EXHIBIT 10.23
-------------
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT ("Agreement"), dated as of the 29th day of October,
1999, is made and entered into on the terms and conditions hereinafter set
forth, by and among EUROPEAN MICRO HOLDINGS, INC., a Nevada corporation with
principal offices at 0000 X.X. 000xx Xxxxxx, Xxxx X-00, Xxxxx, Xxxxxxx 00000
("Borrower"), AMERICAN MICRO COMPUTER CENTER, INC., a Florida corporation
("American Micro"), NOR'EASTER MICRO, INC., a Nevada corporation ("Nor'easter";
American Micro and Nor'easter are sometimes hereinafter collectively referred to
as " Corporate Guarantors"), and SOUTHTRUST BANK, NATIONAL ASSOCIATION, a
national banking association with offices in Nashville, Tennessee ("Lender").
WHEREAS, Borrower has requested that Lender make available to Borrower a
term loan in the original principal amount of $1,500,000 (the "Loan") on the
terms and conditions hereinafter set forth, and for the purpose(s) hereinafter
set forth; and
WHEREAS, in order to induce Lender to make the Loan to Borrower, Borrower
and Corporate Guarantors have made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and inducements of
Borrower and Corporate Guarantors, has agreed to make the Loan upon the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrower, Corporate Guarantors and Lender hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the indicated
meanings:
"Compliance Certificate" shall have the meaning assigned to such term in
SUBSECTION 5.3(A) of this Agreement.
"Event of Default" shall have the meaning assigned to such term in SECTION
7.1 of this Agreement.
"Guaranties" shall mean, collectively, one or more Continuing Guaranties
of even date herewith, executed in favor of Lender by Guarantors.
"Guarantors" shall mean, collectively, Corporate Guarantors and
Individual Guarantors.
"Individual Guarantors" shall mean, collectively, Xxxx X. Xxxxxxxxx and
Xxxxx X. Xxxxxxx.
"Loan Documents" shall mean, collectively, the Security Instruments,
together with the Note and any other instruments and documents now or hereafter
evidencing, securing or in any way related to the indebtednesses evidenced by
the Note.
"Note" shall mean that certain Secured Promissory Note of even date
herewith, in the principal amount of $1,500,000, made and executed by Borrower,
payable to the order of Lender, evidencing the indebtedness of Borrower to
Lender in connection with the Loan, together with any and all extensions,
modifications, renewals, restatements and/or replacements thereof.
"Pledge Agreements" shall mean those two (2) certain Pledge and Security
Agreements of even date herewith, executed by Individual Guarantors, in favor of
Lender.
"Pledge Securities" shall mean the securities pledged to Lender pursuant
to the Pledge Agreements.
"Secured Obligations" shall have the meaning assigned such term in SECTION
3.3 of this Agreement.
"Security Instruments" shall mean, collectively, this Agreement, the
Guaranties, and any other instruments, documents or agreements now or hereafter
securing the Secured Obligations, whether by specific or general reference.
ARTICLE II
THE LOAN
--------
II.1 REPAYMENT. The indebtedness of Borrower to Lender in connection with
the Loan shall be evidenced by, and payable in accordance with the terms of, the
Note.
II.2 COMMITMENT FEE. Upon execution of this Agreement, Borrower shall
pay to Lender a non-refundable commitment fee in the amount of $7,500.00.
II.3 PURPOSE. The purpose of the Loan shall be to finance Borrower's
additional working capital needs resulting from its purchase of one hundred
percent (100%) of the issued and outstanding stock of American Micro.
ARTICLE III
SECURITY
--------
III.1 SECURITY. The Secured Obligations are and shall continue to be
secured by the Guaranties, the Pledge Agreements and the other Security
Instruments.
III.2 VALUE OF PLEDGED SECURITIES. As of the date hereof, the Pledged
Securities shall have an aggregate market value of not less than $3,000,000, as
determined by Lender. If, at any time, the market value of the Pledged
Securities (as determined by Lender from time to time) is less than $3,000,000,
2
Borrower shall cause Individual Guarantors to promptly (and in any event not
later than three (3) days after written notice from Lender to Individual
Guarantors) pledge to Lender additional stock in Borrower (or other marketable
securities acceptable to Lender) in an amount necessary to cause the market
value of the Pledged Securities and such additional stock pledged to Lender to
be not less than $3,000,000.
III.3 SECURED OBLIGATIONs. Without limiting any of the provisions
thereof, the Security Instruments shall secure:
(a) The full and timely payment of the indebtednesses evidenced by
the Note, together with interest thereon, and any extensions,
modifications and/or renewals thereof and any notes given in payment
thereof,
(b) The full and prompt performance of all of the obligations of
Borrower to Lender under the Loan Documents,
(c) The full and prompt payment of all expenses and costs of
whatever kind incident to the collection of the indebtednesses evidenced
by the Note, the perfection, enforcement or protection of the security
interests of the Security Instruments or the exercise by Lender of any
rights or remedies of Lender with respect to the indebtednesses evidenced
by the Note, including but not limited to reasonable attorney's fees and
expenses incurred by Lender, all of which Borrower agrees to pay to Lender
upon demand,
(d) The full and prompt payment of the indebtednesses and
obligations of Corporate Guarantors to Lender evidenced and/or secured by
(i) that certain Loan and Security Agreement of even date herewith, by and
among Lender, Borrower and Corporate Guarantors, entered into in
connection with that certain line of credit from Lender to American Micro
in the original principal amount of $1,500,000, and (ii) that certain Loan
and Security Agreement of even date herewith, by and among Lender,
Borrower and Corporate Guarantors, entered into in connection with that
certain line of credit from Lender to Nor'easter, in the maximum principal
amount of $1,500,000, together with any and all renewals, amendments and
modifications thereof, and
(e) The full and prompt payment and performance of any and all other
indebtednesses and other obligations of Borrower or either Corporate
Guarantor to Lender, direct or contingent (including but not limited to
obligations incurred as indorser, guarantor or surety), however evidenced
or denominated, and however and whenever incurred, including but not
limited to indebtednesses incurred pursuant to any present or future
commitment of Lender to Borrower or either Corporate Guarantor, together
with interest thereon, and any extensions, modifications and/or renewals
thereof and any notes given in payment thereof.
