LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of March 31,
1999 between AMERICAN QUANTUM CYCLES, INC., a Florida corporation (the
"Company"), having its address at 000 Xxxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxx 00000,
and ANCHOR CAPITAL CORPORATION, a Maryland corporation (the "Lender"), having
its address at 00000 Xxxxxx Xxxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000.
WITNESSETH:
WHEREAS, the Company is in the business of manufacturing and assembling
motorcycles at its plant in Melbourne, Florida, and has requested the Lender to
finance the Company's purchase of certain parts inventory from the Company's
vendors for such manufacture and assembly;
WHEREAS, the Lender is prepared to establish a line of credit to finance
such inventory purchases provided that the advances therefor are secured by a
purchase-money security interest in such inventory and the accounts and proceeds
generated thereby and provided that the Company meets certain performance
projections represented by the Company to the Lender;
NOW, THEREFORE, in consideration of the sum of $10.00 and other good and
valuable considerations, the Company and the Lender agree as follows:
1. DEFINITIONS. As used in this Agreement, the following capitalized terms
shall have the meanings set forth below:
(a) "Account Debtor" means the motorcycle dealer or other person who is
obligated on an Account.
(b) "Account" means any account as that term is defined in the Uniform
Commercial Code as in effect in any jurisdiction in which any of the Collateral
may at the time be located (the "U.C.C.") and includes any right of the Company
to payment for goods sold or leased or for services rendered or money loaned
which is not evidenced by an instrument or chattel paper (as those terms are
defined in the U.C.C.) whether or not it has been earned by performance.
(c) "Anchor Account" means a deposit account in the name of the Company
over which the Lender shall have sole signature authority, established at a
depositary institution approved by the Lender and pledged to the Lender as
additional security for the Obligations.
(d) "Cash Flow Projections" means the Company's cash flow projections for
the term of this Agreement, attached hereto as Exhibit "A".
(e) "Chattel Paper" means any chattel paper as that term is defined in the
U.C.C.
1
(f) "Collateral" means (i) all of the Company's Purchase Orders, Accounts,
General Intangibles, Chattel Paper and Instruments now existing or hereafter
arising; (ii) all guarantees of Company's existing and future Accounts, General
Intangibles, Chattel Paper and Instruments and all other security held by the
Company for the payment and satisfaction thereof; (iii) all of the Company's
Inventory now owned or hereafter acquired; (iv) all of the Company's books and
records which relate to the Company's Inventory, Accounts, General Intangibles,
Chattel Paper and Instruments or guarantees thereof; (v) all insurance on all of
the foregoing and the proceeds of that insurance; (vi) the Anchor Account and
all funds deposited therein from time to time; and (vii) all cash and noncash
proceeds and products of all of the foregoing and the proceeds and products of
other proceeds and products. The Collateral does not include any of the
Company's equipment as that term is defined in the U.C.C.
(g) "Collateral Base" means, for any week during the term of this
Agreement, the sum of (i) seventy-five percent (75%) of "Net Receivables
Outstanding" (shown as line item 233 in attached Exhibit "A") plus (ii)
one-third (1/3) of "Net Xxxxxx Inventory at End of Week" (shown as line item 213
in attached Exhibit "A") as shown in the respective Weekly Report.
(h) "Commitment" means the obligation of the Lender to make Loans up to but
not exceeding the aggregate principal amount of $750,000 at any one time
outstanding, subject to the terms and conditions of this Agreement.
(i) "Cumulative Cash Collected" means the cumulative amount of funds
received in the Anchor Account from dealers or from any Floor Plan Lender as
payment for motorcycles built and shipped pursuant to Purchase Orders approved
for funding by the Lender, computed on a weekly basis and included in each
Weekly Report by the Company; the amount of "Cumulative Cash Collected" is
projected in the Cash Flow Projections as line item 232.
(j) "Cumulative Sales" means the cumulative amount of the Company's sales
to dealers of motorcycles built and shipped pursuant to Purchase Orders approved
for funding by the Lender, expressed in dollars based on the actual sales price,
computed on a weekly basis and included in each Weekly Report by the Company;
the amount of "Cumulative Sales" is projected in the Cash Flow Projections as
line item 230.
(k) "Default Rate" is defined in Section 3(h).
(1) "Event of Default" is defined in Subsection 8(a).
(m) "Floor Plan Lender" means Bombardier Capital Inc. or Transamerica
Commercial Finance Corporation or another commercial floor plan lender
reasonably acceptable to the Lender who agrees in writing to extend floor plan
financing to dealers of the Company's motorcycles.
(n) "General Intangibles" means all general intangibles as that term is
defined in the U.C.C., including, without limitation, all books, correspondence,
credit files, records and other documents, computer programs, computer tapes and
cards and other paper and documents in the
2
possession or control of the Company or in the possession or control of any
affiliate or computer service bureau, and all contract rights, claims, chooses
in action, judgments, patents, patent applications, trademarks, license
agreements, royalty payments, copyrights, service names, service marks, logos,
goodwill and deposit accounts.
(o) "Instruments" means all instruments as that term is defined in the
U.C.C.
(p) "Inventory" means any inventory as that term is defined in the U.C.C.
and shall include tangible personal property held for sale or lease or to be
furnished under contracts of service, tangible personal property which the
Company has so leased or furnished, and raw materials, work in process and
materials used, produced or consumed in the Company's business, and shall
include tangible personal property returned to the Company by a purchaser or
lessor thereof following the sale or lease thereof by the Company. All
equipment, accessories and parts related to, attached to or added to items of
Inventory or used in connection therewith and all accessions thereto shall be
deemed to be part of the Inventory.
(q) "Loan" or "Loans" means an advance or advances of funds made by the
Lender from time to time to or for the benefit of the Company as set forth in
this Agreement.
(r) "Maturity Date" means June 30, 1999, or such later date to which the
Lender may in its sole discretion extend the final date for payment of the
Company's Obligations to the Lender.
(s) "Note" means that certain 10% Secured Promissory Note of even date
herewith made by the Company payable to the Lender in the maximum principal
amount of $750,000 to evidence the Loans, and any renewal, replacement or
substitute note made with respect thereto.
(t) "Obligations" means all existing and future liabilities and
obligations of the Company to the Lender, whether absolute or contingent of any
nature whatsoever, now existing or hereafter incurred arising out of or provided
for in this Agreement or the Note and all obligations of the Company to the
Lender created or referred to in the Purchase Agreement.
(u) "Offering" means the proposed public offering by the Company of
1,600,000 shares of its common stock (excluding the underwriter's over-allotment
option) and the proposed public offering by certain selling shareholders of
928,000 shares of common stock.
(v) "Permitted Liens" means all liens and security interests against the
Collateral of record on the date of this Agreement.
(w) "Proceeds" means whatever is received when Collateral is sold,
exchanged, collected or otherwise disposed of.
(x) "Purchase Agreement" means the Purchase Agreement of even date herewith
made by and between the Company and the Lender regarding the Lender's purchase
of common stock in the Company.
3
(y) "Purchase Order" means an unconditional valid and binding written
purchase order for one or more motorcycles submitted to the Company by a dealer,
substantially in the form attached hereto as Exhibit "B" (or another form
reasonably acceptable to the Lender), which purchase order either (i) is
approved by a Floor Plan Lender for funding under the Company's dealer financing
program or (ii) is supported by a deposit for at least one-third of the purchase
price of the motorcycle(s) ordered.
(z) "Termination Date" means June 30, 1999 or the termination of the
Commitment pursuant to Section 8(b) hereof, whichever is earlier.
(aa) "Weekly Report" means a report prepared for the Lender by the Company
and certified by its chief operating officer for each week during the term of
this Agreement, showing the actual operating results achieved by the Company for
each line item in the Cash Flow Projections, compared to the amounts projected
for each such line item.
2. LINE OF CREDIT AND LOANS. The Lender agrees, on the terms and subject to
the conditions of this Agreement, to establish a revolving line of credit for
the Company and to advance Loans to the Company until the Termination Date at
the rate of up to $10,000 per motorcycle ordered under Purchase Orders submitted
by the Company and approved by the Lender in its reasonable discretion.
(a) Purchase Orders. Purchase Orders shall be submitted to the Lender once
each week together with the Weekly Report by the Company described hereinbelow.
Each submission of a Purchase Order by the Company to the Lender shall
constitute a representation by the Company that (i) the copy of the Purchase
Order delivered to the Lender is true, correct and complete, (ii) the Purchase
Order represents a valid and binding order from a dealer for the immediate
delivery of the number of motorcycles identified therein, (iii) the Purchase
Order is in full force and effect and has not been modified, amended, rescinded
or revoked, (iv) the dealer named in the Purchase Order is obligated to pay for
the motorcycle(s) identified therein, and (v) either the Purchase Order has been
approved for floor plan financing by a Floor Plan Lender, or the Company has
received a deposit for one-third of the purchase price and has deposited the
same in the Anchor Account. In addition, the Company may submit to the Lender
for funding a Purchase Order for a cash sale of a motorcycle to a dealer that is
neither covered by a Floor Plan Lender nor by a deposit, provided that (A) the
dealer is obligated under a written dealer agreement to pay the initial
one-third deposit when the Company commences assembly of the motorcycle, (B)
the dealer's credit is acceptable to the Lender, and (C) the Lender shall not be
required to advance Loan funds for more than one such motorcycle without a
deposit at any one time. To the extent that the dealer's purchase price for any
such motorcycle covered by a Purchase Order is less than $17,588, the Lender may
reduce the $10,000 Loan amount for that motorcycle proportionately. The Lender
shall not be required to approve any Purchase Order from a dealer that has
refused to accept delivery from the Company under any previous Purchase Order or
(if the Purchase Order is to be covered by floor plan financing) that is in
default under the floor plan financing provided by a Floor Plan Lender. If any
Purchase Order against which
4
the Lender has advanced Loans is thereafter canceled by the respective dealer,
then the amount of subsequent Loans otherwise available to the Company shall be
reduced by $10,000.
(b) Weekly Limits. Regardless of the number of motorcycles covered by
approved Purchase Orders submitted to the Lender from time to time, the Lender
shall not be required to advance Loans in excess of the following weekly limits
with respect to the maximum principal balance outstanding from time to time and
the maximum cumulative amount of Loans advanced during the term of this
Agreement:
Maximum Maximum
Week Beginning Outstanding Balance Cumulative Loans
-------------- ------------------- ----------------
March 29, 1999 $250,000 $ 250,000
April 5, 1999 $250,000 $ 250,000
April 12, 1999 $250,000 $ 250,000
April 19, 1999 $250,000 $ 250,000
April 26, 1999 $250,000 $ 250,000
May 3, 1999 $400,000 $ 350,000
May 10, 1999 $400,000 $ 450,000
May 17, 1999 $400,000 $ 550,000
May 24, 1999 $400,000 $ 650,000
May 31, 1999 $750,000 $ 830,000
June 7, 1999 $750,000 $1,010,000
June 14, 1999 $750,000 $1,190,000
June 21, 1999 $750,000 $1,400,000
June 28, 1999 $750,000 $1,400,000
Maturity Date $ 0 N/A
Within such limits, the Company may borrow, repay, and reborrow Loans at any
time or from time to time from the date hereof to and including the Termination
Date. To the extent the aggregate principal amount outstanding hereunder may,
from time to time, exceed the foregoing maximum outstanding amount, such excess
shall not constitute or be deemed a waiver or increase of the amount of the
Commitment and shall, at the option of the Lender, be payable on demand and
shall bear interest at the Default Rate specified herein.
(c) Performance Requirements. The Lender has agreed to advance Loans to the
Company in substantial reliance on the Company's Cash Flow Projections
attached to this Agreement as Exhibit "A". At the beginning of each week during
the term of this Agreement, the Company shall deliver to the Lender a Weekly
Report showing the actual operating results achieved by the Company for the
immediately preceding week in comparison to the amount projected for each line
item in the Cash Flow Projections. Each Weekly Report shall include copies of
all relevant Purchase Orders, Floor Plan Lender approvals, parts orders, sales
invoices, shipping papers, and other back-up documentation as the Lender may
request to substantiate the results shown in the Weekly Report. If in any week
during the term of this Agreement the Company fails to achieve the projected
amount of Cumulative Sales or Cumulative Cash Collected as shown in the Cash
Flow Projections, then in the following week: (i) the Lender shall
5
not be required to advance any Loan funds if the amount achieved for the line
item for Cumulative Sales or Cumulative Cash Collected is less than eighty
percent (80%) of the amount projected in the Cash Flow Projections for that line
item; and (ii) if the lowest percentage of achievement for the line item for
Cumulative Sales or Cumulative Cash Collected is between eighty percent (80%)
and one hundred percent (100%) of the amount so projected, then the Loan
otherwise available for that following week shall be reduced to the percentage
actually achieved for the lowest such line item. Amounts achieved in excess of
100% of the projected amount for Cumulative Sales or Cumulative Cash Collected
shall not operate to increase the Loan that the Lender would otherwise be
required to fund in the following week.
(d) Collateral Base Limitations. Commencing with the Weekly Report for the
week of April 19, 1999 and continuing with each Weekly Report thereafter, the
aggregate principal amount of all Loans then outstanding must not exceed the
Collateral Base in order to require the Lender to fund the full amount of the
Loan otherwise available under this Agreement for the following week. To the
extent that the outstanding Loan amount exceeds the Collateral Base in any such
Weekly Report, then Loan to be funded by the Lender in the following week shall
be reduced by the amount of such excess.
3. MANNER OF BORROWING AND PAYMENT. Each Loan shall be disbursed by the
Lender directly to vendors or suppliers of the Company to pay for the purchase
of parts Inventory from such vendors or suppliers in accordance with the
instructions of the Company contained in a Loan request delivered to the Lender.
No Loan funds shall be disbursed directly to the Company unless the Lender
determines to do so in its sole and absolute discretion, in which event the
funds so disbursed shall be used only for the purpose(s) approved by the Lender
in each instance.
