
"Loan Agreement"); and
WHEREAS, the Loan Agreement currently governs (i) a revolving accounts
receivable line of credit in the maximum amount of $1,000,000.00 provided by KBK
to Borrower, as currently evidenced by that certain Revolving Credit Promissory
Note (Accounts Receivable) dated September 28, 1998 payable by Borrower to the
order of KBK in the stated principal amount of $1,000,000.00 (the "A/R Note");
and (ii) a revolving inventory line of credit in the maximum amount of
$1,000,000.00 provided by KBK to Borrower, as currently evidenced by that
certain Revolving Credit Promissory Note (Inventory) dated September 28, 1998
payable by Borrower to the order of KBK in the stated principal amount of
$1,000,000.00 (the "INV Note"); and
WHEREAS, the Loan Agreement, the A/R Note, the INV Note and all other
documents evidencing, securing, governing, guaranteeing and/or pertaining to the
A/R Note and the INV Note are hereinafter referred to collectively as the "Loan
Documents"; and
WHEREAS, the parties hereto now desire to modify the Loan Agreement as
hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties, and agreements contained herein, and for other
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01 The terms used in this Amendment to the extent not otherwise
defined herein shall have the same meanings as in the Loan Agreement.
ARTICLE 11
Amendments
Section 2.01 Effective as of the date hereof, the following definitions as
defined in Section 1 of the Loan Agreement are hereby amended in their entirety
to read as follows:
" 'A/R/ Borrowing Base' shall mean an amount equal to 70% of Eligible
Accounts
"Guarantors" means USA, BTK, Xxxx and Straight Line (whether one or
more).
"INV Borrowing Base" means an amount equal to 50% of all Eligible
Inventory (subject to the provisions of the Inventory Maintenance
Certificate and Inventory Reports attached hereto).
"Straight Line" means Straight Line Manufacturing, Inc."
Section 2.02 Effective as of the date hereof, the term "Obligors", as used in
the definition of "Eligible Accounts" set forth in Section 1 of the Loan
Agreement, shall not include Straight Line.
Section 2.03 Effective as of the date hereof, the 30 day Clean Up Period
required in Subsection 2(b) of the Loan Agreement is hereby deleted.
Subsection 2.04 Effective as of the date hereof, Subsection 3(b) of the Loan
Agreement is hereby amended in its entirety to read as follows:
"(b) Rate and Payments. The principal of and interest on the Notes
shall be due and payable and may be prepaid in accordance with the
terms and conditions set forth in the Notes and in this Agreement.
Interest on the Notes shall accrue at the rate set forth therein;
provided, however, in the event Borrower raises a minimum of
$1,500,000.00 of new equity between March 1, 1999 and May 6, 1999,
the Contract Rate (as defined in the Notes) shall be reduced to the
Base Rate, plus three percent (3%)."
Section 2.05 Effective as of the date hereof, the first two sentences of
Subsection 6(b) of the Loan Agreement are hereby amended in their entirety to
read as follows:
"Borrower agrees to pay KBK a servicing fee on the first day of each
calendar month during the term of the A/R Line of Credit equal to
1/6% of the A/R Line of Credit Amount. Borrower agrees to pay KBK a
servicing fee on the first day of each calendar month during the term
of the INV Line of Credit equal to 1/6% of the INV Line of Credit
Amount."
Section 2.06 Effective as of the date hereof, Subsection 9(b) of the Loan
Agreement is hereby amended in its entirety to read as follows:
"(b) Right of Inspection. Permit KBK to visit its properties and
installations and to examine, audit and make and take away copies or
reproductions of Borrower's books and records, at all reasonable
times. Borrower agrees to pay all costs associated with any such
audits, at a rate equal to $500.00 per day, per person, plus
out-of-pocket expenses."
Section 2.07 effective as of the date hereof, Subsection 9(1) of the Loan
Agreement is hereby amended in its entirety to read as follows:
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"(1) Perpetual Inventory System. USA must have a tested Perpetual
Inventory System in place covering all of their inventory on or
before June 30, 1999."
Section 2.08 Effective as of the date hereof, Subsection 12(d) of the Loan
Agreement is hereby amended to require the Inventory Maintenance Certificate and
Inventory Reports required therein to be delivered to KBK within three (3)
Business Days after each week.
Section 2.09 Effective as of the date hereof, Subsection 12(e) of the Loan
Agreement is hereby amended in its entirety to follows:
"(e) Inventory Listing. A list of inventory for USA and BTK by
location and type (to include the following: raw materials, work in
process and finished goods) within three (3) Business Days after the
end of each week, in form and detail satisfactory to KBK; provided,
however, until USA has a tested Perpetual Inventory Systems in place
covering all of USA's inventory, USA is required to deliver its
inventory listing within three (3) Business Days after each month."
