EXHIBIT 10.22
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LOAN AND SECURITY AGREEMENT
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THIS LOAN AND SECURITY AGREEMENT ("Agreement"), dated as of the 29th day
of October, 1999, is made and entered into on the terms and conditions
hereinafter set forth, by and among AMERICAN MICRO COMPUTER CENTER, INC., a
Florida corporation with principal offices at 0000 X.X. 000xx Xxxxxx, Xxxxx
X-00, Xxxxx, Xxxxxxx 00000 ("Borrower"), EUROPEAN MICRO HOLDINGS, INC., a Nevada
corporation ("European Micro"), NOR'EASTER MICRO, INC., a Nevada corporation
("Nor'easter"; European Micro and Nor'easter are sometimes hereinafter
collectively referred to as "Guarantors"), and SOUTHTRUST BANK, NATIONAL
ASSOCIATION, a national banking association with offices in Nashville, Tennessee
("Lender").
WHEREAS, Borrower has requested that Lender make available to Borrower a
line of credit in the original principal amount not exceeding $1,500,000 (the
"Loan") on the terms and conditions hereinafter set forth, and for the
purpose(s) hereinafter set forth; and
WHEREAS, in order to induce Lender to make the Loan to Borrower, Borrower
and Guarantors have made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and inducements of
Borrower and Guarantors, has agreed to make the Loan upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrower, Guarantors and Lender hereby agree as follows:
ARTICLE I
DEFINITIONS
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As used in this Agreement, the following terms shall have the indicated
meanings:
"Base Rate" shall mean per annum the rate of interest periodically
designated by Lender as its Base Rate. Base Rate does not necessarily represent
the lowest rate charged by Lender. Any rate of interest calculated using the
Base Rate as a reference shall change to reflect any change in the Base Rate, as
and when the Base Rate changes.
"Borrowing Base" shall mean an aggregate amount equal to the sum of (a)
eighty-five percent (85%) of Eligible Receivables, plus (b) fifty percent (50%)
of Eligible Inventory.
"Compliance Certificate" shall have the meaning assigned to such term in
SUBSECTION 5.4(A) of this Agreement.
"Eligible Receivables" shall mean Receivables arising out of the sale or
other disposition of Borrower's Inventory or the rendering of services to
Borrower's customers, excluding (a) all Receivables that have been outstanding
for more than ninety (90) days after the dates of the corresponding invoices,
(b) all Receivables owing from any account debtor if more than 50% of the
Receivables owed to Borrower by such account debtor have been outstanding for
more than ninety (90) days after the dates of the corresponding invoices, (c)
the amount by which Receivables from any account debtor (or its affiliates)
exceed twenty-five percent (25%) of Borrower's total Receivables, (d) all
returns, allowances, discounts, credits and contra items, (e) all amounts owed
from employees, officers, shareholders, directors or affiliates and all
intra-company items, (f) any Receivables evidenced by instruments or chattel
paper that have not been endorsed and delivered to Lender by Borrower, and (g)
all other items which Lender in its sole discretion determines to be ineligible.
"Eligible Inventory" shall mean Borrower's Inventory, valued at the lesser
of cost or market, with such adjustments thereto as Lender in its sole
discretion determines to be appropriate.
"Event of Default" shall have the meaning assigned to such term in SECTION
7.1 of this Agreement.
"Guaranties" shall mean, collectively, one or more Continuing Guaranties
of even date herewith, executed in favor of Lender by Guarantors.
"Inventory" shall have the meaning assigned to such term in the Uniform
Commercial Code.
"Line of Credit Borrowing Limit" shall mean $1,500,000.
"Line of Credit Interest Rate" shall mean an annual rate equal to the
lesser of (a) the maximum contract rate of interest permitted to be charged
under applicable law or (b) the Base Rate plus one-half percentage point (1/2%),
computed on the basis of a 360-day year, actual number of days elapsed, adjusted
daily as the Base Rate changes.
"Line of Credit Termination Date" shall mean October __, 2000.
"Loan Documents" shall mean, collectively, the Security Instruments,
together with the Note and any other instruments and documents now or hereafter
evidencing, securing or in any way related to the indebtednesses evidenced by
the Note.
"Note" shall mean that certain Master Secured Promissory Note of even date
herewith, in the principal amount not exceeding the Line of Credit Borrowing
Limit, made and executed by Borrower, payable to the order of Lender, evidencing
the indebtedness of Borrower to Lender in connection with the Loan, together
with any and all extensions, modifications, renewals, restatements and/or
replacements thereof.
"Pledge Agreements" shall mean those two (2) certain Pledge and Security
Agreements of even date herewith, executed by Xxxx X. Xxxxxxxxx and Xxxxx X.
Xxxxxxx, in favor of Lender.
"Receivables" shall mean accounts, general intangibles, instruments and
chattel paper, as such terms are defined in the Uniform Commercial Code.
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"Secured Obligations" shall have the meaning assigned such term in SECTION
3.2 of this Agreement.
"Security Instruments" shall mean, collectively, this Agreement, the
Guaranties, and any other instruments, documents or agreements now or hereafter
securing the Secured Obligations, whether by specific or general reference.
"Uniform Commercial Code" means the Uniform Commercial Code as in effect
in the State of Tennessee from time to time.
ARTICLE II
THE LOAN
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II.1 ADVANCES. Prior to the Line of Credit Termination Date and so long as
no Event of Default (or event that with the giving of notice or the passage of
time or both would constitute an Event of Default) has occurred and is in
existence hereunder, Lender shall advance proceeds under the Loan to Borrower
upon Borrower's request in an aggregate amount outstanding at any one time not
to exceed the lesser of (a) the Borrowing Base in effect from time to time, or
(b) the Line of Credit Borrowing Limit, although Lender may in its sole and
absolute discretion permit advances to exceed such amount. Any such excess
advances shall be secured by, and subject to the terms and conditions of, this
Agreement. In the absence of an Event of Default, Borrower may repay and
reborrow amounts under the Loan in accordance with the terms, conditions and
provisions of this Agreement.
II.2 REPAYMENT. The indebtedness of Borrower to Lender in connection with
the Loan shall be evidenced by, and payable in accordance with the terms of, the
Note. Amounts outstanding under the Loan shall bear interest at the Line of
Credit Interest Rate. In addition, Borrower covenants and agrees to maintain
Eligible Receivables and Eligible Inventory in an aggregate amount sufficient to
keep the aggregate outstanding principal balance of the advances made in respect
of the Loan within the limits specified in SECTION 2.1 of this Agreement. If at
any time such limits are exceeded, Borrower shall immediately pay to Lender an
amount sufficient to reduce the aggregate outstanding principal balance of the
Loan to an amount that is within such limits.
II.3 LETTERS OF CREDIT. If and to the extent that Lender has issued or
from time to time hereafter shall issue letters of credit for the account of
Borrower pursuant to applications submitted to Lender by Borrower, it is
understood and agreed that:
(a) the credit availability under the Loan shall be reduced by
the aggregate undrawn amount from time to time available under
outstanding letters of credit,
(b) any amounts paid by Lender under any such letters of
credit shall be deemed to be advances against the Note, and the
indebtedness of Borrower to Lender in connection therewith shall
constitute a part of the Secured Obligations and shall be secured as
hereinafter set forth in the same manner as all other advances made
by Lender against the Note.
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Borrower acknowledges and agrees that Lender has made no commitment to Borrower
with respect to the issuance of any such letters of credit.
II.4 COMMITMENT FEE. Upon execution of this Agreement, Borrower shall
pay to Lender a non-refundable commitment fee in the amount of $3,750.00.
II.5 PURPOSE. The purpose of the Loan shall be to provide working capital
to Borrower on a revolving basis.