All of the foregoing indebtedness and other obligations are herein collectively
referred to as the "Secured Obligations".
3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower and Corporate Guarantors hereby represent and warrant to Lender
as follows:
IV.1 CORPORATE STATUS. Borrower and Nor'easter are corporations duly
organized, validly existing and in good standing under the laws of the State of
Nevada. American Micro is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida. Borrower and each
Corporate Guarantor has the corporate power to own and operate its properties,
to carry on its business as now conducted and to enter into and to perform its
obligations under this Agreement and the other Loan Documents to which it is a
party. Borrower and each Corporate Guarantor is duly qualified to do business
and in good standing in each state in which a failure to be so qualified would
have a material adverse effect on its financial position or its ability to
conduct its business in the manner now conducted.
IV.2 AUTHORIZATION. Borrower and each Corporate Guarantor has full legal
right, power and authority to conduct its business and affairs in the manner
contemplated by the Loan Documents, and to enter into and perform its
obligations thereunder, without the consent or approval of any other person,
firm, governmental agency or other legal entity. The execution and delivery of
this Agreement, the borrowing hereunder, the execution and delivery of each Loan
Document to which Borrower or either Corporate Guarantor is a party, and the
performance by Borrower and each Corporate Guarantor of its obligations
thereunder are within the corporate powers of Borrower or Corporate Guarantors
and have been duly and properly authorized by all necessary corporate action,
have received all necessary governmental approvals, if any were required, and do
not and will not contravene or conflict with any provision of law, any
applicable judgment, ordinance, regulation or order of any court or governmental
agency, the charters or by-laws of Borrower or Corporate Guarantors, or any
agreement binding upon Borrower, Corporate Guarantors or their properties. The
officer(s) executing this Agreement and all of the other Loan Documents to which
Borrower and Corporate Guarantors are a party are duly authorized to act on
behalf of Borrower and Corporate Guarantors.
IV.3 VALIDITY AND BINDING EFFECT. This Agreement and the other Loan
Documents are the legal, valid and binding obligations of the parties thereto,
enforceable in accordance with their respective terms.
IV.4 OTHER TRANSACTIONS. Consummation of the transactions hereby
contemplated and the performance of the obligations of Borrower and Corporate
Guarantors under and by virtue of the Loan Documents will not result in any
breach of, or constitute a default under, any mortgage, security deed or
agreement, deed of trust, lease, bank loan or credit agreement, corporate
charter or by-laws, agreement or certificate of limited partnership, partnership
agreement, license, franchise or any other instrument or agreement to which
Borrower or either Corporate Guarantor is a party or by which Borrower,
Corporate Guarantors or their properties may be bound or affected.
IV.5 PLACES OF BUSINESS. Borrower's chief place of business and chief
executive office has the address of 0000 X.X. 000xx Xxxxxx, Xxxxx, Xxxxxxx
00000. Borrower's additional business locations are set forth in attached
SCHEDULE 4.5.
4
IV.6 LITIGATION. There are no actions, suits or proceedings pending, or,
to the knowledge of Borrower or either Corporate Guarantor, threatened, against
or affecting Borrower or any Guarantor or involving the validity or
enforceability of any of the Loan Documents or the priority of the liens
thereof, at law or in equity, or before any governmental or administrative
agency, except actions, suits and proceedings that are fully covered by
insurance and that, if adversely determined, would not impair the ability of
Borrower or Guarantors to perform each and every one of their respective
obligations under and by virtue of the Loan Documents; and to the knowledge of
Borrower and Corporate Guarantors, neither Borrower nor any Guarantor is in
default with respect to any order, writ, injunction, decree or demand of any
court or any governmental authority.
IV.7 FINANCIAL STATEMENTS. The financial statement(s) of Borrower and
Guarantors heretofore delivered to Lender are true and correct in all respects,
have been prepared in accordance with generally accepted accounting principles
consistently applied, and fairly present the financial condition of the subjects
thereof as of the date(s) thereof. No material adverse change has occurred in
the financial condition of Borrower or any Guarantor since the date(s) thereof,
and no additional borrowings have been made by Borrower or any Guarantor since
the date(s) thereof.
IV.8 NO DEFAULTS. No default or event of default by Borrower or
Guarantors exists under this Agreement or any of the other Loan Documents, or
under any other instrument or agreement to which Borrower or any Guarantor is a
party or by which Borrower, Guarantors or their properties may be bound or
affected, and no event has occurred and is existing that with notice or the
passage of time or both would constitute a default or event of default
thereunder.
IV.9 COMPLIANCE WITH LAW. Borrower and Corporate Guarantors have obtained
all necessary licenses, permits and governmental approvals and authorizations
necessary or proper in order to conduct their business and affairs as heretofore
conducted and as intended to be conducted hereafter. To the knowledge of
Borrower and Corporate Guarantors, Borrower and Corporate Guarantors are in
compliance with all laws, regulations, decrees and orders applicable to them
(including but not limited to laws, regulations, decrees and orders relating to
occupational and health standards and controls, antitrust, monopoly, restraint
of trade or unfair competition). Neither Borrower nor either Corporate Guarantor
has received, nor expects to receive, any order or notice of any violation or
claim of violation of any law, regulation, decree, rule, judgment or order of
any governmental authority or agency relating to the ownership and/or operation
of its properties, as to which the cost of compliance is or might be material
and the consequences of noncompliance would or might be materially adverse to
its business, operations, property or financial condition, or which would or
might impair its ability to perform its obligations under the Loan Documents to
which it is a party.
