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EXHIBIT 99.2
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, dated as of June 30, 1999, is entered
into between CAPITAL FACTORS, INC., a Florida corporation ("Capital"), and
XXXXXXX INTERNATIONAL, INC., a Nevada corporation ("Borrower").
The parties agree as follows:
1. DEFINITIONS
In addition to the defined terms contained in the first
paragraph above, as used herein, the following terms shall have the following
definitions:
1. "Accounts" means all presently existing and hereafter
arising accounts (as that term is defined in the Code), contract rights,
instruments, notes, drafts, documents, chattel paper and all other forms of
obligations owing to Borrower, and any and all credit insurance, guaranties and
other security therefor, as well as all merchandise returned to or reclaimed by
Borrower.
2. "Agreement" means this Loan and Security Agreement
and any supplements, amendments or modifications to this Loan and Security
Agreement.
3. "Annual Fee" shall have the meaning set forth in
Section 2.9.3.
4. "Borrowing Base Certificate" means the certificate,
substantially in the form of Exhibit 1.4, with appropriate insertions, to be
submitted to Capital by Borrower pursuant to this Agreement and certified as
true and correct by the Chief Executive Officer or the Chief Financial Officer
of Borrower.
5. "Borrower's Books" means all of Borrower's books and
records including, but not limited to: minute books; ledgers; records
indicating, summarizing or evidencing Borrower's assets, liabilities, and the
Accounts; all information relating to Borrower's business operations; and all
computer programs, disc or tape files, printouts, runs, and other computer
prepared information and the equipment containing such information.
6. "Capital Expenses" means all of the following: (i)
costs or expenses (including, without limitation, taxes and insurance premiums)
required to be paid by Borrower under this Agreement or any of the other Loan
Documents which are paid or advanced by Capital; (ii) filing, recording,
publication and search fees paid or incurred by Capital; and (iii) costs, fees
(including reasonable attorneys' and paralegals' fees) and expenses incurred by
or charged to Capital: (a) to audit Borrower and the Collateral; (b) to correct
any default or enforce any provision of this Agreement, any of the other Loan
Documents and any guaranty of the Obligations, whether or not litigation is
commenced; (c) in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale and/or advertising to sell the
Collateral, whether or not a sale is consummated; (d) in collecting the Accounts
and in collecting the Obligations, whether from Borrower, any guarantor or both;
and (e) in structuring, drafting, reviewing, amending, defending or concerning
this Agreement or any of the other Loan Documents.
7. "Code" means the North Carolina Uniform Commercial
Code, and any and all terms used in this Agreement which are defined in the Code
and are not defined herein shall be construed and defined in accordance with the
definition of such terms under the Code.
8. "Collateral" means each and all of the following:
1. the Accounts;
2. the General Intangibles;
3. the Negotiable Collateral;
4. any money, deposit accounts or other assets
of Borrower in which Capital receives a security interest or which hereafter
come into the possession, custody or control of Capital;
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5. the promissory notes and security agreements
pledged by Borrower and any Guarantor;
6. the proceeds of any of the foregoing,
including, but not limited to, proceeds of insurance covering the Collateral, or
any portion thereof, and any and all Accounts, General Intangibles, Negotiable
Collateral, money, deposit accounts or other tangible and intangible property
resulting from the sale or other disposition of the Collateral, or any portion
thereof or interest therein, and the proceeds thereof.
9. "Daily Balance" means and refers to the amount
determined by taking the amount of the Obligations owed at the beginning of a
given day, adding any new Obligations advanced or incurred on such date, and
subtracting any payments or collections which are deemed to be paid on that date
under the provisions of this Agreement.
10. "Debt to Tangible Net Worth Ratio" means the figure
derived by dividing Borrower's total liabilities, exclusive of Subordinated
Debt, by Borrower's Tangible Net Worth. Borrower's total liabilities shall be
determined in accordance with GAAP consistently applied.
11. "Eligible Accounts" means and includes those Accounts
(i) which have been validly assigned to Capital, (ii) strictly comply with all
of Borrower's warranties and representations to Capital, (iii) contain payment
terms of net thirty (30) days, or less, from the date of invoice, and (iv) are
not past due more than one hundred and twenty (120) days from the invoice due
date; provided, however, that Eligible Accounts shall not include the following:
(a) Accounts with respect to which the account debtor is an officer, employee or
agent of Borrower except for Lone Star Hygiene, L.L.C. and Charlotte Hygiene
Associates, L.L.C.; (b) Accounts with respect to which services or goods are
placed on consignment, guaranteed sale, or other terms by reason of which the
payment by the account debtor may be conditional (other than that portion of the
Accounts which are subject to retention); (c) Accounts with respect to which the
account debtor is not a resident of the United States or Canada; (d) Accounts
with respect to which the account debtor is the United States or any department,
agency or instrumentality of the United States; provided, however, that an
Account shall not be deemed ineligible by reason of this clause (d) if Borrower
has completed all of the steps necessary to comply with the Federal Assignment
of Claims Act of 1940 (31 U.S.C. ss.203) with respect to such Account; (e)
Accounts with respect to which the account debtor is any state of the United
States or any city, town, municipality, county or division thereof; (f) Accounts
with respect to which the account debtor is a subsidiary of, related to,
affiliated with, or has common officers or directors with Borrower except for
Lone Star Hygiene, L.L.C. and Charlotte Hygiene Associates, L.L.C.; (g) Accounts
with respect to which Borrower is or becomes liable to the account debtor for
goods sold or services rendered by the account debtor to Borrower; (h) that
portion of the Accounts owed by an account debtor which exceeds twenty percent
(20%) of all Eligible Accounts; (i) all of the Accounts owed by an account
debtor who is the subject of an Insolvency Proceeding; (j) all of the Accounts
owed by an account debtor where twenty-five percent (25%) or more of all of the
Accounts owed by that account debtor are past due more than one hundred and
twenty (120) days from the invoice due date; and (k) Accounts for which the
services have not yet been rendered to the account debtor or the goods sold have
not yet been delivered to the account debtor (commonly referred to as
"pre-billed accounts").
12. "Equipment" means all of Borrower's present and
hereafter acquired machinery, machine tools, motors, equipment, furniture,
furnishings, fixtures, motor vehicles, tools, parts, dies, jigs, goods, and any
interest in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions and improvements thereto, wherever
located.
13. "Event of Default" means the occurrence of any one of
the events set forth in Section 9.
14. "Facility Fee" shall have the meaning set forth in
Section 2.9.1.
15. "GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination.
16. "General Intangibles" means all of Borrower's present
and future general intangibles and all other presently owned or hereafter
acquired intangible personal property of Borrower (including,
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without limitation, any and all choses or things in action, goodwill, patents,
trade names, trademarks, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, infringement claims,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, deposit accounts, tax refunds and tax refund claims) other than goods
and Accounts, as well as Borrower's Books relating to any of the foregoing.
17. "Governing Rate" shall have the meaning set forth in
Section 2.4.
18. "Guarantor" means individually, and "Guarantors"
means collectively, the following persons and entities::
1. Xxxxxxx Hygiene Franchise Corporation, a
North Carolina corporation and wholly-owned subsidiary of Borrower; and
2. Xxxxxxx Pest Control Corporation, a North
Carolinia corporation and wholly-owned subsidiary of Borrower.
19. "Initial Term" shall have the meaning set forth in
Section 3.1.
20. "Insolvency Proceeding" means any proceeding
commenced by or against any person or entity under any provision of the federal
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including, but not limited to, assignments for the benefit of creditors, formal
or informal moratoriums, compositions or extensions generally with its
creditors.
21. "Inventory" means and includes all of Borrower's
present and future inventory in which Borrower has any interest, including, but
not limited to, goods held for sale or lease or to be furnished under a contract
of service and all of Borrower's present and future raw materials, work in
process, finished goods, and packing and shipping materials, wherever located,
and any documents of title representing any of the above.
22. "Judicial Officer or Assignee" means any trustee,
receiver, controller, custodian, assignee for the benefit of creditors or any
other person or entity having powers or duties like or similar to the powers and
duties of a trustee, receiver, controller, custodian or assignee for the benefit
of creditors.
23. "Loan Documents" means collectively this Agreement,
the Lock Box Agreement, the Pledge Agreements and any other agreements entered
into between Borrower and Capital in connection with this Agreement.
24. "Lock Box Agreement" means that certain Lock Box
Agreement, of even date herewith, among SouthTrust Bank, Borrower and Capital.
25. "Maximum Credit Line" means One Million Seven Hundred
and Fifty Thousand and 00/100 Dollars ($1,750,000.00).
26. "Negotiable Collateral" means all of Borrower's
present and future letters of credit, advises of credit, notes, drafts,
instruments, documents, leases, and chattel paper, and Borrower's Books relating
to any of the foregoing.
27. The term "Net Worth" means, as of any date, the total
assets of Borrower minus the total liabilities of Borrower calculated in
conformity with GAAP.
28. "Obligations" means any and all loans, advances,
debts, liabilities (including, without limitation, any and all amounts charged
to Borrower's account pursuant to any agreement authorizing Capital to charge
Borrower's account), obligations, lease payments, guaranties, covenants and
duties owing by Borrower to Capital of any kind and description (whether
advanced pursuant to or evidenced by this Agreement, any of the other Loan
Documents, or any other instrument, or by any other agreement between Capital
and Borrower and whether or not for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including, without limitation, any debt, liability or
obligation owing from Borrower to others which Capital may have obtained by
assignment or otherwise, and further including, without
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limitation, all interest not paid when due and all Capital Expenses which
Borrower is required to pay or reimburse by this Agreement, by law, or
otherwise.
29. "Over Advance" shall have the meaning set forth in
Section 2.2.
30. "Pledge Agreements" means those certain Pledge
Agreements entered into between the Guarantors and Capital and the Borrower and
Capital each dated June 30, 1999, as same may be modified, extended, amended or
restated from time to time.
31. "Prime Rate" means the variable rate of interest, per
annum, most recently announced by the Reference Bank as its "prime rate," with
the understanding that the Reference Bank's "prime rate" is one of its index
rates and merely serves as a basis upon which effective rates of interest are
calculated for loans making reference thereto and may not be the lowest or best
rate at which the Reference Bank calculates interest or extends credit.
32. "Reference Bank" means Union Planters Bank, N.A. and
if at any time during the term of this Agreement such bank shall no longer
publish a prime rate of interest or shall otherwise cease to exist, Capital
shall be entitled to designate as the "Reference Bank" any other bank whose
prime rate of interest is published from time to time in the Wall Street
Journal.
