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EXHIBIT 10.1
PRINVEST CORP
FINANCING AND SECURITY AGREEMENT
THIS FINANCING AND SECURITY AGREEMENT (the " Financing Agreement") is made as of
this 8th day of June, 2000, between PrinVest Financial Corp, a New Jersey
corporation, whose principal business address is 3 Princess Road, Lawrenceville,
NJ 08648 ("Lender"); and Penn-Akron Corporation, a Nevada corporation, whose
principal business address is 1355 Terrell Mill Road, Marietta, Georgia 30067
("Borrower").
In consideration for loans to be made pursuant to the Promissory Note(s) to be
given to Lender by Borrower hereunder, pursuant to the more specific terms as
outlined on the attached Term Sheet, Exhibit A, incorporated herein and made a
part hereof, and to secure the Liabilities (as such term is hereinafter
defined), Borrower hereby grants Lender a security interest in all present and
future contracts and/or purchase orders with both governmental and
non-governmental entities ("Contracts"), accounts, accounts receivable,
instruments, documents, contract rights, chattel paper, inventory in all stages
of manufacture, equipment, fixtures, goods, money deposit accounts, securities,
insurance policies, reserves, reserve accounts, general intangibles, and
proceeds thereof presently existing or hereafter arising, either now owned or
hereafter acquired by Borrower, and whether or not relating to the Contracts,
and the interest of Borrower in any goods, products, and proceeds thereof, and
all books and records pertaining to security and agrees to cooperate fully with
Lender with respect to filing appropriate financing statements to perfect and
evidence same. Further, Borrower hereby irrevocably sells assigns, sets over,
and transfers to PrinVest Corp, a New Jersey corporation, located at 3 Princess
Road, Lawrenceville, NJ 08648 ("Assignee"), as agent for the Lender for others,
all rights to and interests in all moneys presently due or to become due,
including modifications, extensions and renewals thereof, and any and all
amendments thereof and supplements thereto, from the aforementioned Borrower
accruing under the aforementioned Contracts, as well as any additional work done
and/or materials and supplies furnished thereunder, or any modification,
amendment, change order, or other arrangement relating to any Contracts.
The parties hereto, for good and valuable consideration the receipt of which is
hereby acknowledged, and intending to be legally bound hereby, further agree as
follows:
1. As a material inducement to Lender to enter into this Financing Agreement,
Borrower warrants and represents that:
a) The Borrower is the sole and absolute owner of the Contracts
and all other collateral in which the Borrower is or has
granted the Lender a security interest, has full legal right
to execute, deliver, and perform the pledge and assignment of
its rights under the Contracts for monies due or to become
due, and has not made any prior assignment of the Contracts,
other than as specifically detailed in Exhibit B, incorporated
herein and made part hereof.
b) Neither the Contracts nor any of the other collateral pledged
or previously pledged hereunder are subject to any lien,
encumbrance or security interest other than in favor of
Lender, except as specifically detailed in Exhibit B,
incorporated herein and made part hereof.
c) All open invoices on the Contracts are due and owing to
Borrower without allowance, discount, return, defense,
counterclaim or offset, and the payment of said invoices as
issued is not, and will not be, contingent upon any work to be
performed in the future. Borrower has no reason to believe
that the said invoices will not be paid in full.
d) Borrower will execute Instruments of Assignments of Claim in
favor of Lender for all Contracts as requested from time to
time by the Lender, in a form acceptable to the Lender, so
that Lender may be designated as the Assignee.
e) The information in the Application submitted by Borrower to
Lender was true and correct when given, and all other
representations made, either before or after the signing of
this Financing Agreement, both written and oral in nature,
with respect to Borrower's financial condition, Contracts
herein assigned and other collateral in which the Borrower has
granted the Lender a security interest, provided, still
provide and will continue to provide an accurate depiction of
Borrower's financial condition, the Borrower's Contracts or
the Borrower's performance under said Contracts and were not,
are not and will not be erroneous or misleading when given and
are true as of the date hereof. In addition, as of the date of
execution of this Financing Agreement, there have been no
material, undisclosed adverse changes with respect to such
financial condition of Borrower, the
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Borrower's Contracts or other collateral in which the Borrower has
granted or is granting the Lender a security interest.
f) Borrower understands that the security interest granted herein secures
Borrower's performance and payment of all of its obligations to Lender
whether now existing or hereinafter incurred, however such obligations
may be evidenced by, including without limitation, all principal,
interest, servicing and other fees, attorney fees and costs and/or any
other out-of-pocket expenses now or becoming due to Lender
(collectively the "Liabilities" or "Liability").
g) Other than execution of an Assignment of Claim with respect to
Contracts and the execution and filing of the UCC-1 Financing
Statements in the following location(s), Georgia; no consent, approval,
filing or registration is necessary for the valid execution, delivery
or performance by Borrower of this Financing Agreement or with respect
to any of the Liabilities.
h) Borrower's chief executive office and place where Borrower keeps its
books and records relating to the collateral is 1355 Terrell Mill Road,
Marietta, Georgia and Borrower's state of incorporation is Nevada.
i) Borrower maintains inventory in the following states (enter "None" if
not applicable): None.
j) Borrower maintains equipment in the following states (enter "None" if
not applicable): Georgia.
k) Borrower maintains deposit accounts in the following states:
Georgia.
l) Borrower is in compliance with all applicable statutes, regulations,
ordinances, court decrees, or other directives of the United States of
America, and all states, counties, municipalities, and agencies with
respect to the manufacture and sales of its goods, the rendition of its
services and/or its conduct of business and, without limiting the
foregoing, Borrower has filed all federal, state, and local tax returns
and other reports it is required to file and has paid or made adequate
provisions for payment of all such taxes, assessments and other
government charges; except as otherwise may have been disclosed in
writing to and acknowledged by the Lender on or before the date first
set forth above.
