LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this Loan and Security
Agreement, together with any schedules, exhibits, and other documents
attached hereto or executed in connection herewithwith, as such may be
amended from time to time, being hereinafter referred to as this "Loan
Agreement") is entered into as of this 30th day of September, 1995 by
and between Emergent Group, Inc., a South Carolina corporation
("Emergent") and Young Generations, Inc., a North Carolina corporation
("YGI").
WHEREAS prior to the date hereof, YGI has been a wholly-owned
subsidiary of Emergent;
WHEREAS it is in the best interest of YGI that Emergent sell a
controlling interest in the YGI stock to certain purchasers (the
"Purchasers"), insofar as such sale will increase management's
commitment to YGI and will provide YGI management with significant
incentive to improve the operating performance of YGI;
WHEREAS, as of the date hereof, Emergent has entered
into a Stock Purchase Agreement with the Purchasers, pursuant to which
it has sold 100% of the outstanding shares of YGI (the "Stock Sale");
WHEREAS YGI owes Emergent the principal amount of $2,848,055
(the "Receivable"), which Receivable is payable by YGI upon demand by
Emergent; WHEREAS, in order to improve cash flow stability and to
lengthen the period of time over which YGI's debt must be repaid,
the Purchasers have made it a condition to the consummation of the
Stock Sale that the Receivable be repaid and that a new credit
arrangement in the approximate amount of $3,548,055 be entered into
between YGI and Emergent, all as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
warranties contained herein and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS
Section 1.1 Definitions. The following defined terms shall
have the following meanings when used in this Loan Agreement.
"Borrowing Availability" shall mean (i) from the date hereof
through October 7, 1995, the amount of the Initial Loan, and (ii) at
any date thereafter, the sum of the principal amount unpaid with
respect to the Initial Loan and the amount, up to $700,000, calculated
in accordance with the schedule set forth on Exhibit A.
"Cash Flow" shall mean, for the relevant period of time,
an amount equal to (a) YGI's net profit (loss) for such period, less
(b) scheduled principal payments paid with respect to the loans of
Carolina First Bank and First Factors Corporation, and other
obligations currently existing or existing in the future (if consented
to by Emergent) for such period, plus (c) YGI's depreciation and
amortization for financial reporting purposes for such period, as
each such item is computed in accordance with generally accepted
accounting principles applied on a consistent basis. After the first
monthly period in which YGI has Positive Cash Flow, Cash Flow shall be
calculated on a cumulative basis beginning with such first month of
Positive Cash Flow.
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"Default" shall mean the occurrence of any event or
condition which, after satisfaction of any requirement for the giving of
notice or the lapse of time, or both, would become an Event of Default.
"Event of Default" shall mean any of the events set forth in
Section 6 hereof.
"Initial Loan" shall mean a Loan in the amount of $2,848,055,
which Initial Loan shall be requested by YGI and made by Emergent
immediately upon the execution hereof, and the proceeds of which shall
be utilized as set forth in Section 2.4 below.
"Lien" shall mean any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien,
charge, claim, security interest, easement or encumbrance, or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing
statement perfecting a security interest under the UCC or comparable law
of any jurisdiction).
"Permitted Indebtedness" shall mean (i) the currently existing
indebtedness of Carolina First Bank and First Factors Corporation,
(ii) trade payables arising in the ordinary course of business and
which are not more than 60 days past due.
"Permitted Liens" shall mean (i) the currently existing Liens
of Carolina First Bank and First Factors Corporation, except that the
amount set forth in the currently existing note or notes secured by such
existing Liens shall not be increased except upon the consent of
Emergent and (ii) such additional Liens as may be approved in writing by
Emergent.
"Positive Cash Flow" shall mean, for the relevant period of
time, Cash Flow which is a positive number.
"Termination Date" shall mean September 30, 2000.