IV.10 ENVIRONMENTAL MATTERS.
(a) As used in this SECTION 4.10 and in SECTION 5.11 hereof, the
following terms shall have the indicated meanings:
"BUSINESS" means all of Borrower's and Corporate Guarantors' assets,
both real and personal, tangible and intangible, now existing or hereafter
acquired and wherever located, and all of Borrower's and Corporate
Guarantors' current and future business operations at all locations and in
all jurisdictions.
5
"ENVIRONMENTAL AUTHORITIES" means all federal, state and local
governmental bodies, authorities or agencies and all public corporations
created and/or empowered to administer, regulate and/or enforce
Environmental Laws, including without limitation the U.S.
Environmental Protection Agency.
"ENVIRONMENTAL LAWS" means any and all federal, state, regional,
county or local laws, statutes, rules, regulations or ordinances relating
to the generation, recycling, use, reuse, sale, storage, handling,
transport, treatment or disposal of Hazardous Materials, including without
limitation the Comprehensive Environmental Response Compensation Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization
Act of 1986, 42 U.S.C. ss.ss.9601 ET seq. ("CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended by the Solid and
Hazardous Waste Amendments of 1984, 42 U.S.C. ss.ss.6901 ET seq. ("RCRA"),
the Tennessee Hazardous Waste Management Act, T.C.A. ss.ss.00-00-000 ET
seq., and any rules, regulations and guidance documents promulgated or
published thereunder, and any state, regional, county or local statute,
law, rule, regulation or ordinance relating to public health, safety or
the discharge, emission or disposal of Hazardous Materials or Hazardous
Wastes in or to air, water, land or groundwater, to the withdrawal or use
of groundwater, to the use, handling or disposal of asbestos,
polychlorinated biphenyls, petroleum, petroleum derivatives or
by-products, other hydrocarbons or urea formaldehyde, to the treatment,
storage, disposal or management of Hazardous Materials, to exposure to
Hazardous Materials, to the transportation, storage, disposal, management
or release of gaseous or liquid substances, and any regulation, order,
injunction, judgment, declaration, notice or demand issued thereunder.
"HAZARDOUS MATERIALS" means any hazardous, toxic or dangerous
materials, substances, chemicals, waste or pollutants that from time to
time are defined by or pursuant to or are regulated under any
Environmental Laws, including without limitation asbestos, polychlorinated
biphenyls, petroleum, petroleum derivatives or by-products, other
hydrocarbons, urea formaldehyde and any material, substance, pollutant or
waste that is defined as a hazardous waste under RCRA or defined as a
hazardous substance under CERCLA.
"HAZARDOUS WASTES" means Hazardous Materials that are or become
"wastes" or "solid wastes" as such terms are used in RCRA.
"PROPERTY" means all real property now or hereafter constituting a
part of, or otherwise used or operated by Borrower or Corporate Guarantors
in connection with, the Business.
(b) Borrower and Corporate Guarantors represent and warrant to
Lender as follows:
(i) The Property is being operated by Borrower and
Corporate Guarantors in full compliance with Environmental Laws, and
Borrower and Corporate Guarantors have obtained, maintained and is
in good standing under all approvals, consents, certificates,
licenses and permits required by Environmental Laws with respect to
the Property.
6
(ii) To the knowledge of Borrower and Corporate Guarantors,
the Property is free of all Hazardous Wastes and is free of all
Hazardous Materials other than those maintained therein or thereon
in full compliance with Environmental Laws. Borrower and Corporate
Guarantors have not caused or permitted the Property to be used to
generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer, produce or process Hazardous Materials except in
full compliance with Environmental Laws.
(iii) Neither Borrower nor either Corporate Guarantor has
received notice, nor has knowledge, of any noncompliance with or
violation of any Environmental Laws with respect to the Property or
the Business.
IV.11 NO BURDENSOME RESTRICTIONS. No instrument, document or agreement to
which Borrower or any Guarantor is a party or by which it or its properties may
be bound or affected materially adversely affects, or may reasonably be expected
so to affect, its business, operations, property or financial condition.
IV.12 TAXES. Borrower and each Guarantor has filed or caused to be filed
all tax returns that to its knowledge are required to be filed (except for
returns that are not yet due), and has paid all taxes shown to be due and
payable on said returns and all other taxes, impositions, assessments, fees or
other charges imposed on it by any governmental authority, agency or
instrumentality, prior to any delinquency with respect thereto (other than
taxes, impositions, assessments, fees and charges currently being contested in
good faith by appropriate proceedings, for which appropriate amounts have been
reserved). No tax liens have been filed against Borrower, Guarantors or any of
their property.
ARTICLE V
COVENANTS AND AGREEMENTS
------------------------
Borrower and Corporate Guarantors covenant and agree that during the term
of this Agreement:
V.1 PAYMENT OF SECURED OBLIGATIONS. Borrower shall pay the indebtednesses
evidenced by the Note according to the terms thereof, and shall timely pay or
perform, as the case may be, all of the other Secured Obligations.
V.2 FURTHER ASSURANCES. Borrower will take all actions (or cause all
actions to be taken) requested by Lender to create and maintain in Lender's
favor valid liens upon, security titles to and/or perfected security interests
in any collateral described in the Security Instruments and all other collateral
for the Secured Obligations now or hereafter held by or for Lender.
V.3 FINANCIAL STATEMENTS AND REPORTS. Borrower and Corporate Guarantors
shall furnish to Lender such financial data as Lender may reasonably request.