33. "Renewal Term" shall have the meaning set forth in
Section 3.1.
34. "Subordinated Debt" means all of the indebtedness
owed by Borrower to any third parties, including the Subordinating Creditor(s),
the repayment of which is subordinated to the repayment of the Obligations
pursuant to the terms of a subordination agreement approved by Capital in its
sole and absolute discretion.
35. "Tangible Net Worth" means an amount equal to the Net
Worth of Borrower increased by Subordinated Debt and decreased by the following:
patents, licenses, leasehold improvements, goodwill, subscription lists,
organization expenses, monies due from affiliates (including officers, directors
and shareholders), security deposits, and prepaid costs and expenses.
36. "Working Capital" means the amount determined by
subtracting the aggregate amount of Borrower's current liabilities, excluding
amounts owed under the Loan and Security Agreement, from the aggregate amount of
Borrower's current assets. Borrower's current liabilities and current assets
shall be determined in accordance with GAAP consistently applied.
37. Other Definitional Provisions. References to
"Sections", "subsections", and "Exhibits" shall be to Sections, subsections, and
Exhibits, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in Section 1 may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. In this Agreement, words importing any gender include the other
genders; the words "including," "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to agreements and other
contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement; references to any person includes their respective permitted
successors and assigns or people succeeding to the relevant functions of such
persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
2. LOANS AND TERMS OF PAYMENT
1. Advances. Upon the request of Borrower, made at any
time and from time to time during the term of this Agreement, and so long as no
Event of Default has occurred, Capital shall lend to Borrower, up to eighty
percent (80%) of the net amount of Borrower's Eligible Accounts (the "net
amount" of Eligible Accounts means the gross amount of said Eligible Accounts
less returns, discounts (based upon the shortest or longest payment terms, as
Capital may elect), credits, or allowances of any nature at any time issued,
owing, claimed by account debtors, granted or outstanding) based upon the
Borrowing Base Certificate which must be
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submitted to Capital in connection with such request; provided, however, that in
no event shall Capital be obligated to make advances to Borrower under this
Section 2.1 whenever the aggregate amount of the then outstanding advances made
pursuant to this Section 2.1 exceeds or would exceed as a result of the
requested advance, the Maximum Credit Line.
2. Over Advances. All of the advances made pursuant to
Sections 2.1 and any supplement, if any, to this Agreement shall be added to and
deemed part of the Obligations when made. If, at any time and for any reason,
the amount of advances made pursuant to Sections 2.1 and such supplement, if
any, exceed the percentage or dollar limitations set forth in Section 2.1 and in
such supplement, as applicable, or if all of Borrower's Obligations, at any time
and for any reason, exceed the Maximum Credit Line (an "Over Advance"), then
Borrower, upon Capital's election and demand, shall immediately pay to Capital,
in cash, the amount of such excess.
3. Authorizations. Capital is hereby authorized to make
the loan and the extensions of credit provided for in this Agreement based upon
telephonic or other instructions and transaction reports received from any one
of the authorized personnel of Borrower identified on Exhibit 2.3, or, at the
discretion of Capital, if such extensions of credit are necessary to satisfy any
Obligations of Borrower to Capital. Although Capital shall make a reasonable
effort to determine the person's identity, Capital shall not be responsible for
determining the exact identity of the person calling and Capital may act on the
instructions of anyone it perceives to be one of the authorized personnel
identified on Exhibit 2.3.
4. Interest Rates. All Obligations owed by Borrower to
Capital shall bear interest, on the average Daily Balance owing, at a rate two
(2.0%) percentage points above the Prime Rate (the "Governing Rate").
Notwithstanding the foregoing, at no time during the term of this Agreement
shall the Governing Rate be less than seven percent (7.0%), per annum. All
Obligations owed by Borrower to Capital shall bear interest, from and after
written notice by Capital to Borrower of the occurrence of an Event of Default,
and without constituting a waiver of any such Event of Default, on the average
Daily Balance owing, at a rate five (5) percentage points above the Governing
Rate. All interest chargeable under this Agreement shall be computed on the
basis of a three hundred sixty (360) day year for actual days elapsed.
5. Payment of Obligations. Borrower promises to repay
all Obligations when due in accordance with the terms of this Agreement and the
other Loan Documents. All payments with respect to any of the Obligations shall
be made to Capital on the date when due, in Dollars and in immediately available
funds, without any offset or counterclaim. Except where evidenced by notes or
other instruments issued or made by Borrower to Capital specifically containing
payment provisions which are in conflict with this Section 5 (in which event the
conflicting provisions of said notes or other instruments shall govern and
control), the Obligations shall be payable as follows:
(a) Principal payable on account of advances (or any
loan) shall be paid by Borrower to Capital upon (i) each receipt by Capital or
Borrower of any proceeds of any of the Collateral, to the extent of said
proceeds, (ii) the occurrence of an Event of Default in consequence of which
Capital elects to accelerate the maturity and payment of the Obligations, and
(iii) termination of the Credit Facility pursuant to Section 3 hereof; provided,
however, that if an Over Advance Condition shall exist at any time, Borrower
shall, ON DEMAND, repay the Obligations to the extent necessary to eliminate the
Over Advance Condition.
(b) Payment of Interest. The Prime Rate as of the date of
this Agreement is seven and three quarters percent (7.75%) per annum. In the
event that the Prime Rate announced is, from time to time hereafter, changed,
adjustment in the rate of interest payable by Borrower shall be made as of 12:01
a.m. on the first (1st) day of the calendar month following such change and
shall be based on the Prime Rate in effect as of the last day of the immediately
preceding calendar month. The minimum interest payable by Borrower under this
Agreement shall in no event be less than Two Hundred Fifty and 00/100 Dollars
($250.00) for each month during the term of this Agreement. All interest payable
by Borrower shall be due and payable on the first (1st) day of each calendar
month during the term of this Agreement and Capital shall, at its option, charge
such interest and any and all Capital Expenses to Borrower's loan account with
Capital, which amounts shall thereupon constitute Obligations hereunder and
shall thereafter accrue interest at the rate then provided under this Agreement.
(c) All costs, fees, charges and Capital Expenses payable
pursuant to this Agreement shall be payable by Borrower to Capital as and when
incurred.
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(d) The balance of the Obligations requiring the payment
of money, if any, shall be payable by Borrower to Capital as and when provided
in this Agreement, or if no date of payment is otherwise specified in the Loan
Documents, ON DEMAND.
(e) Borrower irrevocably waives the right to direct the
application of any and all payments and collections at any time or times
hereafter received by Capital from or on behalf of Borrower, and Borrower does
hereby irrevocably agree that Capital shall have the continuing exclusive right
to apply and reapply any and all such payments and collections received at any
time or times hereafter by Capital or its agent against the Obligations, in such
manner as Capital may deem advisable. If as the result of collections of
Borrower's advances and Accounts a credit balance exists in the Loan Account,
such credit balance shall not accrue interest in favor of Borrower, but shall be
available to Borrower at any time or times for so long as no Event of Default
exists.
(f) All Loans to Constitute One Obligation. The Advances
shall constitute one general Obligation of Borrower,
and shall be secured by Capital's lien upon all of
the Collateral.
(g) Loan Account. Capital shall establish an account on
its books (the "Loan Account") and shall enter all
Advances (or loans) as debits to the Loan Account
and shall also record in the Loan Account all
payments made by Borrower on any Obligations and all
proceeds of Collateral which are finally paid to
Capital, and may record therein, in accordance with
customary accounting practice, other debits and
credit, including interest and all charges and
expenses properly chargeable to Borrower.
5.1 Maximum Interest. Regardless of any provision
contained in this Agreement or any other agreement or document executed in
connection herewith, in no contingency or event whatsoever shall the aggregate
of all amounts that are contracted for, charged or received by Capital pursuant
to the terms of this Agreement or any other Loan Document and that are deemed
interest under applicable law exceed the highest rate permissible under any
applicable law. No agreements, conditions, provisions or stipulations contained
in this Agreement or any of the other Loan Documents or the exercise by Capital
of the right to accelerate the payment or the maturity of all or any portion of
the Obligations, or the exercise of any option whatsoever contained in any of
the Loan Documents, or the prepayment by Borrower of any of the Obligations, or
the occurrence of any contingency whatsoever, shall entitle Capital to charge of
receive in any event, interest or any charges, amounts, premiums or fees deemed
interest by applicable law (such interest, charges, amounts, premiums and fees
referred to herein collectively as "Interest") in excess of the maximum rate
allowable under applicable law and in no event shall Borrower be obligated to
pay Interest exceeding such maximum rate, and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel Borrower to pay Interest exceeding the maximum rate
allowable under applicable law shall be without binding force or effect, at law
or in equity, to the extent only of the excess of Interest over such maximum
rate. If any Interest is charged or received in excess of the maximum rate
allowable under applicable law ("Excess"), Borrower acknowledges and stipulates
that any such charge or receipt shall be the result of an accident and bona fide
error, and such Excess, to the extent received, shall be applied first to reduce
the principal Obligations and the balance, if any, returned to Borrower, it
being the intent of the parties hereto not to enter into a usurious or otherwise
illegal relationship. The right to accelerate the maturity of any of the
Obligations does not include the right to accelerate any interest that has not
otherwise accrued on the date of such acceleration, and Capital does not intend
to collect any unearned interest in the event of any such acceleration. Borrower
recognizes that, with fluctuations in the rates of interest set forth in Section
2 of this Agreement and the maximum rate of interest allowable under applicable
law, such an unintentional result could inadvertently occur. All monies paid to
Capital hereunder or under any other Loan Documents, whether at maturity or by
prepayment, shall be subject to any rebate of unearned interest as and to the
extent required by applicable law. By the execution of this Agreement, Borrower
covenants that (i) the credit or return of any Excess shall constitute the
acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or
pursue any other remedy, legal or equitable, against Capital, based in whole or
in part upon contracting for, charging or receiving any Interest in excess of
the maximum rate allowable under applicable law. For the purpose of determining
whether or not any Excess has been contracted for, charged or received by
Capital, all interest at any time contracted for, charged or received from
Borrower in connection with this Agreement and any other agreement or document
executed in connection herewith, any of the Loan Documents shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread in
equal parts throughout the full term of the Obligations. Borrower and
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Capital shall, to the maximum extent permitted under applicable law, (i)
characterized any non-principal payment as an expense, fee or premium rather
than as Interest and (ii) exclude voluntary prepayments and the effects thereof.