ARTICLE III
SECURITY
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III.1 SECURITY. The Secured Obligations are and shall continue to be
secured by the following:
(a) PERSONAL PROPERTY. Borrower hereby grants to Lender a security
interest in the following described property and interests in property,
together with all proceeds (including but not limited to insurance
proceeds) and products thereof and all accessions thereto, as applicable:
(i) EQUIPMENT. All equipment of Borrower of every kind and
description, whether now owned or hereafter acquired and wherever
located, together with all parts, accessories and attachments and
all replacements thereof and additions thereto;
(ii) INVENTORY, ACCOUNTS, LP CHATTEL PAPER, INSTRUMENTS,
DOCUMENTS AND GENERAL INTANGIBLES. All of Borrower's inventory,
whether held for lease, sale or for furnishing under contracts of
service, all agreements for lease of same and rentals therefrom, and
all of Borrower's accounts, accounts receivable, chattel paper,
instruments, documents and general intangibles (including but not
limited to trade marks, copyrights and patents), whether now in
existence or owned or hereafter acquired, entered into, created or
arising, and wherever located; and
(iii) BOOKS AND RECORDS. All of Borrower's right, title and
interest to all of the books, records, files and all other data and
documents of Borrower of all kinds in whatever form, whether
computerized or otherwise and including but not limited to computer
disks, tapes and printouts, relating to the above-described
collateral.
(b) OTHER SECURITY INSTRUMENTS. The Guaranties, the Pledge
Agreements and the other Security Instruments.
III.2 SECURED OBLIGATIONs. Without limiting any of the provisions
thereof, the Security Instruments shall secure:
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(a) The full and timely payment of the indebtednesses evidenced by
the Note, together with interest thereon, and any extensions,
modifications and/or renewals thereof and any notes given in payment
thereof,
(b) The full and prompt performance of all of the obligations of
Borrower to Lender under the Loan Documents,
(c) The full and prompt payment of all expenses and costs of
whatever kind incident to the collection of the indebtednesses evidenced
by the Note, the perfection, enforcement or protection of the security
interests of the Security Instruments or the exercise by Lender of any
rights or remedies of Lender with respect to the indebtednesses evidenced
by the Note, including but not limited to reasonable attorney's fees and
expenses incurred by Lender, all of which Borrower agrees to pay to Lender
upon demand,
(d) The full and prompt payment of the indebtednesses and
obligations of Guarantors to Lender evidenced and/or secured by (i) that
certain Loan Agreement of even date herewith, by and among Lender,
Borrower and Guarantors, entered into in connection with that certain term
loan from Lender to European Micro in the original principal amount of
$1,500,000, and (ii) that certain Loan and Security Agreement of even date
herewith, by and among Lender, Borrower and Guarantors, entered into in
connection with that certain line of credit from Lender to Nor'easter, in
the maximum principal amount of $1,500,000, together with any and all
renewals, amendments and modifications thereof; and
(e) The full and prompt payment and performance of any and all other
indebtednesses and other obligations of Borrower or either Guarantor to
Lender, direct or contingent (including but not limited to obligations
incurred as indorser, guarantor or surety), however evidenced or
denominated, and however and whenever incurred, including but not limited
to indebtednesses incurred pursuant to any present or future commitment of
Lender to Borrower or either Guarantor, together with interest thereon,
and any extensions, modifications and/or renewals thereof and any notes
given in payment thereof.
All of the foregoing indebtedness and other obligations are herein collectively
referred to as the "Secured Obligations".
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
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Borrower and Guarantors hereby represent and warrant to Lender as follows:
IV.1 CORPORATE STATUS. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. Each
Guarantor is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada. Borrower and each Guarantor has the
corporate power to own and operate its properties, to carry on its business as
now conducted and to enter into and to perform its obligations under this
Agreement and the other Loan Documents to which it is a party. Borrower and each
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Guarantor is duly qualified to do business and in good standing in each state in
which a failure to be so qualified would have a material adverse effect on its
financial position or its ability to conduct its business in the manner now
conducted.
IV.2 AUTHORIZATION. Borrower and each Guarantor has full legal right,
power and authority to conduct its business and affairs in the manner
contemplated by the Loan Documents, and to enter into and perform its
obligations thereunder, without the consent or approval of any other person,
firm, governmental agency or other legal entity. The execution and delivery of
this Agreement, the borrowing hereunder, the execution and delivery of each Loan
Document to which Borrower or either Guarantor is a party, and the performance
by Borrower and each Guarantor of its obligations thereunder are within the
corporate powers of Borrower or Guarantors and have been duly and properly
authorized by all necessary corporate action, have received all necessary
governmental approvals, if any were required, and do not and will not contravene
or conflict with any provision of law, any applicable judgment, ordinance,
regulation or order of any court or governmental agency, the charters or by-laws
of Borrower or Guarantors, or any agreement binding upon Borrower, Guarantors or
their properties. The officer(s) executing this Agreement and all of the other
Loan Documents to which Borrower and Guarantors are a party are duly authorized
to act on behalf of Borrower and Guarantors.
IV.3 VALIDITY AND BINDING EFFECT. This Agreement and the other Loan
Documents are the legal, valid and binding obligations of the parties thereto,
enforceable in accordance with their respective terms.
IV.4 OTHER TRANSACTIONS. Except as specifically set forth in this
Agreement and the other Loan Documents, there are no prior loans, liens,
security interests, agreements or other financings upon which Borrower is
obligated or by which Borrower is bound that will in any way permit any third
person to have or obtain priority over Lender as to any of the security
interests or liens granted to Lender pursuant to this Agreement and the other
Security Instruments. Consummation of the transactions hereby contemplated and
the performance of the obligations of Borrower and Guarantors under and by
virtue of the Loan Documents will not result in any breach of, or constitute a
default under, any mortgage, security deed or agreement, deed of trust, lease,
bank loan or credit agreement, corporate charter or by-laws, agreement or
certificate of limited partnership, partnership agreement, license, franchise or
any other instrument or agreement to which Borrower or either Guarantor is a
party or by which Borrower, Guarantors or their properties may be bound or
affected.
IV.5 PLACES OF BUSINESS. The records with respect to all intangible
personal property constituting a part of the collateral security for the Secured
Obligations are maintained at Borrower's chief place of business and chief
executive office, which has the address of 0000 X.X. 000xx Xxxxxx, Xxxxx X-00,
Xxxxx, Xxxxxxx 00000. All tangible personal property constituting a part of the
collateral security for the Secured Obligations is or will be located at
Borrower's chief place of business and chief executive office and/or at any
specific locations set forth in attached SCHEDULE 4.5.
IV.6 LITIGATION. There are no actions, suits or proceedings pending, or,
to the knowledge of Borrower or either Guarantor, threatened, against or
affecting Borrower or either Guarantor or involving the validity or
enforceability of any of the Loan Documents or the priority of the liens
thereof, at law or in equity, or before any governmental or administrative
agency, except actions, suits and proceedings that are fully covered by
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insurance and that, if adversely determined, would not impair the ability of
Borrower or Guarantors to perform each and every one of their respective
obligations under and by virtue of the Loan Documents; and to the knowledge of
Borrower and Guarantors, neither Borrower nor either Guarantor is in default
with respect to any order, writ, injunction, decree or demand of any court or
any governmental authority.
IV.7 FINANCIAL STATEMENTS. The financial statement(s) of Borrower and
Guarantors heretofore delivered to Lender are true and correct in all respects,
have been prepared in accordance with generally accepted accounting principles
consistently applied, and fairly present the financial condition of the subjects
thereof as of the date(s) thereof. No material adverse change has occurred in
the financial condition of Borrower or either Guarantor since the date(s)
thereof, and no additional borrowings have been made by Borrower or either
Guarantor since the date(s) thereof.
IV.8 NO DEFAULTS. No default or event of default by Borrower or Guarantors
exists under this Agreement or any of the other Loan Documents, or under any
other instrument or agreement to which Borrower or either Guarantor is a party
or by which Borrower, Guarantors or their properties may be bound or affected,
and no event has occurred and is existing that with notice or the passage of
time or both would constitute a default or event of default thereunder.