(a) Loan Requests. Loans shall be disbursed by the Lender once each week
during the term of this Agreement. Three (3) business days prior to the date on
which the Company desires Lender to disburse Loan funds to the respective
vendors or suppliers, the Company shall deliver to the Lender a completed Loan
request substantially in the form attached hereto as Exhibit "C", together with
an original or copy of the Company's purchase orders to such vendors or
suppliers for the parts Inventory being purchased with the requested Loan. With
respect to any portions of the weekly Loan that are to be disbursed by checks
drawn on the Anchor Account, the Company shall prepare for the Lender's
signature and include with the Loan request all necessary checks payable to the
vendors or suppliers. If any portion of the weekly Loan is to be disbursed by a
wire transfer or cashier's check or certified check, then all instructions for
such other methods of payment shall be included in the Loan request. Lender
shall not be responsible for any errors, mistakes, omissions or inaccuracies in
any such Loan request, parts order, check or payment instructions prepared by
the Company, and the Company shall be solely responsible for the accuracy and
completeness of the same and shall indemnify and hold the Lender harmless from
and against any losses, liabilities, damages, claims, costs or expenses
(including reasonable attorneys fees) incurred by any person as a result of any
such errors, mistakes, omissions or inaccuracies. Subject to the satisfaction of
the respective conditions to each such Loan set forth in Section 4, the Lender
shall disburse the weekly Loan in accordance with the Company's instructions
included in the Loan Request within three (3) business days after the Lender's
receipt
6
of the completed Loan request. If the Lender determines that the Loan request is
incomplete or inaccurate or ambiguous in any respect, the Lender shall promptly
contact the Company for further instructions and shall be relieved of any
obligation to fund the requested Loan until receipt of such further instructions
resolving the incompleteness, inaccuracy or ambiguity.
(b) Disbursement Fees and Expenses. The Company shall pay the Lender a $400
disbursement fee for handling and disbursing each weekly Loan request submitted
by the Company (regardless of how many separate vendor payments are required),
and the Company shall reimburse the Lender for all out-of-pocket costs incurred
by the Lender in connection with any such Loan disbursement, including without
limitation any wire transfer charges, certified check fees, postage and express
delivery charges, or other expenses incurred by the Lender in order to disburse
the Loan in the manner requested by the Company. Such disbursement fees and
costs may at the Lendees option be charged against funds of the Company in the
Anchor Account.
(c) Deposits in Anchor Account. The Company shall establish a restricted
deposit account in the name of the Company at a depositary institution approved
by the Lender, to be known as the "Anchor Account," which shall be assigned to
the Lender and for which the Lender alone shall have the authority to withdraw
funds. If the Anchor Account is established as an interest-bearing account, then
all interest earned on the funds deposited therein from time to time shall be
reported as interest earned by the Company, and the Company shall be responsible
for providing the depositary institution with its federal employer
identification number and any other information or documents necessary to earn
interest on the deposited funds. The Company shall instruct all dealers
submitting Purchase Orders against which Lender advances Loans to remit directly
to the Anchor Account all payments (including any deposits) for motorcycles
covered by such Purchase Order, and the Company shall instruct the respective
Floor Plan Lender financing any such dealer's Purchase Order (if applicable) to
remit payment for the motorcycles by wire transfer of federal funds directly to
the Anchor Account. If any such payments are nevertheless received by the
Company, the Company shall hold the same in trust for the Lender and shall
deposit such payments in the Anchor Account, in the same form received and
together with any necessary endorsements, on the same business day on which such
payments are received by the Company.
(d) Disbursements from Anchor Account. All disbursements of Loans shall be
made from the Anchor Account, whether by checks drawn directly on the Anchor
Account and signed by the Lender, or by other payment methods specified by the
Company in the respective Loan request and funded from monies drawn by the
Lender from the Anchor Account. The Company shall have no authority to withdraw
or disburse funds from the Anchor Account without the signature of the Lender.
All Loans shall be funded first from the monies then on deposit in the Anchor
Account, and to the extent that the collected balance in the Anchor Account is
insufficient to cover any Loan that the Lender is otherwise required to advance
under this Agreement, then the Lender shall credit or deposit sufficient monies
to the Anchor Account to fund the Loan completely. All monies in the Anchor
Account from time to time shall be applied as follows: (i) first, to reimburse
the Lender for any costs or expenses incurred by the Lender that the Company is
required to pay under this Agreement; (ii) next, to pay the Lender's
disbursement
7
fees for handling and disbursing the Loan request; (iii) next, to pay any unpaid
interest accrued on the Loans that is then due and payable; (iv) next, to pay
down the outstanding principal balance of the Loans; and (v) last, provided the
principal balance of the Loans is then zero and no Event of Default then exists,
the balance (if any) in the Anchor Account shall be remitted to the Company
weekly for its use in its business.
(e) Responsibility by the Lender. The Company acknowledges that the Lender
(unlike the Company) is not engaged in the business of manufacturing or
assembling motorcycles or in ordering parts therefor from the Company's vendors
and suppliers, that the Lender will be acting completely in reliance upon the
Company's preparation of checks or parts orders and the Company's instructions
to the Lender included in the Loan requests, and that the Lender does not have
any responsibility whatsoever to determine the accuracy or completeness of any
such matters submitted by the Company to the Lender. The Company agrees that the
Lender shall not be responsible or liable to the Company or to any third party
for, and the Company shall indemnify and hold the Lender harmless against, any
losses, liabilities, damages, claims, costs or expenses, including reasonable
attorney's fees, arising from the Lender's actions or omissions in connection
with this Agreement, except to the extent that a court of competent jurisdiction
holds that the Lender acted fraudulently or with willful misconduct.
(f) Security Interest. As collateral security for the Obligations, the
Company hereby grants the Lender a lien upon and a security interest in the
Anchor Account and all funds held therein from time to time. If requested by the
Lender, the Company shall execute a blocked account agreement, a lockbox
agreement, an account assignment agreement and/or such other documentation as
the Lender may require to evidence and perfect its lien, security interest and
control over the Anchor Account. During the existence of any Event of Default,
the Lender may at its option apply any funds in the Anchor Account in payment
of the Obligations of the Company, and even if the Obligations are then zero the
Lender may refuse to release funds held in the Anchor Account until either the
Event of Default is cured or the Lender's Commitment to advance Loan funds is
released.
(g) Repayment of Principal. Unless repayment is sooner required because of
an Event of Default hereunder, the Company shall repay to the Lender the
aggregate unpaid principal amount of all Loans outstanding on the Maturity Date.
The Loans may be prepaid at any time without premium or penalty.
(h) Interest. The Company agrees (i) to pay interest on the outstanding
principal balance of Loans hereunder at the rate of TEN PERCENT (10%) per annum;
and (ii) to pay interest on any amount of principal which is not paid when due
(whether at stated maturity, by acceleration or otherwise), on demand, at a rate
equal to EIGHTEEN PERCENT (18%) per annum (the "Default Rate"), provided that in
no event shall the rate of interest on Loans hereunder be in excess of the rate
authorized by applicable law. Interest on the Loans accruing during each month
shall be paid by debit to the Anchor Account, and the Lender will furnish the
Company advices setting forth the amount of interest accrued and debited for
each month in which there is an outstanding principal balance of Loans
hereunder. Interest shall be computed on a 360-day year basis. Whenever any
payment to be made hereunder shall be stated to be due
8
on a Saturday, Sunday, or a public holiday under the laws of the State of
Maryland, such payment may be made on the next succeeding business day, and such
extension of time shall in such case be included in computing interest and
premiums (if any) in connection with such payment.
(i) Commercial Transaction. The Company represents and warrants to the
Lender that the Loans to be advanced under this Agreement shall be used by the
Company for the commercial purposes described in this Agreement, and that
because of the commercial nature of the transaction evidenced hereby this
Agreement the Purchase Agreement, the Note and the Loans advanced hereunder are
exempt from any usury law of the State of Maryland or any other Maryland law
imposing a maximum amount of interest that may be charged by the Lender for
extending credit to the Company. Notwithstanding any contrary provision of this
Agreement, the Purchase Agreement, the Note or any other document, in no event
shall any agreed to or actual exaction charged, reserved or taken as an advance
or forbearance by the Lender as consideration for the Obligations exceed the
limits (if any) imposed or provided by the law applicable from time to time to
the Obligations for the use or detention of money or for forbearance in seeking
its collection; the Lender hereby waives any right to demand such excess. In the
event that any provisions of the Note, this Agreement, the Purchase Agreement or
any other document, or any exactions required thereunder, shall result at any
time or for any reason in an effective rate of interest that transcends the
maximum interest rate permitted by applicable law (if any), then without
further agreement or notice the obligation to be fulfilled shall be
automatically reduced to such limit and all sums received by the Lender in
excess of those lawfully collectible as interest shall be applied against the
principal of the Obligations immediately upon the Lender's receipt thereof, with
the same force and effect as though the payor had specifically designated such
extra sums to be so applied to principal and the Lender had agreed to accept
such extra payment(s) as a premium-free prepayment or prepayments. During any
time that any of the Obligations bear interest at the maximum lawful rate
(whether by application of this paragraph or otherwise), interest shall be
computed on the basis of the actual number of days elapsed and the actual number
of days in the respective calendar year.
4. CONDITIONS OF LENDING.
(a) Initial Loan. The obligation of the Lender to make the initial Loan
to be made by it hereunder is subject to the following conditions precedent:
(i) The Lender shall have received a certified copy of all corporate
actions taken by the Company to authorize the execution, delivery and
performance of this Agreement and the borrowing by the Company hereunder;
(ii) The Company shall have executed and delivered to the Lender the
Note, the Purchase Agreement, the common stock sold to the Lender pursuant to
the Purchase Agreement, and a U.C.C. financing statement describing the
Collateral for filing with the Florida Secretary of State;
9
(iii) The Lender shall have received a satisfactory subordination and
intercreditor agreement executed by Skippack Capital Corp. subordinating its
security interest in those portions of the Collateral pertaining to Purchase
Orders against which the Lender advances Loans;
(iv) The Lender shall have received a satisfactory landlord's waiver or
subordination agreement from the landlord(s) of the premises where the
Inventory of the Company will be kept, agreeing to waive or subordinate any
statutory or contractual landlord's lien against such Inventory; and
(v) The Lender shall have received and approved a copy of all documents
filed with the Securities and Exchange Commission by the Company, including
any such documents pertaining to the Offering.
(b) Each Loan. The obligation of the Lender to make each Loan hereunder
(including the initial Loan) is subject to the following conditions
precedent:
(i) No Event of Default, and no event which with notice or lapse of time
or both would become such an Event of Default, shall have occurred and be
continuing;
(ii) The representations and warranties of the Company hereunder shall
be true on and as of the date of the making of such Loan with the same force
and effect as if made on and as of such date;
(iii) There shall have been no material adverse change to the financial
condition or operations of the Company;
(iv) All Inventory financed with Loans shall have been segregated from
other Inventory on the Company's premises, or otherwise physically identified
as being subject to the Lender's first-priority security interest in a manner
reasonably satisfactory to the Lender;
(v) The Offering shall not have been withdrawn or canceled by the
Company, and there shall have been no material change in the terms,
feasibility or timing of the Offering adverse to the interests of Lender as a
purchaser of the common stock of the Company under the Purchase Agreement;
and
(vi) The Company shall have delivered to the Lender not less than three
(3) business days prior to the date of disbursement a Loan request in the
form attached hereto as Exhibit "C" setting forth the amount of such Loan
and containing a certification by a senior officer of the Company, in form
and substance satisfactory to the Lender, as to the matters specified in the
preceding clauses (i), (ii), (iii), (iv) and (v).
5. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Lender as follows:
10
(a) Existence, Authority, Non-Contravention. The Company is a corporation
duly authorized, validly existing, and in good standing under the laws
of the State of Florida, and has all requisite power and authority to own,
lease and operate its properties, to carry on its business as it is now being
conducted, to enter into this Agreement, to issue the Note and to consummate
the transactions contemplated hereby. All actions of the Company necessary to
authorize it to execute, deliver and consummate this Agreement, and to
perform its obligations hereunder and under the Note have been duly and
validly taken and no other further actions or authorizations are required.
This Agreement and the Note constitute the valid, legally binding obligations
of the Company and are enforceable in accordance with their respective terms.
The execution and delivery of this Agreement and the Note and the
consummation of the transactions contemplated herein and therein will not (i)
result in any breach of, or constitute a default under the Articles of
Incorporation or By-Laws of the Company, or any instrument or obligation to
which the Company is a party or by which it is bound; or (ii) violate any
existing statute, order, writ, injunction or decree of any court,
administrative agency or governmental body.
(b) SEC Matters. The Company has filed all reports and statements
required to be filed by the Company with the Securities and Exchange
Commission and no such report or statement contains a misstatement of a
material fact or omits to state a material fact necessary to make the
statements made therein not misleading. The Offering complies and will comply
with all applicable securities laws, and to the best of the Company's
knowledge the Securities and Exchange Commission staff has required no
changes or corrections in the prospectus or other materials for the Offering
that cannot be accomplished by the Company at a reasonable cost.
(c) Financial Statements. The balance sheets and statements of income
and retained earnings of the Company, and all other documents and information
furnished to the Lender, are complete and correct and fairly represent the
financial condition of the Company as of the dates of said financial
statements and results of operations for the periods ending on said dates.
The Company has no contingent obligations, liabilities for taxes, long-term
leases, or unusual forward or long-term commitments not disclosed by, or
reserved against in, said balance sheets or the notes thereto, and at the
present time there are no material unrealized or anticipated losses from any
unfavorable commitments of the Company. Said financial statements were
prepared in accordance with generally accepted accounting principles and
practices of accounting and consistently maintained throughout the periods.
Since the date of the latest of such statements there have been no material
adverse changes in the financial condition of the Company other than as
disclosed in writing to the Lender.
(d) Litigation. There are no suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company which,
if adversely determined, would have a material adverse effect on the
financial condition or business of the Company, and there are no proceedings
pending or to the knowledge of the Company threatened before any governmental
commission, board, bureau or agency against the Company.
(e) Ownership of Properties. With the exception of any security
interest granted to the Lender, and other than as disclosed and described in
writing to the Lender, the Company owns its respective properties free and
clear of all liens, mortgages, pledges, assignments,
11
security interests or other encumbrances with the exception of liens for taxes
not yet due or being contested in good faith by the Company by appropriate
proceedings.
