Exhibit 10.21.1
_________________________________________WACHOVIA________
Note and Security Agreement
Date July 24, 1997 $2,500,000.00
FOR VALUE RECEIVED, the undersigned (hereinafter called the "Borrower") hereby
promises to pay to the order of WACHOVIA BANK, N.A., f/k/a WACHOVIA BANK OF
NORTH CAROLINA, N.A. (hereinafter called the "Lender") at its office where
borrowed, in immediately available funds, the sum of Two Million Five Hundred
Thousand and No/One Hundred Dollars, together with any unpaid interest hereon
from date of advance, in accordance with the terms contained in this Note and
Security Agreement (hereinafter referred to as the "Note"). The optional
provisions applicable to this Note are checked below.
Repayment:
__ One payment in full of principal and unpaid interest due
__ On Demand ____________________________________
__ Payments of $ ______________beginning____________________and
thereafter_________________
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________until______________
when the entire principal amount then outstanding and all accrued but unpaid
interest shall be paid in full.
X On Demand the principal amount set forth above or the unpaid principal amount
of all advances which the Lender actually makes hereunder to the Borrower,
whichever amount is less. Each advance and each payment made on account of the
principal thereof, shall be evidenced on an attachment hereto; provided,
however, any such notation or the failure of the Lender or other holder to make
any such notation shall not limit or otherwise affect the obligation of the
Borrower with respect to repayment of all advances actually made hereunder. This
Note and any attachment hereto shall be used to record the outstanding principal
balance advanced hereunder until it is surrendered to the Borrower by the
Lender, and it shall continue to be used even though there may be periods prior
to such surrender when no amount of principal or interest is owing hereunder. If
advances of the principal amount hereof are to be made by Lender to the Borrower
after the date of this Note, Lender, at its sole discretion, is hereby
authorized to make such advances under this Note upon telephonic or written
communication of a borrowing request from any person representing himself or
herself to be the Borrower or, in the event the Borrower is a partnership or
corporation, a duly authorized officer or representative of Borrower.
Interest:
Payable: X in arrears; __ in advance.
X in addition to the payments described above; __ included in the
payments described above.
Payable at the rate per annum of: __ Prime Rate ____ %;
__ ____% of Prime Rate; __ ___% Fixed;
__ Those rates which may be offered from time to time by the Lender and
agreed to by the Borrower and so noted by the Lender on an attachment
hereto. In the event of a good faith dispute among the parties to
this Note as to rate under this rate option, the rate shall be the
Prime Rate, adjusted for any changes in the Prime Rate as of the day
such Prime Rate changes;
X The rate(s) set forth in Schedule 1 attached to this Note and
incorporated herein by reference;
__ Those rates which have been offered by the Lender to the Borrower in
the Loan Agreement or Commitment Letter checked below, the provisions
of which shall determine such rates, the procedure for the selection
of such rates and the time periods for which such rates shall apply.
In no case shall interest exceed the maximum rate permitted by applicable law.
To the extent not prohibited by law, a late charge not to exceed 4% of the
payment amount shall be assessed on any payment remaining unpaid on the
fifteenth day after the payment due date or 30 days in the case interest is
payable in advance.
If the interest is based upon the Prime Rate, such interest rate will be
adjusted on: __ The day the Prime Rate changes; __ Other ____________________
Due: __ On principal payment dates; X Other quarterly beginning October 27,
1997
Interest will be calculated on the basis of X A year of 360 days and paid for
the actual number of days elapsed;
__ Other _______________________
After demand or maturity (whether by acceleration or otherwise), as
applicable, interest on any unpaid balance hereof shall be payable on demand
at a rate per annum equal to 150% of the Prime Rate, or if greater, 2% above
the rate applicable prior to demand or maturity, adjusted for any changes in
the Prime Rate as of the day such Prime Rate changes, not to exceed the
maximum rate permitted by applicable law.
As used herein, "Prime Rate' refers to that interest rate so denominated and
set by the Lender from time to time as an interest rate basis for borrowings.
The Prime Rate is one of several interest rate bases used by the Lender. The
Lender lends at interest rates above and below the Prime Rate.
All payments on this Note shall be applied first to accrued interest, then to
principal, and then to late charges.
__ The terms and conditions in a Loan Agreement dated ______________________
between the parties hereto, as the same may be amended from time to time,
shall be considered a part hereof to the same extent as if written
herein.
X The terms and conditions in a Commitment Letter dated July 23, 1997 from
the Lender to the Borrower, as the same may be amended, extended or
replaced from time to time, shall be considered a part hereof to the same
extent as if written herein.