IV.9 COMPLIANCE WITH LAW. Borrower and Guarantors have obtained all
necessary licenses, permits and governmental approvals and authorizations
necessary or proper in order to conduct their business and affairs as heretofore
conducted and as intended to be conducted hereafter. To the knowledge of
Borrower and Guarantors, Borrower and Guarantors are in compliance with all
laws, regulations, decrees and orders applicable to them (including but not
limited to laws, regulations, decrees and orders relating to occupational and
health standards and controls, antitrust, monopoly, restraint of trade or unfair
competition). Neither Borrower nor either Guarantor has received, nor expects to
receive, any order or notice of any violation or claim of violation of any law,
regulation, decree, rule, judgment or order of any governmental authority or
agency relating to the ownership and/or operation of its properties, as to which
the cost of compliance is or might be material and the consequences of
noncompliance would or might be materially adverse to its business, operations,
property or financial condition, or which would or might impair its ability to
perform its obligations under the Loan Documents to which it is a party.
IV.10 ENVIRONMENTAL MATTERS.
(a) As used in this SECTION 4.10 and in SECTION 5.12 hereof, the
following terms shall have the indicated meanings:
"BUSINESS" means all of Borrower's and Guarantors' assets, both real
and personal, tangible and intangible, now existing or hereafter acquired
and wherever located, and all of Borrower's and Guarantors' current and
future business operations at all locations and in all jurisdictions.
"ENVIRONMENTAL AUTHORITIES" means all federal, state and local
governmental bodies, authorities or agencies and all public corporations
created and/or empowered to administer, regulate and/or enforce
Environmental Laws, including without limitation the U.S.
Environmental Protection Agency.
"ENVIRONMENTAL LAWS" means any and all federal, state, regional,
county or local laws, statutes, rules, regulations or ordinances relating
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to the generation, recycling, use, reuse, sale, storage, handling,
transport, treatment or disposal of Hazardous Materials, including without
limitation the Comprehensive Environmental Response Compensation Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization
Act of 1986, 42 U.S.C. ss.ss.9601 ET seq. ("CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended by the Solid and
Hazardous Waste Amendments of 1984, 42 U.S.C. ss.ss.6901 ET seq. ("RCRA"),
the Tennessee Hazardous Waste Management Act, T.C.A. ss.ss.00-00-000 ET
seq., and any rules, regulations and guidance documents promulgated or
published thereunder, and any state, regional, county or local statute,
law, rule, regulation or ordinance relating to public health, safety or
the discharge, emission or disposal of Hazardous Materials or Hazardous
Wastes in or to air, water, land or groundwater, to the withdrawal or use
of groundwater, to the use, handling or disposal of asbestos,
polychlorinated biphenyls, petroleum, petroleum derivatives or
by-products, other hydrocarbons or urea formaldehyde, to the treatment,
storage, disposal or management of Hazardous Materials, to exposure to
Hazardous Materials, to the transportation, storage, disposal, management
or release of gaseous or liquid substances, and any regulation, order,
injunction, judgment, declaration, notice or demand issued thereunder.
"HAZARDOUS MATERIALS" means any hazardous, toxic or dangerous
materials, substances, chemicals, waste or pollutants that from time to
time are defined by or pursuant to or are regulated under any
Environmental Laws, including without limitation asbestos, polychlorinated
biphenyls, petroleum, petroleum derivatives or by-products, other
hydrocarbons, urea formaldehyde and any material, substance, pollutant or
waste that is defined as a hazardous waste under RCRA or defined as a
hazardous substance under CERCLA.
"HAZARDOUS WASTES" means Hazardous Materials that are or become
"wastes" or "solid wastes" as such terms are used in RCRA.
"PROPERTY" means all real property now or hereafter constituting a
part of, or otherwise used or operated by Borrower or Guarantors in
connection with, the Business.
(b) Borrower and Guarantors represent and warrant to Lender as
follows:
(i) The Property is being operated by Borrower and Guarantors
in full compliance with Environmental Laws, and Borrower and
Guarantors have obtained, maintained and is in good standing under
all approvals, consents, certificates, licenses and permits required
by Environmental Laws with respect to the Property.
(ii) To the knowledge of Borrower and Guarantors, the Property
is free of all Hazardous Wastes and is free of all Hazardous
Materials other than those maintained therein or thereon in full
compliance with Environmental Laws. Borrower and Guarantors have not
caused or permitted the Property to be used to generate,
manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce or process Hazardous Materials except in full
compliance with Environmental Laws.
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(iii) Neither Borrower nor either Guarantor has received
notice, nor has knowledge, of any noncompliance with or violation of
any Environmental Laws with respect to the Property or the Business.
IV.11 NO BURDENSOME RESTRICTIONS. No instrument, document or agreement to
which Borrower or either Guarantor is a party or by which it or its properties
may be bound or affected materially adversely affects, or may reasonably be
expected so to affect, its business, operations, property or financial
condition.
IV.12 TAXES. Borrower and each Guarantor has filed or caused to be filed
all tax returns that to its knowledge are required to be filed (except for
returns that are not yet due), and has paid all taxes shown to be due and
payable on said returns and all other taxes, impositions, assessments, fees or
other charges imposed on it by any governmental authority, agency or
instrumentality, prior to any delinquency with respect thereto (other than
taxes, impositions, assessments, fees and charges currently being contested in
good faith by appropriate proceedings, for which appropriate amounts have been
reserved). No tax liens have been filed against Borrower, Guarantors or any of
their property.
IV.13 EQUIPMENT. The equipment constituting a part of the collateral for
the Secured Obligations is owned solely by Borrower, and Borrower has full
right, power and authority to grant to Lender a valid and enforceable security
interest therein. Lender's security interest in such equipment constitutes a
first and prior lien upon and security interest in such equipment, and no other
person or entity has any right, title, interest, security interest, claim or
lien with respect thereto.
IV.14 INVENTORY. The Inventory constituting a part of the collateral for
the Secured Obligations is owned solely by Borrower, and Borrower has all
necessary right, power and authority to grant to Lender a valid and enforceable
security interest therein. Lender's security interest in such Inventory
constitutes a first and prior lien upon and security interest in such Inventory,
and no other person or entity has any right, title, interest, security interest,
claim or lien with respect thereto.
IV.15 RECEIVABLES, ETC. With respect to the Receivables, (a) each
Receivable is a valid and bona fide existing obligation created by or arising
out of the sale and delivery or other disposition of Borrower's Inventory or the
rendition by Borrower of services to Borrower's customers in the ordinary course
of business, (b) the Receivables are owned solely by Borrower and Borrower has
all necessary right, power and authority to grant to Lender a valid and
enforceable security interest therein, (c) Lender's security interest in such
Receivables constitutes a first and prior lien upon and security interest in
such Receivables, and no other person or entity has any right, title, interest,
security interest, claim or lien with respect thereto; (d) each Receivable
constituting an Eligible Receivable will at all times be unconditionally owed to
Borrower and enforceable against the obligor(s) with respect thereto without
dispute of any kind, and (e) each Receivable constituting an Eligible Receivable
is an "account" as defined in the Uniform Commercial Code and is not evidenced
by any instrument or document (except as specifically disclosed to Lender and
accepted by Lender as an Eligible Receivable) that would in any way change or
alter its character as an account.
IV.16 EFFECT OF REQUEST FOR ADVANCE. Each request by Borrower for an
advance of proceeds of the Loan shall constitute an affirmation by Borrower and
Guarantors that the representations and warranties of this ARTICLE IV remain
true and correct on and as of the date of such request.
