LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, dated as of October ____, 2000, is
entered into between CAPITAL BUSINESS CREDIT, a division of CAPITAL FACTORS,
INC., a Florida corporation ("Capital"), and eNetpc, Inc., formerly known as
CyberStar Computer Corporation, a Minnesota corporation ("Borrower").
The parties agree as follows:
1 DEFINITIONS
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In addition to the defined terms contained in the first paragraph above, as
used herein, the following terms shall have the following definitions:
1.1 "Accounts" means all accounts receivable due to Borrower, book debts,
notes, drafts and acceptances and other forms of obligations now or hereafter
owing to the Borrower, whether arising from the sale or lease of goods or the
rendition of services by the Borrower (including, without limitation, any
obligation that might be characterized as an account, contract right, general
intangible or chattel paper under the Code), all of the Borrower's rights in, to
and under all purchase orders now or hereafter received by the Borrower for
goods and services, all proceed from the sale of Inventory, all monies due or to
become due to the Borrower under all contracts for the sale or lease of goods or
the rendition of services by the Borrower (whether or not yet earned)
(including, without limitation, the right to receive the proceeds of said
purchase orders and contracts), all collateral security and guarantees of any
kind given by any obligor with respect to any of the foregoing, and all goods
returned to or reclaimed by the Borrower that correspond to any of the
foregoing;
1.2 "Agreement" means this Loan and Security Agreement and any supplements,
amendments or modifications to this Loan and Security Agreement.
1.3 "Book Value" means with respect to any Account means the book value
thereof as determined in accordance with GAAP.
1.4 "Borrowing Base Certificate" means the certificate, substantially in
the form of Exhibit A, with appropriate insertions, to be submitted to Capital
by Borrower pursuant to this Agreement and certified as true and correct by the
Chief Executive Officer or the Chief Financial Officer of Borrower.
1.5 "Borrower's Books" means all of Borrower's books and records including,
but not limited to: ledgers; records indicating, summarizing or evidencing
Borrower's assets, liabilities, and the Accounts; all information relating to
Borrower's business operations; and all computer programs, disc or tape files,
printouts, runs, and other computer prepared information and the equipment
containing such information.
1.6 "Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of Georgia or is a day on
which Capital is otherwise closed for transacting business with the general
public.
1.7 "Capital Expenses" means all of the following: (i) taxes and insurance
premiums required to be paid by Borrower under this Agreement or any of the
other Loan Documents which are paid or advanced by Capital; (ii) filing,
recording, publication and search fees paid or incurred by Capital; and (iii)
the costs, fees (including reasonable attorneys' and paralegals' fees) and
expenses incurred by or charged to Capital: (a) to examine Borrower and the
Collateral; (b) to correct any default or enforce any provision of this
Agreement, any of the other Loan Documents and any guaranty of the Obligations,
whether or not litigation is commenced; (c) in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale and/or advertising to sell the Collateral, whether or not a sale is
consummated; (d) in collecting the Accounts and in collecting the Obligations,
whether from Borrower, any guarantor or both; and (e) in structuring, drafting,
reviewing, amending, defending or concerning this Agreement or any of the other
Loan Documents.
1.8 "Closing Fee" shall have the meaning set forth in Section 2.3.9
1.9 "Code" means the Georgia Uniform Commercial Code, and any and all terms
used in this Agreement which are defined in the Code and are not defined herein
shall be construed and defined in accordance with the definition of such terms
under the Code.
1.10 "Collateral" means each and all of the following:
A. the Accounts;
B. the Inventory;
C. the Equipment,
D. the General Intangibles;
E. the Negotiable Collateral;
F. the Borrower's Books;
G. any money, deposit accounts or other assets of Borrower in
which Capital receives a security interest or which
hereafter come into the possession, custody or control of
Capital; and
H. the proceeds of any of the foregoing, including, but not
limited to, proceeds of insurance covering the Collateral,
or any portion thereof, and any and all Accounts, Inventory,
Equipment, General Intangibles, Negotiable Collateral, the
Borrower's Books, money, deposit accounts or other tangible
and intangible property resulting from the sale or other
disposition of the Collateral, or any portion thereof or
interest therein, and the proceeds thereof.
1.12 "Daily Balance" means and refers to the amount determined by taking
the amount of the Obligations owed at the beginning of a given day, adding any
new Obligations advanced or incurred on such date, and subtracting any payments
or collections which are deemed to be paid on that date under the provisions of
this Agreement.
1.13 "Dilution" means any and all reductions in Accounts that do not
represent cash reductions.
1.14 "Eligible Accounts" means and includes those Accounts (i) which have
been validly assigned to Capital, (ii) strictly comply with all of Borrower's
warranties, covenants and representations to Capital, (iii) contain payment
terms of not greater than the number of Term Days (as defined on Schedule 1), or
less, from the date of invoice, and (iv) are not past due more than the number
of Past Due Days (as defined on Schedule 1); provided, however, that Eligible
Accounts shall not include the following: (a) Accounts with respect to which the
account debtor is an officer, employee or agent of Borrower; (b) Accounts with
respect to which services or goods are placed on consignment, guaranteed sale,
or other terms by reason of which the payment by the account debtor may be
conditional (other than that portion of the Accounts which are subject to
retention); (c) Accounts with respect to which the account debtor is not a
resident of the United States; (d) Accounts with respect to which the account
debtor is the United States or any department, agency or instrumentality of the
United States; provided, however, that an Account shall not be deemed ineligible
by reason of this clause (d) if Borrower has completed all of the steps
necessary, in the sole opinion of Capital, to comply with the Federal Assignment
of Claims Act of 1940 (31 U.S.C. ss.1/4(R)1/2(R)) with respect to such Account;
(e) Accounts with respect to which the account debtor is any state of the United
States or any city, town, municipality, county or division thereof; (f) Accounts
where the account debtors are located in New Jersey and/or Indiana, unless the
Borrower shall have qualified to do business or shall have filed a Business
Activity Report with the appropriate state offices in such jurisdictions, (g)
Accounts with respect to which the account debtor is a subsidiary of, related
to, affiliated with, or has common officers or directors with Borrower; (h)
Accounts with respect to which Borrower is or becomes liable to the account
debtor for goods sold or services rendered by the account debtor to Borrower;
(i) those Accounts where Capital has notified the Borrower that, in Capital's
sole discretion, the account or account debtor is not acceptable to Capital; (j)
all of the Accounts owed by an account debtor who is the subject of an
Insolvency Proceeding; (k) all of the Accounts owed by an account debtor where
the Cross Aging Percentage (as defined on Schedule 1) or more of all of the
Accounts owed by that account debtor are past due more than the Past Due Days
from the invoice due date; (l) Accounts for which the services have not yet been
rendered to the account debtor or the goods sold have not yet been delivered to
the account debtor (commonly referred to as "pre-billed accounts"); (m) Accounts
not previously approved by Capital where the expected dollar value for such
account debtor is greater than twenty (20%) percent of Client's existing
Accounts and (n) COD and cash sales.
1.15 INTENTIONALLY OMITTED
1.16 "Equipment" means all of Borrower's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
motor vehicles, tools, parts, dies, jigs, goods, and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions and improvements thereto, wherever located.
1.17 "Event of Default" means the occurrence of any one of the events set
forth in Section 9.
1.18 "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination and applied on a consistent basis.
1.19 "General Intangibles" means all of Borrower's present and future
general intangibles and all other presently owned or hereafter acquired
intangible personal property of Borrower (including, without limitation, any and
all choses or things in action, goodwill, patents, trade names, trademarks,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, infringement claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, deposit accounts,
tax refunds and tax refund claims) other than goods and Accounts, as well as
Borrower's Books relating to any of the foregoing.
1.20 "Governing Rate" shall have the meaning set forth in Section 2.3.5.
1.21 "Guarantor" means individually, and "Guarantors" means collectively,
the persons and entities listed on Schedule 1 as Guarantors.
1.22 "Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the federal Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including, but not
limited to, assignments for the benefit of creditors, formal or informal
moratoriums, compositions or extensions generally with its creditors.
1.23 "Inventory" means and includes all of Borrower's present and future
inventory in which Borrower has any interest, including, but not limited to,
goods held for sale or lease or to be furnished under a contract of service and
all of Borrower's present and future raw materials, work in process, finished
goods, and packing and shipping materials, wherever located, and any documents
of title representing any of the above.
1.24 "Judicial Officer or Assignee" means any trustee, receiver,
controller, custodian, assignee for the benefit of creditors or any other person
or entity having powers or duties like or similar to the powers and duties of a
trustee, receiver, controller, custodian or assignee for the benefit of
creditors. 1.25 "Loan Account" shall have the meaning set forth in Section
2.3.12
1.26 "Loan Documents" means collectively this Agreement and any other
agreements entered into between Borrower and Capital in connection with this
Agreement.
1.27 "Lock Box" means that certain post office box maintained on behalf of
Capital (as described on Schedule 1) into which the Borrower shall have
instructed all of its account debtors to remit payments.
1.28 "Lock Box Account" means that account owned by Capital into which all
proceeds of Accounts and all other payments received in the Lock Box are
deposited.
1.29 Intentionally Omitted
1.30 "Maximum Credit Line" has the meaning set forth on Schedule 1.
1.31 "Negotiable Collateral" means all of Borrower's present and future
letters of credit, advises of credit, notes, drafts, instruments, documents,
leases, and chattel paper, and Borrower's Books relating to any of the
foregoing.
1.32 "Net Worth" means, as of any date, the total assets of Borrower minus
the total liabilities of Borrower calculated in conformity with GAAP.
1.33 "Obligations" means any and all loans, advances, debts, liabilities
(including, without limitation, any and all amounts charged to Borrower's
account pursuant to any agreement authorizing Capital to charge Borrower's
account), obligations, lease payments, guaranties, covenants and duties owing by
Borrower to Capital of any kind and description (whether advanced pursuant to or
evidenced by this Agreement, any of the other Loan Documents, or any other
instrument, or by any other agreement between Capital and Borrower and whether
or not for the payment of money), whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and
including, without limitation, any debt, liability or obligation owing from
Borrower to others which Capital may have obtained by assignment or otherwise,
and further including, without limitation, all interest not paid when due and
all Capital Expenses which Borrower is required to pay or reimburse by this
Agreement, by law, or otherwise.
1.34 "Over Advance" shall have the meaning set forth in Section 2.1.
1.35 "Payment Items" means all checks, drafts and other items of payment
payable to the Borrower, including proceeds of any of the Collateral.
1.36 "Prime Rate" shall mean, at any time, the rate of interest noted in
the Wall Street Journal, Money Rates Section as the "Prime Rate" (currently
defined as the base rate on corporate loans posted by at least 75% of the
nation's thirty (30) largest banks), with the Prime Rate in effect on the first
day of a month being applicable to the entire month. In the event that the Wall
Street Journal quotes more than one rate, or a range of rates as the Prime Rate,
then the Prime Rate shall mean the average of the quoted rates. In the event
that the Wall Street Journal ceases to publish a Prime Rate, then the Prime Rate
shall be the average of the three (3) largest U.S. money center commercial
banks, as determined by Capital. The "Prime Rate" may not be the lowest or best
rate at which Capital calculates interest or extends credit.
1.37 "Subordinating Creditor" means collectively, the persons and entities
listed on Schedule 1 as Subordinating Creditor.
1.38 "Subordinated Debt" means all of the indebtedness owed by Borrower to
any third parties, including the Subordinating Creditor, the repayment of which
is subordinated to the repayment of the Obligations pursuant to the terms of a
subordination agreement approved by Capital in its sole and absolute discretion.
1.39 "Tangible Net Worth" means an amount equal to the stockholders' equity
of the Borrower increased by Subordinated Debt and decreased by intangible
assets.
1.40 "Term" shall have the meaning set forth on Schedule 1.
1.41 "Working Capital" means the amount determined by subtracting the
aggregate amount of Borrower's current liabilities from the aggregate amount of
Borrower's current assets. Borrower's current liabilities and current assets
shall be determined in accordance with GAAP consistently applied.