2. The following terms mean:
a) "ADVANCE" - A Draw made by a Borrower representing some
percentage of the total value of an approved invoice or a borrowing
base or collateral certification which is being used as collateral for
such loan.
b) "COLLATERAL SUMMARY REPORT" - A summary of the collateral supporting
individual Draws in such form and detail as is satisfactory to the
Lender.
c) "DISBURSEMENT SUMMARY" - A summary of each borrowing detailing the
actual disbursement of funds to and on behalf of the Borrower in such
form and detail as is satisfactory to the Lender.
d) "DRAW" - An advance or individual loan made to the Borrower under a
Promissory Note between the Borrower as Maker and the Lender as Payee.
e) "DRAW CERTIFICATES" - A certification, in such form and detail as is
satisfactory to the Lender, signed by an officer of the Borrower who
has been specifically authorized by a Resolution (as hereinafter
defined) to execute loan documents on behalf of the Borrower. These
certifications are composed of three sections:
1. A certification of the Borrower attesting to the value of the
collateral supporting the Draw;
2. A Collateral Summary Report, if appropriate; and
3. A Disbursement Summary.
f) "OID PERIOD" (original issue discount) - That minimum period of time on
which interest charges and servicing fees will be charged, irrespective
of how soon after a Draw by the Borrower a payment is received by and
credited to the Lender's bank account.
g) "RESIDUALS" - That portion of a payment received by the Lender on
behalf of a Borrower which remains after the application of the payment
as set forth in the Term Sheet.
3. The following procedures must be adhered to any time a new Promissory Note
is necessary. Borrower must make a clean, hard copy of each Promissory Note
(signed, sealed and witnessed); and then return an executed copy to the
Lender by air express or first class mail; to guaranty receipt by the
Lender within a maximum of five (5) business days.
4. The following procedures must be adhered to at the time of each Advance/
Draw.
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a) The Borrower must make a clean, hard copy of each Draw Certificate
and/or Disbursement Summary (signed); and then return an executed copy
to the Lender by air express or first class mail; to guaranty receipt
by the Lender within a maximum of five (5) business days.
b) A failure to return signed originals of any Draw Certificate and/or
Disbursement Summary can delay future fundings.
c) The Lender will only recognize the Borrower's use of a signature stamp
(a "Signature Stamp") as a temporary substitution for an actual
signature on the copies of a Draw Certificate being faxed back to the
Lender if: (i) the Borrower has previously provided authorization for
the use of such a Signature Stamp by a resolution of the Borrower's
Board of Directors (the "Resolution"), including the name of the
authorized signor whose signature will be represented by the Signature
Stamp, (ii) the Resolution indicates all individuals authorized to use
the Signature Stamp, (iii) a signature specimen for each individual
authorized to use the Signature Stamp is provided together with the
Resolution and (iv) whenever the Signature Stamp is used, it is
countersigned by an authorized user of the Signature Stamp. The
foregoing notwithstanding, the Borrower shall still be required to
provide the Lender a copy of each Draw Certificate with an actual
signature by an authorized signor within the above indicated five
business days. The failure to provide such actual signature within the
prescribed time period can delay future fundings. Promissory Notes and
other loan documentation may NOT be executed by use of a Signature
Stamp.
5. Lender shall have the right to charge Borrower for the amount of any
default, or of any allowance, discount, return, defense, recoupment, setoff
or offset taken or claimed by any payors on the Contracts. Lender shall
have the right to deduct said amount from any other monies due to Borrower,
whether included under the terms of this Financing Agreement, subsequent
amendments to this Financing Agreement, or any other similar agreement,
past or future, between Borrower and Lender.
6. Contracts shall be the property of Borrower and shall be collected by
Lender but, if for any reason any payments assigned to the Lender should be
paid to the Borrower, other than if deposited in to a lockbox or lockbox
account of the Borrower which is under the dominion and control of the
Lender, the Borrower shall promptly notify the Lender of such payment,
shall hold any check, draft, or monies ("Payments") so received in trust
and for the benefit of the Lender and shall pay over such Payments to the
Lender on the same business day without charge or setoff. Borrower
acknowledges that any failure to pay over such Payments immediately to
Lender shall be an Event of Default hereunder and may constitute
misappropriation of funds and may subject the Borrower to criminal
liability. The forgoing notwithstanding, Borrower and Lender agree that any
failure of the Borrower to remit Payments to the Lender within five (5)
business days after receipt by Borrower will result in the Lender
assessing, at its sole option, a Conversion Charge equal to five percent
(5%) of the amount of face value of such Payments. Demand or collection of
such conversion charges shall not constitute a waiver by the Lender of
rights it may have to declare an Event of Default and exercise remedies as
a result of Borrower's failure to immediately pay such Payments to the
Lender. Exercise of these rights by Lender shall in no way limit or
restrict any other rights accruing to Lender hereunder or at law.
7. Borrower shall, within one (1) business day, advise Lender, in writing if:
a) The Borrower's place of business and record keeping is changed or a new
place is added or Borrower changes its state of incorporation;
b) The Borrower adds to or changes any locations in which inventory,
equipment, deposit accounts or other material assets in which the
Lender has been granted a security interest are maintained;
c) There occurs any circumstance or situation, including without
limitation any customer disputes and/or supplier/subcontractor lien
filings, related to or which may impact upon full payment of any
invoices submitted or to be submitted for financing under the
Contracts;
d) There are any changes, modifications, amendments or terminations of any
Contracts;
e) There are any changes in the senior management or of the officers of
the Borrower or should any person previously authorized to execute
loans documents on behalf of the Borrower be terminated or relieved
of their authority to execute such documents;
f) There is any change of greater that five percent (5%) in the stock
ownership of the company within any thirty-day period. If the Borrower
is a public company whose stock is publicly traded, this reporting
requirement is waived.
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g) There is, or is threatened, any attachment or other legal process
levied against Borrower including without limitation, (i) any
assessment made concerning any tax liability, (ii) if any taxing
authority provides any notice of an intent to place a levy or lien,
or (iii) if any tax lien or levy is actually recorded;
h) There are any previously, undisclosed adverse changes with respect to
Borrower's financial condition, the Borrower's Contracts or the
Borrower's performance under said Contracts or any other collateral
in which the Borrower has granted the Lender a security interest;
i) Borrower dissolves, merges or consolidates with or into any
corporation or otherwise changes its identity, including without
limitation the use of a new trade name, or corporate or business
structure; and/or
j) Borrower changes its corporate name or uses any trade name not
previously disclosed in writing to the Lender.