Without limiting the foregoing, Borrower and Corporate Guarantors shall furnish
to Lender (or cause to be furnished to Lender) the following:
(a) as soon as practicable and in any event within ninety (90) days
after the end of each fiscal year of Borrower and Corporate Guarantors,
7
consolidated and consolidating balance sheets of Borrower and Corporate
Guarantors as of the close of such fiscal year, consolidated and
consolidating statements of earnings and retained earnings of Borrower and
Corporate Guarantors as of the close of such fiscal year, and consolidated
and consolidating statements of cash flows for Borrower and Corporate
Guarantors for such fiscal year, all in reasonable detail, prepared in
accordance with generally accepted accounting principles consistently
applied, audited in accordance with generally accepted auditing standards
by independent certified public accountants satisfactory to Lender in its
reasonable judgment, and accompanied by the unqualified favorable opinion
of such accountants and a certificate of the chief executive or chief
financial officers of Borrower and Corporate Guarantors, stating that, to
the best of the knowledge of such officers, Borrower and Corporate
Guarantors have kept, observed, performed and fulfilled each covenant,
term and condition of this Agreement and the other Loan Documents during
such fiscal year and that no Event of Default hereunder has occurred and
is continuing (or if an Event of Default has occurred and is continuing,
specifying the nature of same, the period of existence of same and the
action Borrower and Corporate Guarantors propose to take in connection
therewith), and setting forth calculations of the financial covenants set
forth in ARTICLE VI of this Agreement (a "Compliance Certificate");
(b) within forty-five (45) days of the end of the first three (3)
fiscal quarters of each fiscal year of Borrower and Corporate Guarantors,
consolidated and consolidating balance sheets of Borrower and Corporate
Guarantors as of the close of such quarter and consolidated and
consolidating statements of earnings and retained earnings of Borrower and
Corporate Guarantors as of the close of such quarter, all in reasonable
detail, and prepared substantially in accordance with generally accepted
accounting principles consistently applied, certified by the chief
executive or chief financial officers of Borrower and Corporate Guarantors
as being true and correct, and accompanied by a Compliance Certificate;
(c) within thirty (30) days of the end of each calendar month,
non-consolidated balance sheets of Borrower and each Corporate Guarantor
as of the close of such month, and non-consolidated statements of earnings
and retained earnings of Borrower and each Corporate Guarantor as of the
close of such month, all in reasonable detail, and prepared substantially
in accordance with generally accepted accounting principles consistently
applied, certified by the chief executive or chief financial officers of
Borrower and Corporate Guarantors as being true and correct, and
accompanied by a Compliance Certificate;
(d) promptly upon receipt thereof, copies of all accountants'
reports and accompanying financial reports submitted to Borrower or either
Corporate Guarantor by independent accountants in connection with each
annual examination of Borrower and Corporate Guarantors; and
(e) from time to time, personal financial statements of each
Individual Guarantor, in form satisfactory to Lender, such that at all
times Lender shall have personal financial statements of each Individual
Guarantor on file that are not more than one (1) year old.
V.4 MAINTENANCE OF BOOKS AND RECORDS; INSPECTION. Borrower and Corporate
Guarantors shall maintain their books, accounts and records in accordance with
generally accepted accounting principles consistently applied, and permit
8
Lender, its officers and employees and any professionals designated by Lender in
writing, at any time to visit and inspect any of their properties (including but
not limited to the collateral security described in the Security Instruments),
corporate books and financial records, and to discuss their accounts, affairs
and finances with any employee, officer or director thereof.
V.5 INSURANCE. Without limiting any of the requirements of any of the
other Loan Documents, Borrower shall maintain, in amounts satisfactory to Lender
(a) public liability insurance, (b) worker's compensation insurance (or maintain
a legally sufficient amount of self insurance against worker's compensation
liabilities, with adequate reserves, under a plan approved by Lender), (c) fire
and "all risk" casualty insurance on its properties (including but not limited
to the collateral security now or hereafter securing payment and performance of
the Secured Obligations), against such hazards and in at least such amounts as
are customary in the type of business in which Borrower is engaged, and (d) rent
or business interruption insurance against loss of income arising out of damage
or destruction by such hazards as presently are included in so called "all risk
coverage". At the request of Lender, Borrower will deliver forthwith a
certificate, executed by a duly authorized representative of the insurer(s),
specifying the details of such insurance in effect.
All policies of insurance shall provide that at least thirty (30) days'
prior written notice of cancellation or modification of the policy shall be
given to Lender by the insurer, and all policies of casualty insurance covering
any tangible security for the Secured Obligations shall be payable to Borrower
and Lender as their respective interests may appear. Borrower agrees that there
shall be no recourse against Lender for the payment of premiums, commissions,
assessments or advances in respect of any such policy, and at Lender's request
shall provide Lender with the agreement of the insurer(s) to this effect.
At the request of Lender, all policies of casualty insurance covering any
tangible security for the Secured Obligations shall be delivered to and held by
Lender. Borrower shall act expeditiously in the adjustment and settlement of
claims under such policies in order to preserve the greatest possible value
reasonably obtainable in respect of such claims. Following the occurrence of an
Event of Default, Lender may, at its option, act as attorney in fact for
Borrower in adjusting and settling claims under such insurance and endorsing any
drafts with respect thereto, and this power, being coupled with an interest,
shall be irrevocable prior to payment in full of the indebtednesses evidenced by
the Note and performance of all of the obligations of Borrower to Lender in
connection therewith, and any insurer is hereby instructed to rely upon Lender's
representation that an Event of Default has occurred hereunder without further
inquiry or investigation.
V.6 TAXES AND ASSESSMENTS; TAX INDEMNITY. Borrower and each Corporate
Guarantor shall (a) file all tax returns and appropriate schedules thereto that
are required to be filed under applicable law, prior to the date of delinquency,
(b) pay and discharge all taxes, assessments and governmental charges or levies
imposed upon Borrower or either Corporate Guarantor, upon its income and profits
or upon any properties belonging to it, prior to the date on which penalties
attach thereto, and (c) pay all taxes, assessments and governmental charges or
levies that, if unpaid, might become a lien or charge upon any of its
properties; provided, however, that Borrower and Corporate Guarantors in good
faith may contest any such tax, assessment, governmental charge or levy
described in the foregoing clauses (b) and (c) so long as appropriate reserves
are maintained with respect thereto.