Section 2. 10 Effective as of the date hereof, Schedule A to the Loan Agreement
is hereby amended in its entirety to read as on Schedule A attached hereto.
Section 2.11 Effective as of the date hereof, Schedule D to the Loan Agreement
is hereby amended in its entirety to read as on Schedule D attached hereto.
Section 2.12 Effective as of the date hereof, Schedule E to the Loan Agreement
is hereby amended in its entirety to read, as on Schedule E attached hereto.
ARTICLE III
Note
Section 3.01 Contemporaneously with the execution hereof, Borrower agrees to
execute and deliver to KBK a promissory note (the "Modified A/R Note") in the
stated principal amount of $1,000,000.00, in form and substance satisfactory to
KBK, in amendment and modification of the A/R Note. All Collateral currently
securing the A/R Note will continue to secure the Modified A/R Note.
Contemporaneously with the execution hereof, Borrower agrees to execute and
deliver to KBK a promissory note (the "Modified INV Note") in the stated
principal amount of $1,000,000.00, in form and substance satisfactory to KBK, in
amendment and modification of the INV Note. All Collateral currently securing
the INV Note will continue to secure the Modified INV Note.
ARTICLE IV
Representations, Warranties, Ratification and Reaffirmation
Section 4.01 Borrower hereby represents and warrants that: (i) the
representations and warranties contained in the Loan Agreement are true and
correct on and as of the date hereof as though made on and as of the date
hereof, (ii) no event has occurred and is continuing that constitutes an Event
of Default or would constitute an Event of Default but for the requirement of
notice or lapse of time or both, and (iii) there are no claims or offsets
against, or defenses or counterclaims to, the Loan Documents, the indebtedness
evidenced thereby or the liens securing same (including without limitation, any
defenses or offsets resulting from or arising out of breach of contract or duty,
the amount of interest charged, collected or received on the Loan Documents
heretofore, or breach of any commitments or promises of any type).
Section 4.02 The terms and provisions set forth in this Amendment shall modify
and supersede all inconsistent terms and provisions set forth in the Loan
Agreement, but except as expressly modified and superseded by this Amendment,
the terms and provisions of the Loan Agreement are ratified and confirmed and
shall continue in full force and effect, Borrower hereby agreeing that the Loan
Agreement and the other Loan Documents are and shall continue to be outstanding,
validly existing and enforceable in accordance with their respective terms.
Section 4.03 Guarantors previously executed those three certain guaranty
agreements (collectively the "Guaranty Agreements") each dated September 28,
1998, for the benefit of KBK to unconditionally guarantee the payment and
performance by Borrower of certain indebtedness owing to KBK described therein,
including without limitation, the indebtedness evidenced by the A/R Note and the
INV Note. Guarantors, by executing this Amendment, hereby consent to this
Amendment and agree that, notwithstanding the execution of this Amendment, the
Modified A/R Note and the Modified INV Note, the Guaranty Agreements remain in
full force and effect and the obligations thereunder remain valid and binding
against Guarantors with respect to the A/R Note and the INV Note, as amended and
modified by the Modified A/R Note, the Modified INV Note and all other
indebtedness guaranteed thereunder. Guarantors acknowledge and agree that there
are no claims or offsets against, or defenses or counterclaims to, the terms and
provisions of the Guaranty Agreements or the obligations created or evidenced
thereby.
ARTICLE V
Miscellaneous
Section 5.01 Each of the Loan Documents is hereby amended so that any reference
in the Loan Documents to the Loan Agreement shall mean a reference to the Loan
Agreement as amended hereby.
Section 5.02 This Amendment may be executed simultaneously in one or more
counterparts, each of shall be deemed an original, but all of which together
shall constitute one and the same instrument. Delivery of an executed
counterpart of this Amendment by telecopy shall be equally as effective as
delivery of a manually executed counterpart of this Amendment. Any party
delivering an executed counterpart of this Amendment by telecopy also shall
deliver a manually executed counterpart of this Amendment but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Amendment.
Section 5.03 The agreeemnt and this Amendment have been entered into in Orleans
Parish, Louisiana and shall be performable for all purposes in Orleans Parish,
Louisiana. THE AGREEEMNT, AS AMENDED HEREBY, SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA. Courts within the State
of
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Louisiana shall have jurisdiction over any and all disputes arising under or
pertaining to the Agreement, as amended hereby, and venue in any such dispute
shall be the courts located in Orleans Parish, Louisiana.
Section 5.04 This Amendment shall not become effective until executed by KBK.
EXECUTED as of March 8, 1999.
BORROWER:
KARTS INTERNATIONAL INCORPORATED
By: /s/ Xxxxxxx Xxxxxxx
----------------------
Name: Xxxxxxx Xxxxxxx
Title: President & C.E.O.