8. Upon payment in full of the Liabilities and, at Borrower's written request,
and subject to the Borrower's execution of the Lender's release waiver,
Lender agrees to release its security interest under this Financing
Agreement. Borrower shall be responsible for preparing and filing any
termination statements reasonably required in connection therewith;
provided that Lender shall cooperate with Borrower and shall not
unreasonably withhold its consent and acknowledgment of the same.
9. Lender will not be held responsible for funds that are not properly
addressed to the appropriate lockbox or lockbox account reflected in the
notice of assignment. Credit for such misdirected funds will be given only
when such funds are credited to Lender's account. Borrower is urged to
make sure that Account Debtors properly identify all checks and wires sent
to the Lender's Lockbox or Lockbox Account on behalf of the Borrower.
Should funds received by Lender not be adequately marked so as to enable
Lender to identify the proper Borrower, Borrower's contract number or
Borrower's invoice number, Lender will credit the Borrower as soon as
these funds are properly identified, to reflect the date said funds were
credited to Lender's account.
The Borrower hereby waives any and all right to add any "paid-in-full"
notations to any payments being made to the Lender which would have the
effect of binding the Lender to accept an amount of less than full payment
for any of the Liabilities due to the Lender.
10. In the event any Liabilities become due and still remain unpaid in part or
in their entirety, Lender, at its sole option, may do one or more of the
following:
a) Require the Borrower to pledge additional collateral to secure the
Liabilities;
b) Allow any matured Liability to continue to age, with Interest,
Servicing Fees and the Surcharge, as hereinafter defined, accruing
until the obligation(s) thereunder is paid in full or sufficient
collateral acceptable to the Lender is provided; or
c) Declare an Event of Default under paragraph 11 and exercise its
rights and remedies hereunder or otherwise available to it.
11. If any of the following events ("Events of Default") shall occur and be
continuing:
a) Any Liability is not paid in a timely manner, with respect to Draw
Certificates defined as the earlier of any scheduled payment date or
on or before the maturity date of the Draw Certificate, by or on behalf
of the Borrower.
b) The filing of any petition by or against the Borrower or any guarantor
or surety for any Liability (each an "Obligor"), or the commencement
of any proceedings for the relief or readjustment of the indebtedness
of the Obligor, either through reorganization, composition, extension
or otherwise, under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors.
c) The general nonpayment by any Obligor of their respective debts as
such debts become due, or the admission in writing by an Obligor of
its inability to pay its debts generally, the making by an Obligor of
a general assignment for the benefit of creditors or the taking
advantage by any Obligor of any insolvency law.
d) Any seizure, vesting or intervention by or under authority of a
government, by which the management of an Obligor is displaced or its
authority in the conduct of its business is curtailed.
e) The appointment of a receiver or conservator of any property of an
Obligor.
f) The assertion of any defense, recoupment, setoff, counterclaim or
reduction in the projected payment from the amount shown on the
original invoice by any Account Debtor under any Contract.
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g) If the Borrower fails to perform any of its covenants and/or reporting
obligations to the Lender under this Financing Agreement when and as
required herein, time being of the essence.
h) If there occurs any Event of Default under any other document executed
in connection with any of the Liabilities.
i) If the Borrower submits any invoice(s) for financing on which Borrower
has already received payment or on which Borrower otherwise has
knowledge full payment(s) will not be properly made to Lender.
j) If the Borrower submits any (i) receivables aging reports, inventory
reports or certifications from which collateral eligibility and/or
loan amounts are to be calculated, (ii) financial statements, (iii)
balance sheets, (iv) accounts payable reports or (v) any other report
containing material misrepresentations, whether intentional or
unintentional.
k) If Borrower fails to comply in a timely manner with any federal, state
or local tax or other reporting requirements (including without
limitation requirements relating to the filing of payroll tax returns),
or fails to make timely payment of all tax or municipal obligations,
or if any federal, state or local government asserts or files any tax
or other statutory lien or levy on, or claim of set-off against, any
assets of the Borrower, or otherwise claims or asserts in writing
that the Borrower has failed to comply with its tax or other payment
obligation or otherwise states in writing its intention to file any
lien against the Borrower's assets for failure to pay any or all
required tax or other obligations.
l) Any change in ownership of the Borrower under which more than five
percent (5%) of the stock changes hands, unless the Lender, in its
sole discretion, determines to waive this specific Event of Default.
m) Any change in the senior management of the company, specifically
including without limitation its president, chief executive officer
and/or chief financial officer, unless the Lender, in its sole
discretion, determines to waive this specific Event of Default.
n) If any representation or warranty contained herein or any information,
report, financial statement, exhibit, certificate or schedule
furnished by or on behalf of the Borrower or any Obligor of this
Financing Agreement or in connection with this Financing Agreement
whether provided prior to, simultaneous with or after the execution
of this Financing Agreement, contains any material misstatement of
fact or omitted or omits to state any material fact necessary to make
the statements herein or therein not misleading or in the Borrower
provides information to the Lender which is inconsistent with the
information provided by the Borrower to any Account Debtor or
received by the Borrower from any Account Debtor pursuant to any
Contract or if the Borrower takes any action, whether intentional or
unintentional, which has the effect of diverting from the Lender any
of the payments receivable or to be receivable under any Contract
which has been assigned to the Lender, except as expressly set forth
in this Financing Agreement or otherwise in writing by the Lender.
o) Any Event of Default contained in the Term Sheet or subsequent
Amendments to this Financing Agreement.
Upon the occurrence of an Event of Default hereunder, a surcharge of four
(4%) per annum (a "Surcharge"), in addition to other interest and servicing
charges, payable on the principal amounts of all outstanding Draws made by
the Lender to the Borrower shall immediately be charged without notice and
thereafter shall be payable until and inclusive of the date the Event of
Default has been cured, or in the event that the then outstanding Principal
Amounts of all Draws under any Note have been accelerated, until all
balances arising under all Draws and/or Liabilities have been paid in full,
including the period following entry of any judgment on or relating to any
Draw, the Financing Agreement or any other loan document. The Surcharge on
any such judgment shall accrue and be payable, after judgment, any
execution thereon, and until actual receipt by the Lender in full of the
Liabilities under all Draws and said judgment The Surcharge shall be
collectible as part of any judgment hereunder and shall be secured by the
collateral pledged for all Draws.