(f) Fictitious Names, Etc. Except as disclosed to the Lender in writing,
the Company does not now use and has not used in the past any trade or
fictitious name in the conduct of its business, has not changed its name, and
has not been the surviving entity in a merger or consolidation or acquired
any business.
6. COVENANTS. The Company covenants and agrees with the Lender that, so
long as the Commitment and the Lender's obligations thereunder shall remain
outstanding, or there shall be any principal balance of Loans outstanding
hereunder, or any interest accrued or other amounts due or to become due
hereunder remain unpaid, the Company will:
(a) Financial Statements. Deliver to the Lender a satisfactory annual
financial statement and supporting documentation for the Company, prepared by
an independent certified public accountant acceptable to the Lender, within
sixty (60) days after the end of the Company's fiscal year. The Company shall
also promptly deliver any other information requested by the Lender from time
to time regarding the respective financial conditions or business operations
of the Company. All financial statements of the Company previously delivered
to the Lender have been prepared in accordance with generally accepted
accounting principles consistently applied and fairly present the correct
respective financial conditions of the Company as of their respective dates,
and the foregoing shall be true with respect to all financial statements of
the Company delivered to the Lender hereafter.
(b) Books and Records. Keep proper books of record and account.
(c) Indebtedness and Liens. Not incur any indebtedness for borrowed
money, except for such indebtedness as is outstanding on the date of this
Agreement and indebtedness incurred by the Company after the date hereof in
connection with the financing of inventory other than inventory financed by
the Lender, or permit any lien, security interest or encumbrance to be
created in or with respect to any asset of the Company, whenever acquired,
except for any such as are in effect on the date of this Agreement and except
for purchase money security interests in assets acquired by the Company after
the date of this Agreement.
(d) Payments. Promptly pay and discharge all amounts as and when due and
to become due on all indebtedness of the Company and all taxes, assessments
and governmental charges or levies imposed upon the Company or upon its
income and profits, or upon any of its property, before the same shall become
a lien upon the Company's assets or property, as well as all lawful claims
for labor, materials and supplies which, if unpaid, would become a lien or
charge upon such properties or any part thereof, provided, however, that the
Company shall not be required to pay and discharge any such tax, assessment,
charge, levy or claim so long as the validity thereof shall be contested in
good faith by appropriate proceedings and the Company shall have set aside on
its books adequate reserves with respect to any such tax, assessment, charge,
levy or claim so contested.
12
(e) Common Stock. Not issue any shares of its Common Stock, or any
securities convertible into or exercisable with respect to its Common Stock,
except to the Lender and except for securities sold in an underwritten public
offering or securities issued to the underwriter with respect to any such
offering.
(f) Existence: Mergers; Dispositions. Preserve and maintain its
corporate existence and its rights, privileges and franchises, and not merge
with or into any other corporation or dispose of its assets other than in the
ordinary course of business. Without first notifying the Lender in writing,
the Company shall not change the Company's chief place of business or the
office(s) where the Company's books, papers and records concerning the
Collateral are kept, nor change the Company's name, identity or corporate
structure, nor do business, under any fictitious or assumed name.
(g) Cash Flow Projections. Use its best efforts to conform to the
Company's Cash Flow Projections.
(h) Purchase Agreement. Comply fully with its obligations under the
Purchase Agreement.
7. SECURITY INTEREST. (a) As collateral security for the payment of the
Obligations, the Company hereby grants to the Lender a lien upon and security
interest in all of the "Collateral" as defined in this Agreement, and the
Company warrants and agrees that said security interest shall be a
first-priority security interest with respect to: (i) all Inventory purchased
by the Company with Loan funds, (ii) all Purchase Orders against which the
Lender advances any Loans, (iii) all Accounts, Chattel Paper, Instruments or
General Intangibles arising from or pertaining to any motorcycles sold by the
Company pursuant to any such Purchase Orders; (iv) the Anchor Account; and
(v) all Proceeds, Products and Accessions pertaining to the foregoing.
(b) The Company warrants that it has and at all times will have good
title to the Collateral free of any prior lien (except for Permitted Liens)
and that all Accounts included in the Collateral are bona fide existing
obligations created by the sale and delivery of merchandise or the rendering
of services to customers and arose in the ordinary course of business; and
that such Accounts are not subject to defense, set-off or counterclaim which
in the aggregate would materially impair the value of such Accounts as
collateral for the Obligations.
(c) The Company will promptly notify the Lender if there is any adverse
change in the status of the Collateral that materially impairs its value or
collectibility, or if any defenses, set-offs or counterclaims are asserted by
Account Debtors which in the aggregate materially impair the value or
collectibility of the Accounts.
(d) The Company will preserve the Collateral and its rights against
Account Debtors free and clear of any liens or encumbrances (except for
Permitted Liens) and will keep the Inventory in good condition, insured by
insurers authorized to do business in the jurisdictions where such Collateral
is located from time to time against fire or other casualty loss (with
13
extended coverage in the broadest form), liability and such other hazards as are
customary with companies in the same or similar business and in the same area,
and will cause the Lender's security interest to be endorsed on all policies of
insurance thereon in such manner that all payments for losses will be paid to
the Lender as its interest may appear and will furnish the Lender upon request
with evidence of such insurance.
(e) The Company will segregate all Inventory financed with Loans and
keep the same separate from other Inventory on the Company's premises, or the
Company will otherwise physically identify such Inventory financed with Loans
as being subject to the Lender's first-priority security interest in a manner
reasonably satisfactory to the Lender.
(f) The Lender shall have the right (but not the obligation) at its
option to discharge or pay any taxes, assessments, liens, security interests
or other encumbrances at any time levied or placed on or against the
Collateral or the Company, to pay for the preservation or protection of the
Collateral, to perform any obligations of the Company or cure any default by
the Company under this Agreement, and/or to advance monies for any other
reason or purpose permitted under this Agreement. Any amount so paid or
advanced by the Lender shall be included in the Obligations, shall be secured
by the Collateral and shall be repayable by the Company on demand.
(g) The Lender may sign and file financing statements, security
agreements, recording instruments or other documents or amendments thereto
with respect to the Collateral or any portion thereof without the signature
of the Company, all at the Company's sole expense, and the Company shall
reimburse the Lender on demand for any costs advanced or incurred by the
Lender in connection therewith. At the Lender's option, a carbon,
photographic or other reproduction of this Agreement (or of any financing
statement executed by the Company) shall be sufficient as a financing
statement. At the Lender's request, the Company shall promptly correct patent
errors or omissions in this Agreement, the Note, any financing statement or
any document pertaining to the Loans and shall promptly execute and deliver
such further instruments or documents as may be required to carry out the
intent and purposes of this Agreement.
(h) The Lender is hereby irrevocably appointed the attorney-in-fact of
the Company, which appointment is coupled with an interest, with full power
of substitution, on behalf of the Company to perforn all acts, and to
execute and deliver all endorsements, notices, instruments of assignment and
transfer, deeds, releases, bills of sale or other writings whatsoever, but
only to the extent that Lender determines that such actions or documents are
appropriate to protect and preserve the Collateral and to perfect and
maintain and realize upon the Lender's security interest and rights in the
Collateral. If so requested by the Lender or by any other person, the Company
shall ratify and confirm the acts of the Lender (and/or any substitute) as
the Company's attorney-in-fact.
(i) The Lender shall have the right (but not the obligation) at any time
to take any action the Lender deems appropriate in its sole discretion for
the protection or preservation of any Collateral in its possession or
control. The Lender shall exercise reasonable care with
14
respect to Collateral in its custody only to the extent required by applicable
law. The Lender shall be deemed to have used reasonable care if such Collateral
is accorded treatment substantially equal to that which the Lender accords its
own property, or if the Lender takes such action for that purpose as the Company
may reasonably request in writing. No omission to do any act not requested by
the Company shall be deemed a failure to exercise reasonable care, and no
omission to comply with any request of the Company shall of itself be deemed a
failure to exercise reasonable care. The Lender is not responsible for any
injury or loss to the Collateral or any part thereof arising from Act of God,
robbery, fire, flood, fraud or any other cause whatsoever beyond the control of
the Lender, and the Lender shall not be liable for any negligent act or default
of any of its collecting agents or correspondents. The Lender shall not be
required to examine or inquire into the validity of any Collateral subject to
this Agreement, or to exchange or collect on any such Collateral, or to take any
action necessary to hold any Account Debtor or other person liable on the
Collateral; the Company hereby waives any obligation of diligence on the part of
the Lender in looking after, preserving or acting with respect to the Collateral
or collecting any sums payable with respect to the Collateral.
8. DEFAULT AND REMEDIES.
(a) Events of Default. The occurrence of any one or more of the following
events, regardless of the cause thereof and whether within or beyond the
control of the Company, shall constitute an "Event of Default" under this
Agreement:
(i) The Company shall fail to make any payment of principal or interest
due under this Agreement or the Note, or fail to pay any fee, charge or other
amount owing to the Lender hereunder when due; or
(ii) The Company shall otherwise default in the performance of any
term, covenant or condition contained herein and such default shall continue
unremedied for a period of five (5) days after written notice thereof has
been given to the Company by the Lender; or
(iii) The occurrence of an Event of Default by the Company under the
Purchase Agreement, or the withdrawal, termination or cancellation of the
Offering, or any material change in the terms, feasibility or timing of the
Offering that is adverse to Lender in its capacity as a purchaser of the
Company's common stock under the Purchase Agreement; or
(iv) The Company shall otherwise default in the performance of any term,
covenant or condition of any other obligations to the Lender secured hereby
and such default shall continue for more than the period of grace, if any,
provided therefor; or
(v) Any representation or warranty made by the Company (or any of its
officers) in connection with the making of any Loan shall at any time prove
to have been incorrect when made in any material respect; or
(vi) Any obligation of the Company for the payment of borrowed money or
for the deferred purchase price of property is not paid when due, whether at
stated maturity, by
15
acceleration or otherwise, or is declared to be due and payable prior to the
stated maturity thereof, or
(vii) The entry of a final judgment, arbitration award or order not
subject to further appeal against the Company in an amount exceeding $100,000
which shall remain unsatisfied for thirty (30) days after the date of such
entry; or
(viii) The destruction, seizure, confiscation, theft, sale (except in
the ordinary course of business) or further voluntary or involuntary
encumbering of any of the Collateral, or any substantial loss to or decline
in market value of any of the Collateral; or
(ix) If any levy, attachment, execution, charging order, garnishment or
other process shall be issued, or any involuntary lien or encumbrance shall
be filed, against any material portion of the Collateral; or
(x) The Company's admission in writing of its inability to pay its debts
as they mature, or the Company's making a general assignment for the benefit
of creditors, or the filing by or against the Company of a petition seeking
relief under the Bankruptcy Code or a petition or an answer seeking
reorganization, or an arrangement with creditors; or
(xi) If any event shall occur which, in the exclusive judgment of the
Lender, represents or constitutes a material adverse change in the business
or financial condition of the Company; or if at any time the Lender deems
itself insecure for any reason whatsoever (notwithstanding any grace period
in this Agreement or the Note); or if any change or event shall occur which
in the Lender's exclusive judgment impairs any security for the Obligations,
increases the Lender's risk in connection with the Obligations or indicates
that the Company may be unable to perform its obligations under this
Agreement, the Note or the Purchase Agreement.
(b) Rights and Remedies on Default. If any of the foregoing Events of
Default shall occur, then the Lender, in its sole discretion and without
prior notice to the Company, may at any time and from time to time during the
continuation thereof take any or all of the following actions:
(i) declare any or all of the Obligations immediately due and payable;
and/or
(ii) declare any or all other liabilities of the Company to the Lender
immediately due and payable (notwithstanding any contrary provisions thereof)
without demand or notice of any kind; and/or
(iii) require the Company to issue and sell additional common stock to
the Lender as set forth in the Purchase Agreement; and/or
(iv) terminate any obligation which the Lender may have at that time to
make further Loans or extensions of credit or other financial accommodations
to the Company; and/or
16
(v) set off any and all sums owed to the Company by the Lender in any
capacity (whether or not then due), against the Obligations and/or against
any other liabilities of the Company to the Lender; and/or
(vi) foreclose the Lender's security interest(s) in any or all of the
Collateral as provided by law; and/or
(vii) sell, re-sell, discount or dispose of all or any portion of the
Collateral, or endorse, assign and transfer the same to any third party;
and/or
(viii) require the Company to assemble the Company's books, records,
files, papers, credit information and other data pertaining to the Collateral
and deliver them to the Lender at the Company's expense to a place designated by
the Lender; and/or
(ix) enter the premises of the Company with or without legal process and
take possession of any or all of the Collateral not then in the Lender's
possession and any books, records, files, papers, credit information and
other data pertaining to the Collateral (the Company hereby waiving and
releasing the Lender from, to the fullest extent permitted by law, any and
all claims which the Company might otherwise have against the Lender in
connection therewith or arising therefrom); and/or
(x) accept any or all of the Collateral in discharge of any or all of
the Obligations; and/or
(xi) exercise any and all other rights and remedies with respect to the
Collateral which the Lender may enjoy as a secured party under this
Agreement, the Purchase Agreement, the U.C.C. or any other applicable law.
All rights, remedies and powers granted to the Lender in this Agreement or in
any other agreement or by applicable law shall be cumulative and may be
exercised singly or concurrently on one or more occasions. No delay in
exercising or failure to exercise any of the Lender's rights or remedies shall
constitute a waiver thereof, nor shall any single or partial exercise of any
right or remedy by the Lender preclude any other or further exercise of that or
any other right or remedy. No waiver of any right or remedy by the Lender shall
be effective unless made in writing and signed by the Lender, nor shall any
waiver on one occasion apply to any future occasion, but shall be effective
only with respect to the specific occasion addressed in that signed writing. The
Company shall not be subrogated to any rights of the Lender against any other
party or any Collateral until all sums due to the Lender under the Obligations
shall have been paid in full, and if any of the Obligations shall remain unpaid
after the exercise of any or all of the Lender's rights and remedies, then the
Company shall remain liable for such deficiency.