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ARTICLE V
COVENANTS AND AGREEMENTS
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Borrower and Guarantors covenant and agree that during the term of this
Agreement:
V.1 PAYMENT OF SECURED OBLIGATIONS. Borrower shall pay the indebtednesses
evidenced by the Note according to the terms thereof, and shall timely pay or
perform, as the case may be, all of the other Secured Obligations.
V.2 SALES OF AND ENCUMBRANCES ON COLLATERAL. Borrower will not sell,
exchange, lease, negotiate, pledge, assign or grant any security interest in or
otherwise dispose of the collateral described in the Security Instruments to
anyone other than Lender, nor permit any other lien of any kind to attach
thereto, nor permit same to be attached to or commingled with other goods or
property, without Lender's prior written consent; provided, however, that prior
to the occurrence of an Event of Default hereunder, Borrower shall have the
right to process and sell its Inventory in the ordinary course of business as
herein provided.
V.3 FURTHER ASSURANCES. Borrower will take all actions requested by Lender
to create and maintain in Lender's favor valid liens upon, security titles to
and/or perfected security interests in any collateral described in the Security
Instruments and all other collateral for the Secured Obligations now or
hereafter held by or for Lender. Without limiting the foregoing, Borrower agrees
to execute such further instruments (including financing statements and
continuation statements) as may be required or permitted by any law relating to
notices of, or affidavits in connection with, the perfection of Lender's
security interests or liens, to cooperate with Lender in the filing or recording
and renewal thereof, and, upon Lender's request, to immediately place notations
upon its books of account to disclose Lender's security interest in all
Receivables granted in this Agreement.
V.4 FINANCIAL STATEMENTS AND REPORTS. Borrower and Guarantors shall
furnish to Lender such financial data as Lender may reasonably request. Without
limiting the foregoing, Borrower and Guarantors shall furnish to Lender (or
cause to be furnished to Lender) the following:
(a) as soon as practicable and in any event within ninety (90) days
after the end of each fiscal year of Borrower and Guarantors, consolidated
and consolidating balance sheets of Borrower and Guarantors as of the
close of such fiscal year, consolidated and consolidating statements of
earnings and retained earnings of Borrower and Guarantors as of the close
of such fiscal year, and consolidated and consolidating statements of cash
flows for Borrower and Guarantors for such fiscal year, all in reasonable
detail, prepared in accordance with generally accepted accounting
principles consistently applied, audited in accordance with generally
accepted auditing standards by independent certified public accountants
satisfactory to Lender in its reasonable judgment, and accompanied by the
unqualified favorable opinion of such accountants and a certificate of the
chief executive or chief financial officers of Borrower and Guarantors,
stating that, to the best of the knowledge of such officers, Borrower and
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Guarantors have kept, observed, performed and fulfilled each covenant,
term and condition of this Agreement and the other Loan Documents during
such fiscal year and that no Event of Default hereunder has occurred and
is continuing (or if an Event of Default has occurred and is continuing,
specifying the nature of same, the period of existence of same and the
action Borrower and Guarantors propose to take in connection therewith),
and setting forth calculations of the financial covenants set forth in
ARTICLE VI of this Agreement (a "Compliance Certificate");
(b) within forty-five (45) days of the end of the first three (3)
quarters of each fiscal year of Borrower and Guarantors, consolidated and
consolidating balance sheets of Borrower and Guarantors as of the close of
such quarter and consolidated and consolidating statements of earnings and
retained earnings of Borrower and Guarantors as of the close of such
quarter, all in reasonable detail, and prepared substantially in
accordance with generally accepted accounting principles consistently
applied, certified by the chief executive or chief financial officers of
Borrower and Guarantors as being true and correct, and accompanied by a
Compliance Certificate;
(c) within thirty (30) days of the end of each calendar month,
non-consolidated balance sheets of Borrower and each Guarantor as of the
close of such month, and non-consolidated statements of earnings and
retained earnings of Borrower and each Guarantor as of the close of such
month, all in reasonable detail, and prepared substantially in accordance
with generally accepted accounting principles consistently applied,
certified by the chief executive or chief financial officers of Borrower
and Guarantors as being true and correct, and accompanied by a Compliance
Certificate;
(d) within fifteen (15) days of the end of each calendar month,
accounts receivable and accounts payable listings of Borrower, with
agings, and a certification of inventory of Borrower, all as of the close
of such month and all in form satisfactory to Lender, and accompanied by a
certificate in form satisfactory to Lender setting forth a calculation of
the Borrowing Base as of the close of such month; and
(e) promptly upon receipt thereof, copies of all accountants'
reports and accompanying financial reports submitted to Borrower or either
Guarantor by independent accountants in connection with each annual
examination of Borrower and Guarantors.
V.5 MAINTENANCE OF BOOKS AND RECORDS; INSPECTION. Borrower and Guarantors
shall maintain their books, accounts and records in accordance with generally
accepted accounting principles consistently applied, and permit Lender, its
officers and employees and any professionals designated by Lender in writing, at
any time to visit and inspect any of their properties (including but not limited
to the collateral security described in the Security Instruments), corporate
books and financial records, and to discuss their accounts, affairs and finances
with any employee, officer or director thereof.
V.6 INSURANCE. Without limiting any of the requirements of any of the
other Loan Documents, Borrower shall maintain, in amounts satisfactory to Lender
(a) public liability insurance, (b) worker's compensation insurance (or maintain
a legally sufficient amount of self insurance against worker's compensation
liabilities, with adequate reserves, under a plan approved by Lender), (c) fire
and "all risk" casualty insurance on its properties (including but not limited
to the collateral security now or hereafter securing payment and performance of
the Secured Obligations), against such hazards and in at least such amounts as
are customary in the type of business in which Borrower is engaged, and (d) rent
or business interruption insurance against loss of income arising out of damage
11
or destruction by such hazards as presently are included in so called "all risk
coverage". At the request of Lender, Borrower will deliver forthwith a
certificate, executed by a duly authorized representative of the insurer(s),
specifying the details of such insurance in effect.
All policies of insurance shall provide that at least thirty (30) days'
prior written notice of cancellation or modification of the policy shall be
given to Lender by the insurer, and all policies of casualty insurance covering
any tangible security for the Secured Obligations shall be payable to Borrower
and Lender as their respective interests may appear. Borrower agrees that there
shall be no recourse against Lender for the payment of premiums, commissions,
assessments or advances in respect of any such policy, and at Lender's request
shall provide Lender with the agreement of the insurer(s) to this effect.
At the request of Lender, all policies of casualty insurance covering any
tangible security for the Secured Obligations shall be delivered to and held by
Lender. Borrower shall act expeditiously in the adjustment and settlement of
claims under such policies in order to preserve the greatest possible value
reasonably obtainable in respect of such claims. Following the occurrence of an
Event of Default, Lender may, at its option, act as attorney in fact for
Borrower in adjusting and settling claims under such insurance and endorsing any
drafts with respect thereto, and this power, being coupled with an interest,
shall be irrevocable prior to payment in full of the indebtednesses evidenced by
the Note and performance of all of the obligations of Borrower to Lender in
connection therewith, and any insurer is hereby instructed to rely upon Lender's
representation that an Event of Default has occurred hereunder without further
inquiry or investigation.
V.7 TAXES AND ASSESSMENTS; TAX INDEMNITY. Borrower and each Guarantor
shall (a) file all tax returns and appropriate schedules thereto that are
required to be filed under applicable law, prior to the date of delinquency, (b)
pay and discharge all taxes, assessments and governmental charges or levies
imposed upon Borrower or either Guarantor, upon its income and profits or upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or levies
that, if unpaid, might become a lien or charge upon any of its properties;
provided, however, that Borrower and Guarantors in good faith may contest any
such tax, assessment, governmental charge or levy described in the foregoing
clauses (b) and (c) so long as appropriate reserves are maintained with respect
thereto. If any tax is or may be imposed by any governmental entity in respect
of sales of Borrower's Inventory or the merchandise that is the subject of such
sales, or as a result of any other transaction of Borrower, which tax Lender is
or may be required to withhold or pay, Borrower agrees to indemnify and hold
harmless Lender in connection with such taxes (including penalties and
interest), and Borrower shall immediately reimburse Lender for any such amounts
paid by Lender, and such amounts shall be added to the Secured Obligations
pursuant to the terms hereof.