After the occurrence of an Event of Default, Lender shall be entitled to
apply any payments or proceeds received by it against the Liabilities,
whether interest, fees, principal, attorney fees and costs, costs of
collection or otherwise, in such manner and order as Lender may, at its
sole discretion, determine.
At the time of an Event of Default or at any time after the happening of
any such Event of Default, the Lender may seek any and all remedies
available for the enforcement of this Financing Agreement at law or in
equity, and without limitation, the Lender may also, in its sole
discretion, but shall not be obligated to:
a) Advance any further funds to Borrower, and/or
b) Declare all Liabilities payable by the Borrower to be forthwith due
and payable and/or
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c) Exercise any or all of its rights to collect on the collateral
hereunder.
12. Borrower agrees to give the Lender the right of first refusal, including
without limitation the right to match any competitive offers, with respect
to the financing of any Contracts for so long as the security interests
granted under this Financing Agreement remain in effect unless otherwise
permitted in writing by the Lender.
13. In addition to other reporting requirements as detailed herein or in any
Term Sheet or Amendment hereto, Borrower will provide the Lender with
copies of its:
a) Annual audited financial statements, if available, and otherwise
in-house prepared annual financial statements within seventy-five (75)
days of the end of its fiscal year;
b) Monthly financial statements, including an aged accounts receivable
and accounts payable aging reports within thirty (30) days after the
end of each calendar month; and
c) IRS 940 and 941 within thirty-one (31) days after the end of each
calendar quarter. Further, upon any request by the Lender, within five
(5) business days, provide the Lender with a detailed inventory of all
collateral encumbered by the security interest granted to the Lender.
14. If the Lender requires the Borrower to provide insurance with respect to
any collateral in which the Lender has a security interest, the Borrower
agrees to provide such insurance and to ensure that the Lender is a named
loss-payee and a certificate holder of such policy or policies. The
Borrower agrees that if it does not timely provide such insurance as
required by the Lender, the Lender will have the right to to obtain the
necessary insurance on the Borrower's collateral and the Borrower agrees
to pay to the Lender all out-of-pocket expenses of such insurance,
including without limitation all premiums as paid, plus five percent (5%)
of such cost.
15. Should any of the Contracts being financed by the Lender be construction
projects or otherwise contain provisions under which Borrower's
subcontractors and/or suppliers have the right to petition the issuer or
owner of the Contracts for direct payment, Borrower agrees that all such
payments will be made to such suppliers and/or subcontractors in a timely
manner; as Borrower agrees that its failure to make such payments could
impair the Lender's ability to collect in full on invoices financed by the
Lender. Borrower's failure to make such timely payments shall be an Event
of Default hereunder and may constitute misappropriation of funds.
16. Lender may, at its sole option, use all reasonable efforts, including
direct contact with the Borrower's Account Debtor(s), to collect amounts
due under this Financing Agreement at the earlier of any time an Event of
Default has occurred or if requested to do so by the Borrower. Accordingly,
the Lender is authorized to notify all contracting entities and/or its
designated payors ("Account Debtors") of Borrower that all future
payment(s) on Contracts shall be made directly to Lender without
endorsement.
17. Borrower hereby grants a limited power of attorney to Lender to execute
and file financing statements pursuant to the Uniform Commercial Code in
Borrower's name, to file Assignments of Claims, Notices of Assignment,
Notices of Releases of Assignment and Releases of Assignment with Account
Debtors in Borrower's name; to sign and file with the Internal Revenue
Service IRS Form 8821 on behalf of the Borrower; and to endorse Borrower's
name, and to negotiate or to deposit, any and all checks, notes, drafts,
or other orders for payment of money payable or endorsed to Borrower which
come into Lender's possession hereunder or to record this Financing
Agreement as a Financing Statement.
18. Borrower understands that Draws contemplated by this Financing Agreement,
the Term Sheet, amendments hereto and thereto, and other documents
executed in connection with this Financing Agreement will be made to, or
on behalf of, the Borrower only after receipt and approval of properly
executed copies (without limitation) of the (a) Financing and Security
Agreement; (b) UCC-1 Financing Statements, subordination agreements if the
Lender does not otherwise have a first priority lien on the Borrower's
collateral in which the Lender is being granted a security interest; (c)
Promissory Notes and Draw Certificates; (d) where applicable (i)
Assignments of Claim, Notices of Assignment, Notices of Release of
Assignment and Releases of Assignment; (ii) complete copies of the
Assigned Contracts, duplicate copies of the Borrower's invoices under
Contracts identical to those submitted to respective Account Debtors;
(iii) related invoice acceptances/acknowledgments from the respective
Account Debtors; (iv) Landlord Waivers; (v) current accounts receivable
aging report where required; (vi) detailed equipment and/or
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inventory schedules and (e) such other documents as may be required by
Lender to secure proper collateral for Lender and ensure the Lender's
first security position as a lender to the Borrower.
19. Borrower further understands that funding any such loans or Draws are
always conditional upon Lender's completion of its due diligence with
respect to Borrower's collateral, Account Debtors' creditworthiness,
verification of the value of the collateral supporting each Draw, the
absence of any material adverse changes in the finances, business
operations, business prospects of the Borrower or performance by either
Borrower or Accounts Debtor(s) under any Contracts and is subject to the
absolute right of the Lender, in its sole discretion, to finance any
invoice or other collateral submitted for financing. The Borrower agrees
that the Lender may authorize transfers of proceeds of loans or Draws
and/or final settlements of invoices under the Contracts either directly
to the Borrower or to designated third parties upon the mutual written
agreement of the Lender and the Borrower or, at Lender's sole option, to
pay off shortfalls on existing invoice payment under one or more Draws or
to reduce Borrower's obligations under various types of loan facilities as
provided for in the Term Sheet.
20. The term of this Financing Agreement shall extend until the payment in full
by Borrower of all Liabilities due to the Lender. However, this does not
affect the right of the Borrower to prepay Liabilities, in whole or in
part, without penalty, at any time, subject to the restrictions of
prepayment during the OID Period.