SECTION 2. THE LOANS
2.1 Loans. Subject to the terms and conditions hereof and
provided that there exists no Default or Event of Default, Emergent
agrees to make loans (each a "Loan" and collectively the "Loans"), as
requested by YGI from time to time in writing, to YGI from time to
time on and after the date hereof and up to, but not including, the
Termination Date in an aggregate principal amount which will not
exceed at any one time outstanding an amount equal to the lesser of (i)
the Borrowing Availability or (ii) $3,548,055. The Loans shall be
evidenced by a promissory note, substantially in the form of Exhibit B
attached hereto, payable to Emergent in the principal face amount
of $3,548,055 (together with any and all amendments,
modifications and supplements thereto, the "Note"). The Note shall be
construed to be a separate instrument and may be modified or
renegotiated by Emergent without in any way releasing YGI or the
Collateral (as defined below). Loans may be borrowed, repaid and
reborrowed in accordance with the terms hereof.
2.2 Interest and Principal Payments. Interest on the Loans
shall be payable as set forth in the Note. Unless and until there is
Positive Cash Flow, no principal amounts owed under the Loans shall be
payable until the Termination Date. To the extent of Positive Cash
Flow, payments of principal on the
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Loans shall be made monthly in an amount equal to the sum of (i)
1/120th of the then outstanding principal amount of the Loans (except
for such principal amount as shall have resulted from accrued but
unpaid interest) and (ii) all interest accrued but unpaid on the Loans
as of the date of such payment; provided that on the Termination Date,
all principal and other amounts owed under the Note shall be paid in
full. Any principal payments made prior to the Termination Date
shall be allocated, first to the extent of any amounts owed above the
amount of the Initial Loan and second, to the extent of the Initial
Loan.
2.3 Loan Account; Statements of Account. Emergent will
maintain one or more loan accounts for YGI to which Emergent will
charge all amounts advanced to or for the benefit of YGI hereunder and
to which Emergent will credit all amounts collected hereunder from or
on behalf of YGI. Emergent will account to YGI periodically with a
statement of charges and payments made pursuant to this Agreement. The
unpaid principal amount of the Loans, the unpaid interest accrued
thereon, the interest rate or rates applicable to such unpaid principal
amount, and the accrued and unpaid fees, premiums and other
amounts due hereunder shall at all times be ascertained from the
records of Emergent and such records shall constitute prima facie
evidence of the amounts so due and payable.
2.4 Use of Proceeds. The Initial Loan shall be used to pay
in full the Receivable. The proceeds of other Loans shall be used for
YGI's general working capital needs, consistent with good business
practices. No portion of the proceeds of any Loan may be used
to "purchase" or "carry," as such terms are defined in Regulations G,
T, U or X of the Board of Governors of the Federal Reserve System,
any margin stock, or to extend credit for the purpose of purchasing or
carrying margin stocks.
2.5 Origination Fee. In the event that any funds are
advanced by Emergent to YGI under this Loan Agreement (and
irrespective of when or whether any such amounts are repaid), YGI
hereby agrees to pay to Emergent an amount equal to 30% of the
increase, if any, in YGI's retained earnings from September 30, 1995 to
September 30, 2000, which amount shall be payable in full on or
before November, 30, 2000. YGI's retained earnings shall be
calculated in accordance with generally accepted accounting
principals on a consistently applied basis. YGI shall always employ
as its independent accountants any of Xxxxxxx, Xxxxx and Company, LLP or
one of the "Big Six" accounting firms.
SECTION 3. SECURITY INTEREST
3.1 Security Interest Granted by YGI. In consideration of (i)
the conversion of the Receivable from a demand note to the Initial Loan
(which is payable over five years), (ii) the execution of the Note in an
amount in excess of the amount necessary to repay the Receivable,
and (iii) the sale of the Emergent's controlling interest in YGI in
the Stock Sale, and to secure the payment of all amounts owed under the
Notes and all other present and future obligations of YGI to
Emergent, and the prompt and complete performance by YGI under the Notes
and this Loan Agreement (collectively, the "Obligations"), YGI hereby
grants and conveys to Emergent a security interest in all of its
current and future-acquired property, in whatever form, both tangible
and intangible, real and personal (the "Collateral"), including, without
limitation:
(a) all equipment, computers, office equipment, furniture and
fixtures and vehicles, together with all replacements thereof;
(b) all customer contracts, rights, lists, records,
billing and all other information relating to customers of YGI, and
other similar general intangibles;
(c) all accounts receivable;
(d) all inventory, supplies and clothing patterns;
(e) all real property;
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(f) all corporate labels, trademarks, and names;
(g) all proceeds of and increases to (including interest on
such proceeds) and insurance payable on account of items (a) through (f)
immediately above.