The provisions of this Section shall be deemed to be incorporated into every
Loan Document (whether or not any provision of this Section is referred to
therein). All such Loan Documents and communications relating to any Interest
owed by Borrower and all figures set forth therein shall, for the sole purpose
of computing the extent of Obligations, be automatically recommitted by
Borrower, and by any court considering the same, to give effect to the
adjustments or credits required by this Section.
6. Borrowing Base Certificate. Concurrent with the
execution of this Agreement by Borrower and concurrent with each request for an
advance pursuant to Section 2.1, and on the fifteenth (15th) day of each month
during the term of this Agreement, Borrower shall deliver to Capital a fully
completed Borrowing Base Certificate certified by the Chief Executive Officer or
Chief Financial Officer of Borrower as being true and correct as of the last day
of the immediately preceding calendar month. Concurrent with the delivery of the
Borrowing Base Certificate, Borrower shall provide a written report to Capital
of all returns and all material disputes and claims. If Borrower fails to
deliver to Capital the Borrowing Base Certificate on the date when due, then
notwithstanding any of the provisions contained in Section 2.1 or in any other
Loan Document to the contrary, Capital shall not make any advances to Borrower
until the Borrowing Base Certificate is delivered to Capital.
7. Collections. Borrower shall instruct all of the
account debtors to make payments to the post office box established pursuant to
the Lock Box Agreement. Capital or Capital's designee may, at any time, notify
customers or account debtors of Borrower that the Accounts have been assigned to
Capital and that Capital has a security interest therein, collect them directly,
and charge the collection costs and expenses to Borrower's loan account, but,
unless and until Capital does so or gives Borrower other written instructions,
Borrower shall be entitled to collect the Accounts and, upon receipt, Borrower
shall immediately deliver to Capital the proceeds of such Accounts, together
with a fully completed Collection Report in the form of Exhibit 2.7. Borrower
agrees that all payments received by Borrower in connection with the Accounts
and any other Collateral shall be held in trust for Capital as Capital's
trustee. The receipt of any wire transfer of funds, check, or other item of
payment by Capital shall be applied to conditionally reduce Borrower's
Obligations, but shall not be considered a payment on account unless such wire
transfer is of immediately available federal funds and is made to the
appropriate deposit account of Capital or unless and until such check or other
item of payment is honored when presented for payment. The receipt of any wire
transfer, check or other item of payment by Capital shall be deemed to have been
paid to Capital three (3) business days after the date Capital actually receives
possession of such wire transfer of funds, check or other item of payment.
8. Monthly Statements. Capital shall render monthly
statements of the Obligations owing by Borrower to Capital, including statements
of all principal, interest, and Capital Expenses owing, and such statements
shall be conclusively presumed to be correct and accurate and constitute an
account stated between Borrower and Capital unless, within thirty (30) days
after receipt thereof by Borrower, Borrower shall deliver to Capital, by
registered or certified mail, at Capital's address indicated in Section 13,
written objection thereto specifying the error or errors, if any, contained in
any such statement and Capital in its good faith discretion determines such
exceptions are accurate and makes an appropriate adjustment. If Borrower fails
to so notify Capital of same, then said monthly statement shall be deemed to
have been delivered to Borrower and shall be final and conclusive on Borrower.
At Capital's request, Borrower shall execute and deliver to Capital from time to
time, promissory notes in form and context satisfactory to Capital to evidence
balances owing in Borrower's Loan Account, but notwithstanding any such request
for or delivery of such notes, the monthly statements of Obligations shall be
prima facie evidence of the Advances (loans) and, to the extent intended by
Capital to be included therein, Obligations owing to Capital.
9. Fees.
1. Closing Facility Fee. On the effective date
of this Agreement, Borrower shall pay a facility fee (the "Facility Fee") equal
to one percent (1.0%) of the "Maximum Credit Line". Payment of the Facility Fee
shall be made as of the due date by charging Borrower's account with the amount
of the Facility Fee. The Facility Fee shall represent an unconditional payment
to Capital in consideration of Capital's agreement to extend financial
accommodations to Borrower pursuant to this Agreement and shall not reduce or be
a deposit on account of the Obligations.
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2. If, at any time or times regardless of
whether or not an Event of Default then exists, Capital incurs legal or
accounting expenses or any other costs or out-of-pocket expenses in connection
with the loan transaction described herein, including: (i) the negotiation and
preparation of any amendment of or modification of this Agreement or any of the
other Loan Documents; (ii) the administration of this Agreement or any of the
other Loan Documents and the transactions contemplated hereby and thereby; (iii)
any litigation, contest, dispute, suite, proceeding or action (whether
instituted by Capital, Borrower or any other person) in any way relating to the
Collateral, this Agreement or any of the other Loan Documents or Borrower's
affairs; (iv) any attempt to enforce any rights of Capital, Borrower or any
other person which may be obligated to Capital by virtue of this Agreement or
any of the other Loan Documents, including any Account Debtor or Guarantor; (v)
any consultations regarding this Agreement or any other Loan Documents or
preparation thereof, or the financing extended hereunder; or (vi) any attempt to
inspect, verify, protect, preserve, perfect or continue the perfection of
Capital's liens upon, restore, collect, sell, liquidate or otherwise dispose of
or realize upon the Collateral; then all such legal and accounting expenses,
other reasonable costs and out-of-pocket expenses of Capital shall be charged to
Borrower. All amounts chargeable to Borrower under this Section 2.9 shall be
Obligations secured by all of the Collateral, shall be payable on demand to
Capital and shall bear interest from the date such demand is made until paid in
full at the rate applicable to Advances.
Borrower shall pay to Capital, ON DEMAND, any and all reasonable fees, costs or
expenses which Capital pays to a bank or other similar institution arising out
of or in connection with (i) the forwarding, by Capital to Borrower or any other
person or entity on behalf of the Borrower of proceeds of Advances made by
Capital to Borrower pursuant to this Agreement and (ii) the depositing for
collection by Borrower, of any payment item received or delivered to Capital on
account of the Obligations. All fees payable hereunder shall be fully earned by
Capital when due and payable and, except as otherwise set forth herein or
required by applicable law, shall not be subject to refund, rebate or proration.
All fees provided for in this Section 2 shall be deemed to be for compensation
for services and are not, and shall not be deemed to be, interest or any other
charge for the use, forbearance or detention of money.
3. Annual Fee. On the anniversary date of this
Agreement and on the first day of each Renewal Term thereafter, Borrower shall
pay to Capital an annual fee (the "Annual Fee") in an amount equal to one-half
percent (.50%) of the then prevailing Maximum Credit Line. Payment of the Annual
Fee shall be made as of the due date by charging Borrower's account with the
amount of the Annual Fee. The Annual Fee shall represent an unconditional
payment to Capital in consideration of Capital's agreement to extend financial
accommodations to Borrower pursuant to this Agreement and shall not reduce or be
a deposit on account of the Obligations.
3. TERM AND PREPAYMENT
1. Term.
1. This Agreement shall have an
initial term (the "Initial Term) of three (3) years commencing on the date
hereof and, and shall thereafter be automatically renewed (a "Renewal Term") for
successive periods of one (1) year unless terminated by either party as set
forth below, which termination shall be effective on an anniversary date of this
Agreement. Notice of such termination shall be effectuated by the mailing of a
certified letter, return receipt requested, not less than sixty (60) days
immediately prior to the effective date of such termination, addressed to the
other party in the manner and the address set forth in Section 13.
2. Notwithstanding such term, upon the
occurrence of an Event of Default, Capital may terminate this Agreement without
notice. In addition, should Borrower become insolvent or unable to meet its
debts as they mature, then Capital shall have the right to terminate this
Agreement at any time without notice. On the date of a termination by Capital,
all Obligations shall become immediately due and payable without notice or
demand and shall be paid to Capital in cash or by a wire transfer of immediately
available funds.
3. 1. Effect of Termination.
All of the Obligations shall be immediately due and payable upon the effective
date of termination by Capital or, in the case of a termination by Borrower,
upon the date specified in Borrower's notice of termination of this credit
facility as the effective date of such termination. On the effective date of
any termination (whether by Capital or Borrower), Capital shall have no
obligation to make any Advances or otherwise to extend credit to or for the
direct or indirect benefit of Borrower. All undertakings, agreements,
covenants, warranties and representations of Borrower contained in the Loan
Documents shall survive any such termination, and Capital shall retain its
liens in the Collateral and all of its rights
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and remedies under the Loan Documents notwithstanding such termination, until
Borrower has satisfied all of the Obligations. Notwithstanding the payment in
full of the Obligations, Capital shall not be required to terminate is security
interests in the Collateral unless, with respect to any loss or damage Capital
may incur as a result of dishonored payment items received by Capital from
Borrower or any Account Debtor or maker of any promissory note and applied to
the Obligations, Capital shall, at its option, (i) have received a written
agreement, executed by Borrower and by any person or entity whose loans or other
advances to Borrower are used in whole or in part to satisfy the reserves and
liens on the Collateral for such period of time as Capital, in its reasonable
discretion, may deem necessary to protect Capital from any such loss or damage.
The provisions of this Section 3.1.3 hereof and all obligations of Borrower
pursuant to this Agreement to indemnify Capital shall in all events survive any
termination of this credit facility.
2. Prepayment. Borrower may at any time after
the conclusion of the first six (6) months of the initial term hereof, on thirty
(30) days prior written notice, prepay the Obligations and terminate this
Agreement by paying to Capital in cash or by a wire transfer of immediately
available federal funds, the Obligations together with an amount equal to the
following: (a) seventy-five percent (75%) of the average monthly interest
hereunder during the immediately preceding six (6) months; multiplied by (b) the
number of months of the unexpired balance of the term of this Agreement. When
prepaying the Obligations, Borrower shall also pay the interest accrued on the
principal amount being prepaid to the date of such prepayment.
4. CREATION OF SECURITY INTEREST
1. Grant of Security Interest. Borrower hereby
grants to Capital a continuing security interest in all presently existing and
hereafter acquired or arising Collateral in order to secure prompt repayment of
any and all Obligations owed by Borrower to Capital and in order to secure
prompt performance by Borrower of each and all of its covenants and obligations
under this Agreement and otherwise created. Capital's security interest in the
Collateral shall attach to all Collateral without further act on the part of
Capital or Borrower. In the event that any Collateral, including proceeds, is
evidenced by or consists of Negotiable Collateral, Borrower shall, immediately
upon written request therefor from Capital, endorse and assign such Negotiable
Collateral over to Capital and deliver actual physical possession of the
Negotiable Collateral to Capital.