21. The Borrower affirms that its hardware and software are designed, or will
be modified prior to December 31, 1999, to be used prior to, during and
after the calendar year 2000 A.D. and such hardware and software will
operate during such time period without error, including errors relating
to date data, century recognition, leap year calculations, calculations
which accommodate same century and multi century formulas and date values,
and date data interface values that reflect the century. The Borrower also
agrees to hold the Lender harmless for any transfers of funds occasioned
by the inability of any banks, other financial institutions and/or the
federal reserve system to properly accommodate dates after December 31,
1999.
22. Borrower acknowledges that any reports, audits, credit checks or similar
investigations which have been or will be performed by or for Lender's own
purposes are not for the benefit of Borrower, and Borrower agrees that it
has no right to rely thereon. Borrower further agrees that any lockbox or
other procedure established by Lender to collect payment under the
Contracts are intended for Lender's benefit and not for the benefit of
Borrower, and Lender shall have no duty or obligation to Borrower for any
loss or damage to Borrower as a result thereof except for Lender's willful
misconduct.
23. Borrower agrees that this Financing Agreement and its terms and conditions
are confidential and may not be released or divulged to any third party
without the written consent of the Lender.
24. Lender and Borrower acknowledge that this Financing Agreement shall not
create any (a) agency, (b) partnership or (c) joint venture relationship
between Lender and Borrower.
25. Amendments to this Financing Agreement shall be made in writing and must be
signed by both parties, and shall be subject to all the terms and
conditions described herein and in the Term Sheet, except where
specifically noted under the terms of said amendment(s).
26. Borrower hereby submits to jurisdiction in the State of New Jersey for the
enforcement of this Financing Agreement or any claim(s) hereunder, and
hereby waives any and all rights under the laws of any foreign
jurisdiction to object to such jurisdiction. Any claim by Borrower against
Lender shall be brought in the Superior Court for the State of New Jersey
only. THE PARTIES HEREBY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY in
any action, suit, counterclaim or cross claim arising in connection with,
out of or otherwise relating to this Financing Agreement, the other loan
documents, the obligations, the collateral in any transaction arising
therefrom and/or related thereto. This Financing Agreement shall be
construed in accordance with the laws of the State of New Jersey.
27. Borrower agrees to indemnify and hold the Lender, its officers, directors,
employees, principals and shareholders, harmless from and against any
loss, liability, expense, damage or injury suffered or sustained resulting
from third-party claims and arising from (a) acts or omissions of the
Borrower, (b) acts or omissions of any agent, assignee,
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<PAGE> 8
broker or delegee of the Borrower or (c) otherwise in connection with the
financing provided hereby or any of the activities of Borrower so funded.
Borrower's obligations to provide such indemnification shall survive the
term of this Financing Agreement and shall continue in full force and
effect for a period of sixty (60) months from the date of such
termination.
28. Whenever, by the terms of this Financing Agreement, notice shall be given,
such notice shall be in writing and sent by facsimile transmission
(provided evidence of transmission is maintained), or national overnight or
courier delivery service, addressed to the respective addresses of the
parties set forth on the first page of this Financing Agreement, or at such
other telephone numbers or addresses as have, from time to time, been
designated by like notice.
Borrower: Fax No. 770-541-0001
Lender: Fax No. (609) 844-0449
29. The provisions of this Financing Agreement are severable. Should any
provisions herein be found to be invalid or unenforceable by a court of
competent jurisdiction, the other provisions shall remain in full force and
effect as though the invalid or unenforceable provision were never a part
hereof.
30. No waiver of or failure to enforce any provisions of this Financing
Agreement shall be deemed, or shall constitute, a waiver of any other
provision of this Financing Agreement, nor shall such waiver or failure to
enforce constitute a continuing waiver of any provision of this Financing
Agreement.
31. The parties hereby represent that each has caused, and will cause, the
proper corporate or individual actions to be taken by each respectively, to
effectuate the rights and obligations granted under this Financing
Agreement.
32. In connection with any disagreement or litigation arising out of, or in
connection with, this Financing Agreement, Borrower agrees to reimburse
Lender for all of its expenses in connection therewith, including without
limitation reasonable attorneys' fees, at the trial and appellate levels,
unless Borrower prevails in a final judgment which is unappealable or
unappealed.
33. The Borrower promises to pay and agrees Lender may deduct from monies
otherwise due to Borrower all costs and out-of-pocket expenses of
obtaining performance under this Financing Agreement, performance and/or
collection under any Note, any Draw, in any restructuring of the
Liabilities or in any bankruptcy proceeding, including reasonable attorney
fees and expenses, whether incurred by the Lender or by any agent, or
other party acting on behalf of the Lender as well as any other costs
incurred by the Lender in the exercise of its rights and remedies
hereunder. In addition, in the event it should become necessary for the
Lender to enforce its rights hereunder the Lender is authorized to notify
all of the Borrower's contracting entities and/or designated payors
("Account Debtors") that all future payment(s) on Contracts shall be made
directly to the Lender without endorsement.
34. All the terms and provisions of this Financing Agreement shall be binding
upon and inure to the benefit and be enforceable by the successors in
interest of the respective parties hereto. Nothing contained herein,
expressed or implied is intended nor shall it be construed to confer to or
give to any person, firm, or corporation other than the parties hereto any
rights or remedies under or by reason of this Financing Agreement.
35. The Lender and any subsequent assignee or transferee, at its sole option
and with out the Borrower's consent, may assign (i) its rights and
obligations under this Financing Agreement, (ii) all or any portion of the
Liabilities incurred under this Financing Agreement or any loan or lease
document between the Borrower and the Lender and/or (iii) participation
interests in all or any portion of the Liabilities. Pursuant to this
section, any assignee or purchaser shall have a beneficial interest in the
collateral pledged herein. Borrower agrees that in no event shall it have
or acquire any rights or claims with respect to or against any such
persons.
36. Reference to the masculine shall include the feminine and neuter, and vice
versa. Reference to the singular shall include the plural, and vice versa.