3.2 Other Covenants Regarding the Collateral. In
addition to all covenants and agreements of YGI contained herein, YGI
agrees as follows:
(a) Preservation of Collateral. To do all acts that may
be necessary to maintain, preserve, and protect the Collateral.
(b) Use of Collateral. Not to use or permit any Collateral
to be used unlawfully or in violation of any provision of this Loan
Agreement, any other agreement with Emergent related hereto or any
applicable statute, regulation, or ordinance or any policy of insurance
covering the Collateral.
(c) Payment of Taxes, etc. To pay promptly when due all
taxes, assessments, charges, encumbrances and Liens now or hereafter
imposed upon or affecting any Collateral (except for Permitted Liens).
(d) Defense of Litigation. To appear in and defend any action
or proceeding that may affect its title to or Emergent's interest in the
Collateral.
(e) Possession of Collateral.
Not to surrender or lose possession of, sell, encumber, lease, rent, or
otherwise dispose of or transfer any Collateral or right or interest
therein except as hereinafter provided, and to keep the Collateral
or right or interest therein except as hereinafter provided, free of
all Liens except for Permitted Liens; provided that, unless an
Event of Default shall occur, YGI may, in the ordinary course of
business, sell or lease any Collateral consisting of inventory and may
sell any assets no longer used in the conduct of YGI's business which
have a value not in excess of $100,000.
(f) Compliance with Law. To comply with all laws,
regulations, and ordinances relating to the possession, operation,
maintenance, and control of the Collateral.
(h) Delivery of After Acquired Collateral. To account fully
for and promptly deliver to Emergent, in the form received, all
documents, chattel paper, instruments, and agreements, constituting
Collateral hereunder and all proceeds of the Collateral received,
all endorsed to Emergent or in blank, as requested by Emergent, and
accompanied by such stock powers as appropriate and until so
delivered all such documents, instruments, agreements, and proceeds
shall be held by YGI in trust for Emergent, separate from all other
property of YGI and identified as the property of Emergent.
(i) Maintenance of Records. To keep separate, accurate and
complete records of the Collateral and to provide Emergent with such
records and such other reports and information relating to the
Collateral as Emergent may request from time to time.
(j) Further Assurances. To procure, execute, and
deliver from time to time any indorsements, notifications,
registrations, assignments, financing statements, real property
mortgages, certificates of title, ship mortgages, aircraft mortgages,
copyright mortgages, assignments or mortgages of patents, and other
writings deemed necessary or appropriate by Emergent to perfect,
maintain, and protect its security interest in the Collateral
hereunder and the priority thereof; and to take such other actions as
Emergent may request to protect the value of the Collateral and of
Emergent's security interest in the Collateral, including, without
limitation, provision of assurances from third parties regarding
Emergent's access to, right to foreclose on or sell, Collateral and
right to realize the practical benefits of such foreclosure or sale.
YGI hereby appoints Emergent its attorney in fact to execute and to
file any such financing statements or other documents on YGI's behalf
and to execute and file any renewals, amendments, assignments,
modifications or releases thereof at any time hereafter.
(k) Payment of Emergent's Costs and Expenses. To reimburse
Emergent upon demand for any reasonable costs and expenses,
including, without limitation, attorney fees and disbursements,
Emergent may incur while exercising any right, power, or remedy
provided by this Loan Agreement or by law, all of which costs and
expenses are included in the Obligations.
(l) Notice of Changes. To give Emergent thirty (30) days
prior written notice of (i) any change
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in YGI's residence or chief place of business or (ii) any change in
YGI's legal name or trade name from Young Generations, Inc..
(m) Location of Records. To keep the records concerning the
collateral at its chief place of business and not to remove such records
from such location(s) without the prior written consent of the Emergent.