9
V.7 CORPORATE EXISTENCE. Borrower and each Corporate Guarantor shall
maintain its corporate existence and good standing in the state of its
incorporation, and its qualification and good standing as a foreign corporation
in each jurisdiction in which such qualification is necessary pursuant to
applicable law.
V.8 COMPLIANCE WITH LAW AND OTHER AGREEMENTS. Borrower and each Corporate
Guarantor shall maintain its business operations and property owned or used in
connection therewith in compliance with (a) all applicable federal, state and
local laws, regulations and ordinances governing such business operations and
the use and ownership of such property, and (b) all agreements, licenses,
franchises, indentures and mortgages to which Borrower or either Corporate
Guarantor is a party or by which Borrower, either Corporate Guarantor or any of
their properties is bound. Without limiting the foregoing, Borrower and each
Corporate Guarantor shall pay all of its indebtedness promptly in accordance
with the terms thereof.
V.9 NOTICE OF DEFAULT. Borrower and Corporate Guarantors shall give
written notice to Lender of the occurrence of any default, event of default or
Event of Default under this Agreement or any other Loan Document promptly upon
the occurrence thereof.
V.10 NOTICE OF LITIGATION. Borrower and Corporate Guarantors shall give
notice, in writing, to Lender of (a) any actions, suits or proceedings wherein
the amount at issue is in excess of $250,000, instituted by any persons against
Borrower or any Guarantor, or affecting any of the assets of Borrower or any
Guarantor, and (b) any dispute, not resolved within sixty (60) days of the
commencement thereof, between Borrower or any Guarantor on the one hand and any
governmental or regulatory body on the other hand, which might reasonably be
expected to have a material adverse effect on the business operations or
financial condition of Borrower or either Corporate Guarantor.
V.11 ENVIRONMENTAL MATTERS.
(a) Borrower and Corporate Guarantors will cause the Property to
remain free of all Hazardous Wastes, and to remain free of all Hazardous
Materials other than those maintained therein or thereon in full
compliance with Environmental Laws. Neither Borrower nor either Corporate
Guarantor will cause or permit the Property to be used to generate,
manufacture, refine, transport, treat, store, handle, dispose, transfer,
produce or process Hazardous Materials except in full compliance with
Environmental Laws.
(b) Borrower and Corporate Guarantors will notify Lender immediately
if they receive any notice or obtain knowledge of any noncompliance with
or violation of any Environmental Laws with respect to the Property or the
Business.
(c) In the event that Hazardous Materials unrelated to the Business,
or Hazardous Wastes, are discovered on or are brought onto the Property,
Borrower and Corporate Guarantors will cause such Hazardous Materials or
Hazardous Wastes to be removed and disposed of promptly and in full
compliance with Environmental Laws. Borrower and Corporate Guarantors will
provide Lender prior written notice of such removal and disposal actions.
(d) Borrower and Corporate Guarantors will comply with all
Environmental Laws in all jurisdictions in which Borrower or either
10
Corporate Guarantor operates, now or in the future, and will comply with
all Environmental Laws that in the future become applicable to the
Property or the Business.
V.12 MERGERS, CONSOLIDATIONS, ACQUISITIONS AND SALES. Without the prior
express written consent of Lender, neither Borrower nor either Corporate
Guarantor shall (a) be a party to any merger, consolidation or corporate
reorganization, (b) purchase or otherwise acquire all or substantially all of
the assets or stock of, or any partnership or joint venture interest in, any
other person, firm or entity, (c) sell, transfer, convey, grant a security
interest in or lease all or any substantial part of its assets, nor (d) create
any subsidiaries nor convey any of its assets to any subsidiary; provided,
however, Borrower or either Corporate Guarantor may make acquisitions of all or
substantially all of the stock or assets of other entities, so long as (i) no
Event of Default exists hereunder, (ii) the purchase price payable in connection
with each such acquisition, including the fair market value of any non-cash
consideration, does not exceed $5,000,000, and (iii) any subsidiary of Borrower
or either Corporate Guarantor created or acquired in connection with any such
acquisition shall guarantee the indebtedness of Borrower to Lender and grant
Lender a security interest in all of its assets to secure its obligations and
the obligations of Borrower to Lender, all pursuant to documentation in form and
substance satisfactory to Lender in all respects.
V.13 MANAGEMENT, OWNERSHIP. Neither Borrower nor either Corporate
Guarantor shall permit any significant change in its ownership, executive staff
or management without the prior written consent of Lender. The ownership,
executive staff and management of Borrower and Corporate Guarantors are material
factors in Lender's willingness to institute and maintain a lending relationship
with Borrower.
V.14 DIVIDENDS, ETC. Neither Borrower nor either Corporate Guarantor shall
declare or pay any dividend of any kind, in cash or in property, on any class of
its capital stock, nor purchase, redeem, retire or otherwise acquire for value
any shares of such stock, nor make any distribution of any kind in respect
thereof, nor make any return of capital to shareholders, nor make any payments
in respect of any pension, profit sharing, retirement, stock option, stock
bonus, incentive compensation or similar plan (except as required or permitted
hereunder), without the prior written consent of Lender. Without limiting the
foregoing, not less than seventy-five percent (75%) of the net proceeds of any
equity offering by Borrower or either Corporate Guarantor shall be retained and
shall not be paid out as dividends or otherwise distributed to shareholders.
V.15 GUARANTIES; LOANS. Neither Borrower nor either Corporate Guarantor
shall guarantee nor be liable in any manner, whether directly or indirectly, or
become contingently liable after the date of this Agreement in connection with
the obligations or indebtedness of any person or persons, except for the
indorsement of negotiable instruments payable to Borrower or Corporate
Guarantors for deposit or collection in the ordinary course of business. Neither
Borrower nor either Corporate Guarantor shall make any loan, advance or
extension of credit to any person other than in the normal course of its
business.