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<PAGE> 9
37. This Financing Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter hereof, and merges and
amends, supersedes and replaces and all prior discussions, Financing
Agreements (and Amendments thereto), Term Sheets other agreements,
correspondence and understandings of every and any nature between them. No
party shall be bound by any condition, definition, warranty, or
representation, other than as expressly set forth or provided for in this
Financing Agreement, or as may be, on or subsequent to the date hereof,
set forth in writing and signed by the parties hereto.
38. This Financing Agreement may be executed in any number of counterparts,
each of which shall be an original but all of which shall constitute the
entire instrument. Signature pages may be exchanged by telefacsimile to
expedite the closing, with original signatures to be exchanged as soon as
possible thereafter. In any event, Borrower must provide a copy of this
Financing Agreement with original signatures to the Lender within three (3)
business days.
39. By executing this Financing Agreement, the parties acknowledge that they
have been fully advised by independent counsel as to the ramifications of
the terms and provisions of this Financing Agreement, and the signatories
have authority to act on behalf of the respective entities in executing
this Financing Agreement, for the purposes herein contained.
40. The execution, delivery of this Financing Agreement, and the performance by
Borrower of its obligations hereunder, do not conflict with any provision
of law applicable to Borrower or of any agreement binding on it.
41. This Financing Agreement is only valid when received at the Lender's New
Jersey office and executed and delivered by an officer of the Lender.
IN WITNESS WHEREOF, the parties have executed this Financing Agreement and
affixed their signatures on the date first above written.
LENDER: PRINVEST FINANCIAL CORP
By: /s/ Pamela K. Wilson 6/8/2000
--------------------------- -----------------------
Officer's Signature Date
ACCEPTED AND AGREED TO:
BORROWER: PENN-AKRON CORPORATION
By:/s/ Christopher J. S. Baker 6/8/2000
--------------------------- -----------------------
Officer's Signature Date
Christopher J.S. Baker, Chief Financial Officer
-----------------------------------------------
Print Name & Title
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Exhibit A
TERM SHEET
Borrower acknowledges that at the time of execution hereof Lender has agreed,
subject to final due diligence on a Draw-by-Draw basis, to extend credit,
pursuant to the issuance of Draw Certificates, to Borrower in accordance with
this Term Sheet and the Financing Agreement to which it is attached (as either
may be subsequently amended), each executed by Borrower and Lender in connection
herewith, and provided that the conditions contained therein and herein are
satisfied. It is understood that the attachment of this Term Sheet to the
Financing Agreement hereto is not intended to limit the obligations to be
secured by the security interests granted in the Financing Agreement.
In consideration of the services being rendered by PrinVest Financial Corp (the
"Lender") in providing the contract financing to Penn-Akron Corporation
("Borrower") certain administrative procedures with respect to such financing
will be necessary and the Borrower agrees to pay Lender as follows:
All interest rates are based on a 360-day year, but charged on the number
of days or periods elapsed.
All Prime-based interest calculations are based on the Prime Rate as
published in "The Wall Street Journal" on the date of the Draw; although,
with respect to any Draws with maturity periods of greater than 90-days, the
Lender reserves the right to reset the interest rate at the end of any month
during which the Prime Rate changes to reflect
such changes.
Interest charges and Servicing Fees are calculated from the date of funding
through, and inclusive of the date verified funds are received and properly
credited to the Lender's Account.
BORROWER'S CREDIT LIMIT
THE LENDER HAS APPROVED AN OVERALL CREDIT LIMIT OF $3,500,000.00 FOR THE
BORROWER; SAID LIMIT REPRESENTING THE AGGREGATE MAXIMUM OUTSTANDING BALANCE,
UNDER ALL CREDIT FACILITIES, BORROWER WILL BE PERMITTED AT ANY ONE TIME. In the
event, either by consent or circumstances, the Borrower's outstanding balance
exceeds the aforementioned Credit Limit, such event shall not be considered a
waiver or change to the Credit Limit; and Lender reserves the right to limit
future advances so that Borrower does not exceed its Credit Limit. Upon demand
by the Lender, if Borrower's outstanding principal loan balance exceeds its
Credit Limit, Borrower will pay Lender sufficient funds to reduce its
outstanding balance below its Credit Limit. The foregoing Credit Limit is
subject to the absolute right of the Lender, in its sole discretion, to finance
or not finance any invoice submitted for funding or otherwise approve or deny
any request for financing; although absent the occurrence of an Event of Default
such requests will not be unreasonably denied. Said Credit Limit is not a line
of credit.
The Lender also reserves the right to set limits on the maximum credit to be
extended to any of Borrower's customers ("Account Debtor Credit Limits")
Borrower agrees that Account Debtor Credit Limits may be unilaterally changed by
the Lender, at it sole discretion without notice.
Although under no obligation to do so, if the Lender agrees to provide any
financing in excess of the a Borrower's Credit Limit (an "Over-Advance"), the
Borrower understands and agrees that such Over-Advance will be on an
"exception-only basis" and the Borrower will pay to the Lender a Waiver Fee on
the Over-Advance. Borrower further agrees that should any Over-Advance be made
at any time, it is not an implicit or explicit extension or increase in the
Borrower's Credit Limit as herein stated.
GENERAL FEES
An Enrollment Processing Fee of 1,500.00, paid.
A Credit Line Fee of 1.0% of the Borrower's authorized credit limit will be
assessed annually; to be paid on the Borrower's then authorized credit limit at
the time of Borrower's second year of financing, and annually thereafter on each
anniversary date of the Borrower's execution of its original Financing and
Security Agreement with the Lender. This fee is non-refundable.
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Federal Tax Lien Fee. The Lender will conduct periodic Federal Tax Lien searches
of state and county records. The average cost of such searches is $45.00 [the
actual fee being determined by the location of the Borrower's recording
jurisdiction(s)] that will be charged to the Borrower.
A Processing Fee of one $1.00 for each non-financed "pass through" payments will
be assessed.
A Waiver Fee of 0.5% of any amounts financed in excess of the then authorized
Credit Limit and/or 0.5% per 30-days or fraction thereof for any collateral the
Lender agrees to finance which does not meet the Lender's standard eligibility
requirements.
An Origination Fee of 3.0% of the existing credit facility, as a one time
charge deducted from the first funding.