(n) Purchase Money Agreement. If Emergent advances funds
to enable YGI to acquire rights in or the use of any Collateral which
would give rise to a purchase money security interest, to use such funds
for such purpose.
(o) Inspection by Emergent. At any reasonable time,
upon demand by Emergent, to exhibit to, and allow inspection by,
Emergent (or persons designated by Emergent) of the Collateral.
(p) Location of Collateral. To keep the Collateral at
the location(s) set forth below and not to remove the Collateral from
such location(s) without the prior written consent of Emergent.
(q) Insurance. To insure the Collateral, with Emergent named
as loss payee, in form and amounts, with companies, and against risks
and liabilities satisfactory to Emergent, and YGI hereby assigns the
policies to Emergent, agrees to deliver them to Emergent at its
request, and agrees that Emergent may make any claim thereunder, cancel
the insurance on default by YGI, collect and receive payment and
indorse any instrument in payment of loss or return premium or
other refund or return, and apply such amounts received, at Emergent's
election, to replacement of Collateral or to the Obligations.
SECTION 4. REPRESENTATIONS OF YGI
YGI warrants and represents to Emergent as follows:
4.1 Organization, Good-Standing and Conduct of
Business. YGI is a corporation, duly organized, validly existing and
in good standing under the laws of the state of North Carolina, and
has full power and authority and all necessary governmental and
regulatory authorization to own all of its properties and assets and to
carry on its business as it is presently being conducted, and is
properly licensed, qualified and in good standing as a foreign
corporation in all jurisdictions wherein the character of the
properties or the nature of the business transacted by YGI makes such
license or qualification necessary.
4.2 Corporate Authority. The execution, delivery and
performance of this Loan Agreement have been duly authorized by the
Board of Directors of YGI. No other corporate acts or proceedings on
the part of YGI are required or necessary to authorize this Loan
Agreement.
4.3 Binding Effect. When executed, this Loan Agreement
will constitute a valid and legally binding obligation of YGI,
enforceable against YGI in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to the relief of
debtors generally, and general principles of equity. Each document and
instrument contemplated by this Loan Agreement, when executed and
delivered by YGI in accordance with the provisions hereof, shall
be duly authorized, executed and delivered by YGI and enforceable
against YGI in accordance with its terms, subject to the exceptions in
the previous sentence.
4.3 Absence of Defaults. YGI is not in default under,
or in violation of, any provision of its Articles of Incorporation or
Bylaws. YGI is not in default under, or in violation of, any agreement
to which YGI is a party, the effect of which default or violation
would have a material adverse effect on YGI or its business operations
or prospects. YGI is not in violation of any applicable law, rule
or regulation, the effect of which would have a material adverse effect
on YGI or its business operations or prospects.
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4.4 Non-Contravention and Defaults; No Liens. Neither
the execution or delivery of this Loan Agreement, nor the fulfillment
of, or compliance with, the terms and provisions hereof, will (i) result
in a breach of the terms, conditions or provisions of, or constitute
a default under, or result in a violation of, termination of or
acceleration of the performance provided by the terms of, any
agreement to which YGI is a party or by which it may be bound (except
for YGI's agreements with Carolina First Bank, for which a waiver has
been obtained), (ii) violate any provision of any law, rule or
regulation, (iii) result in the creation or imposition of any Lien
of any nature whatsoever on any asset of YGI, or (iv) violate any
provisions of YGI's Articles of Incorporation or Bylaws. To the best
of YGI's knowledge, no other party to any material agreement to which
YGI is a party is in default thereunder or in breach of any provision
thereof. To the best of YGI's knowledge, there exists no condition or
event which, after notice or lapse of time or both, would constitute a
default by any party to any such agreement.
4.5 Necessary Approvals. YGI has obtained all
certificates of authority, licenses, permits, franchises,
registrations of foreign ownership or other regulatory approvals in
every jurisdiction necessary for the continuing conduct of its
business and ownership of its assets. Except for those which may be
renewed or extended in the ordinary course of business, no such
certificate, license, permit, franchise, registration or other
approval is about to expire, lapse, has been threatened to be
revoked or has otherwise become restricted by its terms which would,
upon such expiration, lapse, revocation or restriction, have a material
adverse effect on the financial circumstances of YGI. No consent,
approval, authorization, registration, or filing with or by any
governmental authority, foreign or domestic, is required on the part of
YGI in connection with the execution and delivery of this Loan
Agreement or the consummation by YGI of the transactions contemplated
hereby.
