LOAN AND SECURITY AGREEMENT

LOAN AND SECURITY AGREEMENT

This LOAN AND SECURITY AGREEMENT is entered into as of June ___, 2006 between BUSINESS ALLIANCE CAPITAL COMPANY, a division of Sovereign Bank, a federal savings bank (BACC), with its chief executive office located at 214 Carnegie Center, Suite 302, Princeton, New Jersey 08540 and DRINKS AMERICAS INC., a Delaware corporation (“DAI”), DRINKS GLOBAL IMPORTS, LLC, a New York limited liability company (DGI”), and D.T. DRINKS, LLC, a New York limited liability company (“DTD”, and together with DAI and DGI individually and collectively Borrower), each with its chief executive office located at 372 Danbury Road, Wilton, CT 06897.

1. DEFINITIONS AND CONSTRUCTION

Accounts means, in addition to the definition of accounts in the Code, all presently existing and hereafter arising accounts receivable, contract rights, health-care-insurance receivables, and all other forms of obligations owing to Borrower arising out of the sale, lease, license or assignment of goods or other property, 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, including those under this Agreement.

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 Company, a division of Sovereign Bank, 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 or its account debtors; 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 or otherwise exercising its rights and remedies upon the existence of an Event of Default, 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, including allocated fees of in-house counsel, incurred in advising, structuring, drafting, reviewing, administering, amending, modifying, 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 or revised from time to time.

Collateral means all assets of the Borrower, whether now owned or existing, or hereafter acquired or arising, and wherever located, including, without limitation, all of the following assets, properties and interests in property of Borrower,: all Accounts; all Equipment; all Commercial Tort Claims, all General Intangibles; all Chattel Paper; all Inventory; all Negotiable Collateral; all Investment Property, all Financial Assets, all Letter of Credit Rights, all Supporting Obligations, all Deposit Accounts, all money or any 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, lease, license or other disposition of the foregoing, or any portion thereof or interest therein, and all proceeds thereof, and any other assets of Borrower or any Guarantor which may be subject to a lien in favor of BACC as security for the Obligations.

Commercial Tort Claims shall have the meaning ascribed to such term in the Code.

Daily Balance means the amount of the Obligations owed at the end of a given day.

Deposit Account shall have the meaning ascribed to such term in the Code.

Documents shall have the meaning ascribed to such term in the Code.

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 good faith 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: (1) the Account debtor on such Account is and at all times continues to be acceptable to BACC in its sole discretion, and up to credit limits acceptable to BACC in its sole discretion, and (2) 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 sixty (60) 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 sixty (60) days of invoice date; (b) Accounts with respect to which goods are sold on a bill and hold basis or 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 or otherwise; (g) Accounts with respect to an Account debtor (or affiliated group of Account debtors) whose total obligations to Borrower exceed twenty five percent (25%) of all Eligible Accounts or such other percentage as BACC may agree to in writing as to a particular Account debtor (the applicable percentage the “Concentration Percentage”), to the extent such obligations exceed the applicable Concentration Percentage; (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; (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; (l) any Account as to which an invoice has not been issued to the Account debtor; (m) any Account which represents a progress billing on a contract which has not been fully completed by Borrower, or (n) any Purchase Order Financed Account.

 

Equipment means in addition to the definition of equipment in the Code, 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 ERISA Section 4001(b)( 1), or IRC Section 414.

Event of Default means the events specified in Section 8, below.

Financial Assets shall have the meaning ascribed to such term in the Code.

General Intangibles means in addition to the definition of general intangibles in the Code, 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, copyrights, 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 issues a validity guaranty relating to the Collateral, or pledges any assets to BACC as additional 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.

Instruments shall have the meaning ascribed to such term in the Code.

Inventory means, in addition to the definition of inventory in the Code, 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.

Investment Property shall have the meaning ascribed to such term in the Code.

IRC means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

Letter of Credit Rights shall have the meaning ascribed to such term in the Code.

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, as each of same may be amended, modified, renewed, extended or substituted from time to time.