(c) Upon occurrence of an Event of Default, the Lender shall have the
right at any time, acting if it so chooses in the Company's name, to collect
the Company's Accounts itself, to sell, assign, compromise, discharge or
extend the time for payment of any Account, to institute legal action for the
collection of any Account, and to do all acts and things necessary or
17
incidental thereto and the Company hereby ratifies all such acts. The Lender
may at any time after the occurrence of such Event of Default and without notice
to the Company, notify any Account Debtor or guarantor thereof that the Account
payable by such Account Debtor has been assigned to the Lender and is to be paid
directly to the Lender. At the Lender's request the Company will so notify
Account Debtors and shall indicate on all xxxxxxxx to Account Debtors that
payments thereon are to be made to the Lender. In the event Account Debtors are
so notified, the Company shall not compromise, discharge, extend the time for
payment or otherwise grant any indulgence or allowance with respect to any
Account without the prior written consent of the Lender.
9. Sale of the Collateral. With respect to any sale or disposition of
any of the Collateral, whether made under the power of sale in this
Agreement, under any applicable provisions of the U.C.C. or other applicable
law, or under judgment or order or decree in any judicial proceeding for the
foreclosure of the Lender's security interest or involving the enforcement of
this Agreement:
(a) The Collateral may be sold, resold, assigned or delivered in one or
more parcels, at the same or at different times, at public or private sale or
at any broker's board or on any securities exchange, for cash or on credit or
for other property, for immediate or future delivery, and at such price(s)
and on such terms as the Lender may determine in its sole discretion, so long
as such disposition is commercially reasonable. Without precluding any other
methods of sale, the sale of the Collateral shall be deemed made in a
commercially reasonable manner if conducted in conformity with reasonable
commercial practices of banks or other financial institutions when disposing
of similar property.
(b) To the fullest extent permitted by law, the Company hereby waives
any and all demand, advertisement or notice (except as required by law), and
any notification required by law with respect to the time and place of such
sale or disposition shall be deemed reasonable if given at least five (5)
days before the time thereof, but notice given in any other reasonable manner
shall also be sufficient. In the case of any sale at a broker's board or on a
securities exchange, the notice shall identify the board or exchange at which
such sale is to be made and the day on which the Collateral (or a portion
thereof) will first be offered for sale. Any public sale of any of the
Collateral shall be held at such time or times within ordinary business hours
at such place or places as the Lender may state in the notice or publication
(if any) of such sale.
(c) The Lender shall not be obligated to sell any of the Collateral if
it determines not to do so, notwithstanding that notice of a sale of such
Collateral may have been given. The Lender may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made, without further notice, at the time and
place identified in such announcement. In case of any sale of all or any part
of the Collateral on credit or for future delivery, the Lender may retain the
Collateral sold until the sales price is paid by the purchaser(s) thereof,
but the Lender shall not incur any liability if any such purchaser shall fail
to take up and pay for the Collateral so sold, in which case such Collateral
may again be sold upon like notice.
18
(d) The Lender may, to the fullest extent permitted by applicable law,
bid for and purchase all or any part of the Collateral in a commercially
reasonable manner, and upon compliance with the terms of sale may hold,
retain and possess and dispose of the same in its own absolute right without
further accountability. The Lender may credit all or any part of the
Obligations against the purchase price(s) so bid, and may deliver any notes
or instruments evidencing any of the Obligations in payment of such purchase
price(s); if the amounts then owing under any such notes or instruments
exceed such purchase price(s), then the same shall be returned to the Lender
after due notation of the partial discharge thereof.
(e) Upon consummation of any sale, the Lender shall have the right to
assign, transfer, endorse and deliver to the respective purchaser(s) the
Collateral or portion thereof so sold. The Lender is hereby irrevocably
appointed the Company's true and lawful attomey-in-fact (which appointment is
coupled with an interest) in the Company's name and stead, with power of
substitution, to make all necessary bills of sale, endorsements and
instruments of assignment and transfer of the Collateral thus sold, and for
such other purposes as the Lender may deem necessary or desirable to
effectuate the provisions of this Agreement. If so requested by the Lender or
by any other person, the Company shall ratify and confirm the acts of the
Lender (and/or any substitute) as the Company's attorney-in-fact.
(f) Such sale shall divest all right, title, interest, equity,
redemption, claim and demand whatsoever of the Company in and to the
Collateral sold and shall be a perpetual bar both at law and in equity
against the Company and the Company's successors and assigns, and against any
and all persons claiming or who may claim all or any part of the Collateral
from, through or under any of them.
(g) A receipt given by the Lender (or its designated agent) shall be a
sufficient discharge to the purchaser(s) at such sale for his or their
purchase money, and none of them shall, after such payment and receipt, be
obliged to see to the application of such purchase money or be answerable for
any loss, misapplication or non-application thereof.
(h) To the extent that the Company may lawfully do so, the Company
agrees not at any time nor in any manner to insist upon, plead, claim or take
the benefit or advantage of any appraisement, valuation, stay, extension or
redemption laws, or any law permitting the Company to direct the order in
which all or any part of the Collateral shall be sold, which may delay,
prevent or otherwise affect the performance or enforcement of this Agreement;
to the fullest extent permitted by law, the Company hereby expressly waives
all benefit or advantage of any such laws now or at any time hereafter in
force and hereby covenants not to hinder, delay or impede the execution of
any power granted or delegated to the Lender in this Agreement, but will
suffer and permit the execution of every such power as though no such laws
were in force.
(i) The Lender shall have no obligation whatsoever to resort first to
any other security which the Lender may hold for the Obligations. The Lender
shall not incur any liability to the Company as a result of the sale of any
Collateral at any private sale conducted in a commercially reasonable manner,
or as a result of any failure to sell or offer for sale any Collateral for
any reason whatsoever or to exercise any other right, privilege, option or
power
19
granted to the Lender hereunder. To the fullest extent permitted by law, the
Company hereby waives any claims against the Lender arising with respect to any
decrease in the market value of any Collateral during the period held for sale,
or arising by reason of the possibility that the price at which the Collateral
may have been sold was less than the price that might have been obtained had the
sale been otherwise effected, even if the Lender accepts the first offer
received and/or does not offer the Collateral to more than one offeree and/or
limits those who may bid at any public or private sale as set forth in this
Agreement.
(j) A written agreement to sell any Collateral under the provisions
hereof, which agreement the Lender in good xxxxx xxxxx itself bound to
perform, shall be treated as a sale of such Collateral and the Lender shall
be free to carry out such agreement. If such an agreement is then effective,
the Company shall not be entitled to the return of any Collateral subject
thereto, even if after the date of such agreement all Events of Default shall
have been cured or the Obligations shall have been fully paid and performed.
(k) After deducting all costs and expenses of every kind for taking,
retaking, care, safekeeping, collecting, holding, preparing for sale,
selling, delivering and the like (including legal costs, insurance,
commission for sale, and reasonable attorney's fees) and all other charges
against the Collateral, the Lender shall apply the residue of the proceeds of
any such sale or other disposition against any and all amounts remaining
unpaid under the Obligations, all in such order of priority as the Lender may
determine in its sole discretion. The Company shall remain liable for any
deficiency remaining after such application, and any surplus shall be
returned to the Company.
10. Waiver of Rights. To the fullest extent permitted by law, the
Company hereby waives notice, demand, presentment, protest, notice of
dishonor, suit against or joinder of any other person, and all other
requirements necessary to charge or hold the Company liable with respect to
the Obligations. The Company hereby consents and agrees that, at any time and
from time to time without notice, (i) the Lender and the owner(s) of the
Collateral may agree to release, increase, change, substitute or exchange all
or any part of the Collateral, and (ii) the Lender and any person(s) then
primarily liable for the Obligations may agree to renew, extend or compromise
the Obligations in whole or in part or to modify the terms of the Obligations
in any respect whatsoever; no such release, increase, change, substitution,
exchange, renewal, extension, compromise or modification shall release or
affect in any way the liability of the Company or the Lender's rights against
any remaining Collateral, and the Company hereby waives any and all defenses
and claims whatsoever based thereon. Until the Lender receives all sums due
with respect to the Obligations in immediately available funds, the Company
shall not be released from liability unless the Lender expressly releases the
Company in a writing signed by the Lender, and the Lender's release of any
person liable for the Obligations shall not release any other person liable
therefor.
11. Actions or Proceedings. With respect to any legal action or
proceeding arising under this Agreement, the Note or the Purchase Agreement
or concerning the Obligations and/or the Collateral, the Company, to the
fullest extent permitted by law, does hereby: (a) submit to the jurisdiction
of the state and federal courts in the State of Maryland; (b) agree that the
venue of
20
any such action or proceeding may be laid in Xxxxxxxxxx County, Maryland (in
addition to any county in which any of the Collateral is located) and waive any
claim that the same is an inconvenient forum; (c) stipulate that service of
process in any such action or proceeding shall be properly made if mailed by any
form of registered or certified mail (airmail if international), postage
prepaid, to the address then registered in the Lender's records for the Company,
and that any process so served shall be effective ten days after mailing;
(d) waive any right to immunity from any such action or proceeding and waive any
immunity or exemption of any property, wherever located, from garnishment, levy,
execution, seizure or attachment prior to or in execution of judgment, or sale
under execution or other process for the collection of debts; and (e) waive any
right to interpose any set-off or non-compulsory counterclaim or to plead laches
or any statute of limitations as a defense in any such action or proceeding, and
waive all provisions' and requirements of law for the benefit of the Company now
or hereafter in force. No provision of this Agreement shall limit the Lender's
right to serve legal process in any other manner permitted by law or to bring
any such action or proceeding in any other competent jurisdiction.
12. NOTICES. All communications and notices to any party provided for
hereunder shall be in writing and mailed or delivered to the respective
address of such party specified on the first page of this Agreement, or to
such other address as shall have been designated by such party for the
purpose in a written notice complying with the terms of this Section 12.
13. FEES AND TAXES; INDEMNITY. The Company shall pay on demand all
filing fees and similar charges and all costs incurred by the Lender in
collecting or securing or attempting to collect or secure any Obligations,
including the expenses and reasonable fees of the Lender's legal counsel,
whether or not involving litigation and/or appellate, administrative or
bankruptcy proceedings. The Company agrees to indemnify and hold the Lender
harmless on demand against all expenses, losses, consequences or damages
incurred or suffered by the Lender arising from or relating to any claim,
demand, action or proceeding brought by any person(s) whomsoever in
connection with or relating to the Collateral, the Obligations, this
Agreement or the Note (including without limitation any court costs and the
expenses and reasonable fees of the Lender's legal counsel), except to the
extent that a court of competent jurisdiction shall hold the same to be the
result of the Lender's own gross negligence or willful misconduct. The
Company shall pay any documentary stamp taxes, intangible taxes or other
taxes (except for federal or Florida franchise or income taxes based on the
net income of the Lender) which may now or hereafter apply to the Collateral,
the Obligations, this Agreement, the Note, or any payments made in respect
thereof, and the Company agrees to indemnify and hold the Lender harmless
from and against any liability, costs, attorney's fees, penalties, interest
or expenses relating to any such taxes, as and when the same may be incurred.
The Company shall pay on demand, and indemnify and hold the Lender harmless
against, any and all present or future taxes, levies, imposts, deductions,
charges and withholdings imposed in connection with the Collateral, the
Obligations, this Agreement, the Note, or any payments made in respect
thereof, by the laws or govenmnental authorities of any jurisdiction other
than the State of Florida or the United States of America. All sums payable
by the Company under this Section are and shall be included in the
Obligations and secured by the Xxxxxxxxxx.
00
00. BINDING AGREEMENT. This Agreement shall be binding upon the Company
and its successors and assigns and the terms hereof shall inure to the benefit
of the Lender and its successors and assigns.
15. INTERPRETATION. Whenever used in this Agreement, the term "person"
means any individual, firm, corporation, trust or other organization or
association or other enterprise or any governmental or political subdivision,
agency, department or instrumentality thereof. Whenever used in this
Agreement, the terms "written" or "in writing" mean any form of written
communication and any communication by means of telex, telecopier device,
telegraph or cable. Any reference in this Agreement to a sum expressed in
dollars or with the symbol "$" or "U.S.$" means the lawful currency of the
United States of America, unless such reference expressly identifies another
dollar-denominated currency. Captions and paragraph headings contained in
this Agreement are for convenience only and shall not affect its
interpretation. Whenever used in this Agreement and unless the context
otherwise requires, words in the plural include the singular, words in the
singular include the plural and pronouns of any gender include the other
genders.
16. MISCELLANEOUS. Time is of the essence with respect to the provisions
of this Agreement. This Agreement may be amended but only by an instrument in
writing executed by the party to be burdened thereby. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction only, be ineffective only to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction. To the extent that the Company may lawfully waive any law
that would otherwise invalidate any provision of this Agreement, the Company
hereby waives the same, to the end that this Agreement shall be valid and
binding and enforceable against the Company in accordance with all its terms.
This Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the State of Maryland.
17. WAIVER OF JURY TRIAL. The Company and the Lender hereby severally,
voluntarily, knowingly and intentionally WAIVE ANY AND ALL RIGHTS TO TRIAL BY
JURY in any legal action or proceeding arising under or in connection with
this Agreement, the Note or the Purchase Agreement, regardless of whether
such action or proceeding concerns any contractual or tortious or other
claim. The Company acknowledges that this waiver of jury trial is a material
inducement to the Lender in extending credit to the Company, that the Lender
would not have extended credit to the Company without this jury trial waiver,
and that the Company has been represented by an attorney or has had an
opportunity to consult with an attorney regarding this Agreement and
understands the legal effect of this jury trial waiver.