To secure the indebtedness evidenced by this Note, Together with any extensions,
modifications, or renewals thereof, in whole or in part, as well as all other
indebtedness, obligations and liabilities of the Borrower to the Lender or to
any of Lender's Affiliates (as hereinafter deemed), now existing or hereafter
incurred or arising (hereinafter sometimes referred to collectively as the
'Obligations'), except for other indebtedness, obligations and liabilities owing
to Lender or Lender's Affiliates that constitute open-end credit under, or are
subject to, the disclosure requirements of the Truth-in-Lending Act and Federal
Reserve Board Regulation Z or any applicable state consumer protection laws
(hereinafter collectively referred to as "Consumer Debt"), the Borrower does
hereby grant to the Lender and to such Lender's Affiliate (as the case may be) a
security interest in and security title to, and does hereby assign, pledge,
transfer and convey to Lender and such Lender's Affiliate (as the case may be),
the following described property:
Collateral as described in General Security Agreement dated July 24, 1997
between Borrower and Lender
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whether now owned or hereafter acquired, together with any and all additions and
accessions thereto or replacements thereof, returned or unearned premiums from
any insurance written in connection with this Note and any products arid/or
proceeds of any of the foregoing. As used herein, "Lender's Affiliates" means
any entity or entities now or hereafter directly or indirectly controlled by
Wachovia Corporation or any successor thereto. In no event, however, shall the
Lender or the Lender's Affiliates (as the case may be) have a security interest
in any goods acquired by the Borrower for personal, family or household purposes
more than 10 days after the date of this Note, unless such goods are added to or
attached to the Collateral (as hereinafter defined). In addition, to the extent
not prohibited by law, the Borrower hereby grants to the Lender and to such
Lender's Affiliate (as the case may be) a security interest in and security
title to, and does hereby assign, pledge, transfer and convey to Lender and such
Lender's Affiliate (as the case may be), (i) all other property of the Borrower
of every kind or description now or hereafter in the possession or control of
the Lender or of any of Lender's Affiliates, exclusive of any such property in
the possession or control of the Lender or any of Lender's Affiliates as a
fiduciary other than as agent, for any reason including, without limitation, all
cash, stock or other dividends and all proceeds thereof, and all rights to
subscribe for securities incident thereto and any substitutions or replacements
for, or other rights in connection with, any of the Collateral and (ii) any
balance or deposit accounts of the Borrower, whether such accounts be general or
special, or individual or multiple party, and upon all drafts, notes, or other
items deposited for collection or presented for payment by the Borrower with the
Lender or the Lender's Affiliates (as the case may be), and the Lender and the
Lender's Affiliates (as the case may be) may at any time, without demand or
notice, appropriate and apply any of such to the payment of any of the
Obligations, whether or not due, with the exception of Consumer Debt. All
property described in this paragraph, in which the Borrower has granted to the
Lender and the Lender's Affiliates a security interest or security title
hereunder, is herein collectively referred to as the 'Collateral.' If, with
respect to any Collateral in the form of investment securities, a stock dividend
is declared or any stock split-up made or right to subscribe issued, all the
certificates for the shares representing such stock dividend or split-up or
right to subscribe will be immediately delivered, duly endorsed, to the Lender
as additional Collateral. The Lender and the Lender's Affiliates (as the case
may be) shall be deemed to have possession, control and custody of any
Collateral actually in transit to it or to any of its officers or agents.
If at any time the Collateral pledged as security for any of the Obligations
shall be or become unsatisfactory to the Lender or should the Lender deem itself
insecure, the Borrower will immediately furnish such further property to be held
by the Lender as if originally pledged as Collateral hereunder or make such
payment on account as will he satisfactory to the Lender.
The Lender shall have, but shall not be limited to, the following rights, each
of which may be exercised at any time: (i) to transfer this Note and the
Collateral, and any transferee shall have all the rights of the Lender hereunder
and the Lender shall be thereafter relieved from any liability with respect to
any Collateral so transferred: (ii) to transfer the whole or any part of the
Collateral in the name of itself or its nominees; (iii) to vote any investment
securities forming a part of the Collateral; (iv) to notify the obligors on any
Collateral to make payment to the Lender of any amounts due thereon; (v) to
execute at any time in the name of any party hereto and to file financing
statements covering any of the Collateral; (vi) to receive or take control of
any income or other proceeds of any of the Collateral; and (vii) to request and
receive current financial information from any party liable for all or any part
of the Obligations.
Furthermore, the Lender shall have the right to require Borrower to maintain
insurance on such of the Collateral, with such companies, in such amounts and
against such risks as Lender may request. All policies of insurance will specify
that Lender is an additional insured as its interest may appear and shall
provide that such insurance shall not be cancelable by the Borrower or the
insurer without at least 10 days advance written notice to Lender. In the event
any or all insurance hereinbefore provided is canceled, any returned premium
thereon shall be payable to Lender and may be applied by Lender to any part of
the Obligations, whether matured or unmatured. Lender is authorized to receive
the proceeds of any insurance loss and at the option of Lender shall apply such
proceeds toward either the repair or replacement of the Collateral or the
payment of the Obligations secured hereby. If the Borrower fails to maintain
such insurance, Lender may, at its option, but without obligation, purchase such
insurance or pay any premium owing and any such paid by Lender shall be payable
by Borrower on demand by Lender or at Lender's option may be added to any of the
Obligations.