V.8 CORPORATE EXISTENCE. Borrower and each Guarantor shall maintain its
corporate existence and good standing in the state of its incorporation, and its
qualification and good standing as a foreign corporation in each jurisdiction in
which such qualification is necessary pursuant to applicable law.
V.9 COMPLIANCE WITH LAW AND OTHER AGREEMENTS. Borrower and each Guarantor
shall maintain its business operations and property owned or used in connection
therewith in compliance with (a) all applicable federal, state and local laws,
regulations and ordinances governing such business operations and the use and
ownership of such property, and (b) all agreements, licenses, franchises,
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indentures and mortgages to which Borrower or either Guarantor is a party or by
which Borrower, either Guarantor or any of their properties is bound. Without
limiting the foregoing, Borrower and each Guarantor shall pay all of its
indebtedness promptly in accordance with the terms thereof.
V.10 NOTICE OF DEFAULT. Borrower and Guarantors shall give written notice
to Lender of the occurrence of any default, event of default or Event of Default
under this Agreement or any other Loan Document promptly upon the occurrence
thereof.
V.11 NOTICE OF LITIGATION. Borrower and Guarantors shall give notice, in
writing, to Lender of (a) any actions, suits or proceedings wherein the amount
at issue is in excess of $250,000, instituted by any persons against Borrower or
either Guarantor, or affecting any of the assets of Borrower or either
Guarantor, and (b) any dispute, not resolved within sixty (60) days of the
commencement thereof, between Borrower or either Guarantor on the one hand and
any governmental or regulatory body on the other hand, which might reasonably be
expected to have a material adverse effect on the business operations or
financial condition or Borrower or either Guarantor.
V.12 ENVIRONMENTAL MATTERS.
(a) Borrower and Guarantors will cause the Property to remain free
of all Hazardous Wastes, and to remain free of all Hazardous Materials
other than those maintained therein or thereon in full compliance with
Environmental Laws. Neither Borrower nor either Guarantor will cause or
permit the Property to be used to generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce or process
Hazardous Materials except in full compliance with Environmental Laws.
(b) Borrower and Guarantors will notify Lender immediately if they
receive any notice or obtain knowledge of any noncompliance with or
violation of any Environmental Laws with respect to the Property or the
Business.
(c) In the event that Hazardous Materials unrelated to the Business,
or Hazardous Wastes, are discovered on or are brought onto the Property,
Borrower and Guarantors will cause such Hazardous Materials or Hazardous
Wastes to be removed and disposed of promptly and in full compliance with
Environmental Laws. Borrower and Guarantors will provide Lender prior
written notice of such removal and disposal actions.
(d) Borrower and Guarantors will comply with all Environmental Laws
in all jurisdictions in which Borrower or either Guarantor operates, now
or in the future, and will comply with all Environmental Laws that in the
future become applicable to the Property or the Business.
V.13 MERGERS, CONSOLIDATIONS, ACQUISITIONS AND SALES. Without the prior
express written consent of Lender, neither Borrower nor either Guarantor shall
(a) be a party to any merger, consolidation or corporate reorganization, (b)
purchase or otherwise acquire all or substantially all of the assets or stock
of, or any partnership or joint venture interest in, any other person, firm or
entity, (c) sell, transfer, convey, grant a security interest in or lease all or
any substantial part of its assets, nor (d) create any subsidiaries nor convey
any of its assets to any subsidiary; provided, however, Borrower or either
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Guarantor may make acquisitions of all or substantially all of the stock or
assets of other entities, so long as (i) no Event of Default exists hereunder,
(ii) the purchase price payable in connection with each such acquisition,
including the fair market value of any non-cash consideration, does not exceed
$5,000,000, and (iii) any subsidiary of Borrower or either Corporate Guarantor
created or acquired in connection with any such acquisition shall guarantee the
indebtedness of Borrower to Lender and grant Lender a security interest in all
of its assets to secure its obligations and the obligations of Borrower to
Lender, all pursuant to documentation in form and substance satisfactory to
Lender in all respects.
V.14 MANAGEMENT, OWNERSHIP. Neither Borrower nor either Guarantor shall
permit any significant change in its ownership, executive staff or management
without the prior written consent of Lender. The ownership, executive staff and
management of Borrower and Guarantors are material factors in Lender's
willingness to institute and maintain a lending relationship with Borrower.
V.15 DIVIDENDS, ETC. Neither Borrower nor either Guarantor shall declare
or pay any dividend of any kind, in cash or in property, on any class of its
capital stock, nor purchase, redeem, retire or otherwise acquire for value any
shares of such stock, nor make any distribution of any kind in respect thereof,
nor make any return of capital to shareholders, nor make any payments in respect
of any pension, profit sharing, retirement, stock option, stock bonus, incentive
compensation or similar plan (except as required or permitted hereunder),
without the prior written consent of Lender. Without limiting the foregoing, not
less than seventy-five percent (75%) of the net proceeds of any equity offering
by Borrower or either Guarantor shall be retained and shall not be paid out as
dividends or otherwise distributed to shareholders.
V.16 GUARANTIES; LOANS. Neither Borrower nor either Guarantor shall
guarantee nor be liable in any manner, whether directly or indirectly, or become
contingently liable after the date of this Agreement in connection with the
obligations or indebtedness of any person or persons, except for the indorsement
of negotiable instruments payable to Borrower or Guarantors for deposit or
collection in the ordinary course of business. Neither Borrower nor either
Guarantor shall make any loan, advance or extension of credit to any person
other than in the normal course of its business.
V.17 DEBT. Neither Borrower nor either Guarantor shall create, incur,
assume or suffer to exist indebtedness of any description whatsoever in an
aggregate amount in excess of $250,000 (excluding the indebtedness evidenced by
the Note, trade accounts payable and accrued expenses incurred in the ordinary
course of business and the indorsement of negotiable instruments payable to
Borrower or Guarantors for deposit or collection in the ordinary course of
business).
V.18 CONDUCT OF BUSINESS. Borrower and Guarantors will continue to
engage, in an efficient and economical manner, in a business of the same general
type as conducted by them on the date of this Agreement.
V.19 MAINTENANCE OF COLLATERAL. Borrower will maintain all tangible
personal property constituting any part of the collateral described in the
Security Instruments in good condition and repair and will pay all costs and
expenses incurred in the maintenance of same, and will not permit any act or
occurrence that may impair the value thereof. Prior to the occurrence of an
Event of Default, Borrower shall be entitled to possession of such tangible
collateral and to use same in any lawful manner permitted hereunder, provided
that such use does not cause excessive wear and tear to such collateral, nor
cause it to decline in value at an excessive rate, nor violate the terms of any
policy of insurance thereon.
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V.20 SALE OF INVENTORY. Borrower will not sell, lease, exchange or
otherwise dispose of any of that portion of the collateral that consists of
Inventory, nor remove the same from its place(s) of business as described
herein, without the prior written consent of Lender, except in the ordinary
course of business for cash or on open account or on terms of payment ordinarily
extended to its customers. Upon the sale, exchange or other disposition of said
Inventory, the security interest and lien created and provided for herein,
without break in continuity and without further formality or act, shall continue
in and attach to any proceeds thereof, including but not limited to accounts,
chattel paper, contract rights, shipping documents, documents of title and cash
or non-cash proceeds, and in the event of any unauthorized sale, shall also
continue in said Inventory itself. All chattel paper shall be delivered to
Lender promptly upon receipt.
V.21 SPECIAL AGREEMENTS OF BORROWER WITH RESPECT TO RECEIVABLES AND
INVENTORY.