1.42 Other Definitional Provisions. References to "Sections",
"subsections", and "Exhibits" shall be to Sections, subsections, and Exhibits,
respectively, of this Agreement unless otherwise specifically provided. Any of
the terms defined in Section 1 may, unless the context otherwise requires, be
used in the singular or the plural depending on the reference. In this
Agreement, words importing any gender include the other genders; the words
"including," "includes" and "include" shall be deemed to be followed by the
words "without limitation"; references to agreements and other contractual
instruments shall be deemed to include subsequent amendments, assignments, and
other modifications thereto, but only to the extent such amendments, assignments
and other modifications are not prohibited by the terms of this Agreement;
references to any person includes their respective permitted successors and
assigns or people succeeding to the relevant functions of such persons; and all
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations.
2. LOANS AND TERMS OF PAYMENT
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Manner of Borrowing Advances (revolving loans). Borrowings under the credit
facility established hereunder shall be as follows:
2.1 Advance Requests. A request for an advance (also known as a revolving
loan) shall be made, or shall be deemed to be made, in the following manner:
Borrower may give Capital notice of its intention to borrow, in which notice
Borrower shall specify the amount of the proposed borrowing and the proposed
borrowing date, no later than 11:00 a.m. on the proposed borrowing date. Capital
may lend to Borrower, in Capital's sole and absolute discretion, (a) up to the
Advance Percentage (as defined on Schedule 1) of the net amount of Borrower's
Eligible Accounts (the "net amount" of Eligible Accounts means the gross amount
of said Eligible Accounts less returns and discounts based upon the shortest or
longest payment terms as Capital may elect, credits or allowances of any nature
at any time issued, owing, claimed by account debtors, granted or outstanding
based upon the Borrowing Base Certificate which must be submitted to Capital in
connection with such request), not to exceed at any time (b) the Maximum Credit
Line. Provided, further, that no such request for an advance may be made (i) at
a time when there exists an Event of Default; and (ii) unless payment is
otherwise timely made by Borrower, the becoming due of any amount required to be
paid under this Agreement or any of the other Loan Documents, as principal,
accrued interest, fees or Capital Expenses, shall be deemed irrevocably to be a
request by Borrower from Capital for an advance or revolving loan on the due
date of, and in an aggregate amount required to pay, such principal, accrued
interest, fees, Capital Expenses or other charges and the proceeds of each such
advance or revolving loan may be disbursed by Capital by way of direct payment
of the relevant Obligation and shall bear interest at the rate of interest
applicable to the Daily Balance (whether or not any Event of Default or
Over-Advance exists at the time of or would result from such advance). As an
accommodation to Borrower, Capital may permit electronic transmittal of
instructions or requests for advances, authorizations, agreements or reports to
Capital by Borrower, received from any one or more of the authorized officers of
the Borrower identified on Exhibit B hereto. In no event shall Capital be
obligated to make advances to Borrower under this Section 2 whenever the
aggregate amount of the then outstanding advances made pursuant to Section 2
exceeds or would exceed as a result of the requested advance, the Maximum Credit
Line. Unless Borrower specifically directs Capital in writing not to accept or
act upon telecopied or electronic communications from Borrower, Capital shall
have no liability to Borrower for any loss or damage suffered by Borrower as a
result of Capital's honoring of any requests, execution of any instructions,
authorizations or agreements or reliance on any reports communicated to Capital
electronically and purporting to have been sent to Capital by Borrower and
Capital shall have no duty to verify the origin of any such communication or the
authority of the person sending it. All of the advances made pursuant to this
Section 2.1 and any supplement, if any, to this Agreement shall be added to and
deemed part of the Obligations when made. If, at any time and for any reason,
the amount of advances made pursuant to Sections 2.1 and such supplement, if
any, exceed the percentage or dollar limitations set forth in Section 2.1 and in
such supplement, as applicable, or if all of Borrower's Obligations, at any time
and for any reason, exceed the Maximum Credit Line (an "Over Advance"), then
Borrower, upon Capital's election and demand, shall immediately pay to Capital,
in cash, the amount of such excess.
2.2 Disbursement. Borrower hereby irrevocably authorizes Capital to
disburse the proceeds of each advance requested, or deemed to be requested,
pursuant to Section 2.1 above as follows: (i) the proceeds of each advance
requested under Section 2.1(i) shall be disbursed by Capital in lawful money of
the United States of America in immediately available funds, in the case of the
initial borrowing, in accordance with the terms of the written disbursement
letter from Borrower, and in the case of each subsequent borrowing, by wire
transfer to such bank account as may be agreed upon by Borrower and Capital from
time to time or elsewhere if pursuant to a written direction from Borrower; and
(ii) the proceeds of each advance requested under Section 2.1 (ii) shall be
disbursed by Capital by way of direct payment of the relevant interest or other
Obligation.
2.3 Payments. The Borrower promises to repay all Obligations when due in
accordance with the terms of this Agreement or the other Loan Documents. All
payments with respect to any of the Obligations shall be made to Capital on the
date when due, in U.S. Dollars ($) and in immediately available funds, without
any offset or counterclaim. Except where evidenced by notes or other instruments
issued or made by Borrower to Capital specifically containing payment provisions
which are in conflict with this Section 2.3 (in which event the conflicting
provisions of said notes or other instruments shall govern and control), the
Obligations shall be payable as follows:
2.3.1 Principal. Principal payable on account of advances shall be
payable by Borrower to Capital immediately upon the earliest of (i) the
receipt by Capital or Borrower of any proceeds of any of the Collateral, to
the extent of said proceeds, (ii) the occurrence of an Event of Default in
consequence of which Capital elects to accelerate the maturity and payment
of the Obligations, (iii) termination of this Agreement pursuant to Section
3 hereof; provided, however, that if an Over Advance condition shall exist
at any time, Borrower shall, ON DEMAND, repay the Obligations to the extent
necessary to eliminate the Over Advance condition.
2.3.2 Interest. Interest accrued on the Advances shall be due and
payable on the earliest of (i) the first (1st) calendar day of each month
(for the immediately preceding month), computed through the last calendar
day of the preceding month; (ii) the occurrence of an Event of Default in
consequence of which Capital elects to accelerate the maturity and payment
of the Obligations; and (iii) termination of this Agreement pursuant to
Section 3 hereof. At its option, Capital may debit such amounts, which
amounts shall thereupon constitute Obligations hereunder and shall
thereafter accrue interest at the rate then provided under this Agreement.
2.3.3 Costs, Fees and Charges. Capital may collect a "late charge"
equal to five percent (5%) of any installment of interest or principal, or
of any taxes, assessments and insurance paid by Capital which is not paid
or reimbursed by the Borrower within ten (10) days of the due date thereof
to cover the extra expense involved in handling such delinquent payment.
All costs, fees charges and Capital Expenses payable pursuant to this
Agreement shall be payable by Borrower as and when incurred, to Capital. At
its option, Capital may debit such amounts, which amounts shall thereupon
constitute Obligations hereunder and shall thereafter accrue interest at
the rate then provided under this Agreement.
2.3.4 Other Obligations. The balance of the Obligations requiring the
payment of money, if any, shall be payable by Borrower to Capital as and
when provided in this Agreement, if no date of payment is otherwise
specified in the Loan Documents, ON DEMAND.
2.3.5 Interest Rates. All Obligations owed by Borrower to Capital
shall bear interest, on the average Daily Balance owing, at a rate equal to
the Margin (as defined on Schedule 1) plus the Prime Rate (the "Governing
Rate"). Upon and after the occurrence of an Event of Default and during the
continuation thereof, all Obligations owed by Borrower to Capital shall, at
the election of Capital, without constituting a waiver of any such Event of
Default, bear interest on the average Daily Balance owing, at the highest
rate permitted by law. All interest chargeable under this Agreement shall
be computed on the basis of a three hundred sixty (360) day year for actual
days elapsed.
2.3.5.1 Maximum Interest. Regardless of any provision contained
in this Agreement or any other agreement or document executed in
connection herewith, in no contingency or event whatsoever shall the
aggregate of all amounts that are contracted for, charged or received
by Capital pursuant to the terms of this Agreement or any other Loan
Documents and that are deemed interest under applicable law exceed the
highest rate permissible under any applicable law. No agreements,
conditions, provisions or stipulations contained in this Agreement or
any of the other Loan Documents or the exercise by Capital of the
right to accelerate the payment or the maturity of all or any portion
of the Obligations, or the exercise of any option whatsoever contained
in any of the Loan Documents, or the prepayment by Borrower of any of
the Obligations, or the occurrence of any contingency whatsoever,
shall entitle Capital to charge or receive in any event, interest or
any charges, amounts premiums or fees deemed interest by applicable
law (such interest, charges, amounts, premiums and fees referred to
herein collectively as "Interest") in excess of the maximum rate
allowable under applicable law and in no event shall Borrower be
obligated to pay Interest exceeding such maximum rate, and all
agreements, conditions or stipulations, if any, which may in any event
or contingency whatsoever operate to bind, obligate or compel Borrower
to pay Interest exceeding the maximum rate allowable under applicable
law shall be without binding force or effect, at law or in equity, to
the extent only of the excess of Interest over such maximum rate. If
any Interest is charged or received in excess of the maximum rate
allowable under applicable law ("Excess"), Borrower acknowledges and
stipulates that any such charge or receipt shall be the result of an
accident and bona fide error, and such Excess, to the extent received,
shall be applied first to reduce the principal Obligations and the
balance, if any, returned to Borrower, it being the intent of the
parties hereto not to enter into a usurious or otherwise illegal
relationship. The right to accelerate the maturity of any of the
Obligations does not include the right to accelerate any interest that
has not otherwise accrued on the date of such acceleration, and
Capital does not intend to collect any unearned interest in the event
of any such acceleration. Borrower recognizes that, with fluctuations
in the rates of interest set forth in Section 2 of this Agreement and
the maximum rate of interest allowable under applicable law, such an
unintentional result could inadvertently occur. All monies paid to
Capital hereunder or under any other Loan Documents, whether at
maturity or by prepayment, shall be subject to any rebate of unearned
interest as and to the extent required by applicable law. By the
execution of this Agreement, Borrower covenants that (i) the credit or
return of any Excess shall constitute the acceptance by Borrower of
such Excess, and (ii) Borrower shall not seek or pursue any other
remedy, legal or equitable, against Capital, based in whole or in part
upon contracting for, charging or receiving any Interest in excess of
the maximum rate allowable under applicable law. For the purpose of
determining whether or not any Excess has been contracted for, charged
or received by Capital, all interest at any time contracted for,
charged or received from Borrower in connection with this Agreement
and any other agreement or document executed in connection herewith,
any of the Loan Documents shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of the Obligations. Borrower and Capital
shall, to the maximum extent permitted under applicable law, (i)
characterize any non-principal payment as an expense, fee or premium
rather than as Interest and (ii) exclude voluntary prepayments and the
effects thereof. The provisions of this Section shall be deemed to be
incorporated into every Loan Document (whether or not any provision of
this Section is referred to therein). All such Loan Documents and
communications relating to any Interest owed by Borrower and all
figures set forth therein shall, for the sole purpose of computing the
extent of Obligations, be automatically recommitted by Borrower, and
by any court considering the same, to give effect to the adjustments
or credits required by this Section.
2.3.5.2 Payment of Interest. In the event that the Prime Rate
announced is, from time to time hereafter, changed, adjustment in the
rate of interest payable by Borrower shall be made as of 12:01 a.m. on
the first (1st) day of the calendar month following such change and
shall be based on the Prime Rate in effect as of the last day of the
immediately preceding calendar month. All interest payable by Borrower
shall be due and payable on the first (1st) day of each calendar month
during the term of this Agreement and Capital shall, at its option,
charge such interest and any and all Capital Expenses to Borrower's
loan account with Capital, which amounts shall thereupon constitute
Obligations hereunder and shall thereafter accrue interest at the rate
then provided under this Agreement.
2.3.6 Borrowing Base Certificate and Authorizations. Concurrent with
the execution of this Agreement by Borrower and concurrent with each
request for an advance pursuant to Section 2.1, but at least on once during
each Reporting Period (as defined on Schedule 1) during the term of this
Agreement, Borrower shall deliver to Capital a fully completed Borrowing
Base Certificate certified by the Chief Executive Officer or Chief
Financial Officer of Borrower as being true and correct. Concurrent with
the delivery of the Borrowing Base Certificate, Borrower shall provide a
written report to Capital of all returns and all material disputes and
claims, together with sales and other reports relating to the Accounts and
Inventory as required by Capital. If Borrower fails to deliver to Capital
the Borrowing Base Certificate on the date when due, then notwithstanding
any of the provisions contained in Section 2.1 or in any other Loan
Document to the contrary, Capital shall not make any advances to Borrower
until the Borrowing Base Certificate is delivered to Capital. Capital is
hereby authorized to make the loan and the extensions of credit provided
for in this Agreement based upon telecopied or other instructions and
transaction reports received from any one of the authorized personnel of
Borrower identified on Exhibit B, or, at the discretion of Capital, if such
extensions of credit are necessary to satisfy any Obligations of Borrower
to Capital. Although Capital shall make a reasonable effort to determine
the person's identity, Capital shall not be responsible for determining the
authenticity of any such telecopied instructions and Capital may act on the
instructions of anyone it perceives to be one of the authorized personnel
identified on Exhibit B.
