Exhibit 10.1
LOAN AGREEMENT
between
American Home Capital Corporation ("BORROWER")
and
EnerGCorp., Inc., a Florida corporation ("LENDER")
dated as of
December 31, 2001
RECITALS
1. Borrower has requested that Lender advance money in a total aggregate
amount not to exceed the sum of $300,000.00 (the "LOAN").
2. Lender will advance money to Borrower, subject to full and strict
compliance with and satisfaction of the terms and conditions of this Agreement.
3. Words and terms used in this Agreement, and as it may be amended from
time to time, shall have the meanings indicated for them, and shall be equally
applicable to both the singular and plural forms of the defined terms.
1. PRIOR AGREEMENTS
1.1. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes in its entirety
all prior agreements between Lender and Borrower, including any loan proposal
letter from Lender to Borrower, except that any existing security agreements and
financing statements previously given by Borrower to Lender or made between
Borrower and Lender which provide security for any existing indebtedness of
Borrower shall remain in effect to the extent the same grant liens or security
interests (but not to the extent the same provide for loans or contain covenants
inconsistent with or additional to those contained herein), and the liens and
security interests granted or perfected thereby shall secure the "NOTE" and the
"OBLIGATIONS SECURED" hereafter described.
1.2. PRIOR CREDIT AGREEMENT ACKNOWLEDGMENTS. Borrower acknowledges with
respect to all amounts owing to Lender under any prior credit agreements that
Borrower has no offset, defense or counterclaim with respect thereto, no claim
or defense in abatement or reduction thereof, nor any other claim against Lender
or with respect to any document forming part of the transaction in respect of
which the prior credit agreements were made or forming part of any other
transaction under which Borrower is indebted to Lender. Borrower acknowledges
that all interest imposed under all prior credit agreements through the date
hereof, and all fees and other charges that have been collected from or imposed
upon Borrower with respect to all loans evidenced by prior credit agreements
were and are agreed to, and were properly computed and collected, and that
Lender has fully performed all obligations that it may have had or now has to
Borrower, and that Lender has no obligation to make any additional loan or
extension of credit to or for the benefit of Borrower under prior credit
agreements.
2. THE GENERAL TERMS OF THE LOAN
2.1. THE LOAN. Borrower agrees to borrow from Lender, and subject to the
terms and conditions of this Agreement, Lender agrees to loan to or for the
benefit of Borrower, a sum not to exceed Three Hundred Thousand and 00/100
Dollars ($300,000.00). The Loan shall be evidenced by and bear interest as
provided in a promissory note in form and substance acceptable to Lender, dated
as of the date hereof, and duly executed and delivered to Lender by Borrower,
and any note or notes taken wholly or partially in renewal or extension thereof
or substitution or replacement therefor (the "NOTE"). The Loan shall be
disbursed in accordance with this Agreement.
2.2. PREPAYMENT. The Loan may be prepaid at any time in any amount, without
premium or penalty. Prepayments of installments shall be applied in the inverse
order of their maturities.
2.3. DISBURSEMENT OF THE LOAN. Upon satisfaction of all conditions
precedent provided in this Agreement, and upon receipt of request from Borrower,
and so long as Borrower shall not then be in Default hereunder, Lender shall
disburse to itself such sums as are payable to it by Borrower and shall disburse
the balance of the Loan by check payable as Borrower directs.
3. COLLATERAL SECURITY
3.1. GRANT OF SECURITY INTEREST. To secure the payment and performance of
the Obligations Secured (as hereafter defined), Borrower hereby creates and
grants to Lender a first priority security interest in the Collateral (defined
and described on SCHEDULE 1 hereto). As used in this Agreement, the term
"OBLIGATIONS Secured" means: (i) the indebtedness evidenced by this Agreement,
the Note and the Loan Documents; (ii) any and all advances by Lender to
Borrower, and any and all debts, obligations and liabilities owed to Lender by
Borrower, now or hereafter existing, incurred or created, whether voluntary or
involuntary, due or not due, secured or unsecured, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and regardless whether
Borrower may be liable individually or jointly with others or whether recovery
upon any such indebtedness may be or hereafter become barred or otherwise
unenforceable, and all extensions, renewals or replacements thereof, but
excluding any indebtedness incurred primarily for personal, family or household
purposes; and, (iii) all sums and expenses, including attorney's fees, advanced
or incurred by Lender for or in connection with the Collateral or any obligation
of Borrower undertaken herein or in any other agreement with Lender. It is the
intention of the parties hereto that the Obligations Secured shall constitute
one indebtedness, and shall constitute one general obligation, including all
whole or partial extensions, renewals or replacements thereof, and including any
obligation to perform or forbear from any action as well as any obligation to
pay money.
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3.2. RIGHTS AND DUTIES WITH RESPECT TO THE COLLATERAL. Lender shall have no
duty as to the collection or protection of the Collateral, or any income
therefrom, nor as to the preservation of rights against prior parties nor as the
preservation of any rights pertaining thereto beyond the safe custody thereof.
Lender may exercise its rights with respect to the Collateral without resorting
or regard to other Collateral or sources of reimbursement for the Obligations
Secured.
3.3. POWER OF ATTORNEY. All assignments and grants of liens to Lender made
or contemplated by Section 3 include, INTER ALIA, all powers, rights and
privileges that are now or hereafter possessed by Borrower in and to the
Collateral. Borrower hereby irrevocably appoints Lender its true and lawful
attorney, with power of substitution, in its name or in the name of Lender or
otherwise, for the use and benefit of Lender, but at the cost and expense of
Borrower without notice to Borrower or its successors, to exercise such powers,
rights and privileges if a default shall exist hereunder.
4. CONDITIONS PRECEDENT
4.1. CONDITIONS PRECEDENT TO LENDER'S OBLIGATIONS. Lender shall not be
obligated to disburse all or any portion of the Loan unless on or before the
time of each disbursement of the Loan all legal matters incident to such Loan
shall be satisfactory to Lender and its counsel, and Lender shall be in
possession of or be satisfied as to each of the matters set forth in Section 4,
as well as satisfaction of other conditions specified elsewhere herein or in the
Loan Documents which are applicable to each advance.