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.

Permitted Indebtedness means the following: (a) indebtedness to BACC arising under any of the Loan Documents or otherwise, (b) current liabilities of Borrower incurred in the ordinary course of business not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; (c) unsecured indebtedness in respect of taxes, assessments, governmental charges, insurance, materials or supplies in the ordinary course of Borrowers business; (d) amounts payable for expense reimbursements to or indemnification of employees, officers, or directors; (f) indebtedness arising in connection with capital leases, provided that the aggregate principal amount of all such indebtedness permitted under this clause shall not exceed amounts provided in the Agreement; (g) indebtedness in respect of judgments or awards that are fully covered by insurance (with the insurer having acknowledged coverage) or that have been in force for less than the applicable period for initiating an appeal of such judgment or award so long as execution is not levied thereunder or in respect of which the Borrower shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review; (h) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; (i) indebtedness under a Permitted Purchase Order Assistance Facility (j) purchase money indebtedness in Equipment incurred in the ordinary course of business (k) indebtedness of Borrower existing on the date hereof and listed and described on Schedule 7.1 hereto; (l) unsecured indebtedness for borrowed money (which may be under convertible debentures or similar debt instruments) provided that such indebtedness is subordinate to the Obligations of Borrower to BACC, pursuant to subordination terms and provisions satisfactory to BACC, and prior written notice of the incurrence of said indebtedness have been furnished to BACC, and (m) indebtedness of Borrower incurred to refinance or replace indebtedness permitted hereunder, provided that the principal amount (or committed principal amount) of such refinancing indebtedness shall not exceed the outstanding principal amount (or committed principal amount) of the indebtedness being refinanced.

Permitted Purchase Order Assistance Facility means a Purchase Order Assistance Facility acceptable to BACC in its sole discretion, provided the subject Purchase Order Assistance Provider has entered into an intercreditor agreement with BACC satisfactory in form and substance to BACC.

PFI means Production Finance International, LLC

 

Plan means any plan described in ERISA Section 3(2) maintained for employees of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.

PO Financed Borrower means D.T. Drinks, LLC or such other Borrower as BACC may agree to and approve to, in writing, from time to time, which may have a Permitted Purchase Order Assistance Facility.

Prime Rate means that rate designated by Sovereign Bank, or any successor thereof, from time to time as its prime rate, which shall not necessarily constitute its lowest available rate.

Purchase Order Assistance Facility means a facility to be provided to a PO Financed Borrower by a Purchase Order Assistance Provider under which, inter alia, such Purchase Order Assistance Provider shall provide assistance to the PO Financed Borrower to acquire specific Inventory approved by BACC, by such Purchase Order Assistance Provider against specific purchase orders to Borrower, and will acquire title to the goods to be acquired to fulfill said purchase order.

Purchase Order Assistance Provider means a third party which provides a Purchase Order Assistance Facility to a PO Financed Borrower.

Purchase Order Financed Account means any Account arising from the sale of Purchase Order Financed Inventory or other Account of a PO Financed Borrower subject to a lien in favor of a Purchase Order Assistance Provider, provided such Account shall cease to be a Purchase Order Financed Account if (a) BACC and the Purchase Order Assistance Provider providing the subject Purchase Order Assistance Facility to a PO Financed Borrower have entered into an Intercreditor Agreement satisfactory in form and substance to BACC, and (b) upon BACC’s forwarding to said Purchase Order Assistance Provider the amount requested by said Purchase Order Assistance Provider (which may be set forth in the intercreditor agreement between BACC and such Purchase Order Assistance Provider), all right, title and interest in said Account shall be owned by the subject PO Financed Borrower and the security interest or other lien or interest of said Purchase Order Assistance Provider in said Account shall be subordinate to the security interest in favor of BACC in accordance with the terms of the subject Intercreditor Agreement.