(a) By the execution of this Agreement, Lender shall not be
obligated to do or perform any of the acts or things to be done or
performed by Borrower pursuant to any contracts in which Lender has a
security interest, but Lender may, at its election, perform some or all of
the obligations provided in said contracts to be performed by Borrower,
and if Lender incurs any liability or expenses by reason thereof, same
shall be payable by Borrower upon demand and same shall also be secured by
this Agreement and the other Loan Documents. Lender shall be subrogated to
all guaranties and security now or hereafter in Borrower's possession or
favor.
(b) If requested by Lender following the occurrence of an Event of
Default, Borrower shall immediately notify all account debtors to direct
payments to Lender or to a lockbox in accordance with a Lockbox Service
Agreement to be entered into between Borrower and Lender at Lender's
request. Borrower will forthwith on receipt of all checks, drafts, cash
and other remittances in payment of inventory sold, or in payment on
account of Borrower's Receivables, deposit the same in a special bank
account maintained with Lender over which Lender alone has power of
withdrawal. Said proceeds shall be deposited in precisely the form
received, except for the indorsement of Borrower where necessary to permit
collection of items, which indorsement Borrower agrees to make, and which
Lender is also hereby authorized to make on Borrower's behalf. Pending
such deposit, Borrower agrees that it will not commingle any such checks,
drafts, cash or other remittances with any of Borrower's other funds or
property, but will hold them separate and apart therefrom and in trust for
Lender until deposit thereof is made in the special account. The funds in
said account and any funds collected by Lender under a Lockbox Service
Agreement shall be held by Lender as additional security for the Secured
Obligations. Lender may on a daily basis apply the whole or any part of
the collected funds on deposit in the special account and from the lockbox
against the Secured Obligations, and the amount, order and method of such
application shall be in the discretion of Lender; provided, however, that
so long as no Event of Default (or event that with the giving of notice or
the passage of time or both would constitute an Event of Default) has
occurred and is existing, said collected funds will be applied first to
the outstanding principal balance of, and accrued and unpaid interest on,
the Loan, in such order of priority as Lender shall determine. Any portion
of said funds on deposit in the special account and from the lockbox that
Lender elects not to so apply may be paid over by Lender to Borrower.
(c) Without limiting the provisions of SUBSECTION 5.21(B) hereof,
Borrower acknowledges and agrees that, upon the occurrences of an Event of
15
Default, Lender shall have the right to notify the account debtors
obligated on any or all of Borrower's Receivables to make payment thereof
direct to Lender, and to take control of all proceeds of any such
Receivables, and charge the collection costs and expenses to Borrower.
Until Lender gives Borrower other instructions, Borrower shall continue to
make collections of all Receivables for Lender. All payments on account of
Receivables, or as proceeds of any collateral, whether such payments are
made by check, draft, cash, money order, wire transfer, or otherwise,
shall be the specific property of Lender. Borrower shall receive such
payments as trustee for Lender and shall immediately deliver them to
Lender in their original form as received.
(d) Lender shall be privileged to enjoy all the rights and remedies
of Borrower as to the Receivables and shall be and become subrogated to
all guaranties and securities possessed by Borrower or due to come into
Borrower's hands, but Lender shall not be liable in any manner for
exercising or refusing to exercise any rights thereby bestowed.
(e) Borrower shall notify Lender promptly of all returns and
recoveries of merchandise and of all disputes and claims where the amount
at issue exceeds $25,000 in the aggregate, and Borrower shall settle or
adjust disputes and claims directly with customers for amounts and upon
terms it considers advisable and dispose of merchandise returns as it sees
fit, unless Lender directs Borrower to make such settlements, adjustments
and disposals subject to Lender's approval. In all cases Lender will
credit the Loan with only the net amounts received by Borrower in payment
of Receivables.
(f) Borrower hereby appoints the officers of Lender and/or any other
person whom Lender may designate as Borrower's attorney(s)-in-fact with
full power to endorse Borrower's name on any checks, notes, acceptances,
money orders, drafts or other forms of payment or security that may come
in Lender's possession; to sign Borrower's name on any invoice or xxxx of
lading relating to any Receivable, on drafts against customers, on
schedules of assignments of Receivables, on notices of assignment, on
financing statements, applications for noting of liens on certificates of
title and other public records or documents of any kind as necessary or
desirable to insure perfection or enforceability of Lender's security
interests in or liens on property of Borrower granted hereunder or
otherwise, on verification of accounts and on notices to customers; to
notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender; to receive, open and
dispose of all mail addressed to Borrower; to send requests for
verifications of accounts to customers; and to do all other things Lender
deems necessary to carry out this Agreement. Borrower hereby ratifies and
approves all acts of the attorney(s) and neither Lender nor the
attorney(s) for Lender will be liable for any acts of commission or
omission, nor for any error of judgment or mistake of fact or law. This
power, being coupled with an interest, is irrevocable so long as any money
remains owing to Lender from Borrower.
(g) Lender will be entitled to hold all sums at any time standing to
Borrower's credit on Lender's books and all of Borrower's property at any
time in Lender's possession, or upon or in which Lender at any time has a
lien or security interest, as security for all of Borrower's obligations
at any time owing to Lender, its parent corporation, subsidiary,
co-subsidiary or affiliate, whether such obligations are direct or
indirect, absolute or contingent, under this Agreement or otherwise. Such
obligations shall include, without limitation, all loans, advances, debts,
16
liabilities, obligations for purchases made by Borrower from other clients
factored or financed by Lender or from any such parent, subsidiary,
co-subsidiary or affiliate, whether such obligations are absolute or
contingent, or under this Agreement or otherwise, no matter how or when
arising and whether due or to become due, and further including all
interest, fees, charges, expenses and attorney's fees chargeable to
Borrower's loan account or incurred in connection with Borrower's loan
account whether provided for herein or in any other agreement between
Borrower and Lender, and Lender shall have the right to charge to
Borrower's loan account the amounts of all such obligations and pay over
such amounts to such parent, subsidiary, co-subsidiary or affiliate.
V.22 PLACES OF BUSINESS; MOBILE GOODS. Borrower will not change the
location of its chief place of business, chief executive office or any place of
business disclosed to Lender pursuant to SECTION 4.5 hereof, nor will Borrower
move any of the tangible personal property constituting a part of the collateral
for the Secured Obligations to any other location(s) (except during temporary
periods in the normal and customary use thereof), nor will Borrower change the
location at which it maintains its records concerning the intangible collateral
for the Secured Obligations, without thirty (30) days' prior written notice to
Lender in each instance. If any of the tangible collateral for the Secured
Obligations constitutes goods of a type normally used in more than one state
(whether or not actually so used), Borrower will contemporaneously with the
execution hereof furnish to Lender a list of all states in which such goods are
or will be used, and hereafter will notify Lender in writing of any other
state(s) in which such goods are or will be so used.
V.23 ERISA PLAN. If Borrower has in effect, or hereafter institutes (with
Lender's consent, as hereinafter provided), a pension plan that is subject to
the requirements of Title IV of the Employee Retirement Income Security Act of
1974, Pub. L. No. 93 406, September 2, 1974, 00 Xxxx. 000, 00 X.X.X.X. ss. 1001
ET Seq. (1975), as amended from time to time ("ERISA"), then the following
warranty and covenants shall be applicable during such period as any such plan
(the "Plan") shall be in effect: (a) Borrower hereby warrants that no fact that
might constitute grounds for the involuntary termination of the Plan, or for the
appointment by the appropriate United States District Court of a trustee to
administer the Plan, exists at the time of execution of this Agreement, (b)
Borrower hereby covenants that throughout the existence of the Plan, Borrower's
contributions under the Plan will meet the minimum funding standards required by
ERISA and Borrower will not institute a distress termination of the Plan, (c)
Borrower hereby covenants that the Plan's annual financial and actuarial
statements and the Plan's annual Form 5500 information return will be filed with
Lender within thirty (30) days of the preparation thereof, and (d) Borrower
covenants that it will send to Lender a copy of any notice of a reportable event
(as defined in ERISA) required by ERISA to be filed with the Labor Department or
the Pension Benefit Guaranty Corporation, at the time that such notice is so
filed.