4.2. ACCURACY OF INFORMATION, REPRESENTATIONS AND WARRANTIES. Borrower must
satisfy Lender that no information, document, exhibit or report furnished to
Lender by Borrower in connection with the negotiation or execution of the Loan
Documents or in connection with Borrower's application for the Loan, and no
report, statement or information required to be furnished by Borrower to Lender
under the Loan Documents, has contained or will contain, any material
misstatement of fact or omitted or will omit to state a material fact or any
fact necessary to make any statement contained therein not misleading. Borrower
must satisfy Lender that Borrower knows of no fact which is not disclosed in
writing to Lender which may in the future have a material adverse effect on
Borrower.
4.3. SHARE CONSOLIDATION; CORPORATE MATTERS. Lender must receive evidence
that Borrower has completed a consolidation of its outstanding shares of common
stock on a basis not greater than 10 to 1; such that after the consolidation,
the shares being issued to Lender pursuant to Section 2.2 constitute not less
than 94% of the issued and outstanding shares of Borrower. In addition, Lender
must receive evidence that Borrower has (a) resolved to Lender's satisfaction,
the outstanding warrants held by Northstar Partners; (b) reduced the size of its
Board of Directors to five members; and (c) sold on terms satisfactory to Lender
its interest in MCCA, Inc. and TCS Financial, Inc. (provided that a sale which
nets Borrower not less than $100,000 in cash and notes receivable shall be
deemed satisfactory to Lender).
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4.4. FINANCIAL CONDITION. Borrower must satisfy Lender that there has not
been any material adverse change in the financial condition of Borrower or any
other Person whose financial condition is reflected in any of the financial
statements furnished to Lender, except those changes contemplated by Section 4.3
hereof.
4.5. LOAN DOCUMENTS. Lender must receive the LOAN DOCUMENTS (i.e. this
Agreement, the Note, and all other documents or instruments executed in
connection herewith or therewith or hereafter executed in modification,
amendment or replacement hereof or thereof) and such other documents required by
this Agreement or any of the Loan Documents as in Lender's opinion may be
necessary and/or appropriate to evidence or effectuate the intent of this
Agreement or any Loan Document. All such documents must be in form and substance
satisfactory to and approved by Lender, duly and validly executed and delivered
by Borrower or such other Person as may be appropriate, and in recordable form
where appropriate.
4.6. NO ADVERSE CHANGES IN COLLATERAL. Lender must be satisfied that there
have been no material adverse changes in the Collateral.
4.7. NO DEFAULT. There shall exist no condition, event or act that would
constitute an event of Default or Potential Default under any of the Loan
Documents and no condition, event or act which, as a result of the giving of
notice or the lapse of time, or both, as specified in this Agreement, would
constitute such an event of Default.
4.8. REIMBURSEMENT OF EXPENSES. Borrower shall pay Lender all fees
(including attorneys' fees) and expenses incurred in connection with the
negotiation and preparation of the Loan Documents and the closing and funding of
the Loan.
4.9. THIRD-PARTY APPROVALS. Borrower must satisfy Lender that any Person
that is required pursuant to any instrument, contract, commitment or other
agreement of any kind, or pursuant to any law or regulation to assent to or in
any manner approve of any of the acts or transactions contemplated by this
Agreement (or any of the other Loan Documents), or the means of effecting any of
the same, shall have given such assent or approval, and shall have been duly
authorized so to do.
5. REPRESENTATIONS AND WARRANTIES
5.1. REPRESENTATIONS AND WARRANTIES GENERALLY. Borrower represents and
warrants to Lender as of the date hereof, and shall be deemed to have
represented and warranted to Lender, as of the time of each disbursement of the
Loan, each of the matters described in this Section. Each advance extended
hereafter constitutes a representation and warranty by Borrower to Lender that
all conditions specified herein have been met as of that time.
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5.2. ACCURACY OF INFORMATION AND REPRESENTATIONS. No information, document,
exhibit or report furnished to Lender by Borrower in connection with the
negotiation or execution of the Loan Documents, and no report, statement or
information required to be furnished by Borrower to Lender under the Loan
Documents, has contained or will contain, any material misstatement of fact or
omitted or will omit to state a material fact or any fact necessary to make any
statement contained therein not misleading. Borrower knows of no fact which is
not disclosed in writing to Lender which may in the future have a material
adverse effect on Borrower.
5.3. ADVERSE RESTRICTIONS. Borrower is not a party to or bound by any
contract or instrument or subject to any restriction (including laws and
governmental regulations) that does or may materially and adversely affect its
business, property, assets, operations or condition or its ability to perform
under the Loan Documents.
5.4. AUTHORIZATION AND VALIDITY. Borrower has all requisite power and
authority to enter into this Agreement and the other Loan Documents to be
entered into by it, and to perform all actions required or contemplated by any
provision contained in any of the Loan Documents. The consummation of all the
transactions contemplated hereby create legal, valid and binding obligations on
Borrower.
5.5. BORROWER'S STATUS. Borrower is and will be a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and is and will be duly qualified and admitted as
a foreign corporation in good standing with all requisite authority to conduct
its business and own its property in each jurisdiction where such conduct of
business or ownership of property makes such qualification and admission
necessary and where the failure to so qualify would have a material adverse
effect on its business, financial condition or operations.
5.6. BROKER'S OR FINDER'S FEE. Borrower has not employed or retained any
broker or finder, or incurred liability for any brokerage fees, commissions or
finder's fees in connection with the Loan.
5.7. COMPLIANCE WITH LAWS AND CONTRACTS. The execution and delivery by
Borrower of the Loan Documents, the consummation of the transactions therein
contemplated, and compliance with the provisions thereof, will not violate any
law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on Borrower or the provisions of any indenture, instrument or agreement
to which Borrower is a party or is subject, or by which Borrower, or its
property, is bound, or conflict with or constitute a Default thereunder, or
result in the creation or imposition of any Lien.