Upon (i) any failure of any Obligor (which term shall include the Borrower and
each endorser, surety or guarantor of this Note) to pay any of the Obligations
when due or to observe or perform any agreement, covenant or promise hereunder
or in any other agreement, note, instrument or certificate of any Obligor to the
Lender, or to any of Lender's Affiliates, now existing or hereafter executed in
connection with any of the Obligations; including, but not limited to, a loan
agreement, if applicable, and any agreement guaranteeing payment of any of the
Obligations; (ii) any default of any Obligor in the payment or performance
of any other liabilities, indebtedness or obligations to any
other creditor or to allow or permit any other liabilities, indebtedness or
obligations to any other creditor to be accelerated; (iii) any failure of any
Obligor to furnish Lender current financial information upon request; (iv) any
failure of any Obligor or any pledgor of any security interest in the Collateral
(the 'Pledgor') to observe or perform any agreement, covenant or promise
contained in any agreement, instrument or certificate executed in connection
with the granting of a security interest in property to secure the Obligations;
(v) any warranty, representation or statement made or furnished to the Lender by
or on behalf of any Obligor or Pledgor in connection with the extension of
credit evidenced by this Note proving to have been false in any material respect
when made or furnished; (vi) any loss, theft, substantial damage, destruction,
sale, foreclosure of or encumbrance to any of the Collateral, or the making of
any levy, seizure or attachment thereof or thereon or the rendering of any
judgment or lien or garnishment or attachment against any Obligor or his
property, whether actual or threatened; (vii) the death, dissolution, change in
control, termination of existence, insolvency, business failure, or appointment
of a receiver of any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding under any bankruptcy or
insolvency laws, state or federal, by or against, the Borrower or any other
Obligor; (viii) any discontinuance or termination of any guaranty of any of the
Obligations by a guarantor; or (ix) the Lender deeming itself insecure;
thereupon, or at any time thereafter, the Lender at its option may terminate any
obligation to extend any additional credit or make any other financial
accommodation to the Borrower and/or may declare all of the Obligations to be
immediately due and payable, all without notice or demand, and shall have in
addition to and independent of the right to declare the Obligations to be due
and payable mid any other rights of the Lender under this Note or any other
agreement with any Obligor or any Pledgor, the remedies of a secured party under
the Uniform Commercial Code of North Carolina, as amended from time to time (the
'Code'), including, without limitation thereto, the right to take possession of
the Collateral, or the proceeds thereof and to sell or otherwise dispose
thereof, and for this purpose, to sign in the name of any Obligor or Pledgor any
transfer, conveyance or instrument necessary or appropriate in order for the
Lender to sell or dispose of any of the Collateral, and the Lender may, so far
as the Borrower can give authority therefor, enter upon the premises on which
the Collateral or any part thereof may be situated and remove the same
therefrom, without being liable in any way to any Obligor on account of entering
any premises. The Lender may require the Borrower to assemble the Collateral and
make the Collateral available to the Lender at a place to be designated by the
Lender which is reasonably convenient to both parties. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the Lender shall give the Borrower written notice
of the time and place of any public sale thereof or of the time after which any
private sale or other intended disposition thereof is to be made. The
requirement of sending reasonable notice shall be met if such notice is mailed,
postage prepaid, or otherwise given, to the Borrower or Pledgor at the last
address shown on the Lender's records at least five days before such
disposition. If any Obligation (including but not limited to the Note) is a
demand instrument, the statement of a maturity date, the requirement for the
payment of periodic interest or the recitation of defaults arid the right of
Lender to declare any Obligation due and payable shall not constitute an
election by Lender to waive its right to demand payment under a demand at any
time and in any event as Lender in its sole discretion may deem appropriate.
The rights of the Lender specified herein shall be in addition to, and not in
limitation of the Lender's rights under the Code, or any other statute or rules
of law conferring rights similar to those conferred by the Code, and under the
provisions of any other instrument or agreement executed by the Borrower, any
other Obligor or any Pledgor to the Lender. Any rights or remedies of the Lender
may be exercised or taken in any order or sequence whatsoever, at the sole
option of the Lender.
The security agreement set forth herein and the security interest in the
Collateral created hereby shall terminate only when all of the Obligations have
been indefeasibly paid in full and such payments are no longer subject to
rescission, recovery or repayment upon the bankruptcy, insolvency,
reorganization, moratorium, receivership or similar proceeding affectingthe
Borrower or any other person. No waiver by the Lender of any default shall be
effective unless in writing nor operate as a waiver of any other default or of
the same default on a future occasion. All rights of the Lender hereunder shall
inure to the benefit of its successors and assigns, and ail obligations of the
Borrower shall bind the heirs, legal representatives, successors and
assigns of the Borrower. The Borrower and each endorser, surety or guarantor
of this Note, whether bound by this or by separate instrument or agreement,
shall be jointly and severally liable for the indebtedness evidence by this
Note and hereby severally (1) waive presentment for payment, demand, protest,
notice of nonpayment or dishonor and of protest arid any and all other
notices and demands whatsoever; (2) consent that at any time,
or from time to time, payment of any sum payable under this Note may
be extended without notice whether for a definite or
indefinite time; and (3) agree to remain liable until all of the
Obligations are paid in full notwithstanding any impairment, substitution,
release or transfer of Collateral or any one or
more Borrower or Obligor by the Lender or any of Lender's Affiliates, with or
without consideration, or of any extension, modification or renewal. No conduct
of the holder shall be deemed a waiver or release of such liability, unless the
holder expressly releases such party in writing. In the event the indebtedness
evidenced hereby is collected by or through an attorney, the holder shall be
entitled to recover reasonable attorneys' fees (15% of the then outstanding
principal and interest of the indebtedness, to the extent not prohibited by law)
and all other costs and expenses of collection. Time is of the essence.