2. Right to Audit and Inspect. In order to
verify the validity of any Borrowing Base Certificate, Borrower shall, upon the
request of Capital, promptly furnish Capital with copies of Borrower's purchase
orders, sales journals, invoices, chattel paper, customer's purchase orders, or
the equivalent, and original shipping or delivery receipts for all Inventory
purchased and goods sold, and Borrower shall warrant the genuineness thereof. In
addition, Capital shall be entitled to conduct from time to time during the term
of this Agreement audits of Borrower's Books, business operations and Inventory
and to check and test the same as to quality, quantity, value and condition.
Borrower shall pay to Capital as an audit fee One Thousand Dollars ($1,000.00)
per month.
3. Sale of Inventory. Until the occurrence of
an Event of Default by Borrower under this Agreement, Borrower may, subject to
the provisions hereof and consistent herewith, sell or lease the Inventory, but
only in the ordinary course of Borrower's business. A sale or lease of Inventory
in Borrower's ordinary course of business does not include an exchange or a
transfer in partial or total satisfaction of a debt owing by Borrower, nor does
it include an exchange for less than reasonably equivalent value.
4. Continuation of Security Interest.
Notwithstanding termination of this Agreement, until all Obligations, contingent
or otherwise, have been fully repaid and performed, Capital shall retain its
security interest in all presently owned and hereafter arising or acquired
Collateral, and Borrower shall continue to immediately deliver to Capital, in
kind, all collections received respecting the Accounts.
5. Perfection of Security Interest. Borrower
shall execute and deliver to Capital, concurrent with Borrower's execution of
this Agreement, and at any time or times hereafter at the request of Capital,
all financing statements, continuation financing statements, security
agreements, assignments, endorsements, affidavits, reports, notices, schedules
of accounts, letters of authority and all other documents that Capital may
reasonably request, in form satisfactory to Capital, to perfect and maintain
perfected Capital's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under this Agreement.
6. Access to Borrower's Books. Capital (through
any of its officers, employees or agents) shall have the right, at any time or
times hereafter, during Borrower's usual business hours, or during the
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usual business hours of any third party having control over the records of
Borrower, to inspect and verify Borrower's Books in order to verify the amount
or condition of, or any other matter relating to, the Collateral and Borrower's
financial condition.
7. Power of Attorney. Borrower hereby
irrevocably makes, constitutes and appoints Capital (and any of Capital's
officers, employees or agents designated by Capital) as Borrower's true and
lawful attorney with power:
1. Upon Borrower's failure or refusal
to comply with its undertakings contained in Section 4.5, to sign the name of
Borrower on any of the documents described in that section or on any other
similar documents which need to be executed, recorded and/or filed in order to
perfect or continue perfected Capital's security interest in the Collateral;
2. To endorse Borrower's name on any
checks, notes, acceptances, money orders, drafts or other forms of payment or
security that may come into Capital's possession;
3. To sign Borrower's name on drafts
against account debtors, on schedules and assignments of Accounts, and on
notices to account debtors;
4. After the occurrence of an Event of
Default, to notify the post office authorities to change the address for
delivery of Borrower's mail to an address designated by Capital, to receive and
open all mail addressed to Borrower, and to retain all mail relating to the
Collateral and forward, within two (2) business days of Capital's receipt
thereof, all other mail to Borrower;
5. To send requests for verification
of Accounts; and
6. To do all things necessary to carry
out this Agreement.
The appointment of Capital as Borrower's attorney,
and each and every one of Capital's rights and powers, being coupled with an
interest, are irrevocable so long as any Accounts in which Capital has a
security interest remain unpaid and until all of the Obligations have been fully
paid and performed. Neither Capital nor its employees, officers or agents shall
be liable for any acts or omissions or for any error in judgment or mistake of
fact or law made in good faith except for gross negligence or willful
misconduct.
5. CONDITIONS PRECEDENT AND SUBSEQUENT
1. Conditions Precedent. As conditions
precedent to any advances by Capital hereunder or any other Loan Agreements,
Borrower shall execute and deliver, or cause to be executed and delivered, to
Capital, in form and substance satisfactory to Capital and its counsel, the
following:
1. Financing statements (form UCC-1) and
fixture filings in form satisfactory for filing and recording with the
appropriate governmental authorities.
2. Certified extracts from the minutes
of the meetings of Borrower's board of directors authorizing the borrowings and
the granting of the security interest provided for herein and authorizing
specific officers to execute and deliver the agreements provided for herein.
3. A certified copy of Borrower's
Articles of Incorporation and any amendments thereto, a certificate of good
standing showing that Borrower is in good standing under the laws of the State
of its incorporation and certificates indicating that Borrower has qualified to
transact business and is in good standing in any other state in which the
conduct of its business or its ownership of property requires that it be so
qualified.
4. UCC searches, tax lien and
litigation searches, fictitious business statement filings, insurance
certificates, notices or other similar documents which Capital may require and
in such
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form as Capital may require, in order to reflect, perfect or protect the
priority of Capital's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under this Agreement.
5. A fully completed Borrowing Base
Certificate, dated as of the date of this Agreement, and certified as being true
and correct by the Chief Executive Officer or Chief Financial Officer.
6. A separate general continuing
guaranty of the Obligations of Borrower to Capital, in a form acceptable to
Capital in its sole discretion, duly executed and delivered by each of the
Guarantors, respectively, to Capital.
7. With respect to each Guarantor that
is a corporation, partnership or limited liability company a separate security
agreement, in form acceptable to Capital in its sole discretion, duly executed
by each such Guarantor, granting to Capital a security interest in all of such
Guarantors personal property in order to secure its obligations under its
respective continuing guaranty.
8. With respect to each Guarantor that
is a corporation, partnership or limited liability company a copy of the
certified extracts from the minutes of the meetings of each of such Guarantor's
board of directors, partners or members, as appropriate authorizing its
continuing guaranty of the Obligations, the granting to Capital of a security
interest in the assets of such Guarantor, and authorizing specific officers,
partners or members to execute and deliver the agreements provided for herein.
9. Evidence satisfactory to Capital
that Borrower has obtained insurance policies or binders, with such insurers and
in such amounts as may be acceptable to Capital, respecting the Inventory,
Equipment and any other tangible personal property comprising the Collateral and
naming Capital as a loss payee on a lender's loss payee endorsement acceptable
to Capital in its sole discretion.
10. INTENTIONALLY OMITTED
11. Separate subordination agreements,
in a form acceptable to Capital in its sole discretion, duly executed and
delivered by each Subordinating Creditor, respectively, to Capital.
12. Evidence satisfactory to Capital,
in its sole discretion, that Borrower has recorded fictitious business name
statements in the appropriate governmental offices regarding all of the trade
names used by Borrower in its business.
13. The Loan Documents.
14. A legal opinion from Borrower's
counsel in form and content acceptable to Capital.
6. BORROWER'S REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties
which shall be deemed to be continuing representations and warranties so long as
any credit hereunder shall be available and until the Obligations have been
repaid in full:
1. Existence and Rights.
1. The chief executive office of Borrower is at
the address indicated in Section 13;
2. Borrower is a corporation duly organized and
existing under the laws of the State of Nevada and is qualified and licensed to
do business and is in good standing in any state in which the conduct of its
business or its ownership of property requires that it be so qualified;
3. Borrower has the right and power to enter
into this Agreement and each of the other Loan Documents;
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4. Borrower has the power, authority, rights
and franchises to own its property and to carry on its business as now
conducted;
5. Borrower has no investment in any other
business entity.
2. Agreement Authorized. The execution, delivery and
performance by Borrower of this Agreement and each of the other Loan Documents:
(a) have been duly authorized and do not require the consent or approval of any
governmental body or other regulatory authority; and (b) shall not constitute a
breach of any provision contained in Borrower's Articles or Certificate of
Incorporation or Bylaws.
3. Binding Agreement. This Agreement is the valid,
binding and legally enforceable obligation of Borrower in accordance with its
terms.
4. No Conflict. The execution, delivery and performance
by Borrower of this Agreement and each of the other Loan Documents: (a) shall
not constitute an event of default under any agreement, indenture or
undertakings to which Borrower is a party or by which it or any of its property
may be bound or affected; (b) are not in contravention of or in conflict with
any law or regulation; and (c) do not cause any lien, charge or other
encumbrance to be created or imposed upon any such property by reason thereof
other than the security interests granted to Capital in the Collateral.
5. Litigation. Except as set forth on Exhibit 6.5, there
are no actions or proceedings pending by or against Borrower or any guarantor of
Borrower before any court or administrative agency, and Borrower has no
knowledge or belief of any pending, threatened or imminent litigation,
governmental investigations or claims, complaints, actions or prosecutions
involving Borrower or any guarantor of Borrower, except for ongoing collection
matters in which Borrower is the plaintiff and except as heretofore disclosed,
in writing, to Capital. Borrower is not in default with respect to any order,
writ, injunction, decree or demand of any court or any governmental or
regulatory authority.
6. Financial Condition. All financial statements and
information relating to Borrower which have been delivered by Borrower to
Capital have been prepared in accordance with generally accepted accounting
principles consistently applied, unless otherwise stated therein, and fairly and
reasonably present Borrower's financial condition. There has been no material
adverse change in the financial condition of Borrower since the date of the most
recent of such financial statements submitted to Capital. Borrower has no
knowledge of any liabilities, contingent or otherwise, which are not reflected
in such financial statements and information, and Borrower has not entered into
any special commitments or contracts which are not reflected in such financial
statements or information which may have a materially adverse effect upon
Borrower's financial condition, operations or business as now conducted.
7. Tax Status. Borrower has no liability for any
delinquent state, local or federal taxes.
8. Title to Assets. Borrower has good title to its
assets and the same are not subject to any liens or encumbrances other than
those permitted by Section 6.11.
9. Trademarks and Patents. Borrower, as of the date
hereof, possesses all necessary trademarks, trade names, copyrights, patents,
patent rights and licenses to conduct its business as now operated, without any
known conflict with the valid trademarks, trade names, copyrights, patents and
license rights of others.
10. Environmental Quality. Borrower has in the past and
is currently in compliance with any and all federal, state and local statutes,
laws and regulations concerning the preservation of the environment and the use
and disposal of hazardous and toxic materials and substances. Borrower is not
aware that it is under investigation by any state or federal agency designed to
enforce any of such laws or regulations.
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11. Accounts and General Intangibles.