2.3.7 Collections. Borrower shall instruct all of its account debtors
to make payments to the Lock Box. Capital or Capital's designee may, at any
time after the occurrence of an event of default, notify customers or
account debtors of Borrower that the Accounts have been assigned to Capital
and that Capital has a security interest therein. Capital may at any time
confirm the validity and/or amount of the Accounts, collect them directly,
and charge the collection costs and expenses to Borrower's loan account,
but, unless and until Capital does so or gives Borrower other written
instructions, the collection of the Accounts shall be made in accordance
with the terms and conditions of this Agreement. Borrower agrees that all
payments received by Borrower in connection with the Accounts and any other
Collateral shall be held in trust for Capital as Capital's trustee. The
receipt of any wire transfer of funds, check, or other item of payment by
Capital shall be applied to conditionally reduce Borrower's Obligations,
but shall not be considered a payment on account unless such wire transfer
is of immediately available federal funds and is made to the appropriate
deposit account of Capital or unless and until such check or other item of
payment is honored when presented for payment. The receipt of any wire
transfer, check or other item of payment by Capital shall be deemed to have
been paid to Capital within the Collection Day Period (as defined on
Schedule 1) after the date Capital actually receives possession of such
wire transfer of funds, check or other item of payment.
2.3.8 Monthly Statements. Capital shall render monthly statements of
the Obligations owing by Borrower to Capital, including statements of all
principal, interest, and Capital Expenses owing, and such statements shall
be conclusively presumed to be correct and accurate and constitute an
account stated between Borrower and Capital unless, within thirty (30) days
after receipt thereof by Borrower, Borrower shall deliver to Capital, by
registered or certified mail, at Capital's address indicated in Section 13,
written objection thereto specifying the error or errors, if any, contained
in any such statement and Capital in its good faith discretion determines
such exceptions are accurate and makes an appropriate adjustment. In the
event that Borrower fails to receive such monthly statement for a
particular month, Borrower hereby agrees and acknowledges that it shall
likewise be obligated to notify Capital in writing no later than 45 days
from the end of each such month. If Borrower fails to so notify Capital of
same then said monthly statement shall be deemed to have been sent and
delivered to Borrower and shall be final and conclusive on Borrower. At
Capital's request, Borrower shall execute and deliver to Capital from time
to time, promissory notes in form and content satisfactory to Capital to
evidence the balances owing in Borrower's Loan Account, but notwithstanding
any such request for or delivery of such notes, such statements of account
shall be prima facie evidence of the loans and, to the extent intended by
Capital to be included therein, other Obligations owing to Capital by
Borrower.
2.3.9 Fees and Reimbursement of Expenses
A. Fees. Borrower will pay to Capital those fees set forth on
Schedule 1.
B. Borrower shall reimburse Capital for all reasonable costs
and expenses incurred in connection with examinations and
appraisals of Borrower's books, records and assets and such
other matters as Capital shall deem reasonable and
appropriate. The cost of such examinations will be subject
to the limitation contained in Section 4.2 of this
Agreement.
C. If, at any time or times regardless of whether or not an
Event of Default then exists, Capital incurs legal or
accounting expenses or any other costs or out-of-pocket
expenses in connection with the loan transaction described
herein, including, without limitation: (i) the negotiation
and preparation of any amendment of or modification of this
Agreement or any of the other Loan Documents; (ii) the
administration of this Agreement or any of the other Loan
Documents and the transactions contemplated hereby and
thereby, including, without limitation, those items
described in C above; (iii) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by
Capital; Borrower or any other person) in any way relating
to the Collateral, this Agreement or any of the other Loan
Documents or Borrower's affairs; (iv) any attempt to enforce
any rights of Capital against Borrower or any other person
which may be obligated to Capital by virtue of this
Agreement or any of the other Loan Documents, including any
account debtor or guarantor of Borrower's Obligations; (v)
any consultations regarding this Agreement or any other Loan
Documents or preparation therefore, or the financing
extended hereunder or (vi) any attempt to inspect, verify,
protect, preserve, perfect or continue the perfection of
Capital's liens upon, restore, collect, sell, liquidate or
otherwise dispose of or realize upon the Collateral; then
all such legal and accounting expenses, other reasonable
costs and out-of-pocket expenses of Capital shall be charged
to Borrower. All amounts chargeable to Borrower under this
Section 2.3.9C shall be Obligations secured by all of the
Collateral, shall be payable on demand to Capital, and shall
bear interest from the date such demand is made until paid
in full at the rate applicable to the Daily Balance from
time to time.
D. Borrower shall pay to Capital, ON DEMAND, any and all
reasonable fees, costs or expenses which Capital pays to a
bank or other similar institution arising out of or in
connection with (i) the forwarding to Borrower or any other
person or entity on behalf of Borrower, by Capital, of
proceeds of advances made by Capital to Borrower pursuant to
this Agreement and (ii) the depositing for collection, by
Borrower, of any check or item of payment received or
delivered to Capital on account of the Obligations.
E. In the event of the existence of an Over Advance, the
Borrower shall pay to Capital an Over Advance Fee of .0685 %
of the amount of the Over Advance for each day that the Over
Advance is outstanding. Nothing provided herein shall
constitute a consent by Capital to such Over Advance.
2.3.10 Application of Payments and Collections. Borrower irrevocably
waives the right to direct the application of any and all payments and
collections at any time or times hereafter received by Capital from or on
behalf of Borrower, and Borrower does hereby irrevocably agree that Capital
shall have the continuing exclusive right to apply and reapply any and all
such payments and collections received at any time or times hereafter by
Capital or its agent against the Obligations, in such manner as Capital may
deem advisable. If as the result of collections of Borrower's advances and
Accounts a credit balance exists in the Loan Account, such credit balance
shall not accrue interest in favor of Borrower, but shall be available to
Borrower at any time or times for so long as no Default or Event of Default
exists.
2.3.11 All Advances to Constitute One Obligation. The advances shall
constitute one general Obligation of Borrower, and shall be secured by
Capital's lien upon all of the Collateral.
2.3.12 Loan Account. Capital shall establish an account on its books
(the "Loan Account") and shall enter all advances as debits to the Loan
Account and shall also record in the Loan Account all payments made by
Borrower on any Obligations and all proceeds of Collateral which are
finally paid to Capital, and may record therein, in accordance with
customary accounting practice, other debits and credits, including interest
and all charges and expenses properly chargeable to Borrower.
3 TERM AND PREPAYMENT
-------------------
3.1 Term.
A. The Agreement will have a term equal to the Term.
B. Notwithstanding the Term, upon the occurrence of an Event of
Default, Capital may terminate this Agreement without
notice. In addition, should either Capital or Borrower
become insolvent or is unable to meet its debts as they
mature, then the other party shall have the right to
terminate this Agreement at any time without notice. On the
date of a termination by Borrower or Capital, all
Obligations shall become immediately due and payable without
notice or demand and shall be paid to Capital in cash or by
a wire transfer of immediately available funds.
C. When Capital has received payment and performance in full of
all Obligations and an acknowledgment from Borrower that it
is no longer entitled to request any advances from Capital
under this Agreement, Capital shall execute a termination of
all security interests given by Borrower to Capital, upon
the execution and delivery of general releases by Borrower,
any guarantor or surety of Borrower's Obligations to
Capital.
4 CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest. Borrower hereby grants to Capital a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations owed by Borrower to Capital and in order to secure prompt
performance by Borrower of each and all of its covenants and obligations under
this Agreement and otherwise created. Capital's security interest in the
Collateral shall attach to all Collateral without further act on the part of
Capital or Borrower. In the event that any Collateral, including proceeds, is
evidenced by or consists of Negotiable Collateral, Borrower shall, immediately
upon written request therefore from Capital, endorse and assign such Negotiable
Collateral over to Capital and deliver actual physical possession of the
Negotiable Collateral to Capital.
4.2 Right to Examine and Inspect. In order to verify the validity of any
Borrowing Base Certificate, Borrower shall, upon the request of Capital,
promptly furnish Capital with copies of Borrower's purchase orders, sales
journals, invoices, chattel paper, customer's purchase orders, or the
equivalent, and original shipping or delivery receipts for all Inventory
purchased and goods sold, and Borrower shall warrant the genuineness thereof. In
addition, Capital shall be entitled to conduct from time to time during the term
of this Agreement, examinations of Borrower's Books, business operations and
Inventory and to check and test the same as to quality, quantity, value and
condition. Borrower shall pay to Capital all costs and expenses incurred by
Capital in connection with such examinations, including examination costs,
travel, etc., and the amount charged shall be deemed included in the
"Obligations" when incurred, and shall thereafter accrue interest at the rate
then provided under this Agreement.
4.3 Setoff. All sums at any time standing to the Borrower's credit on the
Capital's books and all of the Borrower's property at any time in the Capital's
possession, or upon or in which Capital has a lien or security interest shall be
security for all Obligations. In addition to and not in limitation of the above,
with respect to any deposits or property of the Borrower in Capital's possession
or control, now or in the future, Capital shall have the right to setoff all or
any portion thereof, at any time, against any Obligations hereunder, even though
unmatured, without prior notice or demand to the Borrower.
4.4 Continuation of Security Interest. Notwithstanding termination of this
Agreement, until all Obligations, contingent or otherwise, have been fully
repaid and performed, Capital shall retain its security interest in all
presently owned and hereafter arising or acquired Collateral, and Borrower shall
continue to immediately deliver to Capital, in kind, all collections received
respecting the Accounts.
4.5 Perfection of Security Interest. Borrower shall execute and deliver to
Capital, concurrent with Borrower's execution of this Agreement, and at any time
or times hereafter at the request of Capital, all financing statements,
continuation financing statements, security agreements, assignments,
endorsements, affidavits, reports, notices, schedules of accounts, letters of
authority and all other documents that Capital may reasonably request, in form
satisfactory to Capital, to perfect and maintain perfected Capital's security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under this Agreement.
4.6 Access to Borrower's Books. Capital (through any of its officers,
employees or agents) shall have the right, at any time or times hereafter,
during Borrower's usual business hours, or during the usual business hours of
any third party having control over the records of Borrower, to inspect and
verify Borrower's Books in order to verify the amount or condition of, or any
other matter relating to, the Collateral and Borrower's financial condition.
4.7 Power of Attorney. Borrower hereby irrevocably makes, constitutes and
appoints Capital (and any of Capital's officers, employees or agents designated
by Capital) as Borrower's true and lawful attorney with power:
A. Upon Borrower's failure or refusal to comply with its
undertakings contained in Section 4.5, to sign the name of
Borrower on any of the documents described in that section
or on any other similar documents which need to be executed,
recorded and/or filed in order to perfect or continue
perfected Capital's security interest in the Collateral;
B. To endorse Borrower's name on any checks, notes,
acceptances, money orders, drafts or other forms of payment
or security that may come into Capital's possession;
C. To sign Borrower's name on drafts against account debtors,
on schedules and assignments of Accounts, on notices to
account debtors, on any invoice or xxxx of lading relating
to any Account;
D. After the occurrence of an Event of Default, to notify the
post office authorities to change the address for delivery
of Borrower's mail to an address designated by Capital, to
receive and open all mail addressed to Borrower, and to
retain all mail relating to the Collateral and forward,
within two (2) business days of Capital's receipt thereof,
all other mail to Borrower;
E. To send requests for verification of Accounts, and to
contact account debtors in any other manner in order to
verify the Accounts.