GUARANTORS:
USA INDUSTRIES, INC.
By: /s/ Xxxxxxx Xxxxxxx
----------------------
Name: Xxxxxxx Xxxxxxx
Title: President & C.E.O.
XXXXXXX'X THUNDER KARTS, INC.
By: /s/ Xxxxxxx Xxxxxxx
----------------------
Name: Xxxxxxx Xxxxxxx
Title: President & C.E.O.
XXXX, L.L.C.
By: /s/ Xxxxxxx Xxxxxxx
----------------------
Name: Xxxxxxx Xxxxxxx
Title: President & C.E.O.
KBK:
KBK FINANCIAL, INC.
By:
Name: Xxxx Xxxxxxx
Title: Senior Vice President &
General Counsel
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SCHEDULE A
TO LOAN AGREEMENT
Dated September 28, 1998
BY AND BETWEEN
KBK FINANCIAL, INC.
AND
KARTS INTERNATIONAL INCORPORATED
ACCOUNTS RECEIVABLE BORROWING BASE REPORT
Borrower Date
KARTS INTERNATIONAL INCORPORATED
Activity Amount
1. Gross Accounts as of last report
2. Add: Gross Sales since last report (Per attached Sales Journal) (+)
3. Deduct: Collections since last report (Per attached Collection Journal) (-)
4. Debit Memos (-)
5. Dilutive Credit Memos (-)
6. Credit Adjustments (-)
7. Gross Accounts as of this report (=)
8. Deduct: Ineligible Accounts (Per Attached) (-)
9. Eligible Accounts as of this report (=)
10. Lesser of (i) A/R Borrowing Base (line 9 x 70%), or (ii) $1,000,000.00
11. Beginning Principal Balance (Ending Principal Balance as of last report)
12. Deduct: Collections since last report (same as line 3) (-)
13. Principal Balance before any advance under this report (=)
14. Availability (line 10 less line 13)
15. Deduct Advance: Advance Requested (-)
16. Advance for Fees, Interest and Expenses (-)
17. Remaining Availability (=)
18. Ending Principal Balance (sum of lines 13, 15 and 16)
The undersigned, as an authorized officer of Karts International Incorporated
("Borrower"), USA Industries, Inc., Xxxxxxx'x Thunder Karts, Inc., XXXX, L.L.C.,
and Straight Line Manufacturing, Inc. (collectively, the "Guarantors") presents
this Report to K.BK Financial, Inc. ("KBK") in accordance with the terms of that
certain Loan Agreement dated September 28, 1998 between Borrower and KBK (the
"Loan Agreement") and represents and warrants to KBK that, with respect to the
Eligible Accounts (as such term is defined in the Loan Agreement) identified on
this Report such accounts (i) arise from the bona fide sales of products or
xxxxxxxx for services of an Obligor (as defined in the Loan Agreement) and are
obligations of an Obligor's customers, payable at full value, (ii) all goods and
materials have been received by each of such customers or all services completed
to each of customer's satisfaction, (iii) the goods or services meet the
requirements of such customers (as to quality, quantity, delivery timeliness,
etc.), (iv) are not subject to any known offsets, disputes or counterclaims,
except as disclosed to KBK in writing, (v) are not with respect to which goods
are placed on consignment or other terms by reason of which payment by the
account debtor may be conditioned, and (vi) remain unpaid as of the date hereof.
Borrower also represents and warrants to KBK that no Event of Default has
occurred under the Loan Agreement or any other Loan Documents (as such term is
defined in the Loan Agreement) and all representations and warranties contained
in the Loan Agreement and all other Loan Documents are true and correct as of
the date hereof.
BORROWER:
KARTS INTERNATIONAL INCORPORATED
By: ______________________________
Name: Xxxxxxx Xxxxxxx
Title: President & C.E.O.
GUARANTORS:
USA INDUSTRIES, INC. XXXXXXX'X THUNDER KARTS, INC.
By: By:
Name: Name:
Title: Title:
XXXX, L.L.C.
By: Name:
Title:
4
SCHEDULE D
TO LOAN AGREEMENT
Dated September 28,1998
BY AND BETWEEN
KBK FINANCIAL, INC.
AND
KART INTERNATIONAL INCORPORATED
------------------------------------------------------------------------------------------
INVENTORY REPORT
OF XXXXXXX'X THUNDER KARTS, INC.