1. Borrower has good and marketable title to
the Accounts and General Intangibles, free and clear of liens, claims, security
interests, or encumbrances (except as held by Capital, and except as may be
specifically consented to, in advance and in writing, by Capital); at the time
of their assignment to Capital the Accounts will be bona fide existing
obligations created by the sale or lease of goods or the rendition of services
to account debtors in the ordinary and usual course of business and will be owed
to Borrower without any known defenses, disputes, offsets or counterclaims, or
any rights of return or cancellation; Borrower shall have received no notice of
actual or imminent bankruptcy or insolvency of any account debtor at the time
the Account due from such account debtor is created; and in accordance with
prudent credit policies, the account debtor shall be able to timely discharge
all of its indebtedness to Borrower;
2. Borrower shall deliver to Capital, as
Capital may from time to time require, original delivery receipts, customer's
purchase orders, shipping instructions, bills of lading and other documentation
respecting shipment arrangements. Absent such a request by Capital, copies of
all such documentation shall be held by Borrower as custodian for Capital;
3. At the time each Eligible Account is
assigned to Capital, such Eligible Account will be due and payable in accordance
with the terms set forth in Section 1.11, or on such other terms approved, in
writing, by Capital in advance of the creation of such Account, and such terms
shall be expressly set forth on the face of the invoice for such Account. No
Eligible Account will be past due at the time it is assigned to Capital.
12. INTENTIONALLY OMITTED
13 INTENTIONALLY OMITTED
14. Year 2000 Issues. Borrower has reviewed or
will expeditiously review, its operations with a view to assessing whether its
business will have a "Year 2000 Problem" (as defined below). Borrower shall take
all actions reasonably necessary and commit adequate resources to assure that
its computer-based and other systems are able to effectively process data,
including dates before, on or after January 1, 2000, without experiencing any
Year 2000 Problem that is reasonably likely to cause a material adverse effect
on Borrower or its business. Borrower will provide Lender with assurances and
substantiations (including, but not limited to, the results of internal or
external audit reports prepared in the ordinary course of business) reasonably
acceptable to Lender as to the capability of Borrower to conduct its business
and operations before, on, or after January 1, 2000 without experiencing a Year
2000 Problem causing a material adverse effect on Borrower or its business.
Borrower represents and warrants that it has a reasonable basis to believe that
no Year 2000 Problem will cause a material adverse effect on Borrower or its
business. As used herein, a "Year 2000 Problem" shall mean: (a) the computer
software, computer firmware, computer hardware (whether general or special
purpose) or other similar or related items of automated, computerized or
software systems that are used or relied on by Borrower in the conduct of its
business malfunctioning, ceasing to function, generating incorrect data, or
producing incorrect results when processing, providing, or receiving (i)
date-related data from, into and between years 1999 and 2000 or (ii) any
date-related data in connection with any valid date in the years 1999, 2000 and
thereafter; or (b) any of the products and services sold, licensed, rendered or
otherwise provided by Borrower in the conduct of its business malfunctioning,
ceasing to function, generating incorrect data or producing incorrect results
when processing, provided or receiving (i) date-related data from, into and
between the years 1999 and 2000, or (ii) date-related data in connection with
any valid date in the years 1999 and 2000.
7. BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as any
credit hereunder shall be available and until the Obligations have been repaid
in full, unless Capital shall otherwise consent in writing, Borrower shall do
all of the following:
1. Assignment Schedules and Invoices. Not less
than once each week, Borrower shall deliver to Capital: (1) an assignment
schedule of all Accounts created by Borrower since the delivery of the
immediately preceding assignment schedule required hereunder; (2) copies of
invoices evidencing such sales and shipping evidence and proofs of delivery
relating thereto.
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2. Rights and Facilities. Borrower shall
maintain and preserve all rights, franchises and other authority adequate for
the conduct of its business. Borrower shall also maintain its properties,
equipment and facilities in good order and repair and conduct its business in an
orderly manner without voluntary interruption and maintain and preserve its
existence.
3. INTENTIONALLY OMITTED
4. INTENTIONALLY OMITTED
5. Insurance. Borrower, at its expense, shall
keep and maintain its Inventory and Equipment insured against loss or damage by
fire, theft, explosion, sprinklers and all other hazards and risks ordinarily
insured against by other owners who use such properties in similar businesses
for the full insurable value thereof. Borrower shall deliver to Capital
certified copies of such policies of insurance and evidence of the payments of
all premiums therefor. Borrower shall also keep and maintain business
interruption, public liability, and property damage insurance relating to
Borrower's ownership and use of the Inventory, Equipment and its other assets.
All such policies of insurance shall be in such form, with such companies, and
in such amounts as may be satisfactory to Capital. All such policies of
insurance (except those of public liability and property damage) shall contain
an endorsement in a form satisfactory to Capital showing Capital as a loss payee
thereof, and all proceeds payable thereunder shall be payable to Capital and,
upon receipt by Capital, shall be applied on account of the Obligations owing to
Capital. To secure the payment of the Obligations, Borrower grants Capital a
security interest in and to all such policies of insurance (except those of
public liability and property damage) and the proceeds thereof, and Borrower
shall direct all insurers under such policies of insurance to pay all proceeds
thereof directly to Capital.
6. Notice of Litigation. If at any time during
the term of this Agreement any litigation, governmental investigations or
claims, complaints, actions or prosecutions involving Borrower or any guarantor
of Borrower's Obligations due Capital shall be commenced or threatened, Borrower
shall immediately notify Capital in writing of such event.
7. Submission of Records and Reports.
1. Borrower shall execute and deliver
to Capital by the fifteenth (15th) day of each month during the term of this
Agreement, each certified by the Chief Executive Officer or Chief Operating
Officer of Borrower as being true and correct, (i) a current detailed aging, by
total and by customer, of Borrower's Accounts, and a Compliance Certificate in
the form of Exhibit 7.7 from the Chief Executive Officer or Chief Operating
Officer of Borrower certifying that no Event of Default currently exists under
this Agreement, all of which shall be set forth in a form and shall contain such
information as is acceptable to Capital;
2. Borrower shall promptly supply
Capital with such other information concerning its affairs as Capital may
request from time to time hereafter, and shall promptly notify Capital of any
material adverse change in Borrower's financial condition and of any condition
or event which constitutes a breach of, or an event which constitutes an Event
of Default under, this Agreement.
8. Taxes. All assessments and taxes, whether
real, personal or otherwise, due or payable by, or imposed, levied or assessed
against Borrower or any of its property shall be paid in full, before
delinquency or before the expiration of any extension period. Borrower shall
make due and timely payment or deposit of all federal, state and local taxes,
assessments or contributions required of it by law, and will execute and deliver
to Capital, on demand, appropriate certificates attesting to the payment or
deposit thereof. Borrower will make timely payment or deposit of all F.I.C.A.
payments and withholding taxes required of it by applicable laws, and will, upon
request, furnish Capital with proof satisfactory to Capital indicating that
Borrower has made such payments or deposits.
9. Financial Statements.
1. Borrower shall maintain a standard
and modern system of accounting in accordance with generally accepted accounting
principles consistently applied with ledger and account cards and/or computer
tapes, discs, printouts, and records pertaining to the Collateral which contain
information as may from time to time be requested by Capital. Borrower shall not
modify or change its method of accounting or enter into,
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modify or terminate any agreement presently existing, or at any time hereafter
entered into with any third party accounting firm and/or service bureau for the
preparation and/or storage of Borrower's accounting records without said
accounting firm and/or service bureau agreeing to provide to Capital information
regarding the Collateral and Borrower's financial condition. Borrower agrees to
permit Capital and any of its employees, officers or agents, upon demand, during
Borrower's usual business hours, or the usual business hours of third persons
having control thereof, to have access to and examine all of Borrower's Books
relating to the Collateral, the Obligations, Borrower's financial condition and
the results of Borrower's operations, and, in connection therewith, permit
Capital or any of its agents, employees or officers to copy and make extracts
therefrom.
2. For each of Borrower's fiscal years during
the term of this Agreement, Borrower shall deliver to Capital:
1. within thirty (30) days after the
end of each month, a company prepared statement of the financial
condition of Borrower for such monthly period, including, but not
limited to, a balance sheet, a profit and loss statement, and a cash
flow statement, and any other report requested by Capital relating to
the Collateral and the financial condition of Borrower, and a
certificate signed by the Chief Executive Officer or Chief Financial
Officer of Borrower, to the effect that all statements and reports
delivered or caused to be delivered to Capital under this subsection,
fairly and thoroughly present the financial condition of Borrower and
that there exists on the date of delivery to Capital no condition or
event which constitutes an Event of Default under this Agreement or
which, with the giving of notice or the passage of time or both, would
constitute an Event of Default under this Agreement;
2. within sixty (60) days after the
end of the [first three (3) fiscal quarters] of Borrower's fiscal
years, an unaudited statement of the financial condition of Borrower
for each such quarterly period, prepared by independent certified
public accountants acceptable to Capital, including, but not limited
to, a balance sheet, a profit and loss statement, and a cash flow
statement, and any other report requested by Capital relating to the
Collateral and the financial condition of Borrower, and a certificate
signed by the Chief Executive Officer or Chief Operating Officer of
Borrower, to the effect that all reports, statements, computer disc or
tape files, printouts, runs, or other computer prepared information of
any kind or nature relating to the foregoing or documents delivered or
caused to be delivered to Capital under this subsection, fairly and
thoroughly present the financial condition of Borrower and that there
exists on the date of delivery to Capital no condition or event which
constitutes an Event of Default under this Agreement or which, with the
giving of notice or the passage of time or both, would constitute an
Event of Default under this Agreement;
3. within ninety (90) days after the
end of each of Borrower's fiscal years, an audited statement of the
financial condition of Borrower for such fiscal year, prepared by
independent certified public accountants acceptable to Capital,
including, but not limited to, a balance sheet, a profit and loss
statement, and a cash flow statement, and any other report requested by
Capital relating to the Collateral and the financial condition of
Borrower, and a certificate signed by the Chief Executive Officer or
Chief Operating Officer of Borrower, to the effect that all reports,
statements, computer disc or tape files, printouts, runs, or other
computer prepared information of any kind or nature relating to the
foregoing or documents delivered or caused to be delivered to Capital
under this subsection, fairly and thoroughly present the financial
condition of Borrower and that there exists on the date of delivery to
Capital no condition or event which constitutes an Event of Default
under this Agreement or which, with the giving of notice or the passage
of time or both, would constitute an Event of Default under this
Agreement.
10. Financial Covenants. Borrower shall maintain
at all times during the term of this Agreement each of the following:
1. A Debt to Tangible Effective Net
Worth Ratio of not more than 6.3 to 1.0.
2. Working Capital of not less than
Five Hundred and Fifty Thousand and 00/100 Dollars ($550,000.00).