This Note, and the rights and obligations of the parties hereunder, shall be
governed and construed in accordance with the laws of the State of North
Carolina.
IN WITNESS WHEREOF, the Borrower has executed this Note under seal the day and
year set forth above.
Witness: _____________________________(SEAL)
(Individual Borrower)
_______________________________ _____________________________(SEAL)
(Individual Borrower)
_______________________________ Borrower:
Attest: Digital Recorders, Inc.
(Name of Corporation or Partnership)
/s/ Xxxxxxxx X. Xxxxxxx By: /s/ X. Xxxxxxxx X. Xxxxxxxx
Xxxxxxxx X. Xxxxxxx X. Xxxxxxxx X. Xxxxxxxx
Title Secretary Title President
(Corporate Seal)
SCHEDULE 1
Note dated July 24, 1997
Borrower: Digital Recorders, Inc.
Amount: $2,500,000.00
INTEREST RATE:
The rate of interest for the term of the loan shall be the 90 day "LIBOR Base
Rate" plus an amount to be determined by the chart below:
Rolling 4 Quarter EBITDA (X): X >= $700M $700M > X > $300M X <= $300M
Number of basis points over 90 230 300 330
day LIBOR Base Rate
DEFINITION
"LIBOR" means, for any Interest Period, the rate per annum determined
on the basis of the offered rate for deposits in United States Dollars offered
for a term comparable to such Interest Period, that appears on the display
designated as page "3750" of the Telerate Service (or such other page as may
replace page 3750 of that service or such other service or services as may be
nominated by the British Bankers' Association for the purpose of displaying
London interbank offered rates for United States Dollar deposits), determined as
of 11:00 a.m., London time (rounded upward to the next higher of 1/10,000 of
1%), two Euro-Dollar Business Days prior to the first day of such Interest
Period.
If no such offered rate appears on such page, "LIBOR" for such Interest
Period will be the arithmetic average (rounded upward, if necessary, to the next
higher 1/100th of 1%) of rates quoted by not less than two major banks in New
York City at approximately 10:00 a.m., New York City time, two (2) Euro-Dollar
Business Days prior to the first day of such Interest Period, for deposits in
Dollars offered to leading European banks for a period comparable to such
Interest Period in an amount comparable to the principal amount of such
Euro-Dollar Loan.
Initials: /s/ JEK
/s/ JPLJ
____________________________________________________WACHOVIA________
Wachovia Bank, X.X.
Xxxx Xxxxxx Xxx 00000
Xxxxxxx, Xxxxx Xxxxxxxx 00000-0000
July 23, 1997
Xx. X. Xxxxxxxx X. Xxxxxxxx
President and Chief Executive Officer
Digital Recorders, Inc.
X.X. Xxx 00000
Xxxxxxxx Xxxxxxxx Xxxx, XX 00000-0000
Dear Phil:
Wachovia Bank is pleased to make available to your company a
$2,500,000.00 Line of Credit facility and a $ 1,000,000.00 Letter of
Credit facility. This credit facility will become effective upon your
acceptance of this commitment letter, your return of the executed copy
of same to the Bank, and, subject to the conditions set forth herein, a
closing of the transaction in a manner satisfactory to the Bank.
"Closing," "close," or "closed," as used herein, shall mean the
execution, recordation where necessary, and delivery to the Bank of all
documentation required by this commitment letter. After closing, this
credit facility will expire on February 27, 1998. This credit facility
is subject to the maintenance by your company of a condition
satisfactory to the Bank and the following terms and conditions.
As used herein, the term "loan" shall include loan, line of credit,
advance, drawing, debit, liability, and any other obligation of your
company arising out of this commitment.
I. Interest Rate: The rate of interest for the term of the loan shall
be the 90 day "LIBOR Base Rate" plus an amount to be determined by the
chart below:
Rolling 4 Quarter EBITDA (X) X >= S700M S700M > X > S300M X <= S300M
Number of basis points over 90 230 300 330
day LIBOR Base Rate
Rate of interest shall be calculated on a basis of a 360 day year for
the actual number of days in each interest period. As used herein, the
"LIBOR Base Rate" shall mean a rate for deposits in US dollars, with
maturities comparable to the selected LIBOR interest period that
appears on page "3750" of the Telerate Service (or as such page as may
replace page 3750 of that service or services as may be nominated by
the British Bankers Association for the purpose of displaying the
London Interbank offered rates for US dollar deposit) determined as of
1:00 P.M. New York Time two business days prior to commencement of such
interest period.
2. Interest Payments and Principal Payments: At the end of each
applicable Interest Period or quarterly, if earlier, calculated on an
actual/360 day basis. Adjusted LIBOR Loans may not be prepaid before
the end of the Interest Period applicable to such Loans. Base Rate
Loans may be paid at any time on one Business Day's notice in a minimum
amount of $1,000,000.00 and any incremental multiple of $500,000.00.
3. Fees: The Bank shall receive a commitment and documentation
fee in the amount of $500.00 to be paid to the Bank simultaneously with
the acceptance of this commitment by your Company, which commitment and
documentation fee shall be fully earned when paid and non-refundable.