F. To do all things necessary to carry out this Agreement.
The appointment of Capital as Borrower's attorney, and each and every one
of Capital's rights and powers, being coupled with an interest, are irrevocable
so long as any Accounts in which Capital has a security interest remain unpaid
and until all of the Obligations have been fully paid and performed. The
Borrower ratifies and approves all acts of the attorney. Neither Capital nor its
employees, officers or agents shall be liable for any acts or omissions or for
any error in judgment or mistake of fact or law made in good faith except for
gross negligence or willful misconduct. Capital may file one or more financing
statements disclosing Capital's security interest without the Borrower's
signature appearing thereon.
4.8 Sale of Inventory. Until the occurrence of an Event of Default by
Borrower under this Agreement, Borrower may, subject to the provisions hereof
and consistent herewith, sell or lease the Inventory, but only in the ordinary
course of Borrower's business. A sale or lease of Inventory in Borrower's
ordinary course of business does not include an exchange or a transfer in
partial or total satisfaction of a debt owing by Borrower, nor does it include
an exchange for less than reasonably equivalent value.
5 CONDITIONS PRECEDENT AND SUBSEQUENT
-----------------------------------
5.1 Conditions Precedent. As conditions precedent to any advances by
Capital hereunder or any other Loan Documents, Borrower shall execute and
deliver, or cause to be executed and delivered, to Capital, in form and
substance satisfactory to Capital and its counsel, the following:
A. Financing statements (form UCC-1) in form satisfactory for
filing and recording with the appropriate governmental
authorities.
B. Certified extracts from the minutes of the meetings of
Borrower's members authorizing the borrowings and the
granting of the security interest provided for herein and
authorizing specific officers to execute and deliver the
agreements provided for herein.
C. A certified copy of Borrower's Certificate of Formation and
any amendments thereto, a certificate of good standing
showing that Borrower is in good standing under the laws of
the State of its formation and certificates indicating that
Borrower has qualified to transact business and is in good
standing in any other state in which the conduct of its
business or its ownership of property requires that it be so
qualified.
D. UCC searches, tax lien and litigation searches, fictitious
business statement filings, insurance certificates, notices
or other similar documents which Capital may require and in
such form as Capital may require, in order to reflect,
perfect or protect the priority of Capital's security
interests in the Collateral and in order to fully consummate
all of the transactions contemplated under this Agreement.
E. Prior to any funding requested hereunder, a fully completed
Borrowing Base Certificate, dated as of the date of any
requested funding, and certified as being true and correct
by the Chief Executive Officer or Chief Financial Officer.
F. A separate guaranty, in a form acceptable to Capital in its
sole discretion, duly executed and delivered by each of the
Guarantors, respectively, to Capital.
G. Evidence satisfactory to Capital that Borrower has obtained
insurance policies or binders, with such insurers and in
such amounts as may be acceptable to Capital, respecting the
tangible personal property comprising the Collateral and
naming Capital as a loss payee on a lender's loss payee
endorsement acceptable to Capital in its sole discretion.
H. Evidence satisfactory to Capital that Borrower has, after
request from Capital, obtained business interruption
insurance and any insurance maintained on Borrower's
Accounts, with such insurers and in such amounts as may be
acceptable to Capital, covering and naming Capital as a loss
payee on a lender's loss payee endorsement acceptable to
Capital in its sole discretion.
I. Evidence satisfactory to Capital, in its sole discretion,
that Borrower has recorded fictitious business name
statements in the appropriate governmental offices regarding
all of the trade names used by Borrower in its business.
J. The Loan Documents.
K. A legal opinion from Borrower's outside counsel in form and
content acceptable to Capital.
L. Separate subordination agreements, in a form acceptable to
Capital in its sole discretion, duly executed and delivered
by each Subordinating Creditor, respectively, to Capital, if
applicable.
M. Landlord Waivers for all of Borrower's leased locations.
N. Copies of Borrower's most recent quarterly and annual
statements filed with the Securities and Exchange Commission
("SEC").
O. Such other matters set forth on Schedule 1.
6. BORROWER'S REPRESENTATIONS AND WARRANTIES
-----------------------------------------
Borrower makes the following representations and warranties which shall be
deemed to be continuing representations and warranties so long as any credit
hereunder shall be available and until the Obligations have been repaid in full:
6.1 Existence and Rights.
A. The chief executive office of Borrower is at the address
specified on Schedule 1;
B. Borrower is an entity described on Schedule 1 duly organized
and existing under the laws of the State of Incorporation
(as defined on Schedule 1) and is qualified and licensed to
do business and is in good standing in any state in which
the conduct of its business or its ownership of property
requires that it be so qualified;
C. Borrower has the right and power to enter into this
Agreement and each of the other Loan Documents;
D. Borrower has the power, authority, rights and franchises to
own its property and to carry on its business as now
conducted;
E. Borrower has no investment in any other business entity.
6.2 Agreement Authorized. The execution, delivery and performance by
Borrower of this Agreement and each of the other Loan Documents: (a) have been
duly authorized and do not require the consent or approval of any governmental
body or other regulatory authority; and (b) shall not constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws.
6.3 Binding Agreement. This Agreement is the valid, binding and legally
enforceable obligation of Borrower in accordance with its terms.
6.4 No Conflict. The execution, delivery and performance by Borrower of
this Agreement and each of the other Loan Documents: (a) shall not constitute an
event of default under any agreement, indenture or undertakings to which
Borrower is a party or by which it or any of its property may be bound or
affected; (b) are not in contravention of or in conflict with any law or
regulation; and (c) do not cause any lien, charge or other encumbrance to be
created or imposed upon any such property by reason thereof other than the
security interests granted to Capital in the Collateral.
6.5 Litigation. Except as set forth on Exhibit C, there are no actions or
proceedings pending by or against Borrower or any guarantor of Borrower before
any court or administrative agency, and Borrower has no knowledge or belief of
any pending, threatened or imminent litigation, governmental investigations or
claims, complaints, actions or prosecutions involving Borrower or any guarantor
of Borrower, except for ongoing collection matters in which Borrower is the
plaintiff and except as heretofore disclosed, in writing, to Capital. Borrower
is not in default with respect to any order, writ, injunction, decree or demand
of any court or any governmental or regulatory authority.
6.6 Financial Condition. All financial statements and information relating
to Borrower which have been delivered by Borrower to Capital have been prepared
in accordance with GAAP, unless otherwise stated therein, and fairly and
reasonably present Borrower's financial condition. There has been no material
adverse change in the financial condition of Borrower since the date of the most
recent of such financial statements submitted to Capital. Borrower has no
knowledge of any liabilities, contingent or otherwise, which are not reflected
in such financial statements and information, and Borrower has not entered into
any special commitments or contracts which are not reflected in such financial
statements or information which may have a materially adverse effect upon
Borrower's financial condition, operations or business as now conducted.
6.7 Tax Status. Borrower has no liability for any delinquent state, local
or federal taxes.
6.8 Title to Assets. Borrower has good title to its assets and the same are
not subject to any liens or encumbrances other than those permitted by Section
6.11A.
6.9 Trademarks and Patents. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
6.10 Environmental Quality. Borrower has in the past and is currently in
compliance with any and all federal, state and local statutes, laws and
regulations concerning the preservation of the environment and the use and
disposal of hazardous and toxic materials and substances. Borrower is not aware
that it is under investigation by any state or federal agency designed to
enforce any of such laws or regulations.
6.11 Accounts, General Intangibles and Negotiable Collateral.
A. Borrower has good and marketable title to the Accounts, the
General Intangibles and the Negotiable Collateral, free and
clear of liens, claims, security interests, or encumbrances
(except as held by Capital, and except as may be
specifically consented to, in advance and in writing, by
Capital); at the time of their assignment to Capital the
Accounts will be bona fide existing obligations created by
the sale or lease of goods or the rendition of services to
account debtors in the ordinary and usual course of business
and will be owed to Borrower without any known defenses,
disputes, offsets or counterclaims, or any rights of return
or cancellation; Borrower shall have received no notice of
actual or imminent bankruptcy or insolvency of any account
debtor at the time the Account due from such account debtor
is created; and in accordance with prudent credit policies,
the account debtor shall be able to timely discharge all of
its indebtedness to Borrower;
B. Borrower shall deliver to Capital, as Capital may from time
to time require, original delivery receipts, customer's
purchase orders, shipping instructions, bills of lading and
other documentation respecting shipment arrangements as
applicable to each purchase by Borrower of an Account.
Absent such a request by Capital, copies of all such
documentation shall be held by Borrower as custodian for
Capital;
C. At the time each Eligible Account is assigned to Capital,
such Eligible Account will be due and payable in accordance
with the terms set forth in Section 1.14, or on such other
terms approved, in writing, by Capital in advance of the
creation of such Account, and such terms shall be expressly
set forth on the face of the invoice for such Account. No
Eligible Account will be past due at the time it is assigned
to Capital.
6.12 Inventory and Equipment.
A. The Inventory and Equipment are currently located only at
the locations identified on Exhibit E ;
B. All Inventory is now and at all times hereafter shall be of
good and merchantable quality, free from defects;
C. The Inventory and Equipment are and shall remain free from
all liens, claims, encumbrances, and security interests
(except as held by Capital, and except as may be
specifically consented, in advance and in writing, by
Capital);
D. The Inventory is not now stored with a bailee, warehouseman
or similar party; and
E. Borrower currently keeps correct and accurate records
itemizing and describing the kind, type, quality and
quantity of the Inventory, and its cost therefore.
6.13 Brokers There has been no mortgage or loan broker in connection with
this loan transaction other than as set forth on Schedule 1, and the Borrower
agrees to indemnify and hold the Lender harmless from any claim of compensation
payable to any mortgage or loan broker in connection with this loan transaction.
7 BORROWER'S AFFIRMATIVE COVENANTS
--------------------------------
Borrower covenants and agrees that so long as any credit hereunder shall be
available and until the Obligations have been repaid in full, unless Capital
shall otherwise consent in writing, Borrower shall do all of the following:
7.1 Assignment Schedules and Invoices. At the time of each assignment of
Accounts to Capital, Borrower shall deliver to Capital: (1) an assignment
schedule of all Accounts created by Borrower since the delivery of the
immediately preceding assignment schedule required hereunder; (2) copies of
invoices evidencing such sales and shipping evidence or proofs of delivery
relating thereto as applicable to each sale which results in an Account; (3) for
all invoices in the amount of $5,000 or more generated by the Borrower resulting
from drop shipments, copies of invoices and shipping evidence from the seller of
such goods to the Borrower; and (4) such other documentation as Capital may
request from time to time including but not limited to Borrower's proof of
verification on each purchased invoice.
7.2 Rights and Facilities. Borrower shall maintain and preserve all rights,
franchises and other authority adequate for the conduct of its business.
Borrower shall also maintain its properties, equipment and facilities in good
order and repair and conduct its business in an orderly manner without voluntary
interruption and maintain and preserve its existence.
7.3 Location of Inventory and Equipment. The Inventory and Equipment shall
be located only at locations listed on Exhibit E or such other locations as
shall have been approved by Capital.
7.4 Inventory Records. Borrower shall keep correct and accurate records
itemizing and describing the kind, type, quality and quantity of the Inventory,
and its cost thereof, all of which records shall be available upon demand to any
of Capital's officers, agents and employees for inspection and copying.
7.5 Insurance. Borrower, at its expense, shall keep and maintain its assets
insured against loss or damage by fire, theft, explosion, sprinklers and all
other hazards and risks ordinarily insured against by other owners who use such
properties in similar businesses for the full insurable value thereof. Borrower
shall deliver to Capital certified copies of such policies of insurance and
evidence of the payments of all premiums therefore. Borrower shall also keep and
maintain business interruption, public liability, and property damage insurance
relating to Borrower's ownership and use of the Inventory, the Equipment and its
other assets. All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be satisfactory to Capital. All such
policies of insurance (except those of public liability and property damage)
shall contain an endorsement in a form satisfactory to Capital showing Capital
as a loss payee thereof, and all proceeds payable thereunder shall be payable to
Capital and, upon receipt by Capital, shall be applied on account of the
Obligations owing to Capital. To secure the payment of the Obligations, Borrower
grants Capital a security interest in and to all such policies of insurance
(except those of public liability and property damage) and the proceeds thereof,
and Borrower shall direct all insurers under such policies of insurance to pay
all proceeds thereof directly to Capital.
7.6 Notice of Litigation. If at any time during the term of this Agreement
any litigation, governmental investigations or claims, complaints, actions or
prosecutions involving Borrower or any guarantor of Borrower shall be commenced
or threatened, Borrower shall immediately notify Capital in writing of such
event.