3. Tangible Net Worth of not less than
One Million and 00/100 Dollars ($1,000,000.00).
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11. Tax Returns. Borrower shall deliver to
Capital copies of each of Borrower's future federal income tax returns, and any
amendments thereto, within fifteen (15) calendar days following the filing
thereof with the Internal Revenue Service. Upon the written request of Capital,
Borrower further agrees to promptly deliver to Capital copies of all receipts
issued to Borrower for the payment of federal withholding taxes required of it.
12. Payment of Debts. Borrower shall be at all
times hereafter solvent and able to pay its debts (including trade debts) as
they mature.
13. Compliance with Environmental Laws. Borrower
shall comply with any and all federal, state and local statutes, laws and
regulations concerning the preservation of the environment and the use and
disposal of hazardous and toxic materials and substances.
14. Reimbursement for Capital Expenses. Upon the
demand of Capital, Borrower shall immediately reimburse Capital for all sums
expended by Capital which constitute Capital Expenses, and Borrower hereby
authorizes and approves all advances and payments by Capital for items
constituting Capital Expenses.
8. BORROWER'S NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any
credit hereunder shall be available and until the Obligations have been repaid
in full, unless Capital shall otherwise consent in writing, Borrower shall not
do any of the following:
1. Relocate of Chief Executive Office. Borrower
will not, without thirty (30) days prior written notification to Capital,
relocate its chief executive office.
2. Agreements with Account Debtors. After an
Event of Default hereunder, no discount, credit or allowance shall be granted by
Borrower to any account debtor and no return of merchandise shall be accepted by
Borrower without Capital's consent. Capital may, after an Event of Default,
settle or adjust disputes and claims directly with account debtors for amounts
and upon terms which Capital considers advisable, and in such cases, Capital
will credit Borrower's account with only the net amounts received by Capital in
payment of such disputed Accounts, after deducting all Capital Expenses incurred
or expended in connection therewith.
3. Storage of Inventory. The Inventory shall
not at any time or times hereafter be stored with a bailee, warehouseman or
similar party without Capital's prior written consent, and, in such event,
Borrower will, concurrent therewith, cause any such bailee, warehouseman or
similar party to issue and deliver to Capital, in a form acceptable to Capital,
warehouse receipts in Capital's name evidencing the storage of the Inventory.
4. Business Structure and Operations. Borrower
shall not, without Capital's prior written consent:
1. Sell, lease, or otherwise dispose
of, move, relocate (except in connection with a relocation of Borrower's
business facility) or transfer, whether by sale or otherwise, any of Borrower's
assets, except sales of Inventory in the ordinary and usual course of Borrower's
business as presently conducted, ;
2. Change Borrower's name or form of
entity, or add any new fictitious name;
3. Acquire, merge or consolidate with
or into any other business organization;
4. Enter into any transaction not in
the ordinary and usual course of Borrower's business;
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5. Guarantee or otherwise become in
any way liable with respect to the obligations of any third party except by
endorsement of instruments or items of payment for deposit to the general
account of Borrower or which are transmitted or turned over to Capital;
6. Make any change in the Borrower's
financial structure or in any of its business objectives, purposes or operations
which could adversely affect the ability of Borrower to repay the Obligations;
7. Incur any debts outside the
ordinary and usual course of Borrower's business;
8. Make any advance or loan in excess
of $25,000 to any person or entity;
9. Prepay any existing indebtedness
owing to any third party;
10. Cause, permit or suffer any change,
direct or indirect, in Borrower's capital ownership;
11. Make any distribution or declare or
pay any dividends (in cash or in stock) on, or purchase, acquire, redeem or
retire any of its capital stock, of any class, whether now or hereafter
outstanding;
12. Pay total cash compensation to
officers (Xxx Xxxxxxx, CEO and President and W. Xxx Xxxxxx, EVP) of Borrower (or
any of their relatives), including salaries, withdrawals, fees, bonuses,
commissions, drawing accounts and other payments, whether directly or
indirectly, in money or otherwise, during the each fiscal year of Borrower
during the term of this Agreement in an aggregate amount for all such officers
in excess of Five Hundred and Twenty-Five Thousand and 00/100 Dollars
($525,000.00);
13. Make any plant or fixed capital
expenditure, or any commitment therefor, in any fiscal year, in an aggregate
amount in excess of Two Hundred Thousand and 00/100 Dollars ($200,000.00);
14. Suspend or go out of business.
5. ERISA.
1. Borrower shall not withdraw from
participation in, permit the termination or partial termination of, or permit
the occurrence of any other event with respect to any deferred compensation plan
maintained for the benefit of Borrower's employees under circumstances that
could result in liability to the Pension Benefit Guaranty Corporation, or any of
its successors or assigns, or to any entity which provides funds for such
deferred compensation plan.
2. Borrower shall not withdraw from
any multi-employer plan described in Section 4001(a)(3) of ERISA which covers
Borrower's employees.
9. EVENTS OF DEFAULT
Any one or more of the following events shall
constitute an Event of Default by Borrower under this Agreement:
1. Failure to Pay Obligations. If Borrower
fails to pay when due and payable or when declared due and payable all or any
portion of the Obligations owing to Capital (whether of principal, taxes,
reimbursement of Capital Expenses, or otherwise);
2. Failure to Perform. If Borrower or any
guarantor fails or neglects to perform, keep or observe any term, provision,
condition, covenant, agreement, warranty or representation contained in this
Agreement, in any of the other Loan Documents, or in any other present or future
agreement between Borrower and
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Capital or any guarantor and Capital and such failure has a materially adverse
effect on the Collateral or the business operations of Borrower;
3. Inaccurate Information. If any
representation, statement, report, or certificate made or delivered by Borrower,
or any of its officers, employees or agents, to Capital is not true and correct,
including, but not limited to, any Borrowing Base Certificate delivered to
Capital pursuant to this Agreement;
4. Third Party Claim. If all or a material
portion of Borrower's assets are attached, seized, subjected to a writ or
distress warrant, or are levied upon, or come into the possession of any
Judicial Officer or Assignee;
5. Impairment. If there is a material
impairment of the prospect of repayment of all or any portion of the Obligations
owing to Capital or a material impairment of the value or priority of Capital's
security interests in the Collateral;
6. Voluntary Insolvency Proceeding. If an
Insolvency Proceeding is commenced by Borrower;
7. Involuntary Insolvency Proceeding. If an
Insolvency Proceeding is commenced against Borrower;
8. Interruption of Business. If Borrower is
enjoined, restrained or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs;
9. Governmental Lien. If a notice of lien, levy
or assessment is filed of record with respect to any or all of Borrower's assets
by the United States Government, or any department, agency or instrumentality
thereof, or by any state, county, municipal or other governmental agency, or if
any tax or debt owing at any time hereafter to any one or more of such entities
becomes a lien, whether xxxxxx or otherwise, upon any or all of the Borrower's
assets and the same is not paid on the payment date thereof;
10. Liens. If a judgment or other claim becomes
a lien or encumbrance upon all or a material portion of Borrower's assets;
11. Default in Agreement with Third Party. If
there is a default in any loan agreement, mortgage, indenture or other agreement
to which Borrower is a party with third parties and Capital determines that such
default shall have a materially adverse effect on Borrower's business or the
prospects for repayment of the Obligations;
12. Payment on Subordinated Debt. If Borrower
makes any payment on Subordinated Debt in violation of the applicable
Subordination Agreement;
13. Misrepresentation. If any misrepresentation
exists now or hereafter in any warranty or representation made to Capital by
Borrower or any officer or director of Borrower, or if any such warranty or
representation is withdrawn by Borrower or by any officer or director of
Borrower;
14. Impairment of Guaranty. If any guarantor of
Borrower's indebtedness to Capital dies, terminates its guaranty, defaults in
the payment or performance of any obligations of guarantor owing to Capital, or
becomes the subject of an Insolvency Proceeding;
15. Reportable Event Under ERISA. If any
reportable event, which Capital determines will have a material adverse effect
on the financial condition of Borrower or which Capital determines constitutes
grounds for the termination of any deferred compensation plan by the Pension
Benefit Guaranty Corporation or for the appointment by the appropriate United
States District Court of a trustee to administer any such plan, shall have
occurred and be continuing thirty (30) days after written notice of such
determination shall have been given to Borrower by Capital, or any such Plan
shall be terminated within the meaning of Title IV of ERISA, or a trustee shall
be appointed by the appropriate United States District Court to administer any
such plan, or the Pension Benefit Guaranty Corporation shall institute
proceedings to terminate any plan and in case of any event described in this
Section 9.15, the aggregate amount of the Borrower's liability to the Pension
Benefit
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Guaranty Corporation under Sections 4062, 4063 or 4064 of ERISA shall exceed
five percent (5%) of Borrower's tangible net worth; or
16. Withdrawal from Multi-Employer Plan.
Borrower shall have withdrawn from a multi-employer plan described in Section
4001(a)(3) of ERISA and incurs withdrawal liability as a result thereof.
17. Repudiation of or Default Under Guaranty. If
any Guarantor dies, goes out of business, ceases operations, becomes insolvent,
becomes the subject of any voluntary or involuntary bankruptcy, purports to
revoke or terminate its Guaranty, defaults in the payment or performance of any
obligations of Guarantor owing to Capital or disputes liability under this
Guaranty.
18. Cure Periods. Notwithstanding anything
contained in this Section 9 to the contrary, Capital shall refrain from
exercising its rights and remedies and an Event of Default shall not be deemed
to have occurred by reason of the occurrence of: (i) an event set forth in
Section 9.7 if, within thirty (30) calendar days from the date thereof, the same
is discharged or dismissed, or (ii) any of the events set forth in Sections 9.4
or 9.10 if, within ten (10) calendar days from the date thereof, the same is
released, discharged, dismissed, bonded against or satisfied; provided, however,
if the event is the institution of Insolvency Proceedings against Borrower,
Capital shall not be obligated to make advances to Borrower during such cure
period.