Financial Statement
Report#_________________ Date:
1. INVENTORY
a. Raw Materials
b. Work in Process
C. Finished Goods
------------------------------------------------------------------------------------------
2. TOTAL GROSS INVENTORY Per This Certificate (Sum of all lines in Section 1 above)
-------------------------------------------------------------------------------------------
3. INELIGIBLE INVENTORY
------------------------------------------------------------------------------------------
a. Raw Materials
b. Work In Process
C. Finished Goods
------------------------------------------------------------------------------------------
4. TOTAL ELIGIBLE RAW MATERIAL INVENTORY Per This Certificate (Line la less Line 3a)
------------------------------------------------------------------------------------------
5. ADVANCE RATE FOR ELIGIBLE RAW MATERIALS INVENTORY 50%
------------------------------------------------------------------------------------------------------
6. AVAILABILITY PER RAW MATERIALS INVENTORY (Line 4 multiplied by Line 5)
------------------------------------------------------------------------------------------------------
7. TOTAL ELIGIBLE FINISHED GOODS INVENTORY (Line 1c less Line 3c)
------------------------------------------------------------------------------------------------------
8. ADVANCE RATE FOR ELIGIBLE FINISHED GOODS INVENTORY 50%
------------------------------------------------------------------------------------------------------
9. AVAILABILITY PER FINISHED GOODS INVENTORY (Line 7 multiplied by Line 8)
------------------------------------------------------------------------------------------------------
10. TOTAL AVAILABILITY (Sum of Lines 6 and 9)
------------------------------------------------------------------------------------------------------
The undersigned, _______________________ does hereby certify that he/she has
made a thorough inquiry into all matters certified herein and based upon such
inquiry does hereby certify to KBK Financial, Inc. ("KBK") as follows:
1. He/She is duly elected, qualified and acting ________________ of
______________. of
2. This Certificate is being submitted to KBK pursuant to that certain
Loan Agreement dated September 28, 1998 between Karts International
Incorporated and KBK (as from time to time as supplemented or amended,
the "Loan Agreement"). Terms used or not otherwise defined herein
shall have the meanings assigned to them in the Loan Agreement.
3. All information contained in this Certificate is true, correct and
completed.
IN WITNESS HEREOF, this instrument is executed by the undersigned as
of 19______.
XXXXXXX'X THUNDER KARTS, INC.
By:
Name:
Title:
5
SCHEDULE E
TO LOAN AGREEMENT
Dated September 28,1998
BY AND BETWEEN
KBK FINANCIAL, INC.
AND
KART INTERNATIONAL INCORPORATED
------------------------------------------------------------------------------------------
INVENTORY REPORT
OF XXXXXXX'X THUNDER KARTS, INC.
Financial Statement
Report#_________________ Date:
1. INVENTORY
a. Raw Materials
b. Work in Process
C. Finished Goods
------------------------------------------------------------------------------------------
2. TOTAL GROSS INVENTORY Per This Certificate (Sum of all lines in Section 1 above)
-------------------------------------------------------------------------------------------
3. INELIGIBLE INVENTORY
------------------------------------------------------------------------------------------
a. Raw Materials
b. Work In Process
C. Finished Goods
------------------------------------------------------------------------------------------
4. TOTAL ELIGIBLE RAW MATERIAL INVENTORY Per This Certificate (Line la less Line 3a)
------------------------------------------------------------------------------------------
5. ADVANCE RATE FOR ELIGIBLE RAW MATERIALS INVENTORY 50%
------------------------------------------------------------------------------------------------------
6. AVAILABILITY PER RAW MATERIALS INVENTORY (Line 4 multiplied by Line 5)
------------------------------------------------------------------------------------------------------
7. TOTAL ELIGIBLE FINISHED GOODS INVENTORY (Line 1c less Line 3c)
------------------------------------------------------------------------------------------------------
8. ADVANCE RATE FOR ELIGIBLE FINISHED GOODS INVENTORY 50%
------------------------------------------------------------------------------------------------------
9. AVAILABILITY PER FINISHED GOODS INVENTORY (Line 7 multiplied by Line 8)
------------------------------------------------------------------------------------------------------
10. TOTAL AVAILABILITY (Sum of Lines 6 and 9)
------------------------------------------------------------------------------------------------------
The undersigned, _______________________ does hereby certify that he/she has
made a thorough inquiry into all matters certified herein and based upon such
inquiry does hereby certify to KBK Financial, Inc. ("KBK") as follows:
1. He/She is duly elected, qualified and acting ________________ of
______________. of
2. This Certificate is being submitted to KBK pursuant to that certain
Loan Agreement dated September 28, 1998 between Karts International
Incorporated and KBK (as from time to time as supplemented or amended,
the "Loan Agreement"). Terms used or not otherwise defined herein
shall have the meanings assigned to them in the Loan Agreement.
3. All information contained in this Certificate is true, correct and
completed.
IN WITNESS HEREOF, this instrument is executed by the undersigned as
of 19______.
XXXXXXX'X THUNDER KARTS, INC.
By:
Name:
Title:
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