In addition, there will be an unused fee of .20% annually on the unused
portion of the commitment amount, calculated and payable quarterly in
arrears.
4. Use of Proceeds: The loan will be used by your company for
general working capital purposes and Import Letters of Credit.
5. Collateral: General Security Agreement, defined as a first
priority lien position on all accounts receivable, inventory, and
equipment now owned or here after acquired.
6. Loan Covenants: Unless the Bank shall otherwise agree in
writing, for so long as this agreement shall remain in effect and until
all of the Obligations are paid in full, the Borrower agrees as
follows:
A) All of the assets of the company are to remain
unencumbered, with the exception of Wachovia's first lien on
accounts receivable and inventory.
B) Company borrowing shall not exceed either the stated
$2,500,000.00 borrowing line plus the $1,000,000.00 LOC
facility or an amount defined each month as a borrowing base.
C) The company will submit to the Bank a monthly Borrowing
Base report as well as monthly financials and monthly agings
of accounts receivable. The Borrowing Base will be equal to
80% domestic accounts receivable.
D) Rolling four quarter EBITDA, as defined above, shall at all
times be greater than $250,000 in 3Q97 and $300,000 in 4Q97;
to be tested on a quarterly basis.
E) All changes in executive management require the prior
approval of the Bank, whose approval will not be unreasonably
withheld, and the President will maintain key man life
insurance in the amount of $1,000,000.00.
F) The company will inform the Bank of any acquisitions
insofar as this information is in compliance with all SEC
regulations.
7. Applicable Law: This commitment shall be interpreted, construed,
enforced, and governed by the laws of the State of North Carolina. Upon
return by your company the Bank of a fully-executed copy of this
commitment by its expiration of August 1, 1997, this commitment will be
considered accepted and will constitute an agreement obligating the
Bank to make and your company to accept the loan in accordance with the
terms and conditions set forth above. If the executed copy is not
received by the Bank by the expiration date noted above, this
commitment shall be considered null and void.
Should you have any questions of the terms hereof, please do not
hesitate to call me at (000) 000-0000.
Very Truly Yours,
/s/ Xxxxxx Xxxx
Xxxxxx Xxxx
Senior Vice President
ACCEPTED THE 25th DAY OF July, 1997:
DIGITAL RECORDERS, INC.
By: /s/ X. Xxxxxxxx X. Xxxxxxxx
Title: President & Chief Executive Officer
Accepted Copy Received by Bank
Date:_______________________
By: ________________________
___________________________________________________________WACHOVIA____________
General Security Agreement
Wachovia Bank, N.A.
Raleigh ,North Carolina
Gentlemen:
1 . From time to time the undersigned expects to become or has become
indebted or otherwise obligated or liable to Wachovia Bank, N.A., herein called
"Bank", or to any of "Bank's Affiliates" hereinafter defined (the Bank and
Bank's Affiliates being hereafter collectively and/or individually, as the
context shall require, referred to as "Lender"), directly or indirectly,
absolutely or contingently, in connection with letter of credit or acceptance
transactions, trust receipt transactions, or other loan or financial
accommodations (such indebtedness, obligations and liabilities to Lender being
hereinafter referred to as the "Obligation(s)"). As used herein, "Bank's
Affiliates" means any entity or entities now or hereafter directly or indirectly
controlled by Wachovia Corporation or any successor thereto. In consideration of
the Obligation(s), the undersigned agrees that in order to provide Lender with
security for payment and performance of all the Obligations, except for
Obligations extended in North Carolina by Wachovia Bank, N.A. that constitute
openend credit under, or are subject to, the disclosure requirements of the
Truth-in-Lending Act and Federal Reserve Board Regulation Z (hereinafter
collectively referred to as "NC Consumer Debt"), Lender shall have a lien upon,
security interest in and security title to all of the personal property of the
undersigned, now owned or hereafter existing or acquired, of any type or
description, including but not limited to all of the inventory of the
undersigned, now owned or hereafter acquired and wherever located, whether raw,
in process or finished; all materials or equipment usable in processing the
same; all documents of title covering any inventory; all equipment and fixtures
employed or useful in the operation of the undersigned's business; all of the
undersigned's contract rights, accounts, general intangibles, instruments,
investment property, investment securities, dividends and distributions thereof,
chattel paper, notes, drafts, acceptances, and all monies, deposit accounts and
Bank balances of the undersigned with Lender, whether such accounts be general
or special, individual or multiple party, or other claims of the undersigned
against Lender, but exclusive of property in the possession or control of Lender
as a fiduciary other than as agent, and all books and records, computer tapes
and programs and ledger books arising out of or related to any of the foregoing
and the proceeds and products of each of the foregoing in any form whatsoever
including without limitation insurance proceeds (all of the foregoing being
hereinafter referred to collectively as the "Collateral"). In no event, however,
shall the Lender have a security interest in any goods acquired by the
undersigned for personal, family or household purposes more than 10 days after
the date of this Agreement unless such goods are added to or attached to the
Collateral. The undersigned agrees that should the aggregate market value of the
Collateral at any time suffer any decline in value or should any property be
deemed by the Lender to be unsatisfactory or inadequate, or should such property
fail to conform to legal requirements, the undersigned will upon request,
deliver to Lender additional Collateral or will make one or more payments on
account of the Obligations to the satisfaction of Lender. To the extent that the
aforesaid Collateral may consist of investment securities, it is further agreed
that, in the event of any new or additional certificate(s) of stock being issued
(as stock dividends or otherwise) relative to any such investment securities,
held at the time as Collateral hereunder, such certificate(s) shall be deemed an
increment to the stock so held and under pledge to Lender and that, therefore,
such certificate(s) will (to the extent received by or placed under the control
of the undersigned) be held or controlled in trust for Lender and will be
promptly delivered to Lender (in form for transfer) to be held hereunder if
Lender so requests.