Purchase Order Financed Inventory means all goods to be sold under a purchase order issued to a PO Financed Borrower from one of its customers, which goods are acquired or to be acquired through a Purchase Order Assistance Facility between a PO Financed Borrower and a Purchase Order Assistance Provider, including, without limitation, the existing Purchase Order Assistance Facility between D.T. Drinks, LLC and PFI.

Revolving Credit Facility means the revolving credit facility provided for in Section 2.1 hereof.

Supporting Obligation shall have the same meaning ascribed to such term in the Code.

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) June ____, 2009 (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.

2.1 Revolving Advances; Advance Limit.

(A) Upon the request of Borrower, made at any time from and after the date hereof until the Termination Date, and so long as no Event of Default has occurred, BACC may, in its good faith discretion, make Advances in an amount up to eighty five percent (85%) of the aggregate outstanding amount of Eligible Accounts, provided, however, that in no event shall the aggregate amount of the outstanding Advances under the Revolving Credit Facility be greater than, at any time, the amount of Ten Million Dollars ($10,000,000.00) (said dollar limit the Advance Limit). BACC may create reserves against, or reduce its advance percentages based on Eligible Accounts without declaring an Event of Default if it determines, in its good faith discretion, that such reserves or reduction is necessary, including, without limitation, to protect its interest in the Collateral and/or against diminution in the value of any Collateral, and/or to insure the prospect of payment or performance by Borrower of its Obligations to BACC are not impaired.

(B) Borrower has advised BACC that D.T. Drinks, LLC has obtained, or intends to obtain, a Purchase Order Assistance Facility from PFI. Borrower represents it has furnished to BACC a true, accurate and complete copy of the Agreement to be entered into by Borrower and PFI pursuant to which a Purchase Order Assistance Facility will be established, and all other documents and agreements related thereto. Borrower confirms it requested that BACC enter into an Intercreditor Agreement with PFI in the form annexed hereto as Exhibit A, and to which Borrower shall be a party to. Borrower hereby reaffirms said Intercreditor Agreement and the authorization set forth in said Intercreditor Agreement that, inter alia, BACC forward directly to PFI the proceeds of all Advance against an Account that is a Purchased Order Financed Account arising from the Purchase Order Assistance Facility between the PO Financed Borrower and PFI. Borrower will act in accordance with the procedures set forth in said Intercreditor Agreement relative to seeking Advances from BACC. Borrower hereby authorizes BACC to, from time to time, communicate directly with PFI and any other future Purchase Order Assistance Provider, so as to exchange any and all information relative to the Revolving Credit Facility between BACC and Borrower provided for herein and the Purchase Order Assistance Facility provided by said Purchase Order Assistance Provider. If hereafter Borrower obtains a Purchase Order Assistance Facility from a Purchase Order Assistance Provider which replaces the subject facility from PFI, all references in this Section 2.1(B) to PFI shall be deemed to be the replacement Purchase Order Assistance Provider.

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 under the Revolving Credit Facility 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 to be agreed upon between BACC and Borrower, but not less than $500.00 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, or the intercreditor agreement between BACC and the Purchase Order Assistance Provider. 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 interest shall accrue on the Daily Balance of the Obligations at the per annum rate of one and one half percentage points (1.5%) above the Prime Rate, in effect from time to time. The Obligations shall, at the option of BACC, from and after the occurrence of an Event of Default, and without constituting a waiver of any such Event of Default, and if the Obligations are not paid in full by the Termination Date, and without waiving the maturity of the Obligations on the Termination Date, bear interest at the per annum rate of six and one half percentage points (6.5%) above the Prime Rate (the “Default Rate”). All interest payable under the Loan Documents shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed on the Daily Balance. Interest as provided for herein shall continue to accrue until the Obligations are paid in full.

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 monthly interest payable by Borrower on the Advances shall be calculated on a minimum Daily Balance of One Million Dollars ($1,000,000.00).