4.6 Financial Statements. The audited financial statements
of YGI for each of the fiscal years 1992, 1993 and 1994, the
unaudited financial statements of YGI at and for the six month period
ending June 30, 1995 and the unaudited monthly statements subsequent
to June 30, 1995 (the "YGI Financial Statements") all of which have
been provided to Emergent, are true, correct and complete in all
material respects and present fairly, in conformity with generally
accepted accounting principles consistently applied, the financial
position of YGI at the dates indicated and the results of its
operations for each of the periods indicated, except as otherwise set
forth in the notes thereto.
4.7 Undisclosed Liabilities. Except for the liabilities
which are disclosed in the YGI Financial Statements, YGI has no
material liabilities or material obligations of any nature, whether
absolute, accrued, contingent or otherwise, and whether due or to
become due. Since December 31, 1994, there has been (i) no material
adverse change in the business or operations of YGI, (ii) no incurrence
by or subjection of YGI to any obligation or liability (whether fixed,
accrued or contingent) or commitment material to YGI not referred to in
this Loan Agreement, except such obligations or liabilities as were
or may be incurred in the ordinary course of business and which are
reflected on the YGI Financial Statements at and for the periods
subsequent to December 31, 1994.
4.8 Rights of YGI in the Collateral. Except for the
security interest granted hereby and the Permitted Liens, YGI warrants
that it is the owner of the Collateral free from any adverse Lien. YGI
warrants and covenants that no financing statement covering any of
the Collateral, or any proceeds thereof, is on file in any public
office, except those filed with respect to Permitted Liens.
SECTION 5. REPRESENTATIONS OF EMERGENT
Emergent warrants and represents to YGI as follows:
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5.1 Organization, Good-Standing and Conduct of Business.
Emergent is a corporation, duly organized, validly existing and in
good standing under the laws of the state of South Carolina, and has
full power and authority and all necessary governmental and
regulatory authorization to own all of its properties and assets and to
carry on its business as it is presently being conducted, and is
properly licensed, qualified and in good standing as a foreign
corporation in all jurisdictions wherein the character of the
properties or the nature of the business transacted by Emergent makes
such license or qualification necessary.
5.2 Corporate Authority. The execution, delivery and
performance of this Loan Agreement have been duly authorized by the
Board of Directors of Emergent. No other corporate acts or proceedings
on the part of Emergent are required or necessary to authorize this Loan
Agreement.
5.3 Binding Effect. When executed, this Loan Agreement
will constitute a valid and legally binding obligation of Emergent,
enforceable against Emergent in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to the relief
of debtors generally, and general principles of equity. Each document
and instrument contem- plated by this Loan Agreement, when
executed and delivered by Emergent in accordance with the provisions
hereof, shall be duly authorized, executed and delivered by
Emergent and enforceable against Emergent in accordance with its terms,
subject to the exceptions in the previous sentence.
5.3 Absence of Defaults. Emergent is not in default under,
or in violation of, any provision of its Articles of Incorporation or
Bylaws. Emergent is not in default under, or in violation of, any
agreement to which Emergent is a party, the effect of which default
or violation would have a material adverse effect on Emergent or its
business operations or prospects. Emergent is not in violation of any
applicable law, rule or regulation, the effect of which would have a
material adverse effect on Emergent or its business operations or
prospects.