5.8. CONSENTS. No consent, license, permit, approval or authorization of,
exemption by, notice or report to, registration, filing or declaration with, or
other act by or in respect of, any Person (including, without limitation,
Governmental Authorities and creditors of Borrower) is required in connection
with the execution, delivery and performance by Borrower of any Loan Document or
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the Obligations Secured, or with respect to the enforceability or validity of
any Loan Document, other than filings or recordings with Governmental
Authorities required solely for the purpose of perfecting Lender's liens and
security interests.
5.9 DEBT. SCHEDULE 5 is a complete and correct list of all credit
agreements in respect of which Borrower is in any manner directly or
contingently obligated, including indentures, bonds (both corporate and those
issued by bonding companies, such as surety or performance bonds), purchase
agreements, guaranties, capital leases, agreements with investors in or
purchasers of securities issued by Borrower, stock requiring mandatory
redemption, indemnity agreements, and agreements and arrangements for the
issuance of letters of credit or for acceptance financing.
5.10. DEFAULTS. No Default or Potential Default (as hereafter defined) has
occurred and is continuing.
5.11. ENCUMBRANCES. None of the assets of Borrower is subject to any
mortgage, pledge, title retention lien, or other encumbrance or security
interest, except for current taxes not delinquent, and such mortgages, security
interests, and encumbrances as disclosed on SCHEDULE 5.
5.12. ERISA COMPLIANCE. Borrower does not maintain any employee benefit or
other plan subject to ERISA.
5.13. FINANCIAL STATEMENTS. Each of the financial statements (including the
footnotes and opinions thereto) of Borrower provided to Lender is true, correct
and complete, and presents fairly the financial condition and the results of
operations of the Person that it purports to reflect at the date(s) or for the
period(s) set forth in such financial statement. There have been no material
adverse changes in the condition, affairs or prospects, financial or other, of
any Person whose financial condition is reflected in any of the aforesaid
financial statements since the date of such financial statement, and Borrower is
unaware of any facts or circumstances which might give rise to any such material
adverse change. There are no liabilities of Borrower, fixed or contingent, which
are material but are not reflected in the financial statements or in the notes
thereto.
5.14. INSOLVENCY. Borrower is not "insolvent" within the meaning of that
term as defined in the Federal Bankruptcy Code.
5.15. LITIGATION AND JUDGMENTS. There are no outstanding or unpaid
judgments or arbitration awards against Borrower, and no actions, suits or
proceedings (in a court of law or otherwise) pending or, to the best of
Borrower's knowledge and belief, threatened against Borrower (and, to the
knowledge of Borrower, there is no basis for any such suit or proceeding). No
judgment, award, action, suit or proceeding (whether in a court of law or
otherwise, and whether pending or threatened) materially affects the ability of
Borrower to perform any of its obligations under the Loan Documents.
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5.16. SUBSIDIARIES AND OWNERSHIP OF STOCK. Set forth in SCHEDULE 6 is a
complete and accurate list of the subsidiaries of Borrower, showing the
jurisdiction of incorporation of each and showing the percentage of Borrower's
ownership of the outstanding stock of each such subsidiary. All of the
outstanding capital stock of each subsidiary has been validly issued, is fully
paid and nonassessable, and is owned by Borrower free and clear of all liens.
5.17. SURVIVAL OF REPRESENTATIONS AND WARRANTS. All representations and
warranties made by Borrower under or in connection with this Agreement or in any
other document delivered by Borrower to Lender in connection with this Agreement
shall survive the making of the Loan and issuance and delivery of this Agreement
to Lender, notwithstanding any investigation made by Lender or on Lender's
behalf. All statements contained in any certificate or financial statement
delivered by Borrower to Lender under this Agreement shall constitute
representations and warranties made by Borrower hereunder. The representations
and warranties made by Borrower shall be and remain true at all times in all
material respects with the same effect as though the representations and
warranties had been made at any and all times during the term of this Agreement.
5.18. TAXES. Borrower has properly prepared and filed all United States
federal tax returns and all other tax returns which are required to be filed,
and has paid all taxes, interest and penalties due pursuant to said returns or
pursuant to any assessment received by Borrower. Borrower is not presently
involved in any dispute concerning taxes with any taxing authority, and Borrower
has not received any unpaid assessment for federal or state income taxes. The
charges, accruals and reserves on the books of Borrower in respect of any taxes
or other governmental charges are adequate. Borrower has not executed and is not
bound by the execution by another Person of any presently effective waiver
extending the period of the applicable statute of limitations for the payment of
federal income taxes.
5.19. TITLE TO ASSETS AND PROPERTIES. Borrower has good and marketable
title to all of its properties and assets as disclosed in the financial
statements provided to Lender, except for such assets as have been disposed of
since the date of such statements in the ordinary course of business or as are
no longer used or useful in the conduct of its business.
5.20. USE OF PROCEEDS. The Loan is a business loan and the proceeds thereof
shall be used solely for commercial or business purposes or for carrying,
reducing or retiring any debt incurred for such purpose. Borrower is not now
engaged principally or as one of its important activities, in the business of
extending credit for the purposes of purchasing or carrying any margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System). No part of the proceeds of the Loan hereunder has been or will
be used to purchase or carry any such margin stock or to extend credit to others
for the purpose of purchasing or carrying any such margin stock or for carrying,
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reducing or retiring any debt incurred for such purpose. If requested by Lender,
Borrower will furnish to Lender a statement in conformity with the requirements
of Federal Reserve Form U-1. No part of the proceeds of the Loan have been or
will be used for any purpose that violates or which is inconsistent with the
provisions of Regulations G, U or X of said Board of Governors.
6. COVENANTS
6.1. COVENANTS GENERALLY. During the term of this Agreement, and until the
Obligations Secured are paid in full, unless Lender shall otherwise consent in
writing, Borrower covenants and agrees as to the matters described in Section 6.