2. Lender shall have no duty of care with respect to the Collateral,
except that Lender shall exercise reasonable care with respect to Collateral in
Lender's custody, but shall be deemed to have exercised reasonable care if such
property is accorded treatment substantially equal to that which Lender accords
its own property, or if Lender takes such action with respect to the Collateral
as the undersigned shall request in writing, but no failure to comply with any
such request nor any omission to do any such act requested by the undersigned
shall be deemed a failure to exercise reasonable care, nor shall Lender's
failure to take steps to preserve rights against any parties or property be
deemed a failure to have exercised reasonable care with respect to Collateral in
Lender's custody.
3. In addition to the rights and security interest elsewhere herein set
forth, Lender may, at its option at any time(s) and with or without notice to
the undersigned, appropriate and apply to the payment or reduction, either in
whole or in part of the amount owing on any one or more of the Obligations,
whether or not then due, any and all monies now or hereafter with Lender, on
deposit or otherwise, to the credit of or belonging to the undersigned, whether
individual or in a multiple party capacity, and upon all drafts, notes or other
items deposited for collection or presented for payment, it being understood and
agreed that Lender shall not be obligated to assert or enforce any rights or
security interest hereunder or to take any action in reference thereto, and that
Lender may in its discretion at any time(s) relinquish its rights as to
particular Collateral hereunder without thereby affecting or invalidating its
rights hereunder as to all or any other Collateral hereinbefore referred to.
4. The undersigned further agrees and covenants (a) that, if Lender so
demands in writing at any time, all proceeds shall be delivered to Lender
promptly upon the undersigned's receipt in a form satisfactory to Lender; (b)
that, if Lender so demands in writing at any time, all chattel paper,
instruments, and documents shall be delivered to Lender at the time and place
and in the manner in which specified by Lender's demand; (c) to execute and
deliver, upon request, any notice, statement, instrument, document, agreement or
other papers and to perform any act requested by Lender which may be necessary
to create, perfect, preserve, validate or otherwise protect any security
interest granted pursuant hereto or to enable Lender to exercise and enforce its
rights hereunder or with respect to such security interest; (d) that during the
period that any Obligation is outstanding, the undersigned will not, without
obtaining Lender's prior written approval, create, incur, assume, or suffer to
exist any lien, security agreement in or security title with respect to the
Collateral pursuant to a security agreement subject to the Uniform Commercial
Code or any similar law of any jurisdiction, except as herein provided, and the
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undersigned will not sign or file or authorize the signing or filing of a
financing statement under the said Uniform Commercial Code of any jurisdiction
with respect to the Collateral or any portion thereof, except as herein
provided. The undersigned further agrees to provide Lender with such information
as Lender may from time to time request with respect to the location of any of
the undersigned's business. In addition, Lender will be notified promptly in
writing of any change in location of any office where records concerning any of
the accounts that constitute a portion of the Collateral are maintained or of a
change in location of the undersigned's principal place of business or of a
change in location of any Collateral, or of a change in the undersigned's name,
identity or structure.
5. The undersigned will maintain insurance on such of the Collateral,
with such companies, in such amounts and against such risks as Lender may
request. All policies of insurance will specify that Lender is an additional
insured as its interest may appear and shall provide that such insurance shall
not be cancelable by the undersigned or the insurer without at least ten days
advance written notice to Lender. In the event any or all insurance hereinbefore
provided for is canceled, any returned premium thereon shall be collected by
Lender and may be applied by Lender to any part of the Obligations, whether
matured or unmatured. Lender is authorized to receive the proceeds of any
insurance loss and at its option shall apply such proceeds toward either the
repair or replacement of the Collateral or the payment of the Obligations
secured hereby. If the undersigned fails to maintain such insurance, Lender may,
at its option, but without obligation, purchase such insurance or pay any
premium owing and any such sum paid by Lender shall be payable by the
undersigned on demand by Lender or at its option may be added to any of the
Obligations and secured hereby. The undersigned will pay all taxes and other
impositions on the Collateral as well as the cost of repairs and maintenance.
Lender may, at its option, but without obligation, pay any and all amounts for
taxes, repairs and other costs, expenses and liabilities and any such sum shall
be payable on demand or added to the Obligations and secured hereby.
6. The undersigned represents and warrants to Lender (which
representations and warranties shall be deemed to be renewed as of the date of
each renewal or extension of credit under any of the Obligations) that:
(a) The undersigned is the sole owner of the Collateral free and
clear of all security interests, liens and encumbrances
whatsoever, other than those evidenced by this Agreement.