18. COUNTERPARTS; EXHIBITS. This Agreement may be executed in separate
counterparts by the parties hereto, with the respective signature pages from
separate counterparts assembled into one or more completely executed
documents; this Agreement shall become effective when each party hereto has
executed and delivered to the other party at least one such counterpart. This
Agreement consists of twenty-two (23) pages, plus the following attached
Exhibits, which are incorporated herein by this reference:
22
EXHIBIT "A" -- Cash Flow Projections
EXHIBIT "B" -- Purchase Order Form
EXHIBIT "C" -- Loan Request Form
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
ATTEST: AMERICAN QUANTUM CYCLES, INC., a
Florida corporation
BY: /s/ Illegible
----------------------- ---------------------------------
[CORPORATE SEAL] Name:
Title: CEO
ANCHOR CAPITAL CORPORATION, a
Maryland corporation
BY: /s/ Illegible
---------------------------------
Name:
Title: President
23
Cash Flow Projections (March 1999 - July 1999)
V W X Y Z AA AB AC
---- --- -------- --------- --------- --------- --------- --------
Item March Actual 3/26 29-Mar-99 6-Apr-99 12-Apr-99 19-Apr-99 26-Apr-99
---- ----------------- --------- --------- --------- --------- --------
Rent $ 5,800.00 $ 2,971.00 $ 5,800.00 $ -- $ -- $ --
Telephone $ 1,300.00 $ -- $ 12,325.00 $ 325.00 $ 325.00 $ 325.00
Utilities $ 1,020.00 $ 3,300.00 $ 255.00 $ 255.00 $ 255.00 $ 255.00
Cleaning/Ground Maintenance $ 60.00 $ 710.00 $ 15.00 $ 15.00 $ 15.00 $ 15.00
Vehicle Leasing $ 1,695.87 $ -- $ 423.97 $ 423.97 $ 423.97 $ 423.97
Equipment Leasing $ 8,245.94 $ 7,469.00 $ 2,061.49 $ 2,061.49 $ 2,061.48 $ 2,061.49
Payroll Benefits (Health, Life) $ 4,180.00 $ -- $ 1,045.00 $ 1,045.00 $ 1,045.00 $ 1,045.00
Insurance (Product/Corporate Liability) $ 7,083.00 $ 6,000.00 $ 6,270.75 $ 6,270.75 $ 6,270.75 $ 6,270.75
Xxxxxxx'x Compensation $ -- $ 28,138.00 $ -- -- -- --
Legal/Accounting $ -- $ 7,766.00 $ -- -- -- --
Commissions/Fees /Floorplanning Escrow $ 520.00 $ 2,880.00 $ 102,430.00 $ 130.00 $ 130.00 $ 130.00
Payroll Taxes - Current $ 35,208.75 $ 11,736.25 $ 8,802.19 $ 8,802.19 $ 8,802.19 $ 8,802.19
Payroll Taxes - Back $ -- $ -- $ -- $ -- $ -- $ --
Property Tax (Annual) $ -- $ 8,300.00 $ -- $ -- $ -- $ --
Sales Tax $ -- $ 10,000.00 $ -- $ -- $ -- $ --
Office/Safety Suppliers $ 2,488.87 $ -- $ 622.22 $ 622.22 $ 622.22 $ 622.22
Printing $ 1,438.00 $ -- $ 359.50 $ 359.50 $ 359.50 $ 359.50
Internet Access $ 400.00 $ 8,400.00 $ 100.00 $ 100.00 $ 100.00 $ 100.00
Product Advertising Promotion $ -- $ 5,000.00 $ 5,000.00 $ 6,000.00 $ 5,000.00 $ 5,000.00
Secondary Promotion/Roadshow $ -- $ 10,000.00 $ -- $ -- $ -- $ --
Repayment to N. Zeelander $ -- $ -- $ -- $ -- $ -- $ --
Travel/Meetings/Shows $ 14,086.82 $ 1,000.00 $ 3,521.71 $ 3,521.71 $ 3,521.71 $ 3,521.71
Temporary Employees $ -- $ 3,000.00 $ 8,000.00 $ -- $ 3,000.00 $ 3,000.00
Payroll $ 85,875.00 $ 28,625.00 $ 28,625.00 $ 28,625.00 $ 28,625.00 $ 28,625.00
Operating Expenses Subtotal $ 189,402.25 $ 145,296.25 $ 185,656.81 $ 57,656.81 $ 60,656.81 $ 60,556.81
$ 364,327
Cost of Goods
Parts (includes shipping) - Current $ -- $ 88,200.00 $ 81,900.00 $ -- $ -- $ --
Machining Services - Current $ -- $ 18,900.00 $ 17,550.00 $ -- $ -- $ --
Paint and Powder Coating - Current $ -- $ 12,600.00 $ 11,700.00 $ -- $ -- $ --
Miscellaneous/Warranty - Current $ -- $ 6,300.00 $ 5,850.00 $ -- $ -- --
Parts (includes shipping) - Back Bills $ -- $ 48,659.75 $ 36,663.75 $ 10,663.75 $ 6,163.75 $ 6,663.75
Machining Services - Back Bills $ -- $ 14,239.09 $ 3,626.88 $ 3,626.88 $ 3,626.88 $ 3,626.88
Paint and Powder Coating - Back Bills $ -- $ -- $ -- $ -- $ -- $ --
Miscellaneous/Warranty - Back Bills $ -- $ 500.00 $ -- $ -- $ 500.00 $ --
Subtotal $ -- $ 189,398.84 $ 157,290.83 $ 14,290.63 $ 10,290.63 $ 10,290.63
$ 381,561
Capital Expenses
Factory Equipment - Current $ -- $ -- $ -- $ 5,000.00 $ -- $ --
Computer Hardware/Software - Current $ -- $ -- $ -- $ -- $ -- $ --
Miscellaneous Construction - Current $ -- $ -- $ -- $ -- $ -- $ --
Factory Equipment - Back Bills $ -- $ 3,000.00 $ 8,000.00 $ -- $ -- $ --
Computer Hardware/Software -Back Bills $ -- $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00
Miscellaneous/Construction - Back Bills $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00
Subtotal $ 3,000.00 $ 11,000.00 $ 16,000.00 $ 13,000.00 $ 8,000.00 $ 8,000.00
$ 45,000
Grand Totals
Operating Expenses $ 169,402.25 $ 145,295.25 $ 185,656.81 $ 57,556.81 $ 60,556.81 $ 60,556.81
Cost of Goods $ -- 189,398.84 $ 157,290.63 $ 14,290.63 $ 10,290.63 $ 10,290.63
Capital Expenses $ 3,000.00 11,000.00 16,000.00 13,000.00 $ 8,000.00 $ 8,000.00
Miscellaneous/One Time Charges $ -- $ -- $ -- $ -- $ -- $ --
Grand Total - Cash Out $ 174,402.25 $ 345,694.09 $ 358,947.44 $ 84,847.44 $ 78,847.44 $ 78,847.44
$ 601,490
Gross Cost of Goods Per Bike $ 13,000 $ 13,000 $ 13,000 $ 13,000 $ 12,500 $ 12,500
Net Cost of Goods Per Bike (less Quantum
Inventory) $ 9,000 $ 9,000 $ 9,000 $ 9,000 $ 9,000 $ 9,000
Xxxxxx Monies Available $ -- $ 250,000 $ -- $ -- $ -- $ --
Purchase Orders Presented and Approved $ -- $ 14 $ 13 $ 8 $ 6 $ 6
24
Cash Flow Projections (March 1999 - July 1999)
V W X Y Z AA AB AC
--- - --- --- --- ---- ----- ----
Item March Actual 3/26 29-Mar-99 5-Apr-99 12-Apr-99 19-Apr-99 26-Apr-99
---- ----------------- --------- ----------- ----------- ------------ ----------
Bikes Worth of Parts, Ordered -- 14 13 -- -- --
Net Purchase Orders Available -- -- -- 6 12 18
Xxxxxx Monies Used -- 126,000 117,000 -- -- --
Net Xxxxxx Monies Available -- 124,000 7,000 7,000 7,000 7,000
Bikes Built and Sold -- -- 5 5 3 6
Net Parts Inventory for the Week (Bikes) -- -- 9 8 (5) (6)
Cumulative Parts Inventory (Bikes) -- -- 9 17 11 5
Quantum Inventory Drawdown for Week -- -- 20,000 20,000 21,000 21,000
Net Quantum Inventory at End of Week 461,000 461,000 441,000 421,000 400,000 379,000
Xxxxxx Inventory Drawdown for Week -- -- 45,000 45,000 54,000 54,000
Net Xxxxxx Inventory at End of Week -- 126,000 198,000 153,000 99,000 45,000
Revenue From Bikes $ -- $ -- $87,940,000 $ 87,940.00 $ 105,528.00 $ 105,528.00
% Bikes from Bombadier Floorplan 40% 40% 40% 30% 30% 30%
Total Dollars from Bombadier $ -- $ -- $ 35,176 $ 26,382 $ 31,658 $ 31,658
Cumulative Dollars from Bombadier $ -- $ -- $ 35,176 $ 61,558 $ 93,216 $ 124,875
% Bike from Cash 5% 5% 5% 5% 5% 5%
% Bikes from Non-Bombadler Floorplan 55% 55% 55% 65% 65% 65%
Total Dollars fron Non-Bombadier Floorplans -- -- 43,367 57,161 68,593 68,593
Cumulative Dollars fronm Non-Bombadier
Floorplans $ -- $ -- $ 48,367.00 $105,528.00 $ 174,121.20 $ 242,714.40
Cash Flow Sunmary
Cash Out
Total Operating Cash Outlay During Week $172,402 $345,694 $ 358,947 $ 84,847 $ 78,847 $ 78,847
Cash In
Total Sales During Week $ -- $ -- $ 87,940 $ 87,940 $ 105,528 $ 105,528
Cumulative Sales $ -- $ -- $ 87,940 $ 175,880 $ 281,408 $ 388,936
Cash Collections During Week from Prior Sales $ -- $ -- $ -- $ 43,970 $ 87,940 $ 96,734
Cumulative Cash Collected $ -- $ -- $ -- $ 43,970 $ 131,910 $ 228.644
Net Receivables Outstanding $ -- $ -- $ 87,940 $ 131,910 $ 149,498 $ 158,292
Net Cash Resolution and Subsequent Needs
Total Cash Needs During Week $172,402 $345,684 $ 358,947 $ 84,847 $ 78,847 $ 78,847
Cash From Sales $ -- $ -- $ -- $ 43,970 $ 87,940 $ 96,734
Total Net Need for Cash $172,402 $345,894 $ 358,947 $ 40,877 $ (9,093) $ (17,887)
Net Cash from NZ Secured LOC $ -- $383,000 $ -- $ -- $ -- $ --
Cash From Notes $200,000 $ 50,000 $ 100,000 $ 50,000 $ -- $ --
Cash From Collections on Sales $ -- $ -- $ -- $ 43,970 $ 87,940 $ 96,734
Cash From Xxxxxx Secured LOC $ -- $126,000 $ 117,000 $ -- $ -- $ --
Cumulative Cash From Xxxxxx Secured LOC $ -- $126,000 $ 243,000 $ 199,030 $ 111,090 $ 14,356
Interest Charges on Cumulative Xxxxxx Xxxx $ -- $ 1,050 $ 2,025 $ 1,659 $ 926
Total Cash Out by Week $345,894 $ 359,997 $ 86,872 $ 80,506 $ 79,773
Total Cash In By Week $550,000 $ 217,000 $ 93,970 $ 87,940 $ 96,734
Weekly Cash Balance $213,306 $ (142,997) $ 7,098 $ 7,434 $ 16,961
Cumulative Balance $213,306 $ 70,308 $ 77,406 $ 84,840 $ 101,801
25
V AD AE AF AG AM AL
---- -------- --------- --------- --------- --------- --------
Item 3-May-99 10-May-99 17-May-99 24-May-99 31-May-99 7-Jun-99
---- -------- --------- --------- --------- --------- --------
Rent $ 7,000.00 $ -- $ -- $ -- $ -- $ 7,000.00
Telephone $ 1,460.00 $ 1,460.00 $ 1,460.00 $ 1,460.00 $ 1,460.00 $ 825.00
Utilities $ 844.00 $ 844.00 $ 844.00 $ 844.00 $ 844.00 $ 1,055.00
Cleaning/Ground Maintenance $ 142.00 $ 142.00 $ 142.00 $ 142.00 $ 142.00 $ 177.50
Vehicle Leasing $ 339.17 $ 339.17 $ 339.17 $ 339.17 $ 339.17 $ 423.97
Equipment Leasing $ 1,649.19 $ 1,649.19 $ 1,649.19 $ 1,649.19 $ 1,649.19 $ 16,999.49
Payroll Benefits (Health, Life) $ 1,004.40 $ 1,044.40 $ 1,044.40 $ 1,044.40 $ 1,044.40 $ 1,255.50
Insurance (Product/Corporate Liability) $ 6,216.60 $ 6,216.60 $ 6,216.60 $ 6,216.60 $ 6,216.60 $ 6,270.75
Xxxxxxx'x Compensation $ 1,202.60 $ 1,202.60 $ 1,202.60 $ 1,202.60 $ 1,202.60 $ 1,503.25
Legal/Accounting $ 5,000.00 $ -- $ -- $ -- $ -- $ 9,676.00
Commissions/Fees /Floorplanning Escrow $ 10,116.00 $ 116.00 $ 116.00 $ 116.00 $ 118.00 $ (89,855.00)
Payroll Taxes - Current $ 9,061.00 $ 9,061.00 $ 9,061.00 $ 9,061.00 $ 9,061.00 $ 11,326.25
Payroll Taxes - Back $ -- $ -- $ -- $ -- $ 287,000.00 $ --
Property Tax (Annual) $ -- $ -- $ -- $ -- $ -- $ --
Sales Tax $ -- $ -- $ -- $ -- $ -- $ --
Office/Safety Suppliers $ 497.77 $ 497.77 $ 497.77 $ 497.77 $ 497.77 $ 622.22
Printing $ 400.00 $ 400.00 $ 400.00 $ 400.00 $ 400.00 $ 250.00
Internet Access $ 8,080.00 $ 80.00 $ 80.00 $ 80.00 $ 80.00 $ 4,100.00
Product Advertising Promotion $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00
Secondary Promotion/Roadshow $ -- $ -- $ -- $ -- $ -- $ 35,000.00
Repayment to N. Zeelander $ -- $ -- $ -- $ -- $ -- $ --
Travel/Meetings/Shows $ 2,800.00 $ 1,800.00 $ 1,800.00 $ 1,800.00 $ 1,800.00 $ 3,250.00
Temporary Employees $ 14,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00
Payroll $ 41,250.00 $ 31,250.00 $ 31,250.00 $ 31,250.00 $ 31,250.00 $ 43,750.00
Operating Expenses Subtotal $ 116,062.74 $ 64,062.74 $ 64,082.74 $ 64,082.74 $ 351,082.74 $ 61,529.92
$ 659,314
Cost of Goods
Parts (includes shipping) - Current $ 69,300.00 $ 69,300.00 $ 70,000.00 $ 70,000.00 $ 126,000.00 $ 126,000.00
Machining Services - Current $ 14,850.00 $ 14,850.00 $ 15,000.00 $ 15,000.00 $ 27,000.00 $ 27,000.00
Paint and Powder Coating - Current $ 9,900.00 $ 9,900.00 $ 10,000.00 $ 10,000.00 $ 18,000.00 $ 18,000.00
Miscellaneous/Warranty - Current $ 4,950.00 $ 4,950.00 $ 5,000.00 $ 5,000.00 $ 9,000.00 $ 9,000.00
Parts (includes shipping) - Back Bills $ 13,173.75 $ 6,163.75 $ 6,663.75 $ -- $ -- $ (3,903.00)
Machining Services - Back Bills $ 14,643.88 $ 3,628.88 $ 3,626.88 $ -- $ -- $ 4,403.00
Paint and Powder Coating - Back Bills $ -- $ -- $ -- $ -- $ -- $ --
Miscellaneous/Warranty - Back Bills $ -- $ 500.00 $ -- $ -- $ -- $ 600.00
Subtotal $ 126,817.83 $ 109,290.63 $ 110,290.63 $ 100,000.00 $ 180,000.00 $ 181,000.00
$ -- $ $ 626,399 $ --
$ -- $ --
Capital Expenses $ -- $ --
Factory Equipment - Current $ 10,000.00 $ -- $ -- $ -- $ -- $ --
Computer Hardware/Software - Current $ -- $ -- $ -- $ -- $ -- $ --
Miscellaneous Construction - Current $ -- $ -- $ -- $ -- $ -- $ --
Factory Equipment - Back Bills $ 21,000.00 $ -- $ -- $ -- $ -- $ 10,000.00
Computer Hardware/Software -Back Bills $ 8,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 11,000.00
Miscellaneous/Construction - Back Bills $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00
Subtotal $ 42,000.00 $ 8,000.00 $ 8,000.00 $ 8,000.00 $ 8,000.00 $ 24,000.00
$ 74,000
Grand Totals
Operating Expenses $ 116,062.74 $ 64,062.74 $ 84,062.74 $ 64,062.74 $ 351,062.00 $ 61,529.00
Cost of Goods $ 126,817.63 $ 109,290.63 $ 110,290.63 $ 100,000.00 $ 180,000.00 $ 181,000.00
Capital Expenses $ 42,000.00 $ 8,000.00 $ 8,000.00 $ 8,000.00 $ 8,000.00 $ 24,000.00
Miscellaneous/One Time Charges $ -- $ -- $ -- $ -- $ -- $ --