6.2. ACCESS TO PREMISES AND RECORDS. At all reasonable times and as often
as Lender may request, Borrower shall permit and cause each of its subsidiaries
to permit authorized representatives designated by Lender to: (a) have access to
the premises and properties of Borrower and each subsidiary and to the records
relating to the operations of Borrower and each subsidiary; (b) make copies of
or excerpts from such records; and (c) discuss the affairs, finances and
accounts of Borrower and each of its subsidiaries with and be advised as to the
same by the chief executive and financial officers thereof, all to the extent
not inconsistent with applicable law and as shall be relevant to the performance
or observance of the terms, covenants and conditions of this Agreement or the
financial condition of Borrower or any subsidiary.
6.3. ADVERSE CONDITIONS. Borrower will not permit an event to occur or
condition to exist which has or would have a materially adverse effect upon the
financial condition of Borrower, as determined in the sole discretion of Lender.
6.4. COMPLIANCE WITH LAWS. Borrower will comply with, conform to and obey,
and cause each subsidiary to comply with, conform to and obey all material laws,
ordinances, rules, regulations and all other legal requirements applicable to
Borrower.
6.5. CONDUCT OF BUSINESS. Borrower will continue, and cause each subsidiary
to continue to engage in an efficient and economical manner in a business of the
same general type as conducted by it on the date of this Agreement.
6.6. DEBT. Borrower will not incur or suffer to exist any direct or
contingent indebtedness or other obligations for borrowed money, including
without limitation, obligations representing the deferred purchase price of
property or services, capitalized lease obligations, mandatory redemption
obligations relating to the capital stock of any Person, and guaranties.
6.7. FINANCIAL REPORTING. Borrower will timely provide Lender with such
financial information as Lender may request during the term of the Loan,
including without limitation, periodic financial statements, tax returns,
receivables and payables agings, and such other financial data as Lender may
request from time to time.
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6.8. INSURANCE. Borrower will keep its insurable property adequately
insured at all times by financially sound and reputable insurers, against fire,
flood, extended casualty and against such other risks as are customarily insured
against by companies in a similar business, as a prudent owner and operator of
the properties and business of Borrower would maintain. Such policy shall
include a loss payable clause listing Lender as an additional loss payee, shall
provide that Lender must be given at least thirty (30) days prior written notice
of any cancellation or termination of such policy, and must provide coverage for
Lender notwithstanding any act or neglect of Borrower. Borrower will maintain a
policy of comprehensive general liability insurance (the "LIABILITY INSURANCE")
with limits of liability of not less than $One Million combined single limit for
bodily injury and property damage. Such policy shall contain a broad form CGL
endorsement (including products and completed operations).
6.9. LICENSES. Borrower shall obtain promptly and keep in full force and
effect all licenses, permits, authorizations, rights and franchises necessary to
its business, and shall not engage in any action or do anything which would
impair any such license, permit, authorization, right or franchise. Borrower
shall promptly advise Lender of any order, application, suit, hearing or
proceeding which might affect its rights in any respect in any license, permit,
authorization, right or franchise. Borrower shall use its best efforts to defend
against such order, application, suit, hearing or proceedings. Without the prior
written consent of Lender, Borrower shall not enter into any proceeding,
agreement or arrangement for the sale, assignment, transfer or hypothecation of
any franchise, permit, license, right, or authorization now or hereafter held by
Borrower.
6.10. LIENS. Borrower will not create, incur, or suffer to exist any
security interest, mortgage, pledge, lien, claim, charge, encumbrance, title
retention agreement, lessor's interest under a financing lease or analogous
instrument, in, of or on property, or allow any financing statement to be filed
or recorded describing any of its assets, except those otherwise expressly
permitted or created hereunder or approved by Lender in advance.
6.11. LOANS TO OTHERS. Borrower will not make any loans or advances to any
Person other than in the normal and ordinary course of its business now
conducted.
6.12. MAINTENANCE OF PROPERTIES AND COLLATERAL. Borrower will maintain,
keep, and preserve, and cause each subsidiary to maintain, keep, and preserve,
all of its properties (tangible and intangible) necessary or useful in the
proper conduct of its business in good working order and condition, ordinary
wear and tear excepted. Borrower will not allow the Collateral to suffer any
material loss or depreciation in value other than losses fully covered by
insurance, the proceeds of which are paid to Lender, and depreciation resulting
from reasonable ordinary wear and use. Borrower will notify Lender promptly of
any event causing material loss or depreciation in the value of the Collateral
and the amount and nature of such loss or depreciation.
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6.13. MAINTENANCE OF RECORDS. Borrower will keep, and cause each subsidiary
to keep, adequate records and books of account, in which complete entries will
be made in accordance with general accepted accounting principles consistently
applied, reflecting all financial transactions of Borrower and its subsidiaries.
6.14. MERGER AND SALE OF ASSETS. Except as otherwise contemplated hereby,
Borrower shall not: (i) merge or consolidate (whether in one transaction or in a
series of transactions) with or into any corporation or other entity; (ii) sell,
lease, transfer or otherwise dispose of all or a substantial part of its assets;
(iii) enter into a dissolution or liquidation; (iv) sell, transfer, or otherwise
dispose of, any real or personal property to any person and thereafter directly
or indirectly lease back the same or similar property; (v) acquire all or
substantially all of the assets or the business of any Person, or permit any
subsidiary to do so, except that any subsidiary may merge into or transfer
assets to Borrower and any subsidiary may merge into or consolidate with or
transfer assets to any other subsidiary of Borrower. Borrower agrees that Lender
shall be conclusively deemed to be reasonable in conditioning any consent to the
foregoing upon, inter alia, the entity with or into which Borrower shall merge
or consolidate or to which Borrower'S stock or other assets is transferred
agreeing to guarantee or assume the Loan by executing a guaranty or assumption
in form and substance acceptable to Lender.
6.15. NOTICE OF NAME CHANGE. Borrower will notify Lender of any change in
Borrower's name or any name Borrower begins to do business under or name it
assumes within thirty (30) days after the date of such change.
6.16. NOTICE OF DEFAULT AND ADVERSE CONDITIONS. Borrower shall give prompt
(but in no event later than the first Business Day after becoming aware of the
following) written notice to Lender of: (i) the occurrence of any Default or
Potential Default, or (ii) any fact, circumstance or development, financial or
otherwise, which might materially adversely affect its business, properties,
affairs, prospects or condition (financial or other) or the ability of Borrower
to perform hereunder or under the other Loan Documents.