7.7 Submission of Records and Reports.
A. Borrower shall execute and deliver to Capital within ten
(10) days after the end of each month during the term of
this Agreement, reflecting the status as of the end of each
month, certified by the Chief Executive Officer or Chief
Operating Officer of Borrower as being true and correct, (i)
a current detailed aging, by total and by customer, of
Borrower's Accounts, (ii) a current detailed aging, by total
and by vendor, of Borrower's accounts payable and (iii) a
Compliance Certificate in the form of Exhibit D from the
Chief Executive Officer or Chief Operating Officer of
Borrower certifying that no Event of Default currently
exists under this Agreement, all of which shall be set forth
in a form and shall contain such information as is
acceptable to Capital;
B. Borrower shall promptly supply Capital with such other
information concerning its affairs as Capital may request
from time to time hereafter, and shall promptly notify
Capital of any material adverse change in Borrower's
financial condition and of any condition or event which
constitutes a breach of, or an event which constitutes an
Event of Default under, this Agreement.
7.8 Taxes. All assessments and taxes, whether real, personal or otherwise,
due or payable by, or imposed, levied or assessed against Borrower or any of its
property shall be paid in full, before delinquency or before the expiration of
any extension period. Borrower shall make due and timely payment or deposit of
all federal, state and local taxes, assessments or contributions required of it
by law, and will execute and deliver to Capital, on demand, appropriate
certificates attesting to the payment or deposit thereof. Borrower will make
timely payment or deposit of all F.I.C.A. payments and withholding taxes
required of it by applicable laws, and will furnish Capital with proof
satisfactory to Capital indicating that Borrower has made such payments or
deposits.
7.9 Financial Statements.
A. Borrower shall maintain a standard and modern system of
accounting in accordance with GAAP with ledger and account
cards and/or computer tapes, discs, printouts, and records
pertaining to the Collateral which contain information as
may from time to time be requested by Capital. Borrower
shall not modify or change its method of accounting or enter
into, modify or terminate any agreement presently existing,
or at any time hereafter entered into with any third party
accounting firm and/or service bureau for the preparation
and/or storage of Borrower's accounting records without said
accounting firm and/or service bureau agreeing to provide to
Capital information regarding the Collateral and Borrower's
financial condition. Borrower agrees to permit Capital and
any of its employees, officers or agents, upon demand,
during Borrower's usual business hours, or the usual
business hours of third persons having control thereof, to
have access to and examine all of Borrower's Books relating
to the Collateral, the Obligations, Borrower's financial
condition and the results of Borrower's operations, and, in
connection therewith, permit Capital or any of its agents,
employees or officers to copy and make extracts therefrom.
B. For each of Borrower's fiscal years during the term of this
Agreement, Borrower shall deliver to Capital:
(i) within the Monthly Reporting Period (as defined on
Schedule 1), a statement of the financial condition of
Borrower for such monthly period on a Monthly Reporting
Level (as defined on Schedule 1), including, but not
limited to, a balance sheet, a profit and loss
statement, and a cash flow statement, and any other
report requested by Capital relating to the Collateral
and the financial condition of Borrower, and a
certificate signed by the Chief Executive Officer or
Chief Operating Officer of Borrower, to the effect that
all statements and reports delivered or caused to be
delivered to Capital under this subsection, fairly and
thoroughly present the financial condition of Borrower,
are true and correct as of the last day of the
immediately preceding calendar month and that there
exists on the date of delivery to Capital no condition
or event which constitutes an Event of Default under
this Agreement or which, with the giving of notice or
the passage of time or both, would constitute an Event
of Default under this Agreement;
(ii) within the Annual Reporting Period (as defined on
Schedule 1), a statement of the financial condition of
Borrower for such fiscal year, on an Annual Reporting
Level (as defined on Schedule 1) basis, including, but
not limited to, a balance sheet, a profit and loss
statement, and a cash flow statement, and any other
report requested by Capital relating to the Collateral
and the financial condition of Borrower, and a
certificate signed by the Chief Executive Officer or
Chief Operating Officer of Borrower, to the effect that
all reports, statements, computer disc or tape files,
printouts, runs, or other computer prepared information
of any kind or nature relating to the foregoing or
documents delivered or caused to be delivered to
Capital under this subsection, fairly and thoroughly
present the financial condition of Borrower and that
there exists on the date of delivery to Capital no
condition or event which constitutes an Event of
Default under this Agreement or which, with the giving
of notice or the passage of time or both, would
constitute an Event of Default under this Agreement.
7.10 Financial Covenants. Borrower shall maintain at all times during the
term of this Agreement the Financial Covenants set forth on Schedule 1.
7.11 Tax Returns. Borrower shall deliver to Capital copies of each of
Borrower's future federal and state income tax returns, and any amendments
thereto, within fifteen (15) calendar days following the filing thereof with the
Internal Revenue Service and with the appropriate state offices. Upon the
written request of Capital, Borrower further agrees to promptly deliver to
Capital copies of all receipts issued to Borrower for the payment of federal and
state withholding taxes required of it.
7.12 Payment of Debts. Borrower shall be at all times hereafter solvent and
able to pay its debts (including trade debts) as they mature.
7.13 Compliance with Environmental Laws. Borrower shall comply with any and
all federal, state and local statutes, laws and regulations concerning the
preservation of the environment and the use and disposal of hazardous and toxic
materials and substances.
7.14 Reimbursement for Capital Expenses. Upon the demand of Capital,
Borrower shall immediately reimburse Capital for all sums expended by Capital
which constitute Capital Expenses, and Borrower hereby authorizes and approves
all advances and payments by Capital for items constituting Capital Expenses.
8 BORROWER'S NEGATIVE COVENANTS
-----------------------------
Borrower covenants and agrees that so long as any credit hereunder shall be
available and until the Obligations have been repaid in full, unless Capital
shall otherwise consent in writing, Borrower shall not do any of the following:
8.1 Relocate of Chief Executive Office. Borrower will not, without thirty
(30) days prior written notification to Capital, relocate its chief executive
office.
8.2 Agreements with Account Debtors. After an Event of Default hereunder,
no discount, credit or allowance shall be granted by Borrower to any account
debtor and no return of merchandise shall be accepted by Borrower without
Capital's consent. Capital may, after an Event of Default, settle or adjust
disputes and claims directly with account debtors for amounts and upon terms
which Capital considers advisable, and in such cases, Capital will credit
Borrower's account with only the net amounts received by Capital in payment of
such disputed Accounts, after deducting all Capital Expenses incurred or
expended in connection therewith.
8.3 Storage of Inventory. The Inventory shall not at any time or times
hereafter be stored with a bailee, warehouseman or similar party without
Capital's prior written consent, and, in such event, Borrower will, concurrent
therewith, cause any such bailee, warehouseman or similar party to issue and
deliver to Capital, in a form acceptable to Capital, warehouse receipts in
Capital's name evidencing the storage of the Inventory.
8.4 Business Structure and Operations. Borrower shall not, without
Capital's prior written consent:
A. Sell, lease, or otherwise dispose of, move, relocate
(except in connection with a relocation of Borrower's
business facility) or transfer, whether by sale or
otherwise, any of Borrower's assets, except sales of
Inventory in the ordinary and usual course of
Borrower's business as presently conducted;
B. Change Borrower's name or form of entity, or add any
new fictitious name;
C. Acquire, merge or consolidate with or into any other
business organization;
D. Enter into any transaction not in the ordinary and
usual course of Borrower's business;
E. Guarantee or otherwise become in any way liable with
respect to the obligations of any third party except by
endorsement of instruments or items of payment for
deposit to the general account of Borrower or which are
transmitted or turned over to Capital;
F. Make any change in the Borrower's financial structure
or in any of its business objectives, purposes or
operations which could adversely affect the ability of
Borrower to repay the Obligations;
G. Incur any debts outside the ordinary and usual course
of Borrower's business;
H. Make any advance or loan to any person or entity;
I. Prepay any existing indebtedness owing to any third
party;
J. Cause, permit or suffer any change, direct or indirect,
in Borrower's capital ownership;
K. Make any distribution or declare or pay any dividends
(in cash or in stock) on, or purchase, acquire, redeem
or retire any of its common stock, of any class,
whether now or hereafter outstanding;
L. Suspend or go out of business;
M. Pay total compensation to officers of Borrower (or any
of their relatives), including salaries, withdrawals,
fees, bonuses, commissions, drawing accounts and other
payments, whether directly or indirectly, in money or
otherwise, during the each fiscal year of Borrower
during the term of this Agreement in an aggregate
amount for all such officers in excess of one hundred
and fifty percent (150%) such amounts in effect on the
date hereof;
N. Make any loans, advances, intercompany transfers or
cash flow between the Borrower and any subsidiary,
related entity or affiliate of the Borrower or with any
company that has common officers or directors with the
Borrower.
8.5 ERISA.
A. If applicable, no employee benefit plan established or
maintained by the Borrower (including any multiemployer
plan to which the Borrower contributes) which is
subject to Part 3 of Subtitle B or Title I of ERISA had
a material accumulated funding deficiency (as such term
is defined in Section 302 of ERISA) as of the last day
of the most recent fiscal year of such plan ended prior
to the date hereof, or would have had an accumulated
funding deficiency (as so defined) on such day if such
year were the first year of such plan to which Part 3
of Subtitle B of Title I of ERISA applied, and no
material liability to the Pension Benefit Guaranty
Corporation, has been or is expected by the Borrower to
be, incurred with respect to any such plan by the
Borrower.
B. The Borrower is not required to contribute to or is not
contributing to a "Multiemployer Pension Plan" (as such
term is defined in the Multiemployer Pension Plan
Amendments Act of l980). The Borrower has no
"withdrawal liability" (as also defined in such Act) to
any multiemployer pension plan, nor has any reportable
event referred to in section 4043(b) of the Employee
Retirement Income Security Act of 1974 ("ERISA")
occurred that has resulted or could result in liability
of the Borrower; and the Borrower does not have any
reason to believe that any other event has occurred
that has resulted or could result in liability of the
Borrower as set forth above.
C. Borrower shall not withdraw from participation in,
permit the termination or partial termination of, or
permit the occurrence of any other event with respect
to any deferred compensation plan maintained for the
benefit of Borrower's employees under circumstances
that could result in liability to the Pension Benefit
Guaranty Corporation, or any of its successors or
assigns, or to any entity which provides funds for such
deferred compensation plan.
D. Borrower shall not withdraw from any multi-employer
plan described in Section 4001(a)(3) of ERISA which
covers Borrower's employees.
9. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
9.1 Failure to Pay Obligations. If Borrower fails to pay when due and
payable or when declared due and payable all or any portion of the Obligations
owing to Capital (whether of principal, taxes, reimbursement of Capital
Expenses, or otherwise);
9.2 Failure to Perform. If Borrower fails or neglects to perform, keep or
observe any term, provision, condition, covenant, agreement, warranty or
representation contained in this Agreement, in any of the other Loan Documents,
or in any other present or future agreement between Borrower and Capital;
9.3 Inaccurate Information. If any representation, statement, report, or
certificate made or delivered by Borrower, or any of its officers, employees or
agents, to Capital is not true and correct, in any material respect, including,
but not limited to, any Borrowing Base Certificate delivered to Capital pursuant
to this Agreement;
9.4 Third Party Claim. If all or a material portion of Borrower's assets
are attached, seized, subjected to a writ or distress warrant, or are levied
upon, or come into the possession of any Judicial Officer or Assignee;
9.5 Impairment. If there is a material impairment of the prospect of
repayment of all or any portion of the Obligations owing to Capital or a
material impairment of the value or priority of Capital's security interests in
the Collateral;
9.6 Voluntary Insolvency Proceeding. If an Insolvency Proceeding is
commenced by Borrower;
9.7 Involuntary Insolvency Proceeding. If an Insolvency Proceeding is
commenced against Borrower;
9.8 Interruption of Business. If Borrower is enjoined, restrained or in any
way prevented by court order from continuing to conduct all or any material part
of its business affairs;
9.9 Governmental Lien. If a notice of lien, levy or assessment is filed of
record with respect to any or all of Borrower's assets by the United States
Government, or any department, agency or instrumentality thereof, or by any
state, county, municipal or other governmental agency, or if any tax or debt
owing at any time hereafter to any one or more of such entities becomes a lien,
whether xxxxxx or otherwise, upon any or all of the Borrower's assets and the
same is not paid on the payment date thereof;
9.10 Liens. If a judgment or other claim becomes a lien or encumbrance upon
all or a material portion of Borrower's assets;
9.11 Default in Agreement with Third Party. If there is a default, after
the expiration of all applicable cure periods, in any loan agreement, mortgage,
indenture or other material agreement to which Borrower is a party with third
parties, and Capital determines that such default shall have a materially
adverse effect on Borrower's business or the prospects for repayment of the
Obligations;
9.12 Misrepresentation. If any misrepresentation exists now or hereafter in
any warranty or representation made to Capital by Borrower or any officer or
director of Borrower, or if any such warranty or representation is withdrawn by
Borrower or by any officer or director of Borrower;
9.13 Impairment of Guaranty. If any guarantor of Borrower's indebtedness to
Capital dies, terminates its guaranty, defaults in the payment or performance of
any obligations of guarantor owing to Capital, or becomes the subject of an
Insolvency Proceeding;
9.14 Reportable Event Under ERISA. If any reportable event, which Capital
determines, in its sole and absolute discretion, will have a material adverse
effect on the financial condition of Borrower or which Capital determines
constitutes grounds for the termination of any deferred compensation plan by the
Pension Benefit Guaranty Corporation or for the appointment by the appropriate
United States District Court of a trustee to administer any such plan, shall
have occurred and be continuing thirty (30) days after written notice of such
determination shall have been given to Borrower by Capital, or any such Plan
shall be terminated within the meaning of Title IV of ERISA, or a trustee shall
be appointed by the appropriate United States District Court to administer any
such plan, or the Pension Benefit Guaranty Corporation shall institute
proceedings to terminate any plan and in case of any event described in this
Section 9.14, the aggregate amount of the Borrower's liability to the Pension
Benefit Guaranty Corporation under Sections 4062, 4063 or 4064 of ERISA shall
exceed five percent (5%) of Borrower's Tangible Net Worth; or
9.15 Withdrawal from Multi-Employer Plan. Borrower shall have withdrawn
from a multi-employer plan described in Section 4001(a)(3) of ERISA and incurs
withdrawal liability as a result thereof.
9.16 Termination of Employment of Guarantors. If any one or more of the
Guarantors cease to be employed by the Borrower in capacities similar to those
in effect as of the date of this Agreement.
9.17 Payment on Subordinated Debt. If Borrower makes any payment on
Subordinated Debt, if existing, in violation of the applicable Subordination
Agreement.
10 CAPITAL'S RIGHTS AND REMEDIES
10.1 Remedies. Upon the occurrence of an Event of Default by Borrower under
this Agreement, Capital may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are authorized
by Borrower:
A. Declare all Obligations, whether arising pursuant to
this Agreement or otherwise, immediately due and
payable;
B. Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any
other agreement between Borrower and Capital;
C. Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of
Capital, but without affecting Capital's rights and
security interest in the Collateral and without
affecting the Obligations owing by Borrower to Capital;
D. Capital or Capital's designee may notify customers,
account debtors or lessees of Borrower that the
Accounts have been assigned to Capital and that Capital
has a security interest therein, collect them directly,
and charge the collection costs and expenses to
Borrower's loan account;
E. Without notice to or demand upon Borrower or any
Guarantor, make such payments and do such acts as
Capital considers necessary or reasonable to protect
its security interest in the Collateral. Borrower
agrees to assemble the Collateral if Capital so
requires, and to make the Collateral available to
Capital as Capital may designate. Borrower authorizes
Capital to enter the premises where the Collateral is
located, take and maintain possession of the
Collateral, or any part of it, and to pay, purchase,
contest or compromise any encumbrance, charge or lien
which in the opinion of Capital appears to be prior or
superior to its security interest and to pay all
expenses incurred in connection therewith;
F. Capital is hereby granted a license or other right to
use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets,
trade names, trademarks and advertising matter, or any
property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising
for sale and selling any Collateral and Borrower's
rights under all licenses, and all franchise agreements
shall insure to Capital's benefit;
G. Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale and sell
(in the manner provided for herein) the Collateral;
H. Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or
transactions, for cash or on terms. It is not necessary
that the Collateral be present at any such sale;
I. In connection with any such sale, the standard of
commercial reasonableness will be deemed satisfied if
Capital does the following:
(i) Location of Sale(s). The sale(s) may be conducted at
Borrower's premises, Capital's premises, the premises
of any third party located in or adjacent to any county
in which any of the collateral is located, or any other
location which Capital believes is reasonably
convenient to potential purchasers. The selection of
any such location(s) shall be in the sole and absolute
discretion of Capital.
(ii) Notice of Sale. Capital shall give notice of the
disposition of the Collateral as follows:
(a) Capital shall give Borrower and each holder of a
security interest in the Collateral who has filed with
Capital a written request for notice, a notice in writing of
the time and place of public sale, or, if the sale is a
private sale or some other disposition other than a public
sale is to be made of the Collateral, the time on or after
which the private sale or other disposition is to be made;
(b) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 13, at
least ten (10) calendar days before the date fixed for the
sale, or at least ten (10) calendar days before the date on
or after which the private sale or other disposition is to
be made, unless the Collateral is perishable or threatens to
decline speedily in value. Notice to persons other than
Borrower claiming an interest in the Collateral shall be
sent to such addresses as they have furnished to Capital;
(c) If the sale is to be a public sale, Capital shall
also give notice of the time and place by publishing a
notice one time at least ten (10) calendar days before the
date of the sale in a newspaper of general circulation in
the county in which the sale is to be held;
J. Capital may credit bid and purchase at any public sale;
K. Borrower shall pay all Capital Expenses incurred in
connection with Capital's enforcement and exercise of
any of its rights and remedies as herein provided,
whether or not suit is commenced by Capital;
L. Any deficiency which exists after disposition of the
Collateral as provided above will be paid immediately
by Borrower. Any excess will be returned, without
interest and subject to the rights of third parties, to
Borrower by Capital.
10.2 Cumulative Rights. Capital's rights and remedies under this Agreement
and all other agreements shall be cumulative. Capital shall have all other
rights and remedies not inconsistent herewith as provided under the Code, by
law, or in equity. No exercise by Capital of one right or remedy shall be deemed
an election, and no waiver by Capital of any default on Borrower's part shall be
deemed a continuing waiver. No delay by Capital shall constitute a waiver,
election or acquiescence by it.
11 TAXES AND EXPENSES REGARDING THE COLLATERAL
-------------------------------------------
If Borrower fails to pay any monies (whether taxes, assessments, insurance
premiums, or otherwise) due to third persons or entities, or fails to make any
deposits or furnish any required proof of payment or deposit, all as required
under the terms of this Agreement, then Capital may, to the extent that it
determines in its sole discretion that such failure by Borrower could have a
material adverse change on Capital's interests in the Collateral, in its
discretion and without prior notice to Borrower, (i) make payment of the same or
any part thereof; (ii) set up such reserves in Borrower's loan account as
Capital deems necessary to protect Capital from the exposure created by such
failure; or (iii) both. Any amounts paid or deposited by Capital shall
constitute Capital Expenses, shall be immediately charged to Borrower's loan
account and become additional Obligations owing to Capital, shall bear interest
at the applicable rate set forth in Section 2.3.5, and shall be secured by the
Collateral. Any payments made by Capital shall not constitute: (i) an agreement
by Capital to make similar payments in the future, or (ii) a waiver by Capital
of any Event of Default under this Agreement. Capital need not inquire as to, or
contest the validity of, any such expense, tax, security interest, encumbrance
or lien, and the receipt of the usual official notice for the payment thereof
shall be conclusive evidence that the same was validly due and owing.
12 WAIVERS
-------
12.1 Application of Payments. Borrower waives the right to direct the
application of any and all payments at any time or times hereafter received by
Capital on account of any Obligations owed by Borrower to Capital, and Borrower
agrees that Capital shall have the continuing exclusive right to apply and
reapply such payments in any manner as Capital may deem advisable,
notwithstanding any entry by Capital upon its books.
12.2 Demand, Protest, Default, Etc. Except as otherwise provided herein,
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of nonpayment at maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, documents, instruments, chattel paper, and guarantees at any
time held by Capital on which Borrower may in any way be liable.
12.3 Maintenance of Collateral. So long as Capital complies with its
obligations, if any, under Section 9-207 of the Code, Capital shall not in any
way or manner be liable or responsible for: (a) the safekeeping of the Inventory
and/or Equipment; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency
or other person whomsoever. All risk or loss, damage or destruction of the
Inventory and Equipment shall be borne by Borrower.
12.4 Confidential Relationship. Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm and/or
service bureau in connection with any information requested by Capital pursuant
to or in accordance with this Agreement, and agrees that Capital may contact
directly any such accounting firm and/or service bureau in order to obtain such
information.
13 NOTICES
-------
Unless otherwise specifically provided herein, all notices and service of
any process shall be in writing addressed to the respective party as set forth
below and may be personally served, telecopied or sent by overnight courier
service or United States mail and shall be deemed to have been given: (a) if
delivered in person, when delivered; (b) if delivered by telecopy, on the date
of transmission if confirmed and if transmitted on a Business Day before 4:00
p.m. (eastern standard time) or, if not, on the next succeeding Business Day;
(c) if delivered by overnight courier, two days after delivery to such courier
properly addressed; or (d) if by U.S. Mail, four Business Days after depositing
in the United States mail, with postage prepaid and properly addressed.
If to Borrower: At the address specified on Schedule 1
If to Capital: CAPITAL BUSINESS CREDIT,
a division of Capital Factors, Inc.
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxxx 00
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx,
Senior Vice President
Telecopier Number (000) 000-0000
----------------------------
With a copy to: Xxxxxxx X. Xxxxxx, Esq.
Senior Vice President
Capital Factors, Inc.
000 X. Xxxxxxxx Xxxx Xxxx
Xxxx Xxxxx, XX 00000
Telecopier Number (000) 000-0000
and
Xxxx X. Xxxxxx, Esq.
Xxxx X. Xxxxxx, P.A.
0000 Xxxxxxxxx Xxxxxxxxx, X.X.
Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Telecopier Number (000) 000-0000
The parties hereto may change the address at which they are to receive
notices and the telecopier number at which they are to receive telecopies
hereunder, by notice in writing in the foregoing manner given to the other.
14 DESTRUCTION OF BORROWER'S DOCUMENTS
-----------------------------------
Any documents, schedules, invoices or other papers delivered to Capital may
be destroyed or otherwise disposed of by Capital four (4) months after they are
delivered to or received by Capital, unless Borrower requests, in writing, the
return of the said documents, schedules, invoices or other papers and makes
arrangements, at Borrower's expense, for their return.
15 CHOICE OF LAW
-------------
The validity of this Agreement, its construction, interpretation and
enforcement, and the rights of the parties hereunder and concerning the
Collateral, shall be determined under, governed by, and construed in accordance
with the laws of the State of Georgia. The parties agree that all actions or
proceedings arising in connection with this Agreement shall be tried and
litigated only in the state and federal courts located in the County of Xxxxxx,
State of Georgia. Borrower waives any right it may have to assert the doctrine
of forum non conveniens or to object to such venue and hereby consents to any
court ordered relief.