Grand Total - Cash Out $ 284,880.36 $ 181,353.36 $ 182,353.36 $ 172,082.74 $ 539,062.74 $ 266,529.92
$ 1,359,713 --
Gross Cost of Goods Per Bike $ 12,500 $ 12,000 $ 12,000 $ 12,000 $ 12,000 $ 12,000
Net Cost of Goods Per Bike (less Quantum
Inventory) $ 9,000 $ 9,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
Xxxxxx Monies Available $ 100,000 $ 100,000 $ 100,000 $ 100,000 $ 180,000 $ 180,000
26
Cash Flow Projections (March 1999 - July 1999)
V AD AE AF AG AM AL
---- -------- --------- --------- --------- --------- --------
Item 3-May-89 10-May-89 17-May-89 24-May-89 31-May-89 7-Jun-89
---- -------- --------- --------- --------- --------- --------
Bikes Worth of Parts Ordered 11 11 10 10 18 18
Net Purchase Orders Available 15 12 10 10 6 2
Xxxxxx Monies Used 99,000 99,000 100,000 100,000 180,000 180,000
Net Xxxxxx Monies Available 8,000 9,000 9,000 9,000 9,000 9,000
Bikes Built and Sold 5 10 10 10 10 20
Net Parts Inventory for the Week (Bikes) (5) 1 1 -- -- (2)
Cumulative Parts Inventory (Bikes) -- 1 2 2 2 --
Quantum Inventory Drawdown for Week 17,500 30,000 20,000 20,000 20,000 40,000
Net Quantum Inventory at End of Week 361,500 331,500 311,500 291,500 271,500 231,500
Xxxxxx Inventory Drawdown for Week 45,000 90,000 100,000 100,000 100,000 200,000
Net Xxxxxx Inventory at End of Week 99,000 108,000 108,000 108,000 188,000 168,000
Revenue From Bikes $ 87,940.00 $ 175,880.00 $ 175,880.00 $ 175,880.00 $ 175,880.00 $ 351,760.00
% Bikes from Bombadier Floorplan 30% 20% 20% 20% 20% 20%
Total Dollars from Bombadier $ 26,382 $ 35,176 $ 35,176 $ 35,176 $ 35,176 $ 70,352
Cumulative Dollars from Bombadier $ 151,257 $ 166,433 $ 221,809 $ 256,785 $ 291,961 $ 362,313
% Bike from Cash 5% 5% 5% 5% 5% 5%
% Bike from Non-Bombadier Floorplan 65% 75% 75% 75% 75% 75%
Total Dollars from Non-Bombadier
Floorplan 57,161 131,910 131,910 131,910 131,910 263,820
Cumulative Dollars from Non-Bombadier
Floorplan $ 299,875.40 $ 431,785.40 $ 563,895.40 $ 695,605.40 $ 827,515.40 $1,091,335.40
Cash From Summary
Cash Out
Total Operating Cash Outlay During Week $ 284,880 $ 181,353 $ 182,353 $ 172,063 $ 539,063 $ 266,530
Cash in
Total Sales During Week $ 87,940 $ 175,880 $ 175,880 $ 175,880 $ 175,880 $ 351,760
Cumulative Sales $ 474,876 $ 650,756 $ 826,636 $ 1,002,518 $ 1,178,396 $ 1,530,156
Cash Collections During Week from Prior
Sales $ 105,528 $ 96,734 $ 131,910 $ 175,880 $ 175,880 $ 175,880
Cumulative Cash Collected $ 334,172 $ 430,906 $ 562,816 $ 738,696 $ 914,576 $ 1,090,456
Net Receivables Outstanding $ 140,704 $ 219,850 $ 263,820 $ 263,820 $ 263,820 $ 439,700
Net Cash Resolution and Subsequent Needs
Total Cash Needs During Week $ 284,880 $ 181,353 $ 182,353 $ 172,063 $ 539,063 $ 266,530
Cash From Sales $ 105,528 $ 96,734 $ 131,910 $ 175,880 $ 175,880 $ 175,880
Total Net Need for Cash $ 179,352 $ 84,619 $ 50,443 $ (3,817) $ 363,183 $ 90,650
Need Cash from HZ Secured LOC $ -- $ -- $ -- $ -- $ -- $ --
Cash From Notes $ -- $ -- $ -- $ -- $ -- $ --
Cash From Collection on Sales $ 105,528 $ 96,734 $ 131,910 $ 175,880 $ 175,880 $ 175,880
Cash From Xxxxxx Secured LOC $ 99,000 $ 99,000 $ 100,000 $ 100,000 $ 180,000 $ 180,000
Cumulative Cash From Xxxxxx Secured LOC $ 7,828 $ 10,094 $ -- $ -- $ 4,120 $ 8,240
Internet Charges on Cumulative Xxxxxx
Xxxx $ 120 $ 65 $ 84 $ -- $ -- $ 34
Total Cash Out by Week $ 285,000 $ 181,419 $ 142,437 $ 172,063 $ 539,063 $ 266,564
Total Cash Out by Week $ 204,528 $ 195,734 $ 231,910 $ 275,880 $ 355,880 $ 355,880
Weekly Cash Balance $ (80,472) $ 14,315 $ 49,473 $ 103,817 $ (183,183) $ 89,316
Cumulative Balance $ 21,329 $ 36,644 $ 85,117 $ 188,934 $ 5,571 $ 95,067
27
Cash Flow Projections (March 1999 - July 1999)
V AJ AK AL AM AN AO
---- --------- --------- --------- -------- ------ -------------
Item 14-Jun-99 21-Jun-99 28-Jun-99 6-Jul-99 Total (3/25-7/2)
---- --------- --------- --------- --------
Rent $ -- $ -- $ -- $ -- $ 19,800
Telephone $ 825.00 $ 825.00 $ 825.00 $ 825.00 $ 23,900
Utilities $ 1,055.00 $ 1,055.00 $ 1,055.00 $ 1,055.00 $ 9,460
Cleaning/Ground Maintenance $ 177.50 $ 177.50 $ 177.50 $ 177.50 $ 1,480
Vehicle Leasing $ 423.97 $ 423.97 $ 423.97 $ 423.97 $ 5,088
Equipment Leasing $ 2,061.49 $ 2,061.49 $ 2,061.49 $ 2,061.49 $ 39,676
Payroll Benefits (Health, Life) $ 1,255.50 $ 1,255.50 $ 1,255.50 $ 1,255.50 $ 14,224
Insurance (Product/Corporate Liability) $ 6,270.75 $ 6,270.75 $ 6,270.75 $ 6,270.75 $ 81,249
Xxxxxxx'x Compensation $ 1,503.25 $ 1,503.25 $ 1,503.25 $ 1,503.25 $ 12,026
Legal/Accounting $ -- $ -- $ -- $ -- $ 14,576
Commissions/Fees/Floorplanning Escrow $ 145.00 $ 145.00 $ 145.00 $ 145.00 $ 23,980
Payroll Taxes - Current $ 11,326.25 $ 11,326.25 $ 11,326.25 $ 11,326.25
Payroll Taxes - Back $ -- $ -- $ -- $ -- $ 287,000
Property Tax (Annual) $ -- $ -- $ -- $ -- $ --
Sales Tax $ -- $ -- $ -- $ -- $ --
Office/Safety Suppliers $ 622.22 $ 622.22 $ 622.22 $ 622.22 $ 7,467
Printing $ 250.00 $ 250.00 $ 250.00 $ 250.00 $ 4,438
Internet Access $ 100.00 $ 100.00 $ 100.00 $ 100.00 $ 13,200
Product Advertising Promotion $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 65,000
Secondary Promotion/Roadshow $ -- $ -- $ -- $ -- $ 35,000
Repayment to N. Zeelander $ -- $ -- $ -- $ -- $ --
Travel/Meetings/Shows $ 2,250.00 $ 2,250.00 $ 2,250.00 $ 2,250.00 $ 34,087
Temporary Employees $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 52,000
Payroll $ 33,750.00 $ 33,750.00 $ 33,750.00 $ 33,750.00 $ 425,750
Operating Expenses Subtotal $ 70,015.92 $ 70,015.92 $ 70,015.92 $ 70,015.92 $ 1,295,219
$ 271,578
Cost of Goods
Parts (includes shipping) - Current $ 126,000.00 $ 147,000.00 $ -- $ -- $ 885,500
Machining Services - Current $ 27,000.00 $ 31,500.00 $ -- $ -- $ 189,750
Paint and Powder Coating - Current $ 18,000.00 $ 21,000.00 $ -- $ -- $ 126,500
Miscellaneous/Warranty - Current $ 9,000.00 $ 10,500.00 $ -- $ -- $ 63,250
Parts (includes shipping) - Back Bills $ -- $ -- $ -- $ -- $ 82,253
Machining Services - Back Bills $ -- $ -- $ -- $ -- $ 40,808
Paint and Powder Coating - Back Bills $ -- $ -- $ -- $ -- $ --
Miscellaneous/Warranty - Back Bills $ -- $ -- $ -- $ -- $ 1,500
Subtotal $ 180,00.00 $ 210,000.00 $ -- $ -- $ 1,389,561
$ 671,000 $ 1,578,960
$ --
Capital Expenses $ --
Factory Equipment - Current $ -- $ -- $ -- $ -- $ 15,000
Computer Hardware/Software - Current $ -- $ -- $ -- $ -- $ --
Miscellaneous Construction - Current $ -- $ -- $ -- $ -- $ --
Factory Equipment - Back Bills $ -- $ -- $ -- $ -- $ 39,000
Computer Hardware/Software -Back Bills $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 5,000.00 $ 74,000
Miscellaneous/Construction - Back Bills $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 3,000.00 $ 39,000
Subtotal $ 8,000.00 $ 8,000.00 $ 8,000.00 $ 8,000.00 $ 167,000
$ 48,000
Grand Totals
Operating Expenses $ 70,015.92 $ 70,015.92 $ 70,015.92 $ 70,015.92 $ 1,295,219
Cost of Goods $ 180,000.00 $ 210,000.00 $ -- $ -- $ 1,389,581
Capital Expenses $ 8,000.00 $ 8,000.00 $ 8,000.00 $ 8,000.00 $ 167,000
Miscellaneous/One Time Charges $ -- $ -- $ -- $ -- $ --
Grand Total - Cash Out $ 258,015.92 $ 288,015.92 $ 78,015.92 $ 78,015.92 $ 2,851,780
890,578 $ 2,851,780
--
Gross Cost of Goods Per Bike $ 12,000 $ 12,000 $ 12,000 $ 12,000
Net Cost of Goods Per Bike (less Quantum
Inventory) $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 124,000
Xxxxxx Monies Available $ 180,000 $ 210,000 $ -- $ -- $ --
Purchase Orders Presented and Approved $ 18 $ 18 $ 18 $ 18
28
Cash Flow Projections (March 1999 - July 1999)
V AJ AK AL AM AN AO
---- --------- --------- --------- -------- --------- ----------------
Item 14-Jun-99 21-Jun-99 28-Jun-99 5-Jul-99 Total (3/25-7/2)
---- --------- --------- --------- -------- ----------------
Bikes Worth of Parts Ordered 18 21 -- -- 130
Net Purchase Orders Available 2 (1) 17 35
Xxxxxx Monies Used 180,000 210,000 -- --
Net Xxxxxx Monies Available 9,000 9,000 9,000 9,000
Bikes Build and Sold 18 18 18 2 141
Net Parts Inventory for the Week (Bikes) -- -- 3 (2) 3
Cumulative Parts Inventory (Bikes) -- -- 3 1 52
Quantum Inventory Drawdown for Week 36,000 36,000 36,000 4,000
Net Quantum Inventory at End of Week 195,500 159,500 123,600 119,500
Xxxxxx Inventory Drawdown for Week 180,000 180,000 180,000 20,000
Net Xxxxxx Inventory at End of Week 168,000 198,000 18,000 (2,000) April - June
Revenue From Bikes $ 316,584.00 $ 316,584.00 $ 316,584.00 $ 35,176.00 $ 2,479,908
% Bikes from Bombadier Floorplan 15% 15% 15% 15%
Total Dollars from Bombadier $ 47,488 $ 47,488 $ 47,488 $ 5,276
Cumulative Dollars from Bombadier $ 409,800 $ 457,288 $ 504,776 $ 510,052
% Bikes from Cash 5% 5% 5% 5%
% Bikes from Non-Bombadier Floorplan 80% 80% 80% 80%
Total Dollars from Non-Bombadier
Floorplan 253,267 $ 253,267 $ 253,267 $ 26,141
Cumulative Dollars from Non-Bombadier
Floorplan $1,344,602.60 $1,597,869.80 $1,851,137.00 $1,879,277.80
Cash Flow Summary
Cash Out
Total Operating Cash Outlay During
Week $ 258,016 $ 288,016 $ 78,016 $ 78,016 $ 2,851,780
Cash in
Total Sales During Week $ 316,584 $ 316,584 $ 316,584 $ 35,176 $ 2,479,908
Cumulative Sales $ 1,848,740 $ 2,163,324 $ 2,479,908 $ 2,515,084 na
Cash Collections During Week from Prior
Sales $ 263,820 $ 334,172 $ 316,584 $ 316,584 $ 2,005,032
Cumulative Cash Collected $ 1,354,276 $ 1,688,448 $ 2,005,032 $ 2,321,616 na
Net Receivables Outstanding $ 492,464 $ 474,376 $ 474,876 $ 193,468 $ 3,561,570
Net Cash Resolution and Subsequent Needs
Total Cash Needs During Week $ 258,018 $ 288,016 $ 78,016 $ 78,016 $ 2,851,780
Cash From Sales $ 263,820 $ 334,172 $ 316,584 $ 316,584 $ 2,005,032
Total Net Need for Cash $ (5,804) $ (46,156) $ (238,568) $ (238,568) $ 846,748
Net Cash from NZ Secured LOC $ -- $ -- $ -- $ -- $ --
Cash From Notes $ -- $ -- $ -- $ -- $ 150,000
Cash From Collections on Sales $ 263,820 $ 334,172 $ 316,584 $ 316,584 $ 2,005,032
Cash From Xxxxxx Secured LOC $ 180,000 $ 210,000 $ -- $ -- $ 1,265,000
Cumulative Cash From Xxxxxx Secured LOC $ -- $ -- $ -- $ -- $ 597,758
Interest Charges on Cumulative Xxxxxx
Xxxx $ 69 $ -- $ -- $ --
Total Cash Out by Week $ 258,085 $ 288,016 $ 78,016 $ 78,016 $ 3,203,505
Total Cash In by Week $ 443,820 $ 544,172 $ 316,584 $ 316,584 $ 3,979,032
Weekly Cash Balance $ 185,735 $ 256,156 $ 238,568 $ 238,568 $ 775,527
Cumulative Balance $ 280,802 $ 536,950 $ 776,627 $ 1,014,095 $ 2,572,791
29
EXHIBIT "B"
BIKE ORDER CONFORMATION
COMPANY NAME: _________________________ CUSTOMER NUMBER:________________________
QUANTITY OF BIKES ORDERING: ____________________________________________________
PRICE OF BIKES BEING ORDERED: _______________ (BASE PRICE-$17,550)
(FINAL T.B.D. INDIVIDUALLY) _________________
EXPECTED DATE OF DELIVERY:_______ (NOT BEFORE) ________________________________
PAYMENT METHOD:
FLOOR PLAN COMPANY: ____________________________________________________________
CASH PAYMENT SCHEDULE:
DOWN PAYMENT DATE: 1/3 _________________________________________________________
MID-BUILD DATE: 1/3 _________________________________________________________
COMPLETE DATE: 1/3 _________________________________________________________
NAMES AND TITLES OF PERSONS AUTHORIZED TO PLACE ORDERS:
________________________________________________________________________________
________________________________________________________________________________
NAME AND TITLE OF PERSON PLACING ORDER:
________________________________________________________________________________
SIGNATURE/PLACING ORDER ________________________________ DATE: _________________
SIGNATURE/AQC RECEIVING ________________________________ DATE: _________________
30
PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the 31st day of March,
1999, between AMERICAN QUANTUM CYCLES, INC. a Florida corporation (the
"Company"), and ANCHOR CAPITAL CORPORATION, a Maryland corporation
("Purchaser").
NOW, THEREFORE, in consideration of the mutual premises and.
covenants contained herein and for other good and valuable consideration, the
parties hereto, intending to be legally bound, agree as follows:
1. Sale of the Shares. The Company hereby issues, sells and transfers