6.17. STOCK OF SUBSIDIARY Borrower will not permit any subsidiary to issue
any additional shares of its capital stock.
6.18. TAXES. Borrower will pay when due, and before any interest or
penalties shall accrue thereon, all federal, state and local taxes, assessments,
charges, levies or indebtedness, provided that Borrower shall not be required to
pay any such tax, assessment, charge or claim, the payment of which is being
contested in good faith and by appropriate proceedings.
6.19. TRADE ACCOUNTS. Borrower will pay and cause each subsidiary to pay
all trade accounts in accordance with industry practices (unless and to the
extent that any of such obligations or indebtedness are being contested in good
faith and of which Borrower has given notice to Lender of the existence of such
dispute).
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7. DEFAULTS
7.1. EVENTS OF DEFAULT. In addition to the Events of Default listed in the
other Loan Documents, the occurrence of any one or more of the conditions or
events (whether or not within the control of Borrower) described in SECTION 7
shall constitute a "Default". As used in this Agreement "POTENTIAL DEFAULT"
means a condition or event which, but for the lapse of time or the giving of
notice, or both, would constitute a Default.
7.2. BANKRUPTCY OR INSOLVENCY. It is a Default if Borrower: (i) is
adjudicated a bankrupt or debtor, or an order for relief under the Bankruptcy
Code (Title 11 of the United States Code) is entered naming Borrower as
"debtor"; (ii) fails to pay, or admits in writing its inability to pay, its
debts generally as they become due; (iii) makes an assignment for the benefit of
creditors; (iv) applies for, seeks, consents to, or acquiesces in, the
appointment of a receiver, custodian, trustee (interim or otherwise), examiner,
liquidator or similar official for it or any substantial part of its property;
(v) institutes any proceeding seeking to adjudicate it a, debtor, bankrupt or
insolvent, file a petition commencing any case seeking protection, relief or
reorganization, under the Bankruptcy Code (Title 11 of the United States Code)
or institutes any proceeding seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors or fails to file an answer or other pleading denying the material
allegations of any such proceeding filed against it; (vi) takes any corporate
action to authorize or effect any of the foregoing actions set forth in this
Section; or, (vii) fails to contest in good faith any appointment or proceeding
described in this Section.
7.3. DEFAULT IN PERFORMANCE OR OTHER BREACH. It is a Default if any of the
Obligations Secured or any term or covenant hereof or of the other Loan
Documents is not performed or paid as agreed, or there is a breach of any
warranty or representation contained herein or in the other Loan Documents, or
Borrower fails to pay and discharge any indebtedness, liability or obligation to
any Person when and as due (except in the case of a good faith dispute as
expressly permitted herein), or by reason of a Default, the holder of any
indebtedness of Borrower becomes entitled to accelerate the stated maturity of
such indebtedness. Any breach or Default by Borrower of any term or condition of
any Loan Document shall constitute a Default under all the other Loan Documents.
7.4. SECURITY DOCUMENT. It is a Default if any of the Loan Documents shall
at any time after its execution and delivery and for any reason cease: (i) to
create a valid and perfected priority security interest in and to the property
purported to be subject to such Security Document; or (ii) to be in full force
and effect or shall be declared null and void, or the validity or enforceability
thereof shall be contested by Borrower, or Borrower shall deny it has any
further liability or obligation under the Loan Document, or Borrower shall fail
to perform any of its obligations under the Loan Document.
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8. REMEDIES
8.1. LENDER'S REMEDIES UPON DEFAULT. Subject to such limitations as may be
imposed by applicable federal bankruptcy and reorganization law, upon the
occurrence of any event of Default, and in addition to all rights and remedies
provided for under the other Loan Documents, Lender shall have all rights and
remedies provided to it by law, hereunder, or any other document under which
Borrower shall be obligated to Lender and, without limiting the generality of
the foregoing, Lender may do any one or more acts described in this Section, and
in any order it deems appropriate.
8.2. ACCELERATION AND INCREASED RATE OF INTEREST. Without notice or demand
except as expressly provided herein, Lender shall have the right to accelerate
maturity of the Obligations Secured, and require immediate payment of the entire
principal sum owing, together with all accrued interest, advances, costs and
Lender's attorneys' fees. During the existence of a Default (whether or not
Lender shall have accelerated the stated maturity of the Obligations Secured),
interest under the Note shall accrue at the post-Default rate provided in the
Note.
8.3. ADVANCES TO PROTECT LENDER'S INTERESTS. Without notice to or consent
from Borrower, at any time when a Default shall exist hereunder, Lender shall
have the right but not the obligation, at any time to advance to any Person any
sum which Lender in its sole discretion deems necessary to protect or preserve
the Collateral or Lender's assignment of or security interest in the Collateral
(or the priority thereof), or to cure any event of Default which shall then
exist. Each such advance shall be secured by the Collateral and, at Lender's
election, shall either be reimbursed to it by Borrower immediately upon demand
or added to the Loan balance and bear interest at the rate applicable upon
Default under the Note. It is understood and agreed that nothing herein
contained shall obligate Lender to make any such advance, nor shall the making
of one or more such advances constitute an agreement by Lender to make any
further advance or be deemed a waiver of any Default by Borrower under the terms
hereof or of any other Loan Document.
8.4. CEASE FUNDING. Lender shall have the right to cease making any
disbursements hereunder or pursuant to any of the other Loan Documents.
