MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT (the "Agreement") is made and entered into
this 7th day of July, 2000, by and between FIRST KEYSTONE FEDERAL SAVINGS BANK,
chartered under the Laws of the United States of America, having its principal
office at ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (the "Bank") and
TRANSNATIONAL INDUSTRIES, INC. and SPITZ, INC. (hereinafter collectively,
jointly and severally referred to as the "Borrower"), with an address of ▇.▇.
▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Background
A. Bank extended to Borrower two credit facilities on June 12, 1997.
Specifically, the Bank extended to Borrower a term credit facility in the
principal sum of Eight Hundred Twenty Thousand ($820,000.00) Dollars evidenced
by that certain Promissory Note (the "Term Note") made by Borrower and delivered
to Bank June 12, 1997 (the "Term Loan"). The Term Loan is not intended to be
modified. The Bank also extended to Borrower a revolving line of credit not to
exceed the aggregate sum of Eight Hundred Thousand ($800,000.00) Dollars (the
"Line of Credit") to be advanced pursuant to the terms of a Line of Credit
Agreement between Bank and Borrower dated June 12, 1997. The indebtedness to
Bank under the Line of Credit is evidenced by that certain Line of Credit Note
executed by Borrower and delivered to Bank June 12, 1997 (the "Line of Credit
Note"). The Term Loan and the Line of Credit are secured by, among other things,
all of the accounts, inventory, receivables and equipment of Borrower (the
"Collateral") pursuant to that certain Security Agreement, Pledge Agreement and
UCC-1 Financing Statements between Bank and Borrower dated June 12, 1997.
B. Borrower has requested Bank to reduce the rate of interest charged
on the Line of Credit from time to time as set forth in the Line of Credit Note
from the Wall Street Prime Rate plus two (2.0%) percent per annum to Wall Street
Prime Rate plus one-half (0.50%) percent per annum, subject, however to the
interest rate adjustment provisions as set forth in the Line of Credit Note.
C. Borrower has also requested that the Line of Credit be increased to
One Million One Hundred Thousand ($1,1000,000.00) Dollars.
D. As of the date hereof the outstanding principal balance of the Line
of Credit Note is six hundred ninety-five thousand dollars ($695,000).
E. Bank has no obligation to reduce the rate of interest charged on the
Line of Credit or to increase the maximum available credit under the Line of
Credit. Bank is willing to reduce the rate and increase the maximum available
credit under the Line of Credit on the terms and conditions set forth in this
Modification Agreement and in the Renewal Line of Credit Note of even date
herewith (the "Renewal Note").
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Agreement
NOW THEREFORE, in consideration of the sum of One ($1.00) Dollar and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby covenant and agree as follows:
1. The Background recitals are incorporated herein by reference.
2. Paragraph 1.1 of the Line of Credit Agreement dated June 12,
1997, is deleted in its entirety and the following inserted in its place and
stead:
"1.1 Bank will lend to Spitz, Inc. (hereinafter referred to as
"Spitz"), and Spitz may borrow from Bank, the aggregate sum of One
Million One Hundred Thousand ($1,100,000.00) Dollars, (the "Loan")
pursuant to the terms of this Agreement. The indebtedness to Bank under
the Loan is the joint and several obligation and liability of Spitz and
Transnational Industries, Inc. (hereinafter collectively, jointly and
severally referred to as the "Borrower") evidenced by that certain
Renewal Line of Credit Note executed by Borrower and delivered to Bank
July 7, 2000 (the "Note"), in the full amount of the Loan, due and
payable in accordance with the terms thereof. Bank extended to Borrower
a certain other credit facility in the principal sum of Eight Hundred
Twenty Thousand ($820,000.00) Dollars evidenced by that certain
Promissory Note (the "Term Note") made by Borrower and delivered to
Bank on June 12, 1997 (the "Term Loan")."