to Purchaser 750,000 fully paid and non-assessable shares ("Shares") of
Common Stock, par value $.001 per share ("Common Stock") of the Company for
an aggregate purchase price of $750 paid by the Purchaser simultaneously with
the execution and delivery of this Agreement.
2. Line of Credit. Purchaser agrees to extend to the Company a line of
credit in the maximum aggregate principal amount of Seven Hundred Fifty Thousand
($750,000) Dollars (the "Line of Credit"), and the Company has executed and is
delivering to Purchaser herewith the Company's Secured Promissory Note in the
maximum principal amount of $750,000 ("Promissory Note") and a Loan and Security
Agreement pertaining to the Line of Credit (the "Loan Agreement"). The Company
may take advances under such Line of Credit by written request to Purchaser from
time to time up to June 25, 1999; provided, however, that no advances under the
Line of Credit may be taken if an Event of Default under this Agreement, the
Loan Agreement or the Promissory Note shall have occurred or if the Company
materially shall have failed to comply with the Cash Flow Projections delivered
by the Company to Purchaser contemporaneously with this Agreement.
3. [Reserved].
4. Representations and Warranties.
(a) The Company represents and warrants to the Purchaser, upon which
representations and warranties the Purchaser is relying, as follows:
(1) The Company is a corporation duly authorized, validly existing,
and in good standing under the laws of the State of Florida, and has all
requisite power and authority to own, lease and operate its properties, to
carry on its business as it is now being conducted, to enter into this
Agreement, to issue the Promissory Note and to consummate the transactions
contemplated hereby and under the Loan Agreement and the Promissory Note.
(2) All actions of the Company necessary to authorize it to execute,
deliver and consummate this Agreement, and to perform its obligations
hereunder and under the Loan Agreement and the Promissory Note have been
duly and validly taken and no other further actions or authorizations are
required. This Agreement, the Loan Agreement and the Promissory
31
Note constitute the valid, legally binding obligations of the Company and are
enforceable in accordance with their respective terms.
(3) The execution and delivery of this Agreement, the Loan Agreement
and the Promissory Note and the consummation of the transactions contemplated
herein and therein will not:
(i) result in any breach of, or constitute a default under the
Articles of Incorporation or By-Laws of the Company, or any instrument or
obligation to which the Company is a party or by which it is bound; or
(ii) violate any existing statute, order, writ, injunction or decree
of any court, administrative agency or governmental body.
(4) The Company has filed all reports and statements required to be
filed by the Company with the Securities and Exchange Commission and no such
report or statement contains a misstatement of a material fact or omits to
state a material fact necessary to make the statements made therein not
misleading.
5. Rgpresentations and Warranties of Purchaser. Purchaser represents
and warrants to the Company, upon which representations and warranties the
Company relies, as follows:
(a) Purchaser is acquiring the Shares for investment for its account
and for the account of certain participants as disclosed to the Company, with
no present intention of reselling or otherwise participating, directly or
indirectly, in a distribution of such Shares, and shall not make any sale,
transfer, or pledge thereof (except to such participants) without
registration under the Securities Act of 1933, as amended (the "Securities
Act"), and any applicable securities laws of any state, or unless an
exemption from such registration is available under those laws in the opinion
of counsel reasonably acceptable to the Company.
(b) Purchaser acknowledges that the certificates for the Shares will
contain a legend substantially as follows:
THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE,
AND MAY NOT BE SOLD, TRANSFERRED, MADE SUBJECT TO A SECURITY INTEREST,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL
REGISTERED UNDER THE ACT, OR APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY IS RECEIVED THAT
REGISTRATION IS NOT REQUIRED THEREUNDER.
32
6. Covenants of the Company. The Company hereby covenants and agrees
with Purchaser that:
(a) In the event that the Company shall fail to pay in full, as and
when due, by acceleration or otherwise, all amounts of principal and interest
under the Loan Agreement and the Promissory Note within 30 days after demand
in writing for such payment shall have been made by Purchaser and delivered
to the Company, the Company agrees to issue and sell to Purchaser, at the par
value thereof, that number of shares of Common Stock which, after issuance,
shall constitute 25% of the then outstanding Common Stock of the Company.
(b) (1) As used in this Section (b), the following terms have the
following respective meanings:
(i) "Commission" shall mean the Securities and Exchange Commission.
(ii) "Purchaser" shall mean Anchor Capital Corporation and each of
its affiliates to whom Anchor Capital Corporation shall have transferred any
of the Shares and any person controlling any of the foregoing within the
meaning of the Securities Act.
(iii) "Registration Expenses" and "Selling Expenses" shall mean the
expenses so described in Paragraph (4).
(iv) "Registrable Shares" shall mean 750,000 shares of Common Stock
owned by Purchaser, and the additional shares of Common Stock that may be
purchased by Purchaser under Section 6(a) of this Agreement.
(v) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time.
(2) The Company shall:
(i) Upon the written request of Purchaser, prepare and file with the
Commission not later than the earlier of 90 days after the date of such
request or the filing of a registration statement by the company under the
Securities Act, a registration statement with respect to the Registrable
Shares (the "Registration Statement") and use its best efforts to cause the
Registration Statement to become and remain effective as soon thereafter as
possible. In the event that the Company shall have filed a registration
statement before the expiration of 90 days, the Registrable Shares shall be
included in such Registration Statement on the following terms.
(ii) Prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep the Registration Statement
effective for not more than eighteen (18) months from the date of its
effectiveness (plus such additional time during which Purchaser must
33
cease making offers and sales, as provided in paragraph (v) below) or (unless
otherwise required by the Securities Act) until the Registrable Shares covered
thereunder have been sold, whichever is earlier.
(iii) Furnish to Purchaser such number of copies of each prospectus
contained in the Registration Statement (other than a preliminary
prospectus), in conformity with the requirements of the Securities Act, and
such other documents as Purchaser may reasonably request in order to
facilitate the disposition of the Registrable Shares owned by Purchaser.
(iv) Use its best efforts to register or qualify the Registrable
Shares covered by the Registration Statement under the securities or blue sky
laws of such jurisdictions as Purchaser shall reasonably request, and use its
best efforts to do any and all other acts and things which may be necessary
or advisable so to register or qualify the Registrable Shares to enable
Purchaser to consummate the disposition of the Registrable Shares owned by
Purchaser in such jurisdictions during the period covered in paragraph (ii)
above; provided that the Company shall not be obligated to qualify to do
business in any jurisdiction where it is not then so qualified or to take any
action which would subject it to the service of process in suits other than
those arising out of the offer or sale of the securities covered by the
Registration Statement in any jurisdiction where it is not then so subject.
(v) Notify Purchaser at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing. Purchaser agrees, upon receipt of such notice,
forthwith to cease making offers and sales of the Registrable Shares pursuant
to the Registration Statement or deliveries of the prospectus contained
therein for any purpose and to return to the Company, for modification and
exchange, the copies of such prospectus not theretofore delivered by
Purchaser; provided, that the Company shall forthwith prepare and fumish,
after securing such approvals as may be necessary, to Purchase a reasonable
number of copies of any supplement to or amendment of such prospectus that
may be necessary so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
(vi) Promptly notify Purchaser of any stop order or similar
proceeding initiated by state or federal regulatory bodies and use its best
efforts to take all necessary steps expeditiously to remove such stop order
or similar proceeding.
(vii) Otherwise use reasonable efforts in good faith to comply with
all applicable rules and regulations of the Commission, and, if required,
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering a period of at least twelve months, but not more
than eighteen months, beginning with the first day of the
34
Company's first fiscal quarter after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of Section
11 (a) of the Securities Act and Rule 158 thereunder; provided, however, that
the Company shall not be required to conduct a special audit in order to satisfy
its obligation under this paragraph (vii).
(viii) Upon receipt of such confidentiality agreements as the Company
may reasonably request, make available for inspection, upon the written
request of Purchaser, by Purchaser and by any attorney, accountant or other
agent retained by Purchaser, all pertinent financial and other records,
pertinent corporation documents and properties of the Company and its
subsidiaries as shall be reasonably necessary to enable Purchaser to exercise
and fulfill his due diligence responsibility, and cause all of the Company's,
and its subsidiaries, officers, directors and employees to supply all
information reasonably requested by Purchaser, attorney, accountant or agent
in connection with the Registration Statement.
(3) As a condition to the Company's obligation hereunder to file and
use its best efforts to cause to become effective the Registration Statement,
Purchaser shall provide such information and execute such documents,
including questionnaires and indemnities not inconsistent herewith, as may
reasonably be required in connection with such registration.
(4) All expenses incurred by the Company in complying with any of the
foregoing provisions of this Section (b), including without limitation all
federal (including the Commission and the National Association of Securities
Dealers, Inc.) and state registration, qualification and filing fees,
printing expenses, any premium involved in securing a policy or policies of
registration insurance (but only if the Company in its sole discretion shall
choose to secure such a policy or policies, such policy or policies to be
herein referred to as "registration insurance"), fees and disbursements of
counsel for the Company, and accountants' fees and expenses (but excluding
the compensation of regular employees of the Company which shall be paid in
any event by the Company), incident to or required by any such registration
are herein called "Registration Expenses". All underwriting discounts,
selling commissions and transfer taxes applicable to the sale of Registrable
Shares hereunder are herein called "Selling Expenses". The Registration
Expenses and Selling Expenses in connection with the registration of the
Registrable Shares shall be borne as follows:
(i) All Registration Expenses and the costs of securing registration
insurance shall be borne by the Company.