8.5. FORECLOSURE. Lender shall have the right to foreclose the liens and
security interests created hereby or pursuant to any other Loan Document, either
by judicial or nonjudicial foreclosure, and notify the obligors or account
debtors on the Collateral to render all further payment or performance thereon
directly to Lender, and directly collect the same. In connection with the
foregoing, Lender may prosecute, compromise, or settle claims and sell, lease or
otherwise dispose of the Collateral, applying all proceeds received therefrom,
less the costs and expenses incurred in connection therewith, to Borrower's
obligations to Lender secured thereby in such order and priority of application
as Lender may elect. For the purpose of taking possession of any of the
Collateral, Lender may enter upon and remove the Collateral from such place as
the Collateral may then be located or may render the Collateral unusable, and/or
12
may sell or otherwise dispose of the Collateral on such premises or at such
other place as Lender shall determine. Borrower hereby grants to Lender and
potential purchasers and bidders a right of access to the premises or places
where the Collateral may then be located for the purpose of inspecting the
Collateral and conducting a sale or other disposition of the same. Lender may
also require Borrower, at Borrower's expense, to assemble the Collateral and
deliver it to Lender at such place or places as Lender may designate which is or
are reasonably convenient to Lender and Borrower and Borrower agrees to do so
when so required by Lender. With or without removal of the Collateral, Lender
may operate or consume the Collateral in efforts to continue or productively
employ the Collateral for such period or periods as Lender deems appropriate
under the circumstances. Lender may sell or otherwise dispose of the Collateral
at public or private sale or disposition, upon such terms as Lender may
determine, and with or without having the Collateral at the place of sale or
disposition. Lender may bid upon and purchase the Collateral at any public sale
thereof. From the proceeds of any such sale, disposition, lease or operation of
the Collateral, Lender shall deduct all expenses of retaking, storing, operating
and selling or otherwise disposing of the Collateral, including the cost of
maintenance and repairs and any other reasonable costs of preparing the
Collateral for sale, lease or disposition, and Lender's counsels' fees and
expenses. The balance of such proceeds shall be applied to the Obligations
Secured in such order and priority of application as Lender may elect. Should
the disposition of the Collateral (other than by retention by Lender) fail to
satisfy all amounts secured by this Agreement, Borrower shall pay Lender the
amount of any deficiency. Any assumption of management or collection hereunder
or the application of monies received as a result thereof or otherwise shall not
be deemed in any manner to cure or waive any Default hereunder. Notwithstanding
Lender's right to notify the obligors of or account debtors on the Collateral,
this Agreement is intended to and shall serve as notice to all obligors of
Borrower and to any and all other persons whomsoever as an authorization and
direction to them to pay over all obligations and other items constituting
Collateral hereunder to Lender on demand therefor, and an assurance to them that
they shall be entitled to rely solely on the advice and instructions of Lender
as to whether Default exists and as to all matters whatsoever pertaining to the
payment of their obligations, and that they shall thus be fully protected in
making any payments to Lender. If written notice pertaining to the disposition
of the Collateral by Lender after Default is required by law, notice delivered
or posted as provided in Section 9.15 (Notices) hereof at least five (5)
calendar days before the date of a proposed public disposition or the date after
which a private disposition may occur shall conclusively be deemed reasonable
notice; provided, however, that nothing herein shall prevent the sale or other
disposition upon shorter notice or without notice of the Collateral if it is
perishable or if it threatens to decline speedily in value.
8.6. OTHER REMEDIES. Lender shall have the right to exercise any other
right, privilege, or remedy available to Lender under any of the Loan Documents,
under any other agreement or instrument or as may be provided by applicable law
or in equity. Lender shall have the right to enforce any one or more of the
remedies provided hereunder or by law or in equity either successively or
concurrently, and any such action by Lender shall not be deemed an election of
remedies or otherwise prevent Lender from pursuing any further remedy it may
have hereunder or at law or in equity.
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8.7. SPECIFIC PERFORMANCE. Lender shall have the right to institute
appropriate proceedings to specifically enforce performance of the terms and
conditions of all or any of the Loan Documents.
9. GENERAL PROVISIONS
9.1. ACCOUNTING TERMS. All financial covenants and terms referred to in
this Agreement shall be determined in accordance with generally accepted
accounting principles consistent with those used in preparing Borrower's
financial statements.
9.2. AGREEMENT CONTROLS. The Loan Documents shall be deemed to include this
Agreement. In the event of a conflict between any of the provisions of this
Agreement and any provisions of the other Loan Documents, the provisions of this
Agreement shall control.
9.3. ASSIGNABILITY. Borrower shall not assign this Agreement or any part of
any advance to be made hereunder. The rights of Lender under this Agreement are
assignable in part or in whole, and any assignee of Lender shall succeed to and
be possessed of the rights of Lender hereunder to the extent of the assignment
made, including the right to make advances to Borrower.
9.4. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
9.5. LENDER'S CONSENT AND APPROVAL. In any instance hereunder where
Lender's approval or consent is required or the exercise of Lender's judgment is
required, the granting or denial of such approval or consent and the exercise of
such judgment shall be within the sole discretion of Lender, and Lender shall
not, for any reason or to any extent, be required to grant such approval or
consent or exercise such judgment in any particular manner regardless of the
reasonableness of either the request or Lender's judgment.
9.6. COSTS AND EXPENSES. Borrower shall pay Lender upon demand any and all
costs, expenses and fees (including reasonable attorneys' fees) incurred in
connection with the Loan, including without limitation, those incurred in
enforcing or attempting to recover payment of the amounts due under the
Obligations Secured, including negotiating, documenting and otherwise pursuing
or consummating modifications, extensions, compositions, renewals or other
similar transactions pertaining to this Agreement or the Note, irrespective of
the existence of an event of Default, and including costs, expenses and fees
incurred before, after or irrespective of whether suit is commenced, and in the
event suit is brought to enforce payment hereof, such costs, expenses and fees
and all other issues in such suit shall be determined by a court sitting without
a jury.
14
9.7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall be an original,
but all of which shall together constitute one and the same instrument.
