Inventory Agreement Addendum to Loan and Security Agreement between Action Products International, Inc. and Presidential Financial Corporation
This agreement is an addendum to a previous loan and security agreement and promissory note between Action Products International, Inc. (the Borrower) and Presidential Financial Corporation (the Lender). It allows the Borrower to draw funds based on inventory, subject to specific limits and conditions. The maximum draw amount varies by time of year and cannot exceed certain percentages of inventory value or the accounts receivable loan balance. The Borrower must provide monthly inventory reports, maintain insurance, and pay service charges and interest. Failure to comply with repayment terms constitutes a default.
Exhibit 10.3
INVENTORY AGREEMENT
ADDENDUM TO LOAN AGREEMENT AND SECURITY AGREEMENT DATED JUNE 25, 2008
AND DEMAND SECURED PROMISSORY NOTE DATED JUNE 25, 2008
THIS AGREEMENT made this twenty-fifth day of June, 2008 by and between Action Products International, Inc., a Florida Corporation (hereinafter referred to as “Borrower”), and Presidential Financial Corporation (hereinafter referred to as “Lender”) for the purpose of Lender advancing funds based upon inventory. The terms and conditions of said advances are as follows:
| 1. | The maximum amount available for draws against inventory is as shown below and is within the limits of the Demand Secured Promissory Note executed by Borrower, dated June 25, 2008 in the amount of Two Million and no/100 Dollars ($2,000,000.00), provided however draws against inventory shall not exceed draws against Approved Receivables (as that term is defined in the Loan Agreement and Security Agreement between Borrower and Lender dated June 25, 2008): |
| Period Available | Maximum Amount Available | ||
| October 1 through June 30 | $ | 600,000.00 | |
| July 1 through September 30 | $ | 700,000.00 | |
If on October 1 of any calendar year, the amount outstanding against inventory exceeds $600,000.00, Borrower shall immediately repay the amount of the inventory loan in excess of $600,000.00. Borrower’s failure to repay the inventory loan as required herein shall constitute a default under the Loan Agreement.
| 2. | A service charge of zero point six percent (.6%) based on the average daily outstanding inventory loan balance during the month shall be earned by Lender and the undersigned hereby agrees that the service charge will be transferred to the A/R line. An interest rate of Prime plus one percent (1%) on the principal will also be earned by Lender and transferred to the A/R line. |
| 3. | Borrower agrees to provide to Lender at the end of each month a summary listing of inventory stating approximate values and location. In addition, Borrower agrees to maintain property damage insurance coverage on all inventory with Lender named as Loss Payee and Additional Insured. |
| 4. | It is agreed that inventory advances will be limited to the lesser of (a) fifty percent (50%) of the value of all eligible inventory as provided by Borrower (“inventory availability”); (b) Six Hundred Thousand and No/100 Dollars ($600,000.00) with the exception during the period of July 1 through September 30 when the maximum amount available for draws against inventory is Seven Hundred Thousand and no/100 Dollars ($700,000.00) or (c) the accounts receivable loan balance. |
IN WITNESS WHEREOF, the parties have signed and sealed on the day first above written.
| BORROWER: | ||
| Action Products International, Inc. | ||
| By: | /s/ Robert Burrows | |
| Name: | Robert L. Burrows | |
| Title : | CFO/Secretary | |
| LENDER: | ||
| Presidential Financial Corporation | ||
| By: | /s/ Raymond Alberti | |
| Name: | Raymond Alberti | |
| Title: | Senior Vice President | |