(ii) All Selling Expenses incurred in connection with the
Registration Statement shall be borne by Purchaser; provided, however, that if
other shares of capital stock of the Company are included in the Registration
Statement, such Registration Expenses shall be borne by Purchaser pro rata
with all other persons (including the Company) for whose account the
securities covered by the Registration Statement are offered in accordance
with the amount of securities being so offered for the account of each such
person.
(5) (i) The Company agrees to indemnify and hold harmless Purchaser
against any and all losses, claims, damages, liabilities or expenses, joint
or several
35
(including any investigation, legal and other expenses incurred in connection
with any action, suit or proceeding or any claim asserted), arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, or any prospectus included therein, or
any omission or alleged omission of any material fact required to be stated
therein or necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon a statement in writing furnished
by or on behalf of Purchaser for inclusion therein or an omission or failure by
Purchaser to furnish any statement with respect to Purchaser required to be
included therein. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of Purchaser and shall
survive the transfer of the Shares. Promptly after receipt by Purchaser of
written notice of the commencement of any action in respect of which indemnity
may be sought against the Company, Purchaser shall notify the Company in writing
of the commencement thereof, and, subject to the provisions hereinafter stated
and Purchaser's reasonable cooperation, the Company shall assume the defense of
such action (including the employment of counsel, who shall be counsel
reasonably satisfactory to Purchaser and the payment of expenses and such
counsel's fees) insofar as such action shall relate to any alleged liability in
respect of which indemnity may be sought against the Company; provided, however,
that the failure of Purchaser to give written notice to the Company of the
commencement of any action shall not relieve the Company of its obligations
hereunder except to the extent that the Company is actually prejudiced by such
failure to give notice. Purchaser shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall not be at the expense of the Company
unless in the reasonable judgment of Purchaser, a conflict of interest between
the Company and Purchaser exists in respect of such claim, in which event the
fees and expenses of such counsel shall be at the expense of the Company. In
connection with any offering under this Section (b).which is to be underwritten,
the Company further agrees to enter into an underwriting agreement in usual and
standard form respecting such offering; provided that the terms of such
underwriting agreement shall not be inconsistent or conflict with the provisions
of this Agreement.
(ii) The obligations of the Company under this Section (b) are
subject to the following conditions, which Purchaser hereby agrees to
fulfill: (i) that Purchaser whose Registrable Shares are to be included in
any registration referred to in this Section agrees, in writing, prior to
the filing of such registration or qualification, and hereby does agree to
indemnify and hold harrnless the Company, each Person, if any, who controls
the Company within the meaning of the Securities Act and the officers and
directors of the Company, against any and all losses, claims, damages,
liabilities or expenses arising out of or based upon any untrue statement or
alleged untrue statement of a material fact in any related registration
statement, prospectus, offering circular, notification or other document or
any omission or alleged omission of any material fact required to be stated
therein or necessary to make the statements therein not misleading, but only
with reference to statements or omissions made in reliance upon a statement
in writing furnished by or on behalf of Purchaser (but only to the extent
such statement was made in Purchaser's capacity as a holder of Registrable
Shares and not in Purchaser's capacity as an officer or director of the
Company, if applicable) for inclusion therein and with reference to
statements or omissions made in reliance upon an omission or failure by
Purchaser to fumish any statement with respect to Purchaser required to be
included
36
therein (which indemnification shall remain in full force and effect regardless
of any investigation made by the Company or any person controlling the Company
and shall survive the transfer of the Shares), and (ii) if such registration or
qualification relates to an offering which is to be underwritten, that Purchaser
agrees to enter into an underwriting agreement in usual and standard form
respecting such offering; provided that the terms of such underwriting agreement
shall not be inconsistent or conflict with the provisions of this Agreement.
Promptly after receipt of written notice of the commencement of any action in
respect of which indemnity may be sought against Purchaser, the Company will
notify Purchaser in writing of the commencement thereof, and Purchaser shall,
subject to the provisions hereinafter stated and the Company's reasonable
cooperation, assume the defense of such action (including the employment of
counsel, who shall be counsel reasonably satisfactory to the Company, and the
payment of expenses and such counsel's fees) insofar as such action shall relate
to the alleged liability in respect of which indemnity may be sought against
Purchaser, provided, however, that the failure of the Company to give written
notice to Purchaser of the commencement of any action shall not relieve
Purchaser of its obligations hereunder except to the extent that Purchaser is
actually prejudiced by such failure to give notice. The Company and each such
director, officer, or controlling Person shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expense of such counsel shall not be the expense of Purchaser unless in
the reasonable judgment of the Company or controlling Person, a conflict of
interest between Purchaser and the Company or controlling Person exists in
respect of such claim, in which event the fees and expenses of such counsel
shall be at the expense of Purchaser.
(6) A party required to indemnify another party pursuant to this
Section ("indemnifying party") shall not be liable for any settlement of any
action or claim relating to any such liability or expense affected without
its consent, but if any settlement is effected with its consent or if a final
judgment for the plaintiff is entered in any such action, such indemnifying
party agrees to indemnify and hold harmless the indemnified party from and
against any loss or liability by reason of any such settlement or judgment.
7. Miscellaneous.
(a) An "Event of Default" under this Agreement shall mean and refer
to (i) any material inaccuracy or omission in any representation or warranty
made by the Company in this Agreement, (ii) any failure by the Company to
perform its agreements and covenants herein, or (iii) any Event of Default
under the Loan Agreement or the Promissory Note.
(b) All notices hereunder shall be in writing and shall be mailed by
first class registered or certified mail, postage prepaid, return receipt
requested, or by telecopy with confirmation back, or by nationally recognized
overnight courier or hand delivery, and all communications shall be addressed
to the addresses of the Company and Purchaser as shown on the signature page
or such other address (or telecopy number) as the parties shall designate by
notice to the other party hereunder.
(c) This Agreement, the Loan Agreement and the Promissory Note
contain the final, complete and exclusive understanding of the parties with
respect to its subject matter, and
37
all prior negotiations, discussions, commitments and understandings heretofore
between them are merged herein. This Agreement may not be modified or amended
except by an instrument in writing signed by the party to be charged therewith.
(d) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the parties, including transferees of the
Shares permitted pursuant to Section 5 and holders of Registrable Shares.
(e) The titles and headings of the sections of this Agreement are
included for the convenience of the parties only and are not part of this
Agreement.
(f) Whenever possible, each provision of this Agreement will be
interpreted in such manner so as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable under any applicable law or rule in any jurisdiction, provided,
that such provision will be ineffective only to the extent of such
invalidity, illegality or unenforceability in such jurisdiction, without
invalidating the remainder of this Agreement in such jurisdiction or any
provision hereof in any other jurisdiction.
(g) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all of which shall
constitute but one and the same document.
(h) At any time, and from time to time, each party agrees, at its own
expense, to take such actions and to execute and deliver such documents as
may be reasonably necessary to effectuate the purposes of this Agreement.
(i) This Agreement shall be governed in all respects, whether as to
validity, construction, interpretation, capacity, performance or otherwise,
by the laws of the State of Maryland.
(j) The Company agrees to pay the reasonable fees of counsel to the
Purchaser in connection with this Agreement, the Line of Credit, and other
contemporaneous transactions contemplated by the parties.
IN WITNESS VIHEREOF, the parties have duly executed this Agreement
the date first written above.
AMERICAN QUANTUM CYCLES, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Xxxxxxx X. Xxxxx, Chairman & CEO
ANCHOR CAPITAL CORPORATION
By: /s/ Illegible
----------------------------
President
38
EXHIBIT "C"
LOAN REQUEST
For Week Beginning ______________, 1999
THE UNDERSIGNED AFFIANT, being duly sworn, deposes and says that:
1. Affiant is an officer of AMERICAN QUANTUM CYCLES, INC., a Florida
corporation (the "Company"), being duly elected or appointed to the office of
the Company set forth below the Affiant's signature, and the Affiant has been
duly authorized to make this Loan Request on behalf of the Company, and has
made due investigation as to the following matters.
2. Affiant certifies the following matters on behalf of the Company to
induce and request ANCHOR CAPITAL CORPORATION (the "Lender") to disburse a
Loan as described herein pursuant to the terms of the Loan and Security
Agreement dated as of March 30, 1999 between the Lender and the Company (the
"Agreement"). The capitalized terms used in this certificate have the
respective meanings given them in the Agreement.
3. No Event of Default exists under the Agreement, and no event has
occurred and is continuing which with notice or lapse of time or both would
become an Event of Default.
4. All representations and warranties of the Company made in the
Agreement are true on and as of the date of the making of the Loan requested
herein, with the same force and effect as if the representations and
warranties were made on and as of such date.
5. There has been no material adverse change to the financial condition
or operations of the Company.
6. All Inventory previously financed with Loans has been segregated from
other Inventory on the Company's premises, or has otherwise been physically
identified as being subject to the Lender's first-priority security interest.
7. The Offering has not been withdrawn or canceled by the Company, and
there has been no material change in the terms, feasibility or timing of the
Offering adverse to the interests of Lender as a purchaser of the common
stock of the Company under the Purchase Agreement.
8. With respect to each Purchase Order for motorcycles submitted to the
Lender as of this date: (i) the copy of the Purchase Order delivered to the
Lender is true, correct and complete; (ii) the Purchase Order represents a
valid and binding order from a dealer for the immediate delivery of the
number of motorcycles identified therein; (iii) the Purchase Order is in full
force and effect and has not been modified, amended, rescinded or revoked;
(iv) the dealer named in the Purchase Order is obligated to pay for the
motorcycle(s) identified therein; and (v) either the Purchase Order has been
approved for floor plan financing by a Floor Plan Lender, or the Company has
received a deposit for one-third of the purchase price and has deposited the
39
same in the Anchor Account (except for up to one permitted cash sale without
deposit as provided in Section 2(a) of the Agreement).
9. As of this date, the Company has submitted and the Lender has
approved Purchase Orders covering dealer orders for a total of ___________
motorcycles, and at the rate of $10,000 per motorcycle, the total fundable
amount of approved Purchase Orders to date is: $ ___________
The cumulative amount of Loans funded against
Purchase Orders to date is: (__________),
and the remaining Loan funds now available for
approved Purchase Orders is: $ ___________
10. The maximum permitted cumulative Loan amount
for this week is: $ ___________
As of this date, the cumulative amount of all Loans
advanced by the Lender is: (__________),
and the excess of this maximum amount over the
cumulative amount to date is: $ ___________
11. The maximum permitted outstanding Loan balance $ ___________
for this week is:
As of this date, the outstanding principal balance of (__________),
all unpaid Loans is:
and the excess of this maximum amount over the present $ ___________
principal balance is:
12. The least of the three dollar amounts determined under foregoing
paragraphs 9, 10 and 11 is $____________.
13. As shown in the Weekly Report for the immediately preceding week,
the amount of actual Cumulative Sales achieved by the Company was ________%
of the amount of Cumulative Sales projected in the Company's Cash Flow
Projections for that week, and the amount of actual Cumulative Cash Collected
achieved by the Company was ________% of the amount of Cumulative Cash
Collected so projected for that week. The "Performance Factor" is: (i) zero,
if either percentage is less than 80%; (ii) 100%, if both percentages are
100% or more; and (iii) in any other case, the lower of the two percentages.
The product of the dollar amount determined in foregoing paragraph 12
multiplied by the Performance Factor is: $ ___________
14. As shown in the Weekly Report for the immediately preceding week,
the amount of "Net Receivables Outstanding" was $ ____________, and 75% of
that amount is: $ __________
As shown in that Weekly Report, the amount of "Net Xxxxxx
Inventory at End of Week" was $ _________, and one third
of that amount is: $ ___________
A. The Collateral Base for the previous week is the sum
of these two amounts: $ ___________
B. The outstanding principal balance of the Loans at end
of previous week was: $ ___________
If line B exceeds line A, then the amount from
paragraph 12 minus this excess is: $ ___________
15. The amount of available Loan funds this week is the lesser of the
two amounts respectively determined under paragraph 13 and paragraph 14,
which is: $ ___________
16. The Company requests the Lender to disburse a Loan in the total
amount of $ __________ to the respective vendors and suppliers listed below,
to each of them in the respective amount listed below, by the respective
payment method listed below. For each vendor or supplier to be paid by check
drawn on the Anchor Account, the Company has prepared and submitted with this
Loan request a check drawn in the correct amount payable to the correct
40
vendor or supplier, and the Company hereby requests the Lender to sign the check
prepared by the Company and to deliver the check (or other specified payment) to
the respective payee by the delivery method specified below (if no delivery
method is specified below, then the Lender is instructed to send the check by
regular U.S. mail). For each such vendor or supplier, an original or a true copy
of the respective parts order is attached hereto, and if so indicated below the
Lender is instructed to enclose the parts order with the payment sent to the
respective vendor or supplier.
----------------------------------------------------------------------------------------------------------
Vendors Name & Brief Payment Delivery Enclose Amount of
Mailing Address Description of Method Method Parts Payment to,
Parts Ordered (Anchor Account (US Mail if Order Vendor
Check if not not [Yes/No]
specified) specified)
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
TOTAL LOAN AMOUNT THIS WEEK:
----------------------------------------------------------------------------------------------------------
IN WITNESS WHEREOF, the undersigned Affiant has executed this Loan
Request on behalf of the Company as its duly elected or appointed __________
on __________, 1999.
____________________________
___________________, Affiant
STATE OF ______________ )
) SS:
COUNTY OF _____________ )
SWORN TO AND SUBSCRIBED before me this __ day of ___________, 1999 by
_____________, who personally appeared before me and who is personally known
to me or produced a driver's license as identification.
41
My Commission Expires: ________________________________
NOTARY PUBLIC, STATE OF ________
[NOTARIAL SEAL]
_______________________________
42