(b) The Collateral is located at the address(es) indicated below,
wherever located to include but not limited to:
0000 Xxxxxxx Xxxxx, Xxxxx X, Xxxxxxxx Xxxxxxxx Xxxx, XX 00000
(c) Lender and any persons designated by it shall have the right to
call at the place where the Collateral is located at any
reasonable time and without hindrance or delay to inspect the
Collateral, and to inspect, audit, check and make extracts from
the undersigned's books, records, journals, orders, receipts and
any correspondence and other data relating to the undersigned's
business or the Collateral. (d) The undersigned's legal name is
the name listed below and the following is a list of any and all
names used by the undersigned during all or any part of the seven
year period preceding the date of this Agreement:
Digital Recorders, Inc.
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(e) The undersigned will promptly advise the Lender in writing of any
change in name, identity or structure of the undersigned or any change
of the Collateral locations listed above or the opening of any new
places of business or the closing of the undersigned's existing places
of business.
(f) The undersigned has the power to make, deliver and perform this
Agreement and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement. This Agreement
is the valid Obligation of the undersigned, legally binding upon the
undersigned and enforceable in accordance with its terms. No consent or
approval of any other person or entity and no consent, license,
approval or authorization of any governmental authority, bureau or
agency is required in connection with the execution, delivery,
performance, validity and enforceability of this Agreement.
7. In the event of happening of any one or more of the following events
of default, to wit:
(a) Any failure to make any payments of principal or of interest on any
of the Obligations to Lender when due or to observe or perform any agreement,
covenant or promise hereunder or in any other agreement, note, instrument or
certificate of the undersigned or any endorser, surety or guarantor of the
obligations (collectively the "Obligor") to the Lender, now existing or
hereafter executed in connection with any of the Obligations or the granting of
a security interest in property to secure the Obligations, including but not
limited to, a loan agreement, if applicable, a security agreement and any
agreement guaranteeing payment of any of the Obligations.
(b) Any default of the undersigned or any Obligor in the payment or
perform any of any other liabilities, indebtedness or obligations to any other
creditor or to allow or permit any other liabilities, indebtedness or
obligations to any other creditor to be accelerated.
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(c) Any failure of the undersigned or any Obligor to furnish Lender
current financial information upon request or as required under any other
agreement with Lender.
(d) Any representation or warranty made in this Agreement or in
connection with the extension of credit evidenced by any Obligation or in any
certificate, financial or other statement furnished at any time hereunder or in
connection with this Agreement or the extension of credit evidenced by any
Obligation proving to have been untrue in any material respect when made or
furnished.
(e) Any discontinuance or termination of any guaranty of any of
the Obligations by a guarantor.
(f) The death, dissolution, termination of existence, insolvency,
business failure, appointment of a receiver of any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding under any bankruptcy or insolvency laws, state or federal, by or
against the undersigned or any Obligor.
(g) Any loss, theft, substantial damage, destruction, sale, foreclosure
of or encumbrance to any of the Collateral or any part of any of the property
securing the Obligations, or the making of any levy, seizure or attachment
thereof or thereon or the rendering of any judgment or lien or garnishment or
attachment against the undersigned or any Obligor, or his property, whether
actual or threatened.
(h) Lender, at any time and in good faith, deeming itself insecure.
Then or any time after the happening of such event of default or at any
time thereafter, Lender may declare any or all of the Obligations immediately
due and payable, without presentment, demand, protest, or notice of any kind,
demand or notice to the undersigned. Furthermore, upon the occurrence of any
such event of default, or at any time thereafter, Lender, at its option, may
terminate any obligation to make further loans or extensions of credit or other
financial accommodations to the undersigned and, in addition to and independent
of any of the foregoing rights or other rights, Lender shall also have all of
the rights and remedies provided to a secured party by the Uniform Commercial
Code in effect in Georgia at that time. In addition thereto, the undersigned
further agrees that (i) in the event that notice is necessary under applicable
law, written notice mailed to the undersigned at the address given below five
(5) business days prior to the date of public sale of any of the Collateral
subject to the security interest created herein or prior to the day after which
private sale or any other disposition of said Collateral will be made shall
constitute reasonable notice, but notice given in any other reasonable manner or
at any other time shall be sufficient; (ii) in the event of sale or other
disposition of any such Collateral, Lender may apply the proceeds of any such
sale or disposition to the satisfaction of its reasonable attorneys' fees, legal
expenses, and other costs and expenses incurred in connection with its taking,
retaking, holding, preparing for sale, and selling of the Collateral and to any
of the Obligations in such order as Lender, in its discretion, may elect; (iii)
without precluding any other methods of sale, the sale of Collateral shall have
been made in a commercially reasonable manner if conducted in conformity with
reasonable commercial practices of banks disposing of similar property but in
any event Lender may sell on such terms as Lender may choose, without assuming
any credit risk and without any obligation to advertise or give notice of any
kind; and (iv) Lender may require the undersigned to assemble the Collateral,
taking all necessary or appropriate action to preserve and keep it in good
condition, and make such available to Lender at a place and time convenient to
both parties, all at the expense of the undersigned. Furthermore, in any such
event, to the extent permitted under applicable law, the undersigned waives all
rights which the undersigned has or may have as to notice and to a judicial
hearing prior to any seizure of the Collateral by Lender and full power
and authority are hereby given Lender to sell, assign, and deliver the
whole of the Collateral or any part(s) thereof, at any time(s) at any broker's
board, or at public or private sale, at its option, and no delay on its part in
exercising any power of sale or any rights or options hereunder, and no notice
of demand, which may be given to or made upon the undersigned by Lender with
respect to any power of sale or other right or option hereunder, shall
constitute a waiver thereof, or limit or impair Lender's right to take any
action or to exercise any power of sale or any other rights hereunder, without
notice or demand, or prejudice Lender's rights as against the undersigned in any
respect.