5.4 Non-Contravention and Defaults; No Liens. Neither
the execution or delivery of this Loan Agreement, nor the fulfillment
of, or compliance with, the terms and provisions hereof, will (i) result
in a breach of the terms, conditions or provisions of, or constitute
a default under, or result in a violation of, termination of or
acceleration of the performance provided by the terms of, any agreement
to which Emergent is a party or by which it may be bound, (ii) violate
any provision of any law, rule or regulation, (iii) result in the
creation or imposition of any Lien of any nature whatsoever on any
asset of Emergent, or (iv) violate any provisions of Emergent's
Articles of Incorporation or Bylaws. To the best of Emergent's
knowledge, no other party to any material agreement to which
Emergent is a party is in default thereunder or in breach of any
provision thereof. To the best of Emergent's knowledge, there exists
no condition or event which, after notice or lapse of time or both,
would constitute a default by any party to any such agreement.
SECTION 6. DEFAULT AND REMEDIES
6.1 Default. YGI shall be in default under this Security
Agreement on the happening of any of the following events or conditions
(each, an "Event of Default"):
(a) The failure in the payment or performance of any
obligation, covenant, or liability contained or referred to herein or
in the Notes, or the breach by YGI of any representation or warranty
contained herein, or a default in any other obligation, covenant, or
liability of YGI to Emergent, which default shall not have been cured
after ten (10) business days following such default.
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(b) Dissolution, termination of existence, insolvency,
business failure, appointment of a receiver of any part of the
property of, assignment for the benefit of creditors by, or
commencement of any proceeding under any bankruptcy or insolvency laws
by, or against YGI (or any guarantor or surety for YGI).
(c) Entry of any judgment against YGI which results in any
levy on, or seizure or attachment of the Collateral.
6.2 Remedies for Default. Emergent shall, in addition to
other remedies available at law or equity, have the following remedies
upon the occurrence of an Event of Default:
(a) On default hereunder and at any time thereafter,
Emergent may declare any or all of the Obligations immediately due
and payable and shall have the remedies of a secured party under
the Uniform Commercial Code or other applicable statutes of the
State of South Carolina. Emergent may require YGI to assemble the
Collateral and make it available to Emergent at a place to be
designated by Emergent that is reasonably convenient to both parties.
Emergent shall give YGI reasonable notice of the time and place of any
public sale thereof or of the time after which any private sale or any
other intended disposition thereof is to be made. The requirements of
reasonable notice shall be met if such notice is mailed, postage
prepaid, to the address of YGI shown in this Loan Agreement at
least ten (10) business days before the time of the sale or disposition.
(b) With respect to Collateral which is accounts
receivable, YGI hereby grants Emergent the right, upon default
hereunder by YGI, to instruct the account debtors of such accounts
receivable to pay all monies payable on such accounts receivable
directly to Emergent. YGI hereby irrevocably grants to Emergent a power
of attorney to execute and to file any such documents on YGI's
behalf as may be necessary to effectuate this subparagraph (b).
(c) YGI shall be liable to Emergent for all reasonable
expenses of Emergent incurred in connection with exercise or the
protection of its rights hereunder, including but not limited to
reasonable attorneys' fees and legal expenses incurred by
Emergent. After deducting all legal and other costs, expenses, and
charges, including reasonable attorneys' fees, incurred in the
collection, sale, delivery, or preservation of the Collateral, or any
part thereof, Emergent shall apply the residue of such sale proceeds to
the payment of the Obligations and the interest thereon. Should there
be any surplus of such proceeds, such surplus shall be paid to YGI.
YGI shall pay on demand to Emergent whatever balance may be due after
the sale of the Collateral and the application of the proceeds of such
sale as above provided.
SECTION 7. COVENANTS
7.1 Compensation. YGI shall not grant any increases in
compensation to any executive officer in excess of an amount equal to a
consumer price index increase without the consent of Emergent.
7.2 Directors. For so long as any amounts are owed by YGI
under this Loan Agreement and the Note, YGI shall have meetings of
its board of directors no less than on a quarterly basis, and YGI
shall permit a designee of Emergent to be present at all Board
meetings and shall make available to such designee all information
made available to the YGI board members (under the same conditions
as such information is made available to the YGI board members).
7.3 Indebtedness. YGI shall not incur, assume, or suffer to
exist any indebtedness except (a) for the Obligations; (b) Permitted
Indebtedness; and (c) other indebtedness so long as the aggregate
principal amount incurred by YGI (including amounts made available to
YGI but not yet drawn) does not exceed $100,000.