No Plan shall be instituted by Borrower unless Lender shall have given its
written consent thereto.
ARTICLE VI
FINANCIAL COVENANTS
-------------------
VI.1 NET WORTH REQUIREMENTS. Borrower and Guarantors shall at all times
maintain a minimum tangible net worth of $12,000,000, calculated on a
consolidated basis. For purposes of this covenant, "tangible net worth" shall
17
refer to the excess of Borrower's and Guarantors' total assets above the sum of
their intangible assets plus total liabilities (exclusive of any debt
subordinated to indebtedness of Borrower or Guarantors to Lender), all
determined in accordance with generally accepted accounting principles
consistently applied.
VI.2 DEBT TO WORTH RATIO. Borrower and Guarantors shall at all times
maintain a ratio of total liabilities (exclusive of any debt subordinated to
indebtedness of Borrower or Guarantors to Lender) to tangible net worth of not
more than 2.0 to 1.0, calculated on a consolidated basis. For purposes of this
covenant, "tangible net worth" shall have the meaning set forth in SECTION 6.1
hereof.
VI.3 INTEREST COVERAGE RATIO. Borrower and Guarantors shall maintain a
ratio of earnings before interest and taxes to interest expense, all determined
in accordance with generally accepted accounting principles consistently
applied, calculated on a consolidated basis as of the last day of each
September, December, March and June, for the then-previous twelve-month period
(beginning September 30, 1999), of not less than 4.0 to 1.0.
ARTICLE VII
DEFAULT AND REMEDIES
--------------------
VII.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Failure to make payment of the principal of or interest on the
indebtedness evidenced by the Note within five (5) days of when due;
(b) Any misrepresentation by Borrower or either Guarantor as to any
material matter hereunder or under any of the other Loan Documents, or
delivery by Borrower or either Guarantor of any schedule, statement,
resolution, report, certificate, notice or writing to Lender that is
untrue in any material respect on the date as of which the facts set forth
therein are stated or certified;
(c) Failure of Borrower or any Guarantor to perform any of its
obligations under SECTIONS 5.7, 5.9 or 5.12 of this Agreement within
fifteen (15) days after the earlier of (i) written notice from Lender to
Borrower of such failure to perform, or (ii) the date Borrower becomes
aware of such failure to perform;
(d) Failure of Borrower or either Guarantor to perform any other of
its obligations under this Agreement, the Note, any of the Security
Instruments or any of the other Loan Documents;
(e) Borrower or either Guarantor (i) shall generally not pay or
shall be unable to pay its debts as such debts become due; or (ii) shall
make an assignment for the benefit of creditors or petition or apply to
any court or tribunal for the appointment of a custodian, receiver or
trustee for it or a substantial part of its assets; or (iii) shall
commence any proceeding or case under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, whether now or hereafter in effect; or (iv)
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shall have had any such petition or application filed or any such
proceeding or case commenced against it in which an order for relief is
entered or an adjudication or appointment is made; or (v) shall indicate,
by any act or omission, its consent to, approval of or acquiescence in any
such petition, application, case, proceeding or order for relief or the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (vi) shall suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of
thirty (30) days or more;
(f) Borrower or either Guarantor shall be liquidated, dissolved,
partitioned or terminated, or the charter or certificate of authority
thereof shall expire or be revoked;
(g) A default or event of default shall occur under any of the other
Loan Documents;
(h) Borrower or either Guarantor shall default in the timely payment
or performance of any obligation now or hereafter owed to Lender in
connection with any other indebtedness of Borrower or either Guarantor now
or hereafter owed to Lender;
(i) Lender shall reasonably suspect the occurrence of one or more of
the aforesaid events of default and Borrower, upon the written request of
Lender, shall fail to provide evidence reasonably satisfactory to Lender
that such event or events of default have not in fact occurred; or
(j) Lender in good faith shall deem itself insecure.
VII.2 ACCELERATION OF MATURITY; REMEDIES. Upon the occurrence of any Event
of Default described in SUBSECTION 7.1(D) hereof as it relates to Borrower, the
indebtednesses evidenced by the Note as well as any and all other indebtedness
of Borrower to Lender shall be immediately due and payable in full; and upon the
occurrence of any other Event of Default described above (including but not
limited to SUBSECTION 7.1(D) hereof as it relates to any Guarantor), Lender at
any time thereafter may at its option accelerate the maturity of the
indebtednesses evidenced by the Note as well as any and all other indebtedness
of Borrower to Lender; all without notice of any kind. Upon the occurrence of
any such Event of Default and the acceleration of the maturity of the
indebtednesses evidenced by the Note:
(a) any obligation of Lender to advance any proceeds under the Loan
shall immediately cease and be of no further force nor effect, and Lender
shall be immediately entitled to exercise any and all rights and remedies
possessed by Lender pursuant to the terms of the Security Instruments and
all of the other Loan Documents;
(b) Lender shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code; and
(c) Lender shall have any and all other rights and remedies that
Lender may now or hereafter possess at law, in equity or by statute.
VII.3 RIGHT OF SETOFF. Without limitation of the foregoing, upon the
occurrence and during the continuance of any Event of Default, Lender is hereby
authorized at any time and from time to time, without notice to Borrower or
Guarantors (any such notice being expressly waived by Borrower and Guarantors),
to set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by Lender or any of its affiliates, and
19
any other indebtedness at any time owing by Lender or its affiliates to or for
the credit or the account of Borrower or Guarantors, against any and all of the
Secured Obligations, irrespective of whether Lender shall have made any demand
under this Agreement or the Note or any other Loan Document and although such
obligations may be unmatured. Lender agrees to notify Borrower or Guarantors (as
applicable) within a reasonable time after any such setoff and application;
provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of Lender under this SECTION 7.3 are in
addition to any other rights and remedies (including, without limitation, other
rights of setoff) that Lender may have.
VII.4 REMEDIES CUMULATIVE; NO WAIVER. No right, power or remedy conferred
upon or reserved to Lender by this Agreement or any of the other Loan Documents
is intended to be exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and concurrent and shall
be in addition to any other right, power and remedy given hereunder, under any
of the other Loan Documents or now or hereafter existing at law, in equity or by
statute. No delay or omission by Lender to exercise any right, power or remedy
accruing upon the occurrence of any Event of Default shall exhaust or impair any
such right, power or remedy or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein, and every right, power and remedy
given by this Agreement and the other Loan Documents to Lender may be exercised
from time to time and as often as may be deemed necessary by Lender.
VII.5 PROCEEDS OF REMEDIES. Any or all proceeds resulting from the
exercise of any or all of the foregoing remedies shall be applied as set forth
in the Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
First, to the costs and expenses, including reasonable attorney's
fees and expenses, incurred by Lender in connection with the exercise of
its remedies;
Second, to the expenses of curing the default that has occurred, in
the event that Lender elects, in its sole discretion, to cure the default
that has occurred;
Third, to the payment of the Secured Obligations, including but not
limited to the payment of the principal of and interest on the
indebtednesses evidenced by the Note, in such order of priority as Lender
shall determine in its sole discretion; and
Fourth, the remainder, if any, to Borrower or to any other person
lawfully thereunto entitled.
ARTICLE VIII
MISCELLANEOUS
-------------
VIII.1 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or otherwise would be within the limitations of, another covenant shall not
avoid the occurrence of an Event of Default if such action is taken or condition
exists.
VIII.2 PERFORMANCE BY LENDER.