10. CAPITAL'S RIGHTS AND REMEDIES
1. Remedies. Upon the occurrence of an Event of
Default by Borrower under this Agreement, Capital may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrower:
1. Declare all Obligations, whether
arising pursuant to this Agreement or otherwise, immediately due and payable;
2. Cease advancing money or extending
credit to or for the benefit of Borrower under this Agreement or under any other
agreement between Borrower and Capital;
3. Setoff, appropriate and apply any
and all deposits held or owing to Capital to or for credit or account of
Borrower against and on account of the Obligations of Borrower arising under the
Loan Documents;
4. Terminate this Agreement and any of
the other Loan Documents as to any future liability or obligation of Capital,
but without affecting Capital's rights and security interest in the Collateral
and without affecting the Obligations owing by Borrower to Capital;
5. Capital or Capital's designee may
notify customers, account debtors or lessees of Borrower that the Accounts have
been assigned to Capital and that Capital has a security interest therein,
collect them directly, and charge the collection costs and expenses to
Borrower's loan account;
6. Without notice to or demand upon
Borrower or any guarantor, make such payments and do such acts as Capital
considers necessary or reasonable to protect its security interest in the
Collateral. Borrower agrees to assemble the Collateral if Capital so requires,
and to make the Collateral available to Capital as Capital may designate.
Borrower authorizes Capital to enter the premises where the Collateral is
located, take and maintain possession of the Collateral, or any part of it, and
to pay, purchase, contest or compromise any encumbrance, charge or lien which in
the opinion of Capital appears to be prior or superior to its security interest
and to pay all expenses incurred in connection therewith;
7. Capital is hereby granted a license
or other right to use, without charge, Borrower's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale and selling any
Collateral and Borrower's rights under all licenses, and all franchise
agreements shall insure to Capital's benefit;
8. Ship, reclaim, recover, store,
finish, maintain, repair, prepare for sale, advertise for sale and sell (in the
manner provided for herein) the Collateral;
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9. Sell the Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms. It is not necessary that the Collateral be
present at any such sale;
10. In connection with any such sale,
the standard of commercial reasonableness will be deemed satisfied if Capital
does the following:
1. Location of Sale(s). The
sale(s) may be conducted at Borrower's premises, Capital's premises,
the premises of any third party located in or adjacent to any county in
which any of the collateral is located, or any other location which
Capital believes is reasonably convenient to potential purchasers. The
selection of any such location(s) shall be in the sole and absolute
discretion of Capital.
2. Notice of Sale. Capital
shall give notice of the disposition of the Collateral as follows:
1. Capital shall
give Borrower and each holder of a security interest in the
Collateral who has filed with Capital a written request for
notice, a notice in writing of the time and place of public
sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the
Collateral, the time on or after which the private sale or
other disposition is to be made;
2. The notice shall
be personally delivered or mailed, postage prepaid, to
Borrower as provided in Section 13, at least ten (10) calendar
days before the date fixed for the sale, or at least ten (10)
calendar days before the date on or after which the private
sale or other disposition is to be made, unless the Collateral
is perishable or threatens to decline speedily in value.
Notice to persons other than Borrower claiming an interest in
the Collateral shall be sent to such addresses as they have
furnished to Capital;
3. If the sale is to
be a public sale, Capital shall also give notice of the time
and place by publishing a notice one time at least ten (10)
calendar days before the date of the sale in a newspaper of
general circulation in the county in which the sale is to be
held;
3. Capital may credit bid and purchase
at any public sale;
4. Borrower shall pay all Capital
Expenses incurred in connection with Capital's enforcement and exercise of any
of its rights and remedies as herein provided, whether or not suit is commenced
by Capital;
5. Any deficiency which exists after
disposition of the Collateral as provided above will be paid immediately by
Borrower. Any excess will be returned, without interest and subject to the
rights of third parties, to Borrower by Capital.
2. Cumulative Rights. Capital's rights and
remedies under this Agreement and all other agreements shall be cumulative.
Capital shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Capital of one
right or remedy shall be deemed an election, and no waiver by Capital of any
default on Borrower's part shall be deemed a continuing waiver. No delay by
Capital shall constitute a waiver, election or acquiescence by it.
11. TAXES AND EXPENSES REGARDING THE COLLATERAL
If Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums, or otherwise) due to third persons or entities,
or fails to make any deposits or furnish any required proof of payment or
deposit, all as required under the terms of this Agreement, then Capital may, to
the extent that it determines in its sole discretion that such failure by
Borrower could have a material adverse change on Capital's interests in the
Collateral, in its discretion and without prior notice to Borrower, (i) make
payment of the same or any part thereof; (ii) set up such reserves in Borrower's
loan account as Capital deems necessary to protect Capital from the exposure
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created by such failure; or (iii) both. Any amounts paid or deposited by Capital
shall constitute Capital Expenses, shall be immediately charged to Borrower's
loan account and become additional Obligations owing to Capital, shall bear
interest at the applicable rate set forth in Section 2.4, and shall be secured
by the Collateral. Any payments made by Capital shall not constitute: (i) an
agreement by Capital to make similar payments in the future, or (ii) a waiver by
Capital of any Event of Default under this Agreement. Capital need not inquire
as to, or contest the validity of, any such expense, tax, security interest,
encumbrance or lien, and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
12. WAIVERS
1. Application of Payments. Borrower waives the
right to direct the application of any and all payments at any time or times
hereafter received by Capital on account of any Obligations owed by Borrower to
Capital, and Borrower agrees that Capital shall have the continuing exclusive
right to apply and reapply such payments in any manner as Capital may deem
advisable, notwithstanding any entry by Capital upon its books.
2. Demand, Protest, Default, Etc. Except as
otherwise provided herein, Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of
nonpayment at maturity, release, compromise, settlement, extension or renewal of
any or all commercial paper, accounts, documents, instruments, chattel paper,
and guarantees at any time held by Capital on which Borrower may in any way be
liable.
3. Maintenance of Collateral. So long as
Capital complies with its obligations, if any, under Section 9207 of the Code,
Capital shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Inventory and/or Equipment; (b) any loss or damage thereto
occurring or arising in any manner or fashion from any cause; (c) any diminution
in the value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency or other person whomsoever. All risk or loss, damage
or destruction of the Inventory and Equipment shall be borne by Borrower.
4. Confidential Relationship. Borrower waives
the right to assert a confidential relationship, if any, it may have with any
accounting firm and/or service bureau in connection with any information
requested by Capital pursuant to or in accordance with this Agreement, and
agrees that Capital may contact directly any such accounting firm and/or service
bureau in order to obtain such information.
13. NOTICES
Unless otherwise specifically provided herein, all
notices and service of any process shall be in writing addressed to the
respective party as set forth below and may be personally served, telecopied or
sent by overnight courier service or United States mail and shall be deemed to
have been given: (a) if delivered in person, when delivered; (b) if delivered by
telecopy, on the date of transmission if confirmed and if transmitted on a
Business Day before 4:00 p.m. (Eastern Standard time) or, if not, on the next
succeeding Business Day; (c) if delivered by overnight courier, two days after
delivery to such courier properly addressed; or (d) if by U.S. Mail, four
Business Days after depositing in the United States mail, with postage prepaid
and properly addressed.
If to Borrower: XXXXXXX INTERNATIONAL, INC.
0000 Xxxxxxxx Xxxx
Xxxxxxxxx, X. C. 28210
Attn: Xxxxxx X. Xxxxx, Chief Financial
Officer
Telecopier Number (000) 000-0000
If to Capital: CAPITAL FACTORS, INC.
One Morrocroft Center
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, Senior Vice
President
Telecopier Number (000) 000-0000
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The parties hereto may change the address at which
they are to receive notices and the telecopier number at which they are to
receive telecopies hereunder, by notice in writing in the foregoing manner given
to the other.
14. DESTRUCTION OF BORROWER'S DOCUMENTS
Any documents, schedules, invoices or other papers
delivered to Capital may be destroyed or otherwise disposed of by Capital four
(4) months after they are delivered to or received by Capital, unless Borrower
requests, in writing, the return of the said documents, schedules, invoices or
other papers and makes arrangements, at Borrower's expense, for their return.
15. CHOICE OF LAW
The validity of this Agreement, its construction,
interpretation and enforcement, and the rights of the parties hereunder and
concerning the Collateral, shall be determined under, governed by, and construed
in accordance with the laws of the State of North Carolina. The parties agree
that all actions or proceedings arising in connection with this Agreement shall
be tried and litigated only in the state and federal courts located in the
County of Mecklenburg, State of North Carolina. Borrower waives any right it may
have to assert the doctrine of forum non conveniens or to object to such venue
and hereby consents to any court ordered relief.
16. GENERAL PROVISIONS
1. Representations and Warranties Repeated.
Each representation, warranty and agreement contained in this Agreement shall be
automatically deemed repeated with each advance and shall be conclusively
presumed to have been relied on by Capital regardless of any investigation made
or information possessed by Capital. The warranties, representations and
agreements set forth herein shall be cumulative and in addition to any and all
other warranties, representations and agreements which Borrower shall give, or
cause to be given, to Capital, either now or hereafter.
2. Binding Agreement. This Agreement shall be
binding and deemed effective when executed by Borrower and accepted and executed
by Capital.
3. Right to Grant Participations. This
Agreement shall bind and inure to the benefit of the respective successors and
assigns of each of the parties; provided, however , that Borrower may not assign
this Agreement or any rights hereunder without Capital's prior written consent
and any prohibited assignment shall be absolutely void. No consent to an
assignment by Capital shall release Borrower from its Obligations to Capital.
Capital may assign this Agreement and its rights and duties hereunder. Capital
reserves the right to sell, assign, transfer, negotiate or grant participations
in all or any part of, or any interest in, Capital's rights and benefits
hereunder. In connection therewith, Capital may disclose all documents and
information which Capital now or hereafter may have relating to Borrower or
Borrower's business.
4. Indemnification. In consideration of the
execution and delivery of this Agreement and the extension of financial
accommodations by Capital to Borrower pursuant to this Agreement, Borrower
agrees to indemnify, save, exonerate, and hold Capital, and each of the
officers, directors, employees and agents of Capital (herein collectively called
the "Indemnitees" and individually called an "Indemnitee") free and harmless
from and against any and all actions, claims, causes of action, suits, losses,
liabilities, damages, and expenses, including, without limitation, reasonable
attorneys' fees (including allocated costs for in-house legal services provided
and attorneys' fees in all bankruptcy proceedings) and disbursements (herein
collectively called the "Indemnified Liabilities"), which may be incurred by or
asserted against the Indemnitees or any Indemnitee as a result of, or arising
out of, or relating to, or in connection with, any investigation, litigation, or
proceeding related to any use made or proposed to be made by Borrower of the
proceeds of any advance or loan made hereunder, or the consummation of the
transactions contemplated hereby, whether or not any such Indemnitee is a party
thereto, and, if and to the extent that the foregoing undertaking may be
unenforceable for any reason, Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities as is permissible under applicable law.