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7.4 Guaranties. YGI shall not guarantee the obligations
of any other person or entity except by endorsement of negotiable
instruments for deposit or collection and similar transactions in the
ordinary course of business.
7.5 Investments. YGI shall not make any investment in any
person or entity except for investments in certificates of deposit
issued by commercial banks located in the United States and having a
maturity date within one year after the date such investment is made;
(B) readily marketable commercial paper of a domestic issuer rated at
least "A-1" by Standard & Poor's Rating Group or "P-1" by Xxxxx'x
Investors Service, Inc.; and (C) direct obligations of the United
States of America or agencies thereof or obligations fully guaranteed by
the United States of America.
7.6 Prohibition of Fundamental Changes. YGI shall not
enter into any transaction of merger or consolidation or amalgamation,
or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), form any subsidiary or make any
substantial change in the basic type of business conducted by YGI as of
the date hereof.
7.7 Issuance of Stock. YGI shall not issue any shares of
capital stock or other ownership interests.
7.8 Affiliate Transactions. YGI shall not enter into any
transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service or the payment of
management or other service fees, except upon the consent of Emergent.
7.9 Dividends. YGI shall not declare or pay any dividends
on, or make any distribution with respect to, the shares of any class
of its capital stock, redeem or retire any of its capital stock, or take
any action having an effect equivalent to the foregoing in any fiscal
year.
SECTION 8. MISCELLANEOUS
8.1 Waiver. Any waiver by Emergent of any default
hereunder shall not be a waiver of any other default or of the same
default on a future occasion.
8.2 Choice of Law. This Loan Agreement shall be governed by
the laws of the State of South Carolina.
8.3 Assignment. Emergent may assign this Loan Agreement
and, if assigned, the assignee shall be entitled, upon notifying YGI,
to performance of all of YGI's obligations and responsibilities and
shall further be entitled to all rights and remedies of Emergent
hereunder. All rights of Emergent hereunder shall inure to the benefit
of its successors and assigns, and all obligations of YGI shall
bind the heirs, executors, administrators, successors, or assigns of
YGI.
8.4 Prior Agreements. This is the entire agreement
of the parties and supersedes all prior agreements, written or oral,
between the parties with respect to the subject matter hereto.
8.5 Amendment. This Loan Agreement may be amended only by
instrument in writing signed by all the parties hereto and/or duly
authorized officers and agents.
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8.6 Notices. All notices hereunder shall be sent by
depositing the same in the United States mail in a sealed envelope,
with postage prepaid, marked confidential and addressed to YGI, the
Shareholders or Emergent at the following addresses, or at such other
address as shall be furnished in writing:
YGI: Young Generations, Inc.
Xxxx Xxxxxx Xxx 0000
Xxxxxxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx Xxxxx
(tel) 000-000-0000 (fax) 000-000-0000
Emergent: Emergent Group, Inc.
Xxxx Xxxxxx Xxx 00000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Xx.
(tel) 000-000-0000 (fax) 000-000-0000
8.7 Headings. The headings of the sections of this
Loan Agreement are for the convenience of reference only and do not
form a part hereof and in no way modify, interpret or construe the
meanings of the parties.
8.8 Counterparts. This Loan Agreement may be signed in one
or more counterparts, each of which shall be construed to be an
original.
8.9 Severability. Each portion of this Loan Agreement is
severable, and if one portion shall prove to be invalid, unenforceable
or violative of any statute, regulation, ordinance or other law, the
remainder of the Agreement shall remain in full force and effect.
THE REMAINDER OF THE PAGE IS BLANK
SIGNATURE PAGE FOLLOWS
10
IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands and seals the day and year first above written.
WITNESSES:
YOUNG GENERATIONS, INC.
__________________________ ___________________(SEAL)
Secretary Chief Executive Officer
EMERGENT GROUP, INC.