V.16 DEBT. Neither Borrower nor either Corporate Guarantor shall create,
incur, assume or suffer to exist indebtedness of any description whatsoever in
an aggregate amount in excess of $250,000 (excluding any indebtedness of
Borrower or either Corporate Guarantor to Lender, trade accounts payable and
accrued expenses incurred in the ordinary course of business and the indorsement
of negotiable instruments payable to Borrower or Corporate Guarantors for
deposit or collection in the ordinary course of business).
V.17 CONDUCT OF BUSINESS. Borrower and Corporate Guarantors will continue
to engage, in an efficient and economical manner, in a business of the same
general type as conducted by them on the date of this Agreement.
11
V.18 PLACES OF BUSINESS. Borrower will not change the location of its
chief place of business, chief executive office or any place of business
disclosed to Lender pursuant to SECTION 4.5 hereof, without thirty (30) days'
prior written notice to Lender in each instance.
V.19 ERISA PLAN. If Borrower has in effect, or hereafter institutes (with
Lender's consent, as hereinafter provided), a pension plan that is subject to
the requirements of Title IV of the Employee Retirement Income Security Act of
1974, Pub. L. No. 93 406, September 2, 1974, 00 Xxxx. 000, 00 X.X.X.X. ss. 1001
ET Seq. (1975), as amended from time to time ("ERISA"), then the following
warranty and covenants shall be applicable during such period as any such plan
(the "Plan") shall be in effect: (a) Borrower hereby warrants that no fact that
might constitute grounds for the involuntary termination of the Plan, or for the
appointment by the appropriate United States District Court of a trustee to
administer the Plan, exists at the time of execution of this Agreement, (b)
Borrower hereby covenants that throughout the existence of the Plan, Borrower's
contributions under the Plan will meet the minimum funding standards required by
ERISA and Borrower will not institute a distress termination of the Plan, (c)
Borrower hereby covenants that the Plan's annual financial and actuarial
statements and the Plan's annual Form 5500 information return will be filed with
Lender within thirty (30) days of the preparation thereof, and (d) Borrower
covenants that it will send to Lender a copy of any notice of a reportable event
(as defined in ERISA) required by ERISA to be filed with the Labor Department or
the Pension Benefit Guaranty Corporation, at the time that such notice is so
filed.
No Plan shall be instituted by Borrower unless Lender shall have given its
written consent thereto.
ARTICLE VI
FINANCIAL COVENANTS
-------------------
VI.1 NET WORTH REQUIREMENTS. Borrower and Corporate Guarantors shall at
all times maintain a minimum tangible net worth of $12,000,000, calculated on a
consolidated basis. For purposes of this covenant, "tangible net worth" shall
refer to the excess of Borrower's and Corporate Guarantors' total assets above
the sum of their intangible assets plus total liabilities (exclusive of any debt
subordinated to indebtedness of Borrower or Corporate Guarantors to Lender), all
determined in accordance with generally accepted accounting principles
consistently applied.
VI.2 DEBT TO WORTH RATIO. Borrower and Corporate Guarantors shall at all
times maintain a ratio of total liabilities (exclusive of any debt subordinated
to indebtedness of Borrower or Corporate Guarantor to Lender) to tangible net
worth of not more than 2.0 to 1.0, calculated on a consolidated basis. For
purposes of this covenant, "tangible net worth" shall have the meaning set forth
in SECTION 6.1 hereof.
VI.3 INTEREST COVERAGE RATIO. Borrower and Corporate Guarantors shall
maintain a ratio of earnings before interest and taxes to interest expense, all
determined in accordance with generally accepted accounting principles
12
consistently applied, calculated on a consolidated basis as of the last day of
each September, December, March and June, for the then-previous twelve-month
period (beginning September 30, 1999), of not less than 4.0 to 1.0.
ARTICLE VII
DEFAULT AND REMEDIES
--------------------
VII.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Failure to make payment of the principal of or interest on the
indebtedness evidenced by the Note within five (5) days of when due;
(b) Any misrepresentation by Borrower or any Guarantor as to any
material matter hereunder or under any of the other Loan Documents, or
delivery by Borrower or any Guarantor of any schedule, statement,
resolution, report, certificate, notice or writing to Lender that is
untrue in any material respect on the date as of which the facts set forth
therein are stated or certified;
(c) Failure of Borrower or any Guarantor to perform any of its
obligations under SECTIONS 5.6, 5.8 or 5.11 of this Agreement within
fifteen (15) days after the earlier of (i) written notice from Lender to
Borrower of such failure to perform, or (ii) the date Borrower becomes
aware of such failure to perform;
(d) Failure of Borrower or any Guarantor to perform any other of its
obligations under this Agreement, the Note, any of the Security
Instruments or any of the other Loan Documents;
(e) Borrower or any Guarantor (i) shall generally not pay or shall
be unable to pay its debts as such debts become due; or (ii) shall make an
assignment for the benefit of creditors or petition or apply to any court
or tribunal for the appointment of a custodian, receiver or trustee for it
or a substantial part of its assets; or (iii) shall commence any
proceeding or case under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (iv) shall have had
any such petition or application filed or any such proceeding or case
commenced against it in which an order for relief is entered or an
adjudication or appointment is made; or (v) shall indicate, by any act or
omission, its consent to, approval of or acquiescence in any such
petition, application, case, proceeding or order for relief or the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (vi) shall suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of
thirty (30) days or more;
(f) Borrower or any Guarantor shall die, be liquidated, dissolved,
partitioned or terminated, or the charter or certificate of authority
thereof shall expire or be revoked;
(g) A default or event of default shall occur under any of the other
Loan Documents;
13
(h) Borrower or any Guarantor shall default in the timely payment or
performance of any obligation now or hereafter owed to Lender in
connection with any other indebtedness of Borrower or any Guarantor now or
hereafter owed to Lender;
(i) Lender shall reasonably suspect the occurrence of one or more of
the aforesaid events of default and Borrower, upon the written request of
Lender, shall fail to provide evidence reasonably satisfactory to Lender
that such event or events of default have not in fact occurred; or
(j) Lender in good faith shall deem itself insecure.