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 revolving credit facility 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, Facility 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 Fees, any Examination Fees, 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 or other obligors that the Accounts or other Collateral have been assigned to BACC, and that BACC has a security interest in them and collect the Accounts and other Collateral 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 and other obligors to remit payments on Accounts and other Collateral to a lockbox to be designated by BACC, and with payments to be made by wire transfer, ACH or other electronic means, to an account designated by BACC. All such payments remitted to the lockbox or made by wire transfer, ACH or other electronic means, shall be credited to a deposit account of BACC and into which account remittances from account debtors or obligors of other clients of BACC may be credited. If notwithstanding said notice Borrower obtains payment on any Account or other Collateral, including, without limitation, collections under credit card sales, Borrower shall receive all such payments on Accounts and other Collateral and other proceeds, including cash, in trust for BACC and immediately deliver said payments to BACC in their original form as received from the Account debtor or other obligor, together with any necessary endorsements.

2.6 Crediting Payments. The receipt of any item of payment by BACC shall, for the sole purpose of determining availability under the revolving credit facility provided for herein, subject to final payment of such item, be provisionally applied to reduce the Obligations on the date of receipt of such item by BACC, but the receipt of such an item of payment shall for all other purposes in determining the Daily Balance, including without limitation for the purpose of calculation of interest on the Obligations and the calculation of the Servicing Fee, not be deemed to have been paid to BACC until three (3) 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 Closing and Facility Fee. In consideration of BACC’s entering into this Agreement, Borrower shall pay BACC a closing fee (the Closing Fee) of one half percent (.5%) of the Advance Limit (said closing fee being Fifty Thousand Dollars ($50,000.00), one half of which (Twenty Five Thousand Dollars ($25,000.-00) shall be paid simultaneous with the execution hereof, and the balance on June 1, 2007. Notwithstanding the foregoing the unpaid balance of said closing fee shall be payable in full on the earlier of (a) termination of this Agreement or (b) at BACC’s option upon BACC’s declaration of an Event of Default. On each annual anniversary of the date hereof Borrower shall pay to BACC an annual facility fee (the Facility Fee) of one quarter percent (.25%) of the Advance Limit plus the then outstanding principal balance of any term loans and Advances other than under the Revolving Credit Facility. The Closing Fee and Facility Fee shall be deemed to have been fully earned upon the execution hereof for the entire Initial Term.

2.8 Servicing Fee. Borrower shall pay BACC a monthly fee (the Servicing Fee) in an amount equal to two tenths percent (.2%) of the average Daily 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, provided, however, that if Borrower breaches its obligations under Section 2.5 of this Agreement, and without constituting a waiver of an Event of Default as a consequence of such breach, at the election of BACC the Servicing Fee shall be doubled. Notwithstanding anything to the contrary contained in the Loan Documents, the Servicing Fee shall be based on a minimum Daily Balance of Advances of One Million Dollars ($1,000,000.00).

2.9 Field Examination Fee. Borrower shall pay BACC a fee (the Field Examination Fee) in an amount equal to Seven Hundred Fifty Dollars ($750.00) 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 Fifty Dollars ($50.00) 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.

 

 

3.1 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. Expressly in addition to all rights and remedies available to BACC, if the term of this Agreement is not renewed and the Obligations are not paid in full by the Termination Date, then Borrower shall also pay to BACC, as part of the Obligations, a fee of two percent (2%) of the then outstanding principal balance of the Obligations.

3.2 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, in addition to payment of all principal, interest, fees, expenses and other Obligations, Borrower shall pay BACC upon the effective date of such termination a fee in an amount equal to: (a) three percent (3%) of the Advance Limit plus the then outstanding principal balance of any term loans or Advances other than under the Revolving Credit Facility, if such termination occurs on or prior to the first (1st) anniversary of the commencement date of the Initial Term; or (b) two percent (2%) of the Advance Limit plus the then outstanding principal balance of any term loans or Advances other than under the Revolving Credit Facility if such termination occurs after the first (1st) anniversary of the commencement date of the Initial Term and prior to the second (2nd) 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 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.

4. CREATION OF CONTINUING SECURITY INTEREST

4.1 Grant of Continuing Security Interest. Borrower hereby grants to BACC a continuing