3. Paragraph 1.2 of the Line of Credit Agreement dated June 12, 1997,
is deleted in its entirety and the following inserted in its place and stead:
"1.2 MAXIMUM REVOLVING CREDIT LIMIT. Provided there exists no Event of
Default hereunder (as hereinafter defined), principal advances of
available funds under the Loan shall be advanced to Spitz at Spitz's
written request from time to time until July 6, 2005, provided,
however, the aggregate amount advanced, less repayments, shall not
exceed the sum of One Million One Hundred Thousand ($1,1000,000.00)
Dollars at any one time outstanding (the "Maximum Credit Limit"). Bank
shall not be obligated to fund all or any part of a requested advance
under the Loan if such advance would cause the aggregate amount
advanced, less repayments, to exceed the Maximum Credit Limit.
Notwithstanding anything herein to the contrary, Bank shall not be
obligated to fund, and Spitz shall not be permitted to receive, all or
any part of any advance requested under the Loan which advance would
cause the aggregate amount advanced under the Loan and the Term Loan,
less repayments, to exceed the sum of; (i) eighty (80%) percent of the
Borrower's "Qualified Accounts Receivable" (as hereinafter defined) and
(ii) fifty (50%) percent of Borrower's "Qualified Inventory" (as
hereinafter defined) and (iii) Five Hundred Two Thousand ($502,000.00)
Dollars representing the orderly
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liquidation value of the Borrower's machinery and equipment, which
figure may, from time to time, be reduced, but not increased, by the
Bank based upon any reduction in the orderly liquidation value of the
Borrower's machinery and equipment (such a determination to be at the
Bank's sole and absolute discretion). "Qualified Accounts Receivable"
shall mean accounts receivable earned by Borrower in the ordinary
course of business for services rendered and goods sold to customers
for which there are no claims of offset or defense, and which, in the
opinion of Bank, are not of doubtful collectability, and which have
been outstanding for one hundred twenty (120) days or less, as
reflected on the most recent, certified statement of accounts
receivable delivered to Bank. "Qualified Inventory" shall be valued at
the lesser of the cost or present market value determined in accordance
with generally accepted accounting principles, consistently applied,
and shall mean all inventory which is in good merchantable condition,
is not obsolete or discontinued, which would properly be classified as
"raw materials", "work in process", or "finished goods inventory" under
generally accepted accounting principles, and which has been fully paid
for from Borrower's own funds and for which no security interest exists
except the security interest to be granted in favor of Lender as herein
contemplated. An account receivable or item of inventory which is at
any time a Qualified Account Receivable or an item of Qualified
Inventory, but which subsequently fails to meet any of the foregoing
requirements, shall cease to be a Qualified Account Receivable or an
item of Qualified Inventory as the case may be, for so long as such
failure continues."
4. Paragraph 6.1 (g) of the Line of Credit Agreement dated June 12,
1997, is deleted in its entirety and the following inserted in its place and
stead:
"(g) In the Bank's sole but reasonable discretion, a material adverse
change occurring in the financial condition of Borrower when compared
to the financial condition of the Borrower set forth in the financial
statements included within the Borrower's Annual Report on Form 10-KSB
for the fiscal year ended January 31, 1999."
5. The Security Agreement dated June 12, 1997, (the "Security
Agreement") is amended as follows:
The term "Line of Credit Note" as used in the Security Agreement is
defined to mean, identify and designate that certain Line of Credit
Note in the original principal sum of Eight Hundred Thousand
($800,000.00) Dollars made by Borrower and delivered to Bank on June
12, 1997, as renewed by and continued in that certain Renewal Line of
Credit Note in the original principal sum of One Million One Hundred
Thousand ($1,100,000.00) Dollars made by Borrower and delivered to Bank
July 7, 2000, and any extensions and/or renewals thereof.
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6. The Pledge Agreement dated June 12, 1997, (the "Pledge Agreement")
is amended as follows:
The term "Line of Credit Note" as used in the Pledge Agreement is
defined to mean, identify and designate that certain Line of Credit
Note in the original principal sum of Eight Hundred Thousand
($800,000.00) Dollars made by Borrower and delivered to Bank on June
12, 1997, as renewed by and continued in that certain Renewal Line of
Credit Note in the original principal sum of One Million One Hundred
Thousand ($1,100,000.00) Dollars made by Borrower and delivered to Bank
July 7, 2000, and any extensions and/or renewals thereof.