VII.2 ACCELERATION OF MATURITY; REMEDIES. Upon the occurrence of any Event
of Default described in SUBSECTION 7.1(D) hereof as it relates to Borrower, the
indebtednesses evidenced by the Note as well as any and all other indebtedness
of Borrower to Lender shall be immediately due and payable in full; and upon the
occurrence of any other Event of Default described above (including but not
limited to SUBSECTION 7.1(D) hereof as it relates to any Guarantor), Lender at
any time thereafter may at its option accelerate the maturity of the
indebtednesses evidenced by the Note as well as any and all other indebtedness
of Borrower to Lender; all without notice of any kind. Upon the occurrence of
any such Event of Default and the acceleration of the maturity of the
indebtednesses evidenced by the Note:
(a) Lender shall be immediately entitled to exercise any and all
rights and remedies possessed by Lender pursuant to the terms of the
Security Instruments and all of the other Loan Documents;
(b) Lender shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code; and
(c) Lender shall have any and all other rights and remedies that
Lender may now or hereafter possess at law, in equity or by statute.
VII.3 RIGHT OF SETOFF. Without limitation of the foregoing, upon the
occurrence and during the continuance of any Event of Default, Lender is hereby
authorized at any time and from time to time, without notice to Borrower or
Guarantors (any such notice being expressly waived by Borrower and Guarantors),
to set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by Lender or any of its affiliates, and
any other indebtedness at any time owing by Lender or its affiliates to or for
the credit or the account of Borrower or Guarantors, against any and all of the
Secured Obligations, irrespective of whether Lender shall have made any demand
under this Agreement or the Note or any other Loan Document and although such
obligations may be unmatured. Lender agrees to notify Borrower or Guarantors (as
applicable) within a reasonable time after any such setoff and application;
provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of Lender under this SECTION 7.3 are in
addition to any other rights and remedies (including, without limitation, other
rights of setoff) that Lender may have.
VII.4 REMEDIES CUMULATIVE; NO WAIVER. No right, power or remedy conferred
upon or reserved to Lender by this Agreement or any of the other Loan Documents
is intended to be exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and concurrent and shall
be in addition to any other right, power and remedy given hereunder, under any
14
of the other Loan Documents or now or hereafter existing at law, in equity or by
statute. No delay or omission by Lender to exercise any right, power or remedy
accruing upon the occurrence of any Event of Default shall exhaust or impair any
such right, power or remedy or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein, and every right, power and remedy
given by this Agreement and the other Loan Documents to Lender may be exercised
from time to time and as often as may be deemed necessary by Lender.
VII.5 PROCEEDS OF REMEDIES. Any or all proceeds resulting from the
exercise of any or all of the foregoing remedies shall be applied as set forth
in the Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
First, to the costs and expenses, including reasonable attorney's
fees and expenses, incurred by Lender in connection with the exercise of
its remedies;
Second, to the expenses of curing the default that has occurred, in
the event that Lender elects, in its sole discretion, to cure the default
that has occurred;
Third, to the payment of the Secured Obligations, including but not
limited to the payment of the principal of and interest on the
indebtednesses evidenced by the Note, in such order of priority as Lender
shall determine in its sole discretion; and
Fourth, the remainder, if any, to Borrower or to any other person
lawfully thereunto entitled.
ARTICLE VIII
MISCELLANEOUS
-------------
VIII.1 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or otherwise would be within the limitations of, another covenant shall not
avoid the occurrence of an Event of Default if such action is taken or condition
exists.
VIII.2 PERFORMANCE BY LENDER. If Borrower or Corporate Guarantors shall
default in the payment, performance or observance of any covenant, term or
condition of this Agreement, Lender may, at its option, pay, perform or observe
the same, and all payments made or costs or expenses incurred by Lender in
connection therewith (including but not limited to reasonable attorney's fees
and expenses), with interest thereon at the default rate provided in the Note
(if none, then at the maximum rate from time to time allowed by applicable law),
shall be immediately repaid to Lender by Borrower and Corporate Guarantors and
shall constitute a part of the Secured Obligations and be secured hereby until
fully repaid. Lender shall determine at its sole discretion the necessity for
any such actions and of the amounts to be paid.
VIII.3 COSTS AND EXPENSES. Borrower agrees to pay all costs and expenses
incurred by Lender in connection with the making of the Loan, including but not
limited to filing fees, recording taxes and reasonable attorney's fees and
expenses, promptly upon demand of Lender. Borrower further agrees to pay all
15
premiums for insurance required to be maintained pursuant to the terms of the
Loan Documents and all of the out-of-pocket costs and expenses incurred by
Lender in connection with the administration, servicing and/or collection of the
Loan, including but not limited to reasonable attorney's fees and expenses,
promptly upon demand of Lender.
VIII.4 ASSIGNMENT. The Note, this Agreement and the other Loan Documents
may be endorsed, assigned and/or transferred in whole or in part by Lender, and
any such holder and/or assignee of the same shall succeed to and be possessed of
the rights and powers of Lender under all of the same to the extent transferred
and assigned. Lender may grant participations in all or any portion of its
interest in the indebtednesses evidenced by the Note. Borrower shall not assign
any of its rights nor delegate any of its duties hereunder or under any of the
other Loan Documents without the prior express written consent of Lender.