A Pre-Approval Audit Fee of at the time of the initial funding if such fee was
not paid during the enrollment process or otherwise prior to any releases being
issued if no fundings are ever made.
An Unutilized Facility Fee will be assessed in arrears for any PrinVest fiscal
month in which a Borrower's average daily outstanding loan balance is less than
$100,000. This fee will be equal to the difference between $100,000 less the
average daily outstanding loan balance times two percent.
TERM
The Borrower agrees that it will finance its receivables with the Lender for a
period of 2 years, beginning with the date of the first Draw from the Lender
(the "Term")
An Early Termination Fee equal to 2.0% of the Borrower's Credit Line if the
Borrower's financing is terminated within the first year of the initial funding
date. A 1.0% Exit Fee, of the prevailing Credit Line, will be assessed if
financing terminates between the 12th and 24th months. Such Early Termination
Fee must be paid prior to the Lender issuing any releases.
The foregoing notwithstanding, if the Borrower seeks to terminate its financing
relationship with the Lender prior to the end of its Term in order to obtain
funding from another lender, the Borrower shall provide the Lender with a copy
of any competing proposal after which the Lender reserves the right to match
such proposal within three (3) business days. Upon matching said proposal, the
Borrower's commitment to finance with the Lender shall continue for the balance
of the Term or one year, whichever is longer.
O.I.D. PERIOD
Unless otherwise indicated in this Term Sheet or any Amendment thereto, the OID
Period for all loans or Draws will be five (5) days.
ACCOUNTS RECEIVABLE FINANCING
"ACCOUNTS RECEIVABLES FINANCING" refers to Draws authorized by Lender and made
to Borrower which are backed by receivables due on specific invoices submitted
to Account Debtors under Contracts whose proceeds have been assigned to the
Lender. Financing under this program is contingent on the Lender obtaining
invoice verifications which in its sole judgment are deemed satisfactory.
PROGRAM PARAMETERS
This section outlines the parameters of the Lender's Accounts Receivable
Financing for which the Borrower has been approved.
a) The Lender will rely on the following criteria to determine whether
an invoice submitted for financing qualifies under its Accounts
Receivable Financing ("Qualified Account"). Such Qualified Accounts:
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(i) must be created by the Borrower in arm's length
transactions in the ordinary course of the Borrower's
business;
(ii) must be lawfully owned by the Borrower free and clear of
all liens, security interests and assignments other than
those in favor of the Lender;
(iii) must be assigned to the Lender and subject to the Lender's
first priority security interest;
(iv) must be valid and enforceable, representing an undisputed
indebtedness of the Account Debtor;
(v) must not be subject to any defense, recoupment, setoff,
counterclaim, credit, allowance or adjustment;
(vi) if for services, must be for services performed in full;
(vii) if for the sale of goods, must have been for a final sale
and not made on consignment, on approval or on a
sale-or-return basis nor subject to any other repurchase or
return agreements and such goods must have been shipped to
and accepted by the Account Debtor, no part of which having
been returned, rejected lost or damaged;
(viii) must not be for a contra Account, an international Account
(defined as an account for which the payment decisions and
issuance of payments are made and controlled by entities
operating outside the United States) or owed by a
subsidiary or affiliate of the Borrower;
(ix) must be payable by an Account Debtor deemed to be credit
worthy by the Lender in its sole discretion;
(x) must have arisen pursuant to an invoice which was
originally issued and dated NOT more than sixty (60) days
prior to the determination date of the Borrower's Borrowing
Base;
(xi) must be financed by the Lender within the payment terms of
the invoice;
(xii) must have arisen pursuant to an invoice which was or will
be delivered to the Account Debtor within ten days after
completion of the services or delivery of the goods or
materials;
(xiii) must represent an obligation of an Account Debtor which has
not submitted a medium of payment therefor which has been
returned uncollected for any reason; and
(xiv) must otherwise be acceptable to the Lender.
(b) The Borrower must submit copies of all invoices it wishes to finance
together with the agreed upon verifications, if available.
(c) The Lender will, at its sole option, undertake any additional
collateral verifications it deems necessary.
(d) Each Draw Certificate and accompanying Disbursement Summary must
signed and faxed to the Lender prior to funding.
(e) Thereafter an original copy of the Draw Certificate and Disbursement
Summary must be sent to the Lender as detailed in section 3 of the
Financing Agreement.
COST OF FUNDS
Borrower will pay an Interest Rate on Accounts Receivable Financing of Prime
plus 2.0% per annum calculated on a per diem basis, subject to the OID period
calculation, on the net outstanding balance of monies advanced to, or on behalf
of, Borrower, for all eligible invoices, plus any accrued fees and/or charges
incurred in providing such financing (other than previous interest charges).
Borrower will pay a Servicing Fee of 1.0% per 30-day period (or fraction
thereof, based on a 360-day year), the first period being deducted from each
funding, with subsequent period Servicing Fees collected at the time payments
are received and processed; with a minimal fee of $50 being assessed per period.
Such fee is charged to compensate PrinVest for its costs of administering the
Borrower's account, processing funding requests, handling and applying payment
receipts and such other clerical, administrative and bookkeeping functions as
are necessary to properly service the Borrower.
ADVANCE RATES
Advance Rates on Accounts Receivable Financing will be as indicated below:
a) 80% on acknowledged and/or approved invoices.
b) Said advances are to solely be for the use of vendor, Lynxus,
payments. Any other advance, solely for use by Borrower, must be
individually approved and documented by a detailed "use of proceeds"
statement.
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APPLICATION OF PAYMENT RECEIPTS
Prior to an Event of Default, the Lender shall apply payments in the following
order and manner unless otherwise agreed to in writing between the parties.
a) First, to accrued interest and/or servicing fees on the amount of the
invoice funded, if applicable;
b) Second, to any other outstanding fee due by Borrower to Lender in
accordance with the terms of the Term Sheet,
c) Third, to the principal balance of the invoice funded, if applicable;
d) Fourth, to satisfy any previously agreed upon third party payments,
including those made pursuant to a Third Party Agreement to which
both Lender and Borrower are parties;
e) Fifth, to accrued interest and/or servicing fees on advances on any
other financed invoices on which payment shortfalls have occurred;
f) Sixth, to the principal balance(s) with respect to any other invoices
on which payment shortfalls have occurred;
g) Seventh, to reduce outstanding balances of any Mobilization, Overhead
or Purchase Order loans owed by Borrower on which payments are due,
if applicable;
h) Eighth, to retire any other outstanding Liabilities then due and
payable to Lender by Borrower; and
i) Ninth, with any remaining monies being paid by Lender to Borrower,
less applicable deductions pursuant to the provisions of Paragraph 4
of the Financing Agreement.