8. Any and all of Lender's rights with respect to the security interest
hereunder shall continue unimpaired, and the undersigned shall be and remain
obligated in accordance with the terms hereof, notwithstanding the release or
substitution of any Collateral at any time or of any rights or of interest
therein, or any delay, extension of time, renewal, compromise or other
indulgence granted by Lender in reference to any of the Obligations, or any
promissory note, draft, xxxx of exchange or other instrument given in connection
therewith, the undersigned hereby waiving all notice of any such delay,
extension, release, substitution, renewal, compromise or other indulgence, and
hereby consenting to be bound thereby as fully and effectually as if the
undersigned had expressly agreed thereto in advance.
9. No delay on Lender's part in exercising any power of sale, option or
other right hereunder, and no notice or demand which may be given to or made
upon the undersigned by Lender, shall constitute a waiver thereof, or limit or
impair Lender's right to take any action or to exercise any other power of sale,
option or any other right hereunder, without notice or demand, or prejudice
Lender's rights as against the undersigned in any respect.
10. Lender is authorized at its option and without any obligation to do
so, to transfer or register in the name of its nominee(s) all or any part of the
securities that constitute a portion of the Collateral, and to do so before or
after the maturity of any of the Obligations, and with or without notice to the
undersigned.
11. The undersigned shall execute and file such financing statements as
Lender may request and Lender is authorized, at its option, to file financing
statement(s) or amendments thereto without the signature of the undersigned with
respect to any of the Collateral; the undersigned agrees to reimburse Lender for
the expense of any such filing.
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12. Lender may assign or otherwise transfer this Agreement, or any
instrument(s) evidencing all or any of the Obligations, and any agreement
relating thereto and may deliver all or any of the Collateral to the
transferee(s), who shall thereupon become vested with all the powers and rights
in respect thereto given to Lender herein or in the instrument(s) transferred,
and Lender shall thereafter be forever relieved and fully discharged from any
liability or responsibility with respect thereto, all without prejudice to the
retention by Lender of all rights and powers hereby given with respect to any
and all instruments, rights or property not so transferred.
13. This is a continuing Agreement and shall remain in full force and
effect until revoked by Lender in writing or written notice shall have been
received by Lender that it has been revoked, but any such notice by the
undersigned shall not release the notifying party (or parties) from liability,
responsibility, lien or security interest created hereunder with respect to such
of the Obligation(s) as may have been theretofore incurred and any renewals,
extensions or modifications of such Obligations and any expenses paid or
incurred by Lender in endeavoring to collect the Obligations, including
reasonable attorneys' fees, or realize upon the Collateral or in enforcing this
Agreement. Furthermore, if this Agreement is terminated, or revoked by operation
of law as against the undersigned, the undersigned will indemnify and save
Lender. its successors or assigns, harmless from any loss which may be suffered
or incurred by Lender in making, giving, granting or extending any loans or
other credit or otherwise acting, hereunder prior to receipt by Lender of notice
in writing of such termination or revocation.
14. The undersigned agrees that the lien, security interest and
security title granted hereby shall remain in full force and effect and shall
not be released by Lender until all Obligations have been indefensibly paid in
full and such payments are no longer subject to rescission, recovery or
repayment upon the bankruptcy, insolvency, reorganization, moratorium,
receivership or similar proceeding affecting the undersigned.
15. If this Agreement is executed by two or more parties, they shall be
severally bound and committed hereunder and the word "undersigned" whenever used
herein shall be construed to refer to such parties separately and collectively
to all such parties and this Agreement shall not be revoked or impaired as to
one or more of the parties hereto by the revocation or release of any
Obligation(s) hereunder of any other(s) of the parties hereto.
16. This Agreement shall be governed by the laws of the State of North
Carolina in all respects, including matters of construction, validity and
performance; none of its terms or provisions may be waived, altered, modified,
limited or amended except by an agreement expressly referring hereto and to
which Lender consents in writing duly signed for Lender and on its behalf, the
rights granted to Lender herein shall be supplementary and in addition to those
granted in any other agreements with respect to the Obligation(s).
Executed under seal this 24th day of July, 1997
Very truly yours,
Digital Recorders, Inc.
By: /s/ X. Xxxxxxxx X. Xxxxxxxx
X. Xxxxxxxx X. Xxxxxxxx
Title: President
0000 Xxxxxxx Xxxxx, Xxxxx X
(Mailing Address)
Research Xxxxxxxx Xxxx, XX 00000
(Mailing Address)