If any action, suit, or proceeding arising from any
of the foregoing is brought against Capital, or any Indemnitee or affiliate of
an Indemnitee indemnified or intended to be indemnified pursuant to this
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Section 16.4, Borrower, to the extent and in the manner directed by the
Indemnitee or intended Indemnitee, shall resist and defend such action, suit, or
proceeding or cause the same to be resisted and defended by counsel designated
by Borrower (which counsel shall be reasonably satisfactory to the Indemnitee or
intended Indemnitee). Each Indemnitee shall use its best efforts to cooperate in
the defense of any such action, writ, or proceeding. Borrower shall have no
obligation to any Indemnitee under this Section 16.4 to the extent that the
Indemnified Liabilities resulted from the gross negligence or willful misconduct
on the part of any Indemnitee. The Obligations of Borrower under this Section
16.4 shall survive the termination of this Agreement and the discharge of the
Borrower's other Obligations hereunder.
5. Section Headings. Section headings and
section numbers have been set forth herein for convenience only. Unless the
contrary is compelled by the context, everything contained in each section
applies equally to this entire Agreement.
6. Interpretation. Neither this Agreement nor
any uncertainty or ambiguity herein shall be construed or resolved against
Capital or Borrower, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.
7. Severability. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
8. Modification and Merger. This Agreement
cannot be changed or terminated orally. All prior agreements, understandings,
representations, warranties and negotiations, if any, are merged into this
Agreement.
9. Good Faith Requirement. The parties intend
and agree that their respective rights, duties, powers, liabilities, obligations
and discretions shall be performed, carried out, discharged and exercised
reasonably and in good faith.
10. JURY TRIAL. BORROWER AND CAPITAL EACH WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OF THE LOAN DOCUMENTS.
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IN WITNESS WHEREOF, BORROWER AND CAPITAL HAVE CAUSED THEIR
DULY AUTHORIZED OFFICERS TO EXECUTE THIS AGREEMENT TO BE EFFECTIVE ON THE DATE
FIRST SET FORTH ABOVE.
WITNESSES: XXXXXXX INTERNATIONAL, INC.
a Nevada corporation
Xxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------- ----------------------------------
Xxxxxx X. Xxxxx Xxxxxxx X. Xxxxxxx, President
---------------------------------------
CAPITAL FACTORS, INC.,
a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------- ----------------------------------
Xxxxxxx X. Xxxxxxxx
--------------------------------------- Senior Vice President
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STATE OF NORTH CAROLINA )
) SS:
COUNTY OF MECKLENBURG )
The foregoing instrument was acknowledged before me this 30 day of
June, 1999 by XXXXXXX X. XXXXXXX, as President of XXXXXXX INTERNATIONAL, INC.,
a Nevada corporation, on behalf of the corporation. He is personally known
to me or [] has produced _________________________________, as identification.
/s/ Xxx X. Xxxxxxx
---------------------------------------------
Notary Public, State of North Carolina
Print Name: XXX X. XXXXXXX
My Commission Expires:
November 15, 2002
---------------------------
Commission Number:
--------------------------
[NOTARIAL SEAL]
STATE OF NORTH CAROLINA )
) SS:
COUNTY OF MECKLENBURG )
The foregoing instrument was acknowledged before me this 8th day of
July, 1999 by XXXXXXX X. XXXXXXXX, as Senior Vice President of CAPITAL FACTORS,
a Florida corporation, on behalf of t he corporation.
/s/ Xxxxx X. Xxxxxx
--------------------------------------------
Notary Public, State of North Carolina
Print Name: XXXXX X. XXXXXX
My Commission Expires:
6-23-2001
---------------------------
Commission Number:
--------------------------
[NOTARIAL SEAL]
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SAMPLE
EXHIBIT 1.4
BORROWING BASE CERTIFICATE AND DISBURSEMENT INSTRUCTIONS
Present to : Capital Factors, Inc.
0000 Xxxxxxxx Xxxx., Xxxxx 000, Xxxxxxxxx, XX 00000
By: XXXXXXX INTERNATIONAL, INC Date:__________________________
0000 Xxxxxxxx Xxxx Client #: SWI01
_____________________
Charlotte, North Carolina Certificate #:_________________
Pursuant to Section 2.6 of that certain Loan and Security Agreement dated
______, as amended, between Xxxxxxx International, Inc. and Capital Factors,
Inc. (defined terms therein being used with the same meanings), the undersigned
represents the following:
I. COLLATERAL COMPUTATION
-------------------------------
A. ACCOUNTS RECEIVABLE
1. A/R balance forward from Line 5 of Borrowing Base Certificate #_________ ______________
2. Add: Net sales on assignment # ________________, (attached): ______________
3. Subtract: Net collections on collection report #___________, (attached): ______________
4. Subtract: Returns & other credits: ______________
5. Gross A/R: (Line 1 plus Line 2, minus Line 3, minus Line 4) ______________
6. Subtract: Ineligible A/R: (from page 2) ______________
7. ELIGIBLE A/R: (Line 5 minus Line 6) ______________
II. BORROWING BASE COMPUTATION
B. ACCOUNTS RECEIVABLE
8. TOTAL BORROWING BASE (Lesser of 80% of Line 7 or $1,750,000): ______________
III. LOAN COMPUTATION
9. Adjusted loan balance from Line 13 of Borrowing Base Certificate # ________: ______________
10. Subtract: Net collections on collection report #________, (attached): ______________
11. Add: other charges ______________
12. ADD: ADVANCE REQUESTED ON THIS BORROWING BASE CERTIFICATE: ______________
13. Adjusted loan balance (Line 9 minus Line 10, plus Line 11, plus ______________
Line 12): ______________
IV. AVAILABILITY
14. Total Borrowing Base (from Line 8): ______________
15. Subtract: Adjusted loan balance (Line 13): ______________
16. AVAILABLE TO BORROW (Line 14 minus Line 15) Must be a positive #: ______________
DISBURSEMENT INSTRUCTIONS: Please transfer the amount requested on Line 12 above
to our account #______________________ at ___________________ Bank.
CERTIFICATION: In connection with the foregoing and page 2 hereof, the
undersigned further certifies that no Event of Default or an event which the
giving of notice or the passage of time both would constitute an Event of
Default presently exists.
CERTIFIED, TRUE AND CORRECT: XXXXXXX INTERNATIONAL, INC.
BY:
-------------------------
XXXXXX X. XXXXX
TITLE: CHIEF FINANCIAL OFFICER
27
SAMPLE
PAGE 2 OF BORROWING BASE CERTIFICATE #______________________________
BY: XXXXXXX INTERNATIONAL, INC.
0000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx
COMPUTATION OF INELIGIBLE ACCOUNTS AS OF: ___________/___________/__________
a. Accounts 120 days or more past due ______________
b. Government accounts ______________
c. Affiliate accounts other than Lone Star Hygiene or Charlotte ______________
Hygiene Associates ______________
d. Concentrations in excess of 25%
e. % of Line IA1 of page 1 ______________
f. Cross aged 25% or more ______________
g. Finance charges ______________
h. Employee accounts ______________
i. COD accounts ______________
j. Contra accounts ______________
k. Credits ______________
l. Foreign Accounts other than Canada ______________
m. Consignment, guaranteed sale accounts ______________
n. Pre-billed accounts ______________
o. Account with terms in excess of net 30 days ______________
p. Other ______________
TOTAL INELIGIBLE ACCOUNTS: (Enter on Line 6 on page 1) ______________
28
SAMPLE
EXHIBIT 2.3
TELEPHONE INSTRUCTION LETTER
June , 1999
Capital Factors, Inc.
0000 Xxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn:
Gentlemen:
Please refer to that certain Loan and Security Agreement of even date
herewith between us (as at any time amended, the "Loan Agreement").
From any advances which you make to us under the Loan Agreement, we
hereby authorize and direct you to make disbursements from time to time for our
account to our bank account number maintained with ______________, N.A. upon
receipt of telephone instructions from any of the following persons or their
respective designees:
Name: Title
Xxxxxxx X. Xxxxxxx Chairman of the Board,/President
Xxxxxx X. Xxxxx Chief Financial Officer
Xxx Xxxxx Vice President Finance
You shall have no liability to us whatsoever for acting upon any such
telephone instruction which you, in good faith, believe was given by any of the
above designated persons or their respective designees and you shall have no
duty to inquire as to the propriety of any disbursement.
You shall have the right to accept the telephone instructions of any of
the above designated persons or their respective designees unless and until
actual receipt by you from us of written notice of termination of the authority
of any such designated persons. We may change persons designated to give you
telephone instructions only by delivering to you written notice of such change,
but you shall be authorized in all events to act upon the telephone instructions
of other persons whom you in good faith believe to be one of our officers.
29
SAMPLE
Unless and until you advise us to the contrary, each telephone instruction from
the above-named persons or their respective designees shall be followed by a
written confirmation of the request for disbursement in such form as you make
available from time to time to us for such purpose.
Very truly yours,
By:
-------------------------------
Title:
----------------------------
30
SAMPLE
EXHIBIT 2.7
CAPITAL FACTORS
COLLECTION REPORT
CLIENT: XXXXXXX INTERNATIONAL, INC. REPORT #
----------------
DATE:
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INVOICE CHECK
CUSTOMER INVOICE # AMOUNT DISCOUNT DEDUCTION AMOUNT
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TOTALS
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31
EXHIBIT 6.5
Litigation Matters
There is no material litigation against the Company other than as
disclosed in the filings with the Securities and Exchange Commission in the
Company's Form 10KSB for the year ended October 31, 1998; Form 10QSB for the
quarter ended January 31, 1999; and Form 10QSB for the quarter ended April 30,
1999.
32
SAMPLE
EXHIBIT 7.7
COMPLIANCE CERTIFICATE
THE UNDERSIGNED, BEING THE _______________________________ OF XXXXXXX
INTERNATIONAL, INC., A NEVADA CORPORATION ("XXXXXXX"), HEREBY CERTIFIES TO
CAPITAL FACTORS, INC. (""CAPITAL"), THAT NO EVENT OF DEFAULT (AS DEFINED IN A
CERTAIN LOAN AND SECURITY AGREEMENT DATED AS OF JUNE ___, 1999 BY AND BETWEEN
XXXXXXX AND CAPITAL (THE "AGREEMENT") CURRENTLY EXISTS UNDER THE AGREEMENT, AND
THERE IS NO CONDITION OR EVENT WHICH CONSTITUTES AN EVENT OF DEFAULT UNDER THE
AGREEMENT, OR WHICH WITH THE GIVING OF NOTICE OR THE PASSAGE OF TIME OR BOTH
CONSTITUTES AN EVENT OF DEFAULT UNDER THE AGREEMENT.
DATED:
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