9.8. GENERAL INDEMNIFICATION. Borrower hereby indemnifies Lender, its
employees, agents and officers from and against any and all loss, expenses,
charges, fees (including attorneys' fees) and liability and agrees to hold
Lender and its employees, agents and officers harmless from any and all damages,
costs, expenses, claims, demands, and liabilities which may be asserted or
alleged in connection with or arising out of the Loan, the administration or
enforcement of the Loan Documents or the exercise of any right under the Loan
Documents (including, without limitation, in connection with or as a result of
any sale, use, operation, lease, disposition or consumption of any of the
Collateral as long as such is done in a commercially reasonable manner),
whenever asserted, and for all reasonable expenses (including attorneys' fees)
and all costs of compromise or settlement which may be incurred by Lender on
account of or arising out of or in connection with any such claim, demand or
obligation. The foregoing indemnity shall extend to claims, demands or
obligations, and expenses relating thereto and costs of compromise or settlement
thereof, but not to those resulting from the negligence or misconduct of any
indemnitee. In the event that any action or proceeding is brought against
Lender, its employees, agents or officers arising out of the Loan, the
administration or enforcement of the Loan Documents or the exercise of any right
under the Loan Documents, Borrower shall, upon notice from Lender, resist and
defend such action or proceeding on behalf of Lender, its employees, agents and
officers as applicable; provided that failure of such party to give such notice
shall not relieve Borrower from any of its obligations under this Section unless
such failure prejudices defense of such action or proceeding by Borrower. At its
own expense, an indemnified party may employ separate counsel and participate in
the defense. If employment of separate counsel is required because of a conflict
of interest between Borrower and the indemnified party or between the
indemnified parties, or the failure of Borrower after receipt of notice to
assume the defense, then the indemnified parties may employ separate counsel at
Borrower's expense. Borrower shall not be liable for any settlement without its
consent unless Borrower shall have failed to perform any of its obligations
under this Section.
9.9. GOVERNING LAW. The Loan Documents are executed and delivered in the
State of Arizona, and the laws of the State of Arizona shall govern their
interpretation and enforcement.
9.10. GOVERNMENTAL REGULATION. Anything contained in this Agreement to the
contrary notwithstanding, Lender shall not be obligated to extend credit to
Borrower in an amount in violation of any limitation or prohibition provided by
any applicable statute or regulation.
9.11. HEADINGS AND MISCELLANEOUS DEFINITIONS. All sections and descriptive
headings of subsections in this Agreement are inserted for convenience only, and
shall not affect the construction or interpretation hereof. "BUSINESS DAY" is a
15
day other than a Saturday, Sunday or a public or bank holiday under federal law
or the laws of the State of Arizona. "GOVERNMENTAL AUTHORITY" means any body
politic, including without limitation the United States of America, the State of
Arizona, and any other state, county, parish, city, town, township or
municipality, and any subpart thereof or any person(s) or entity deriving their
authority from any such body politic, including without limitation any
department, agency, commission, board, division, bureau or office, or any
subpart thereof, of any body politic. "PERSON" means any corporation, natural
person, firm, joint venture, partnership, trust, unincorporated organization,
government or any department or agency of any governmental authority. "SECTION"
means a numbered section of this Agreement, unless another document is
specifically referenced.
9.12. MODIFICATION AND WAIVER. No provision of this Agreement shall be
amended, waived or modified except by an instrument in writing signed by the
parties hereto.
9.13. NO AGENCY OR PARTNERSHIP RELATIONSHIP. Borrower understands and
agrees that Lender is not its agent, representative or partner.
9.14. NO OTHER PARTIES TO BENEFIT. The Loan Documents are made for the sole
benefit of Borrower and Lender and their respective successors and assigns, and
no other person or entity is intended to or shall have any rights or benefits
hereunder, whether as third-party beneficiary or otherwise.
9.15. NOTICES. All notices and other communications provided for hereunder
shall be in writing (including telegraphic, telecopy or other facsimile
communication) and mailed, telegraphed, telexed, cabled, telecopied (or
communicated by other means of facsimile transmission) or delivered (by hand or
by courier service), to the parties at their respective addresses set forth
below or at such other address as shall be designated by such party in a written
notice to the other parties. All such notices and communications shall, when
mailed by certified mail, telegraphed, telexed, cabled or telecopied, be
effective upon the earlier to occur of actual receipt or three (3) Business Days
after deposit in the mail (postage prepaid), or upon delivery to the telegraph
company, or upon confirmation by telex answerback, or upon delivery to the cable
company or upon confirmation at the established confirmation number,
respectively.
To Borrower as follows: American Home Capital Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To Lender as follows: EnerGCorp., Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
16
9.16. OTHER DOCUMENTS. Borrower hereby agrees to provide Lender with all
other documents reasonably required by Lender to give effect to this Agreement.
9.17. RATE DETERMINATION. Any determination by Lender of a rate of interest
hereunder shall, in the absence of manifest error, be conclusive and binding
upon Borrower for the purposes of this Agreement and prima facie evidence
thereof in any court of law.
9.18. RATE OF INTEREST. Notwithstanding anything herein or in any of the
other Loan Documents to the contrary, if any charge or fee for which Borrower is
or becomes obligated in connection with the Loan Documents constitutes interest
and is not otherwise stated as a rate, such charge or fee shall be deemed an
additional rate of interest which Borrower agrees to as authorized by A.R.S. ss.
44-1201.A, computed by dividing the amount of such charge or fee by the
principal amount of the Note. If, from any circumstances whatsoever, fulfillment
of any provision hereof or of any of the Loan Documents, at the time performance
of such provision shall be due, shall involve transcending the limit of validity
prescribed by law which a court of competent jurisdiction may deem applicable
thereto, then IPSO FACTO, the obligation to be fulfilled shall be reduced to the
limit of such validity, and if, from any circumstance, Lender shall ever receive
as interest an amount which would exceed the highest lawful rate, such amount
which would be excessive interest shall be applied to the reduction of the
unpaid principal balance due under the Loan Documents as of the date such amount
is received or deemed to be received by Lender and not to the payment of
interest. This provision shall control every other provision of all agreements
between Borrower and Lender. However, in the event an amount determined to be
excessive interest is applied against the unpaid principal balance, and
thereafter the rate of interest accruing on the Loan decreases, the Loan shall
in fact, accrue interest at the then highest lawful rate until such time that an
amount accrues equal to the amount of excessive interest previously applied
against principal. Notwithstanding the foregoing, if the provisions of any law
or regulation of the United States or any agency or instrumentality thereof, as
amended, which validly supersedes any restriction of the State of Arizona would
permit Lender to charge or receive a rate of interest with respect to the
indebtedness evidenced by the Loan Documents in excess of the maximum rate of
interest (if any) permitted to be charged or received by Lender under applicable
law of the State of Arizona, the less restrictive provisions of any such United
States law or regulation shall apply in determining the rate of interest
permitted to be charged or received.