7. It is expressly agreed and understood that except as expressly
provided in this Agreement, the terms, conditions and provisions set forth in
the Security Agreement, Pledge Agreement, Term Note and related Term Loan
documents, and Line of Credit Agreement, Line of Credit Note, Renewal Note and
related Line of Credit documents shall remain in full force and effect in
accordance with their respective terms, conditions and provisions. Without
limiting the generality of the foregoing, nothing in this Agreement shall be
construed to:
(i) impair the validity, perfection or priority of any lien or
security interest securing the Term Loan and/or the Line of Credit;
(ii) waive or impair any rights, powers or remedies of Bank
under the Pledge Agreement, Security Agreement, Line of Credit
Agreement, Term Note, Renewal Note or related Term Loan and/or Line of
Credit documents with respect to any defaults thereunder which may
occur;
(iii) require Bank to hereafter amend or extend the term of
the Term Note, Renewal Note, the Line of Credit Agreement, Security
Agreement, Pledge Agreement or the time for payment of the Term Loan or
the Line of Credit;
(iv) make any loan or other extension of credit to Borrower.
In the event of any inconsistency between the terms of this Agreement
and the Line of Credit Agreement and/or the Security Agreement, this Agreement
shall govern. Borrower acknowledges that it has consulted with counsel in
connection with the negotiation and delivery of this Agreement. This Agreement
shall be construed without regard to any presumption or rule requiring that it
be construed against the party causing this Agreement or any part of this
Agreement to be drafted.
8. Borrower acknowledges and agrees that its relationship with Bank is
one of the lender and borrower only and is not a partnership or joint venture.
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9. Borrower hereby ratifies and affirms all of the terms, conditions
and provisions of the Security Agreement, Pledge Agreement, UCC-1 Financing
Statements, Term Note, Line of Credit Note, Renewal Note and Line of Credit
Agreement to the extent the same are not otherwise modified herein.
10. Borrower hereby represents, warrants and covenants that all of the
representations, warranties and covenants set forth in the Security Agreement,
Pledge Agreement, UCC-1 Financing Statements, Term Note, Line of Credit Note,
Renewal Note and Line of Credit Agreement are true and correct as of the date
hereof and hereby renews the same.
11. The Renewal Note is executed and delivered in substitution and
replacement of the Borrower's obligations under and the indebtedness evidenced
by the Line of Credit Note. The Renewal Note stands in the place and stead of
the Line of Credit Note and is not an additional indebtedness or a satisfaction
of the indebtedness evidenced by the Line of Credit Note. The indebtedness and
obligations evidenced by the Line of Credit Note are continued, renewed,
extended and modified by the Renewal Note and such indebtedness is and shall
continue to be secured by the Security Agreement, Pledge Agreement, UCC-1
Financing Statements and Line of Credit Agreement without novation or
interruption.
12. Borrower hereby acknowledges and agrees that no setoff or
counterclaim to Borrower's obligations evidenced by the Renewal Note exists, and
no agreement has been made with any person under which any deduction or discount
may be claimed, that the outstanding balance of principal and interest due under
the Line of Credit Note as of July 7, 2000 is $695,000 , that to the best of
Borrower's knowledge, information and belief, no Event of Default (as defined in
the Renewal Note) has occurred which is continuing and no event has occurred
which with the passage of time or the giving of notice or both, could become an
Event of Default under the Renewal Note.
[THIS SPACE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
EXECUTED, SEALED AND
DELIVERED IN THE PRESENCE OF:
Witnesses Present: BORROWER:
TRANSNATIONAL INDUSTRIES, INC.
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇ (as to both) By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇. (SEAL)
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ATTEST: /s/ ▇▇▇▇ ▇ ▇▇▇▇▇▇ (SEAL)
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Witnesses Present: BORROWER:
SPITZ, INC.
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇ (as to both) By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇. (SEAL)
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ATTEST: /s/ ▇▇▇▇ ▇ ▇▇▇▇▇▇ (SEAL)
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BANK:
FIRST KEYSTONE FEDERAL SAVINGS BANK
By: /s/ A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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ATTEST:
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