Borrower will be provided with a weekly report detailing all receipts and
applications for the preceding week, together with copies of all check
stubs and wire advices.
Residual payments, as and if applicable will be forwarded to the Borrower:
a) Within three (3) business days after funds are credited to the
Lender's account.
The Borrower is responsible for indicating the appropriate payment instructions
on all invoices submitted for financing:
REMIT PAYMENT TO: PRINVEST FINANCIAL CORP
FBO: PENN-AKRON CORPORATION
INDICATE THE APPROPRIATE LOCKBOX INSTRUCTIONS AS INDICATED ON THE ASSIGNMENT OF
CLAIMS
OTHER TERMS AND CONDITIONS
The following terms and conditions must be met prior to the first funding:
- First security position evidenced by a filed and recorded UCC-1 Financing
Statement on all Borrower's assets
- Satisfactory search results
- Satisfactory verbal verification of SLD invoices confirming that Lender is
reflected as "remit to" party and that payment has been approved
- Satisfactory Notice of Assignment for Schools and Libraries Division
(USAC/SLD)
- Receipt of properly executed loan documents
The following terms and conditions must be met prior to any subsequent fundings:
- Borrower to provide Lender with Internal Revenue Service contact for
satisfactory tax verification. Tax identification number previously
provided is not recognized by the I.R.S.
- Borrower to provide current financial statements, post-merger, including
Balance Sheet, Income Statement and detailed Accounts Receivable and
Payable Agings
In the event Lender determines that there are reasonable grounds to believe
Borrower has experienced material financial, contract or other changes, Lender
reserves the right to undertake an on-site audit of Borrower's financial and
related records at Borrower's expense.
Bank wire and lock box fees, UCC search and filing fees, messenger costs, postal
and/or overnight mail, third-party payment fees and other costs incurred by
Lender (including, but not limited to, reasonable attorneys' fees and insurance
bonding premiums) will be charged to Borrower as they are incurred.
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In the event any court of competent jurisdiction rules that any fee hereunder is
actually an interest rate and when added to the Interest Rate the total exceeds
the jurisdiction's usury rate, it is hereby agreed among the parties hereto that
the total interest rate payable will be the highest permitted under such
jurisdiction.
The Lender, in its sole discretion, reserves the right to set and revise (i)
maximum limits on the amount of credit to be extended with respect to any
account debtor and (ii) the maximum advance rates for other collateral against
which loans will be made to the Borrower. These account debtor credit limits and
collateral advance rates will be communicated, as appropriate, under separate
cover from the Lender.
In the event any payments received on behalf of the Borrower are subsequently
returned by the Borrower's bank or the Borrower's customer's bank for
insufficient funds or any other reason which was not caused by a mistake on the
part of the Lender, Borrower acknowledges a return check charge of the greater
of $50.00, or the maximum allowed under law, will be assessed.
Borrower agrees that after termination of its financing relationship with the
Lender, Residuals will be held a sufficient time, at Lender's sole discretion,
to reasonably assure full collectability on the payor's accounts prior to
releasing such funds to or for the benefit of the Borrower.
As the Lender will provide the Borrower with ongoing receipt and application
information as detailed in this Term Sheet, the Lender reserves the right to
charge the Borrower for time and materials should the Borrower request the
Lender to provide additional detailed reconciliations and/or copies of materials
previously provided.
The interest rates, fees and other charges; authorized advance rates; credit
limits and other terms and conditions contained herein are subject to change
with a 30-day advance written notice by the Lender. This Term Sheet, and any
amendments thereto, commits Lender to the financing against collateral in which
the Lender has (i) a first priority, perfected security interest, (ii) been
assigned the proceeds therefrom and (iii) in its sole discretion, accepted for
financing in a specific written acknowledgement delivered to the Borrower or, if
no written acknowledgment is so delivered, for which the Lender has actually
advanced loan proceeds. Borrower acknowledges that the Lender is under no
obligation to make any Advances or provide any Draws hereunder and Lender, at
its sole discretion, reserves the right to fund or decline to fund any such
request for any reason or for no reason.
ACCEPTED AND EXECUTED
LENDER: PRINVEST FINANCIAL CORP
By: /s/ Pamela K. Wilson 6/8/2000
--------------------------- -----------------------
Officer's Signature Date
ACCEPTED AND AGREED TO:
BORROWER: PENN-AKRON CORPORATION
By: /s/ Christopher J.S. Baker 6/8/2000
--------------------------- -----------------------
Officer's Signature Date
Christopher J.S. Baker, Chief Financial Officer
-----------------------------------------------
Print Name & Title
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Exhibit B
SCHEDULE OF PREVIOUSLY ASSIGNED CONTRACTS
Pursuant to section 1(a) of the Agreement, Borrower hereby warrants that no
Contracts other than those listed below are presently assigned to any third
party other than the Lender.
CONTRACTS
<TABLE>
<CAPTION>
CONTRACTING ENTITY CONTRACT NUMBER CONTRACT DATE INDICATE ASSIGNEE CURRENT IF
CURRENTLY UNDER ASSIGNMENT
------------------ --------------- ------------- ----------------------------
<S> <C> <C> <C>
</TABLE>
Pursuant to section 1(b) of the Agreement, Borrower hereby warrants that there
are no liens, encumbrances or other security interests presently in filed with
respect to any of the Contracts or other collateral being pledged to the Lender
other than as listed below.
OTHER ENCUMBERED COLLATERAL
<TABLE>
<CAPTION>
SECURED PARTY DESCRIPTION OF ENCUMBERED COLLATERAL DATE OF SECURITY
INTEREST FILING
------------- ------------------------------------ ----------------
<S> <C> <C>
</TABLE>
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