16 CONCERNING REVISED ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE.
-----------------------------------------------------------
The parties acknowledge and agree to the following provisions of this
Agreement in anticipation of the possible application, in one or more
jurisdictions to the transactions contemplated hereby, of the revised Article 9
of the Uniform Commercial Code in the form or substantially in the form approved
by the American Law Institute and the National Conference of Commissioners on
Uniform State Law and contained in the 1999 Official Text of the Uniform
Commercial Code ("Revised Article 9").
a. Attachment. In applying the law of any jurisdiction in which
Revised Article 9 is in effect, the Collateral is substantially all
assets of the Borrower, whether or not within the scope of Revised
Article 9. The Collateral shall include, without limitation, the
following categories of assets as defined in Revised Article 9: goods
(including inventory and any accessions thereto), equipment,
instruments (including promissory notes), documents, accounts
(including health-care-insurance receivables), chattel paper (whether
tangible or electronic), deposit accounts, letter-of-credit rights
(whether or not the letter of credit is evidenced by a writing),
commercial tort claims, securities and all other investment property,
general intangibles (including payment intangibles and software),
supporting obligations and any and an proceeds of any thereof,
wherever located, whether now owned and hereafter acquired. If the
Borrower shall at any time, whether or not Revised Article 9 is in
effect in any particular jurisdiction, acquire a commercial tort
claim, as defined in Revised Article 9, the Borrower shall immediately
notify Capital in a writing signed by the Borrower of the brief
details thereof and grant to Capital in such writing a security
interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance
satisfactory to Capital.
b. Perfection by Filing. Capital may at any time and from time to
time, pursuant to the provisions of Section 4.7, file financing
statements, continuation statements and amendments thereto that
describe the Collateral as all assets of the Borrower or words of
similar effect and which contain any other information required by
Part 5 of Revised Article 9 for the sufficiency or filing office
acceptance of any financing statement, continuation statement or
amendment, including whether the Borrower is an organization, the type
of organization and any organization identification number issued to
the Borrower. The Borrower agrees to furnish any such information to
Capital promptly upon request. Any such financing statements,
continuation statements or amendments may be signed by Capital on
behalf of the Borrower, as provided in Section 4.7, and may be filed
at any time in any jurisdiction whether or not Revised Article 9 is
then in effect in that jurisdiction.
c. Other Perfection, etc. The Borrower shall at any time and from
time to time, whether or not Revised Article 9 is in effect in any
particular jurisdiction, take such steps as Capital may reasonably
request for Capital (a) to obtain an acknowledgment, in form and
substance satisfactory to Capital, of any bailee having possession of
any of the Collateral that the bailee holds such Collateral for
Capital, (b) to obtain "control" of any investment property, deposit
accounts, letter-of-credit rights or electronic chattel paper (as such
terms are defined in Revised Article 9 with corresponding provisions
in Rev. Sections 9-104, 9-105, 9106 and 9-107 relating to what
constitutes "control" for such items of Collateral), with any
agreements establishing control to be in form and substance
satisfactory to Capital, and (c) otherwise to insure the continued
perfection and priority of Capital's security interest in any of the
Collateral and of the preservation of its rights therein, whether in
anticipation and following the effectiveness of Revised Article 9 in
any jurisdiction.
d. Savings Clause. Nothing contained in this Article 16 shall be
construed to narrow the scope of Capital's security interest in any of
the Collateral or the perfection or priority thereof or to impair or
otherwise limit any of the rights, powers, privileges or remedies of
Capital hereunder except (and then only to the extent) mandated by
Revised Article 9 to the extent then applicable.
17. GENERAL PROVISIONS
------------------
17.1 Representations and Warranties Repeated. Each representation, warranty
and agreement contained in this Agreement shall be automatically deemed repeated
with each advance and shall be conclusively presumed to have been relied on by
Capital regardless of any investigation made or information possessed by
Capital. The warranties, representations and agreements set forth herein shall
be cumulative and in addition to any and all other warranties, representations
and agreements which Borrower shall give, or cause to be given, to Capital,
either now or hereafter.
17.2 Binding Agreement. This Agreement shall be binding and deemed
effective when executed by Borrower and accepted and executed by Capital.
17.3 Right to Grant Participations. This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the parties;
provided, however , that Borrower may not assign this Agreement or any rights
hereunder without Capital's prior written consent and any prohibited assignment
shall be absolutely void. No consent to an assignment by Capital shall release
Borrower from its Obligations to Capital. Capital may assign this Agreement and
its rights and duties hereunder. Capital reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, Capital's rights and benefits hereunder.
17.4 Indemnification. In consideration of the execution and delivery of
this Agreement and the extension of financial accommodations by Capital to
Borrower pursuant to this Agreement, Borrower agrees to indemnify, save,
exonerate, and hold Capital, and each of the officers, directors, employees and
agents of Capital (herein collectively called the "Indemnitees" and individually
called an "Indemnitee") free and harmless from and against any and all actions,
claims, causes of action, suits, losses, liabilities, damages, and expenses,
including, without limitation, reasonable attorneys' fees (including allocated
costs for in-house legal services provided and attorneys' fees in all bankruptcy
proceedings) and disbursements (herein collectively called the "Indemnified
Liabilities"), which may be incurred by or asserted against the Indemnitees or
any Indemnitee as a result of, or arising out of, or relating to, or in
connection with, any investigation, litigation, or proceeding related to any use
made or proposed to be made by Borrower of the proceeds of any advance or loan
made hereunder, or the consummation of the transactions contemplated hereby,
whether or not any such Indemnitee is a party thereto, and, if and to the extent
that the foregoing undertaking may be unenforceable for any reason, Borrower
hereby agrees to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities as is permissible under applicable law.
If any action, suit, or proceeding arising from any of the foregoing is
brought against Capital, or any Indemnitee or affiliate of an Indemnitee
indemnified or intended to be indemnified pursuant to this Section 17.4,
Borrower, to the extent and in the manner directed by the Indemnitee or intended
Indemnitee, shall resist and defend such action, suit, or proceeding or cause
the same to be resisted and defended by counsel designated by Borrower (which
counsel shall be reasonably satisfactory to the Indemnitee or intended
Indemnitee). Each Indemnitee shall use its best efforts to cooperate in the
defense of any such action, writ, or proceeding. Borrower shall have no
obligation to any Indemnitee under this Section 17.4 to the extent that the
Indemnified Liabilities resulted from the gross negligence or willful misconduct
on the part of any Indemnitee. The Obligations of Borrower under this Section
17.4 shall survive the termination of this Agreement and the discharge of the
Borrower's other Obligations hereunder.
17.5 Tax Indemnification. The Borrower agrees to pay and save Capital
harmless against any liability for payment of any state documentary stamp taxes,
intangible taxes or similar taxes (including interest or penalties, if any)
which may now or hereafter be determined to be payable in respect to the
execution, delivery or recording of any Loan Document or the making of any
advance, whether originally thought to be due or not, and regardless of any
mistake of fact or law on the part of Capital or the Borrower with respect to
the applicability of such tax. The provisions of this section shall survive
payment in full of the Obligations and termination of this Agreement.
17.6 Section Headings. Section headings and section numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
17.7 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Capital or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
17.8 Severability. Each provision of this Agreement shall be severable from
every other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
17.9 Modification and Merger. This Agreement cannot be changed or
terminated orally. All prior agreements, understandings, representations,
warranties and negotiations, if any, are merged into this Agreement.
17.10 Compliance. The Borrower, for and in consideration of the making of
the loan described herein and future advance funding, agree if requested by
Capital or its counsel, Borrower will fully cooperate and execute and/or
re-execute any document or documents due to clerical errors, scrivener's errors
or relating to additional matters due to receipt and review of miscellaneous
required items post closing, or otherwise on any or all of the closing
documentation for the loan if deemed necessary, using reasonable discretion of
Capital and its counsel.
17.11 Capital's Counsel. In the event that Capital has utilized counsel in
connection with the closing of the transaction described in this Agreement, such
counsel ("Capital Counsel") has (1) prepared certain documents relating to the
Loan, including, among other documents, this Agreement; (2) examined such
documents as Capital Counsel deemed necessary in connection with this
transaction; and (3) supervised the closing of the Loan. Capital Counsel's fee
for providing these services is stated on the Loan Closing Statement. These
legal services have been performed on behalf of Capital and not on behalf of
Borrower, and Capital Counsel's fees are being reimbursed to Lender by Borrower.
17.12 JURY TRIAL.
-----------
CAPITAL, THE BORROWER AND THE GUARANTORS ACKNOWLEDGE THAT THE TRANSACTIONS
AND MATTERS SET FORTH IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE COMPLEX
IN NATURE AND THAT ANY LITIGATION ARISING THEREFROM WOULD BE MOST APPROPRIATELY,
ECONOMICALLY AND SPEEDILY RESOLVED BY A NON-JURY TRIAL. THE BORROWER, CAPITAL
AND THE GUARANTORS THEREFOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION, DIRECTLY OR INDIRECTLY, BASED ON OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS OR THE LOANS AND
FACILITIES CONTEMPLATED HEREBY, OR IN ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENT (WHETHER WRITTEN OR ORAL) OR ACTIONS OR OMISSIONS OF ANY PARTY TO THIS
AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR CAPITAL'S ENTERING INTO
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. BORROWER AND
CAPITAL EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS.
17.13 AUTOMATIC RELIEF FROM STAY AND OTHER BANKRUPTCY WAIVERS.
-------------------------------------------------------
THE BORROWER AGREES THAT IF ANY PROCEEDING IS COMMENCED UNDER TITLE 11 OF
THE UNITED STATES CODE RELATIVE TO IT, CAPITAL SHALL BE AUTOMATICALLY ENTITLED
TO IMMEDIATE RELIEF FROM STAY UNDER 11 U.S.C. ss.362 WITHOUT ESTABLISHING EQUITY
OR NEED OR LACK OF NEED FOR THE PROPERTY SECURING THE LOANS OR CAUSE OR LACK OF
CAUSE, AND THE BORROWER HEREBY CONSENTS TO SUCH RELIEF, IT BEING EXPRESSLY
ACKNOWLEDGED THAT THIS PROVISION WAS SPECIFICALLY NEGOTIATED AND CONSTITUTES A
MATERIAL INDUCEMENT TO CAPITAL ENTERING INTO THIS AGREEMENT AND MAKING FINANCIAL
AND OTHER ACCOMMODATIONS AND ADDITIONAL ADVANCES CONTEMPLATED HEREIN.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective on the date first set forth above.
Witnesses: eNetpc, Inc. formerly known as
CyberStar Computer Corporation, a
Minnesota corporation
_________________________ By: ---------------------------
Xxxxxxxx Xxxxx
_________________________ Its: President
--------------------------
CAPITAL BUSINESS CREDIT,
a division of CAPITAL FACTORS,
INC., a Florida corporation
__________________________By: ----------------------------
Xxxxxx X. Xxxxxx
__________________________ Senior Vice President
----------------------------
STATE OF )
) SS:
COUNTY OF )
The foregoing instrument was acknowledged before me this __ day of October
2000 by Xxxxxxxx Xxxxx as President of eNetpc, Inc. formerly known as CyberStar
Computer Corporation, a Minnesota corporation, on behalf of the corporation. He
[ ] is personally known to me or [ ] has produced
_____________________________________, as identification.
Notary Public,
My Commission Expires:
Print Name: ________________________
Commission Number:_________________
[NOTARIAL SEAL]
STATE OF )
) SS:
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of August
2000 by Xxxxxx X. Xxxxxx, as Senior Vice President of CAPITAL BUSINESS CREDIT, a
division of CAPITAL FACTORS, INC., a Florida corporation, on behalf of the
corporation. He [ ] is personally known to me or [ ] has produced
________________________________, as identification.
AFFIDAVIT FOR EXECUTION OF LOAN AND SECURITY
--------------------------------------------
AGREEMENT WITHOUT THE STATE OF FLORIDA
--------------------------------------
STATE OF )
-------------------------------
) SS:
COUNTY OF )
BEFORE ME, the undersigned authority, personally appeared the undersigned
Xxxxxxxx Xxxxx (the "Affiant"), who being first duly sworn upon oath, deposes
and says that he is the President of eNetpc, Inc. formerly known as CyberStar
Computer Corporation, a Minnesota corporation, having a street address of 0000
Xxxxx Xxx Xxxx, Xxxx Xxxxxxx, Xxxxxxxxx 00000, to me well known and who deposed
and said he executed and delivered that certain Loan and Security Agreement
dated October ___, 2000, in the maximum amount of two million five hundred
thousand dollars ($2,500,000.00) (the "Agreement"), which Agreement is between
eNetpc, Inc. formerly known as CyberStar Computer Corporation, a Minnesota
corporation, as borrower, and CAPITAL BUSINESS CREDIT, a division of CAPITAL
FACTORS, INC., as lender, in the City of , State of . I then deposited the same
with Federal Express addressed to Xx. Xxxxxx X. Xxxxxx, Capital Business Credit,
a division of Capital Factors, Inc., 0000 Xxxxxx Xxxxx Xxxx, Xxxxxxxx 00,
Xxxxxxxx, XX 00000.
FURTHER AFFIANT SAYETH NAUGHT.
------------------------------
Xxxxxxxx Xxxxx, President
SWORN TO AND SUBSCRIBED before me this _____ day of October___, 2000 by
________________, who personally appeared before me, and who [ ] is personally
known to me or [ ] has produced __________________________________________, as
identification.