Secretary
_______________________ ___________________(SEAL)
President
11
EXHIBIT A
Borrowing Availability Regarding $700,000
From October 7, 1995 through September 30, 1996, Emergent shall
be obligated to advance the amount of the projected monthly negative
cash flow set forth in the projections set forth below up to a maximum
of $700,000, unless the cumulative negative cash flow equals or
exceeds 150% of cumulative projected negative cash flow as set forth
below, in which case Emergent shall not be obligated to advance further
funds. Once the obligation to advance funds has ceased, Emergent
shall not be obligated to advance additional funds until the cumulative
negative cash flow is equal to or is less than 125% of cumulative
projected negative cash flow as set forth below (but in no event to
exceed $700,000).
After September 30, 1996, Emergent shall be obligated to advance such
additional funds (if any, up to a maximum of $700,000) as Emergent in
its sole discretion, deems appropriate.
Cash Flow Projections
See attached page
12
EXHIBIT B
REVOLVING CREDIT NOTE
$3,548,055 September 30, 1995
FOR VALUE RECEIVED, the undersigned, YOUNG GENERATIONS, INC., a
North Carolina corporation (hereinafter referred to as "Maker"),
promises to pay to the order of Emergent Group, Inc. (hereinafter
referred to as the "Holder"), at Holder's principal executive
offices in Greenville, South Carolina or at such other place as Holder
may from time to time designate in writing, the principal sum of Three
Million, Five Hundred Forty-eight Thousand and Fifty-five United
States Dollars (U.S. $3,548,055) or, if less, the aggregate
outstanding principal amount of the Loans, as such term is defined in
the Loan Agreement referred to below, made or issued by Holder to
Maker, in lawful money of the United States, payable in full on the
Termination Date, as such term is defined in such Loan Agreement.
Interest on the principal balance from time to time
outstanding hereunder shall accrue at a rate of 10% per annum and shall
be payable monthly.
Principal shall be payable in the manner set forth
in that certain Loan and Security Agreement dated as of September 30,
1995 among Maker and the Holder (the "Loan Agreement"). In no
contingency or event whatsoever shall the interest rate charged
pursuant to the terms of this Note exceed the highest rate permissible
under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto. In the event that such
a court determines that Holder has received interest hereunder in
excess of the highest applicable rate, Holder shall promptly refund such
excess interest to Maker.
The date and amount of each Loan, as such term is defined in
the Loan Agreement, made by the Holder to the Maker of this Note
under the Loan Agreement, and each payment of principal thereof, shall
be recorded by Holder on its books and, prior to any transfer of this
Note, endorsed by Holder on the Schedule attached hereto or on any
continuation thereof.
This Note is the "Note" referred to in the Loan
Agreement, and is subject to all of the terms and conditions of the
Loan Agreement, including, but not limited to, those related to the
acceleration of the indebtedness represented hereby upon the occurrence
of an Event of Default (as such term is defined in the Loan Agreement)
or upon the termination of the Commitment (as such term is defined in
the Loan Agreement). Payment of this Note is secured by the
"Collateral" (as such term is defined in the Loan Agreement).
In the event that all or any portion of the indebtedness
evidenced hereby shall be collected by or through an attorney-at-law,
Holder shall be entitled to collect from Maker all costs of collection,
including reasonable attorneys' fees.
The Maker hereby waives presentment, demand for payment,
protest and notice of protest, notice of dishonor and all other
notices in connection with this Note. This Note shall be payable
without right of set off, any defense of want or failure of
consideration, nonperformance of any condition precedent, nondelivery or
delivery for a special purpose or any other defense of any nature
whatsoever.
This Note and the rights and obligations of the parties
hereunder and thereunder, shall be governed by, and construed in
accordance with, the laws of the state of South Carolina (without
regard to principles of conflicts of law).
IN WITNESS WHEREOF, the undersigned has caused this
Note to be executed under seal by its duly authorized officer as of the
day and year first written above.
"MAKER"
YOUNG GENERATIONS, INC.
By: _______________________________
Name: _____________________________
Title: ____________________________
Attest: ___________________________
Name: _____________________________
Title: ____________________________
Schedule
to Promissory Note
Dated September 30, 1995
of Young Generations, Inc.
Principal Amount Principal Amount Outstanding
Date of Loan Interest Rate of Payment Balance Notation By