9.19. RELIANCE. All covenants, agreements, representations and warranties
made herein or in any document delivered in support of the Loan shall be deemed
to have been relied on by Lender in making the Loan, and shall survive the
execution and delivery of any of the Loan Documents and any disbursement or
advance of funds made pursuant to the Loan Documents.
9.20. RIGHT TO APPEAR IN LITIGATION. Lender shall have the right to
commence, appear in or defend any action or proceeding which Lender, in good
faith, believes may affect the rights or duties of any of the parties hereunder
17
or in connection herewith or in and to the Collateral. If no Default shall exist
hereunder, Lender shall give notice to Borrower of its intent to exercise its
rights hereunder, and, if Borrower fails, within five (5) business days, to
diligently commence, appear in or defend any action or proceeding which Lender
sets forth in its notice to Borrower then Lender may commence such action or
appear in or defend any action or proceeding then pending. In the event Lender
exercises its rights hereunder, then Borrower agrees to pay all necessary and
reasonable expenses incurred by Lender in connection therewith (including, but
not limited to, reasonable attorneys' fees).
9.21. SEVERABILITY; INTEGRATION; TIME OF THE ESSENCE. Inapplicability or
unenforceability of any provision of this Agreement shall not limit or impair
the operation or validity of any other provision of this Agreement. The Loan
Documents constitute the entire agreement between the parties with respect to
the subject matter hereof. Each of the Loan Documents is intended to represent
the mutual intent of the parties thereto and no rule of strict construction
shall be applied against any party. Time is of the essence hereof.
9.22. TAXES. Any taxes (excluding income taxes) payable or ruled payable by
federal, state or local authority in respect of the Loan Documents shall be paid
by Borrower, together with interest and penalties, if any.
9.23. WAIVERS GENERALLY. Lender shall not be deemed to have waived any
rights upon or under the Obligations Secured or the Collateral unless such
waiver be in writing and signed by Lender. No delay or omission on the part of
Lender in exercising any right shall operate as a waiver or such right or any
other right. A waiver on any one occasion shall not be construed as a bar to the
exercise of any right on any future occasion all rights and remedies of Lender
as to the Obligations Secured or the Collateral whether evidenced hereby or by
any other instrument or papers shall be cumulative and may be exercised
singularly or concurrently. The waiver by Lender of any breach or Default by
Borrower under any of the terms of any of the Loan Documents shall not be deemed
to be a waiver of any subsequent breach or Default on the part of Borrower under
the same or any other of the Loan Documents.
18
9.24. WAIVER OF JURY TRIAL. Borrower HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY, WAIVES ANY RIGHTS IT MAY HAVE TO REQUIRE A TRIAL BY JURY IN ANY
COURT ACTION PERTAINING TO THIS AGREEMENT.
EnerGCorp., Inc. American Home Capital Corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------- ------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President Its: President and Director
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Its: Chief Financial Officer
19
SCHEDULE 1
COLLATERAL
1. A first priority, perfected security interest or lien in all or any
portion, as in each case may be appropriate, of:
(i) All of Borrower's accounts, instruments, chattel paper and general
intangibles (as such terms are defined in the Arizona Uniform Commercial Code),
and including any right to payment acquired by Borrower pursuant to the exercise
of warrants for the stock of Borrower, patents, copyrights, trademarks and
designs;
(ii) All of Borrower's inventory, goods, merchandise, materials, raw
materials, goods in process, finished goods, packaging and shipping materials
and other tangible personal property, whether now or hereafter in existence, now
owned or hereafter acquired by Borrower and held for sale or lease or to be or
actually furnished under contracts for service or consumed in Borrower's
business, whether or not such inventory be in the constructive or actual
possession or custody of Borrower;
(iii) All of Borrower's machinery, equipment, appliances, apparatuses,
tools, machine tools, supplies, materials, furniture, fixtures, goods and
chattels of every kind and wherever located, now or hereafter owned or acquired
by Borrower;
(v) All of Borrower's personal property coming into the hands of or
under the control of Lender in any manner, including securities held by,
deposited with, assigned or pledged to Lender, and all interest, dividends,
stock rights, stock dividends, benefits and other property or rights to which
Borrower may become entitled by virtue of the ownership thereof;
(vii) all additions, accessories and accessions to, and replacements
of, the foregoing;
(viii) all proceeds of insurance covering the foregoing, including
returned or unearned premiums becoming due on any insurance covering the
foregoing;
(x) all property substituted or exchanged for the foregoing;
(xi) all proceeds of the foregoing; and
(xii) all books and records pertaining to the foregoing.
SCHEDULE 5
DEBT
* Office Lease - San Diego
TCS Mortgage and Wateridge Industrial Partnership, dtd. 3/25/96
With Tenant Estoppel Certificate, dtd. 9/26/96 (Assigned lease to new
ownership: CarrAmerica Corp)
* Office Lease - Las Vegas
TCS Mortgage and ▇▇▇▇▇▇▇, dtd. 6/27/00
* Amended and Restated Warehouse Loan and Security Agreement
TCS Mortgage and The Provident Bank, dtd. 7/12/99
* Equipment Lease Agreement
TCS Mortgage and Scripps Bank, dtd. 1/11/99
* Equipment Lease Agreement
TCS Mortgage and Scripps Bank, dtd. 6/4/99
SCHEDULE 6
SUBSIDIARIES
Date Percentage
Incorporated Company Name TIN # Ownership
------------ ------------ ----- ---------
2/1/84 TCS Mortgage, Inc. ▇▇-▇▇▇▇▇▇▇ 100%
2/1/84 TCS Real Estate Services, Inc. ▇▇-▇▇▇▇▇▇▇ 100%
2/1/84 TCS Insurance Services, Inc. ▇▇-▇▇▇▇▇▇▇ 100%