Notary Public, State of
Print Name: ___________________
My Commission Expires: ________
[NOTARIAL SEAL]
STATE OF GEORGIA )
) SS:
COUNTY OF XXXXXXX )
AFFIDAVIT OF OUT-OF-STATE DELIVERY
BEFORE ME, the undersigned authority, personally appeared the undersigned
Xxxxxx X. Xxxxxx (the "Affiant"), who being first duly sworn upon oath, deposes
and says that:
1. The Affiant is a Senior Vice President of CAPITAL BUSINESS CREDIT, a
division of CAPITAL FACTORS, INC., a Florida corporation ("Factors"), and the
Affiant is duly authorized to and does make this affidavit in said capacity on
behalf of Factors.
2. That on the ___ day of October, 2000, I received and executed on behalf
of Factors that certain Loan and Security Agreement dated October____, 2000, in
the maximum amount of two million five hundred thousand dollars ($2,500,000.00)
(the "Agreement"), which Agreement is between eNetpc, Inc. formerly known as
CyberStar Computer Corporation, a Minnesota corporation, as borrower, and
CAPITAL BUSINESS CREDIT, a division of CAPITAL FACTORS, INC., as lender.
3. That the execution of the Agreement by the Borrower took place in
City of , State of .
------------------ ---------------------------
4. That I accepted delivery of, and executed the Agreement on behalf of
Factors in the city of Marietta, State of Georgia.
FURTHER AFFIANT SAYETH NAUGHT.
---------------------------
Xxxxxx X. Xxxxxx, Affiant
Title: Senior Vice President
SWORN TO AND SUBSCRIBED before me this _____ day of October ____, 2000 by
Xxxxxx X. Xxxxxx, who personally appeared before me, and who [ ] is personally
known to me or [ ] has produced _________________________________________, as
identification.
----------------------
Notary Public, State of
Print Name: ___________________
My Commission Expires: ________
[NOTARIAL SEAL]
SCHEDULE 1
----------
1. "Term Days" as referred to in Section 1.14 means 30 from invoice date.
---------------------
2. "Past Due Days" as referred to in Section 1.14 means 90 days from
invoice date. ------------
------------
3. "Cross Aging Percentage" as referred to in Section 1.14 means 50%.
4. "Guarantor" and "Guarantors" as referred to in Section 1.21 means:
Xx. Xxxxxxx X. Xxxxxx.
5. "Lock Box" as referred to in Section 1.27 means:
Operations Center
Xxxx Xxxxxx Xxx 000000
Xxxxxxxxx, XX 00000-0000
6. "Maximum Credit Line" as referred to in Section 1.30 means TWO MILLION
FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00).
-----------------------
7. "Subordinated Creditor" as referred to in Section 1.37 means
None
8. "Term" as referred to in Section 1.40 means one (1) year from the date
hereof. The Term shall thereafter be automatically renewed (a "Renewal Term")
for successive periods of one (1) year unless terminated by either party as set
forth below, which termination shall be effective on an anniversary date of this
Agreement. Notice of such termination shall be effectuated by the mailing of a
certified letter, return receipt requested, not less than thirty (30) days
immediately prior to the effective date of such termination, addressed to the
other party in the manner and the address referred to in Section 13.
9. "Advance Percentage" as referred to in Section 2.1 means eighty-five
percent (85%). -----------
-------------
10. "Margin" as referred to in Section 2.3.5 means four percent (4.0%). The
Governing Rate on the date hereof is equal to thirteen and one-half percent (
13.5%) (The Margin plus the Prime Rate). So long as the ratio of Borrower's
total liabilities, as determined by GAAP, to the Borrower's Tangible Net Worth
is no greater than four to one (4:1) and net income (as determined by GAAP) is
positive on a trailing twelve month period, then Margin shall mean three percent
(3.0%). In the event that the Borrower fails to maintain the above financial
covenants, then the Margin will immediately revert to four percent (4%).
11. "Reporting Period" as referred to in Section 2.3.6 means week.
----
12. "Collection Day Period" as referred to in Section 2.3.7 means 2 days.
13. The Borrower will pay the following fees to Capital, which fees shall
be fully earned when due and shall not be refundable to the Borrower in any
event:
a. Loan Administration Fee. Borrower will pay Capital a Loan
Administration Fee equal to the difference between one percent (1%) of the
Maximum Credit Line and the actual interest paid to Capital during each
twelve month Term of the Agreement. Such fee shall be payable at the end of
the Term. In the event that the Agreement is terminated at any time prior
to the expiration of the Term, the Loan Administration Fee shall be payable
at such time.
14. The Borrower's chief executive office, as referred to in Section 6.1A
is:
0000 Xxxxx Xxx Xxxx
Xxxx Xxxxxxx, XX 00000
------
15. The Borrower is a ___X__corporation, _____limited liability company
_______limited partnership ______general partnership ______sole proprietor, for
the purposes of Section 6.1 B (check one)
16. "State of Incorporation" as referred to in Section 6.1 B. is Minnesota.
17. "Broker" as referred to in Section 6.13 is none.
18. "Monthly Reporting Period" as referred to in Section 7.9 B. (i) means
forty-five (45) days after the end of each month.
19. "Monthly Reporting Level" as referred to in Section 7.9 B. (i) means:
internally prepared financial statements certified by Borrower's management.
20. "Annual Reporting Period" as referred to in Section 7.9 B. (ii) means
ninety (90) days after the end of each of the Borrower's fiscal years.
21. "Annual Reporting Level" as referred to in Section 7.9 B. (ii) means
Audited financial statements prepared by a Certified Public Accountant
acceptable to Capital.
22. The Borrower shall at all times maintain the following financial
covenants:
1. Borrower's total Obligations under the Agreement shall not exceed five (5)
times the Borrower's Tangible Net Worth.
23. Notices to the Borrower under Section 13 shall be sent to:
If to Borrower: eNetpc, Inc., a Minnesota corporation
0000 Xxxxx Xxx Xxxx
Xxxx Xxxxxxx, XX 00000
Attn: Xxxxxxxx Xxxxx, President
Telecopier Number (000) 000-0000
24. The following additional terms and conditions are made a part of this
Agreement:
a. Sections 1.14 (d) is deleted in its entirety, and the following is
substituted in its place:
"(d) Accounts with respect to which the account debtor is
the United States or any department, agency or
instrumentality of the United States; provided, however,
that an Account shall not be deemed ineligible by reason of
this clause (d) if the aggregate amount of such Accounts
does not exceed five percent (5%) of the total of Borrower's
Accounts outstanding, or in the event aggregate amount of
such Accounts does exceed five percent (5%) of the total of
Borrower's Accounts outstanding, that Borrower has completed
all of the steps necessary, in the sole opinion of Capital,
to comply with the Federal Assignment of Claims Act of 1940
(31 U.S.C. ss.203) with respect to such Account;"
b. The following is added at the end of Section 4.2:
"Prior to the occurrence of an Event of Default, the cost
and frequency of field examinations will be limited as
follows: (i). Capital may perform at least three (3) field
examinations per annum; and (ii) the cost of the field
examinations will not exceed $2,250.00 per field
examination. Upon and after the occurrence of an Event of
Default, there will be no limitation on the cost of field
examinations."
c. The following is added as Section 6.14:
"6.14 Securities Compliance The Borrower is in compliance
with all federal and state laws and regulations with respect
to the issuance of securities, including but not limited to,
disclosure and reporting obligations and all other matters
relative thereto."
d. The following is added at the end of Section 7.9:
"C. The Borrower will provide to Capital, promptly upon
receipt thereof, copies of any reports submitted by
independent certified public accountants in connection with
examination of the financial statements of the Borrower or
any subsidiary or any Guarantor made by such accountants.
The Borrower will provide to Capital, promptly after the
furnishing thereof, copies of any statement or report
furnished to any other party pursuant to the terms of any
indenture, loan, credit or similar agreement and not
otherwise required to be furnished to Capital.
E. The Borrower will provide to Capital, promptly after the
sending or filing thereof, copies of all proxy statements,
financial statements and reports which the Borrower or any
subsidiary sends to its stockholders, and copies of all
regular, periodic and special reports, and all registration
statements which the Borrower or any subsidiary files with
the SEC or any governmental authority which may be
substituted therefore, or with any national security
exchange."
e. Section 8.4 (A) is hereby deleted in its entirety, and the
following is substituted in its place:
"Sell, lease, or otherwise dispose of, move, relocate
(except in connection with a relocation of Borrower's
business facility) or transfer, whether by sale or
otherwise, any of Borrower's assets, except sales of
Inventory in the ordinary and usual course of Borrower's
business as presently conducted and except for the sale of
other assets of the Borrower in excess of $25,000 ( book
value basis) in each of the Borrower's fiscal years on a
non-cumulative basis. Any sales of assets (except sales of
Inventory in the ordinary and usual course of Borrower's
business as presently conducted) in excess of $25,000.00 (
book value basis) in each of the Borrower's fiscal years on
a non-cumulative basis, shall be subject to Capital's prior
written consent;"
25. The Borrower presently conducts its business under the following trade
names:
1. CyberStar
2. EZPC
3. International Trade Center
4. eNetpc
The Borrower shall immediately furnish written notification
to Capital of any change of corporate name of the Borrower
or the use of any trade name.
THIS SCHEDULE 1 IS MADE A PART OF AND INCORPORATED INTO THE LOAN AND
SECURITY AGREEMENT.
INDEX TO EXHIBITS
A. Borrowing Base Certificate
B. List of Borrower's Officers
C. Litigation Listing
D. Compliance Certificate
E. Inventory Locations
EXHIBIT A
Opening Borrowing Base Certificate
EXHIBIT B
Officers
All officers of Borrower are listed below:
Xx. Xxxxxxxx Xxxxx, President
Xxxxxxx X. Xxxxxx, Treasurer
Xxxxxxx X. Xxxxxx, Secretary
Xxxxx Xxxxxxxxxxx, National Marketing Manager
Xxxxxxx Xxxxxx, Senior Buyer
Xxxxxxx X. Xxxxxx, Chairman of the Board
Xxxxx X. Xxxxxxxxxx, Director
Xx Xxxxxx, Director
EXHIBIT C
Litigation
All litigation of Borrower, its officers, directors or shareholders, and
guarantors, whether as plaintiff or defendant, are listed below:
Xxxxxx X. XxXxxxxx V Borrower
Borrower V Euler Solutions
EXHIBIT D
eNetpc, Inc., a Minnesota corporation
0000 Xxxxx Xxx Xxxx
Xxxx Xxxxxxx, XX 00000
____ , 2000__
Capital Business Credit
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxxx 00
Xxxxxxxx, Xxxxxxx 00000
The undersigned, the of eNetpc, Inc., a Minnesota corporation ("Borrower"),
gives this certificate to CAPITAL BUSINESS CREDIT ("Lender") in accordance with
the requirements of that certain Loan and Security Agreement dated as of October
, 2000, between Borrower and Lender ("Loan Agreement"). Capitalized terms used
in this Certificate, unless otherwise defined herein, shall have the meanings
ascribed to them in the Loan Agreement.
Based upon my review of the balance sheets and statements of income of the
Borrower for the [fiscal year] [monthly period] ending , 2000, copies of which
are attached hereto, I hereby certify that:
The Borrower's total Obligations under the Loan Agreement are $ , and the
Borrower's Tangible Net Worth is $ . The Borrower's total Obligations under the
Loan Agreement [do] [do not] exceed five (5) times the Borrower's Tangible Net
Worth
No Event of Default exists on the date hereof, other than:
---------------
[if none, so state].
As of the date hereof, Borrower is current in its payment of all accrued
rent and other charges to Persons who own or lease any premises where any
of the Collateral is located, and there are no pending disputes or claims
regarding Borrower's failure to pay or delay in payment of any such rent or
other charges.
Yours truly,
--------------------------
--------------------------
Name/title
EXHIBIT E
Inventory and Equipment Locations
Inventory and equipment of Borrower may be located at the following locations,
including but not limited to those locations owned, rented, leased or occupied
by the Borrower (including inventory and equipment located or stored at
locations of customers, venders, public warehouses, or other):
0000 Xxxxx Xxx Xxxx
Xxxx Xxxxxxx, XX 00000
0000 Xxxxxxxx
Xxxxx 000
Xxxxx, XX 00000