VIII.5 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Subject to the
provisions of SECTION 8.4 hereof, whenever in this Agreement one of the parties
hereto is named or referred to, the heirs, legal representatives, successors,
successors-in-title and assigns of such parties shall be included, and all
covenants and agreements contained in this Agreement by or on behalf of Borrower
or by or on behalf of Lender shall bind and inure to the benefit of their
respective heirs, legal representatives, successors-in-title and assigns,
whether so expressed or not.
VIII.6 THIRD PARTY BENEFICIARIES. This Agreement and the other Loan
Documents are intended for the sole and exclusive benefit of the parties hereto
and their respective successors and permitted assigns, and shall not serve to
confer any rights or benefits in favor of any person not a party hereto. No
other person shall have any right to rely on this Agreement or the other Loan
Documents, or to derive any benefit herefrom.
VIII.7 TIME OF THE ESSENCE. Time is of the essence with respect to each
and every covenant, agreement and obligation of Borrower and Guarantors
hereunder and under all of the other Loan Documents.
VIII.8 SEVERABILITY. If any provision(s) of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
VIII.9 INTEREST AND LOAN CHARGES NOT TO EXCEED MAXIMUM ALLOWED BY LAW.
Anything in this Agreement, the Note, the Security Instruments or any of the
other Loan Documents to the contrary notwithstanding, in no event whatsoever,
whether by reason of advancement of proceeds of the Loan, acceleration of the
maturity of the unpaid balance of the Loan or otherwise, shall the interest and
loan charges agreed to be paid to Lender for the use of the money advanced or to
be advanced hereunder exceed the maximum amounts collectible under applicable
laws in effect from time to time. It is understood and agreed by the parties
that, if for any reason whatsoever the interest or loan charges paid or
contracted to be paid by Borrower in respect of the indebtednesses evidenced by
the Note shall exceed the maximum amounts collectible under applicable laws in
effect from time to time, then IPSO facto, the obligation to pay such interest
and/or loan charges shall be reduced to the maximum amounts collectible under
applicable laws in effect from time to time, and any amounts collected by Lender
that exceed such maximum amounts shall be applied to the reduction of the
principal balance(s) of the indebtednesses evidenced by the Note and/or refunded
to Borrower so that at no time shall the interest or loan charges paid or
payable in respect of the indebtednesses evidenced by the Note exceed the
maximum amounts permitted from time to time by applicable law.
16
VIII.10 ARTICLE AND SECTION HEADINGS; DEFINED TERMS. Numbered and titled
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
VIII.11 NOTICES. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing and shall be
delivered personally, telecopied or sent by certified mail or nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
by the party whose address is being changed and of which receipt has been
acknowledged in writing. The date of personal delivery or telecopy or the date
of mailing (or delivery to such courier service), as the case may be, shall be
the date of such notice, election or demand. For the purposes of this Agreement:
The address of Lender is:
SouthTrust Bank, National Association
000 Xxxxxx Xxxxxx Xxxxx
0xx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Telecopy Number: 615/880-4004
with copy to:
Bass, Xxxxx & Xxxx PLC
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, III
Telecopy Number: 615/742-2728
The address of Borrower is:
European Micro Holdings, Inc.
0000 X.X. 000xx Xxxxxx, Xxxx X-00
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxx
Telecopy Number: 305/825-7774
with copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
Miami Center, 20th Floor
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopy Number: 305/358-7095
17
The addresses of Corporate Guarantors are:
American Micro Computer Center, Inc.
0000 X.X. 000xx Xxxxxx, Xxxx X-00
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxx
Telecopy Number: 305/825-7774
Nor'easter Micro, Inc.
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxx Xxxx
Telecopy Number: 615/254-9318
VIII.12 INTEGRATION. This Agreement and the Loan Documents contain the
entire agreement between the parties relating to the subject matter hereof and
supersede all oral statements and prior writings with respect thereto.
VIII.13 INDEMNITY. Borrower and Corporate Guarantors hereby agree to
defend, indemnify, and hold Lender harmless from and against any and all claims,
damages, judgments, penalties, costs and expenses (including reasonable
attorney's fees and expenses and court costs now or hereafter arising from the
aforesaid enforcement of this clause) arising directly or indirectly from the
activities of Borrower or Corporate Guarantors, their predecessors in interests,
or third parties with whom they have a contractual relationship, or arising
directly or indirectly from the violation of any law, whether such claims are
asserted by any governmental agency or any other person. This indemnity shall
survive the termination of this Agreement.
VIII.14 JURY TRIAL WAIVER. BORROWER, CORPORATE GUARANTORS AND LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTER-CLAIM,
WHETHER IN CONTRACT IN TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY
RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS.
VIII.15 VENUE. All actions or proceedings in any way, manner or respect
arising out of or from or related to this Agreement shall be litigated in courts
having situs within the City of Nashville, State of Tennessee. Borrower and
Corporate Guarantors hereby consent and submit to the jurisdiction of any local,
state or federal courts located within said city and state.
VIII.16 MISCELLANEOUS. This Agreement shall be construed and enforced
under the laws of the State of Tennessee. No amendment, modification,
termination or waiver of any provision of any Loan Document to which Borrower or
either Corporate Guarantor is a party, nor consent to any departure by Borrower
or either Corporate Guarantor from compliance with the terms of any Loan
Document to which it is a party, shall be effective unless the same shall be in
writing and signed on behalf of Lender by a duly authorized officer of Lender,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER:
SOUTHTRUST BANK, NATIONAL ASSOCIATION
By:_____________________________
Title:_______________________
BORROWER:
EUROPEAN MICRO HOLDINGS, INC.
By:_____________________________
Title:_______________________
CORPORATE GUARANTORS:
AMERICAN MICRO COMPUTER CENTER, INC.
By:_____________________________
Title:_______________________
NOR'EASTER MICRO, INC.
By:_____________________________
Title:_______________________
19