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(a) Lender may file one or more financing statements disclosing
Lender's security interests under this Agreement and the other Loan
Documents without the signature of Borrower appearing thereon, and
Borrower shall pay the costs of, or incidental to, any recording or filing
of any financing statements concerning the collateral security described
in the Security Instruments. Borrower agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or any other Security
Instrument or of a financing statement is sufficient as a financing
statement.
(b) If Borrower or Guarantors shall default in the payment,
performance or observance of any covenant, term or condition of this
Agreement, Lender may, at its option, pay, perform or observe the same,
and all payments made or costs or expenses incurred by Lender in
connection therewith (including but not limited to reasonable attorney's
fees and expenses), with interest thereon at the default rate provided in
the Note (if none, then at the maximum rate from time to time allowed by
applicable law), shall be immediately repaid to Lender by Borrower and
Guarantors and shall constitute a part of the Secured Obligations and be
secured hereby until fully repaid. Lender shall determine at its sole
discretion the necessity for any such actions and of the amounts to be
paid.
VIII.3 COSTS AND EXPENSES. Borrower agrees to pay all costs and expenses
incurred by Lender in connection with the making of the Loan, including but not
limited to filing fees, recording taxes and reasonable attorney's fees and
expenses, promptly upon demand of Lender. Borrower further agrees to pay all
premiums for insurance required to be maintained pursuant to the terms of the
Loan Documents and all of the out-of-pocket costs and expenses incurred by
Lender in connection with the administration, servicing and/or collection of the
Loan, including but not limited to reasonable attorney's fees and expenses,
promptly upon demand of Lender.
VIII.4 ASSIGNMENT. The Note, this Agreement and the other Loan Documents
may be endorsed, assigned and/or transferred in whole or in part by Lender, and
any such holder and/or assignee of the same shall succeed to and be possessed of
the rights and powers of Lender under all of the same to the extent transferred
and assigned. Lender may grant participations in all or any portion of its
interest in the indebtednesses evidenced by the Note. Borrower shall not assign
any of its rights nor delegate any of its duties hereunder or under any of the
other Loan Documents without the prior express written consent of Lender.
VIII.5 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Subject to the
provisions of SECTION 8.4 hereof, whenever in this Agreement one of the parties
hereto is named or referred to, the heirs, legal representatives, successors,
successors-in-title and assigns of such parties shall be included, and all
covenants and agreements contained in this Agreement by or on behalf of Borrower
or by or on behalf of Lender shall bind and inure to the benefit of their
respective heirs, legal representatives, successors-in-title and assigns,
whether so expressed or not.
VIII.6 THIRD PARTY BENEFICIARIES. This Agreement and the other Loan
Documents are intended for the sole and exclusive benefit of the parties hereto
and their respective successors and permitted assigns, and shall not serve to
confer any rights or benefits in favor of any person not a party hereto. No
other person shall have any right to rely on this Agreement or the other Loan
Documents, or to derive any benefit herefrom.
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VIII.7 TIME OF THE ESSENCE. Time is of the essence with respect to each
and every covenant, agreement and obligation of Borrower and Guarantors
hereunder and under all of the other Loan Documents.
VIII.8 SEVERABILITY. If any provision(s) of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
VIII.9 INTEREST AND LOAN CHARGES NOT TO EXCEED MAXIMUM ALLOWED BY LAW.
Anything in this Agreement, the Note, the Security Instruments or any of the
other Loan Documents to the contrary notwithstanding, in no event whatsoever,
whether by reason of advancement of proceeds of the Loan, acceleration of the
maturity of the unpaid balance of the Loan or otherwise, shall the interest and
loan charges agreed to be paid to Lender for the use of the money advanced or to
be advanced hereunder exceed the maximum amounts collectible under applicable
laws in effect from time to time. It is understood and agreed by the parties
that, if for any reason whatsoever the interest or loan charges paid or
contracted to be paid by Borrower in respect of the indebtednesses evidenced by
the Note shall exceed the maximum amounts collectible under applicable laws in
effect from time to time, then IPSO facto, the obligation to pay such interest
and/or loan charges shall be reduced to the maximum amounts collectible under
applicable laws in effect from time to time, and any amounts collected by Lender
that exceed such maximum amounts shall be applied to the reduction of the
principal balance(s) of the indebtednesses evidenced by the Note and/or refunded
to Borrower so that at no time shall the interest or loan charges paid or
payable in respect of the indebtednesses evidenced by the Note exceed the
maximum amounts permitted from time to time by applicable law.
VIII.10 ARTICLE AND SECTION HEADINGS; DEFINED TERMS. Numbered and titled
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
VIII.11 NOTICES. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing and shall be
delivered personally, telecopied or sent by certified mail or nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
by the party whose address is being changed and of which receipt has been
acknowledged in writing. The date of personal delivery or telecopy or the date
of mailing (or delivery to such courier service), as the case may be, shall be
the date of such notice, election or demand. For the purposes of this Agreement:
The address of Lender is:
SouthTrust Bank, National Association
000 Xxxxxx Xxxxxx Xxxxx
0xx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Telecopy Number: 615/880-4004
with a copy to:
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Bass, Xxxxx & Xxxx PLC
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, III
Telecopy Number: 615/742-2728
The address of Borrower is:
American Micro Computer Center, Inc.
0000 X.X. 000xx Xxxxxx, Xxxx X-00
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxx
Telecopy Number: 305/825-7774
with a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
Miami Center, 20th Floor
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopy Number: 305/358-7095
The addresses of Guarantors are:
European Micro Holdings, Inc.
0000 X.X. 000xx Xxxxxx, Xxxx X-00
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxx
Telecopy Number: 305/825-7774
Nor'easter Micro, Inc.
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxx Xxxx
Telecopy Number: 615/254-9318
VIII.12 INTEGRATION. This Agreement and the Loan Documents contain the
entire agreement between the parties relating to the subject matter hereof and
supersede all oral statements and prior writings with respect thereto.
VIII.13 INDEMNITY. Borrower and Guarantors hereby agree to defend,
indemnify, and hold Lender harmless from and against any and all claims,
damages, judgments, penalties, costs and expenses (including reasonable
attorney's fees and expenses and court costs now or hereafter arising from the
aforesaid enforcement of this clause) arising directly or indirectly from the
activities of Borrower or Guarantors, their predecessors in interests, or third
parties with whom they have a contractual relationship, or arising directly or
indirectly from the violation of any law, whether such claims are asserted by
any governmental agency or any other person. This indemnity shall survive the
termination of this Agreement.
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VIII.14 JURY TRIAL WAIVER. BORROWER, GUARANTORS AND LENDER HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTER-CLAIM, WHETHER IN
CONTRACT IN TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO
THIS AGREEMENT OR THE LOAN DOCUMENTS.
VIII.15 VENUE. All actions or proceedings in any way, manner or respect
arising out of or from or related to this Agreement shall be litigated in courts
having situs within the City of Nashville, State of Tennessee. Borrower and
Guarantors hereby consent and submit to the jurisdiction of any local, state or
federal courts located within said city and state.
VIII.16 MISCELLANEOUS. This Agreement shall be construed and enforced
under the laws of the State of Tennessee. No amendment, modification,
termination or waiver of any provision of any Loan Document to which Borrower or
either Guarantor is a party, nor consent to any departure by Borrower or either
Guarantor from compliance with the terms of any Loan Document to which it is a
party, shall be effective unless the same shall be in writing and signed on
behalf of Lender by a duly authorized officer of Lender, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER:
SOUTHTRUST BANK, NATIONAL ASSOCIATION
By:_____________________________
Title:_______________________
BORROWER:
AMERICAN MICRO COMPUTER CENTER, INC.
By:_____________________________
Title:_______________________
GUARANTORS:
EUROPEAN MICRO HOLDINGS, INC.
By:_____________________________
Title:_______________________
NOR'EASTER MICRO, INC.
By:_____________________________
Title:_______________________
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