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EXHIBIT 10.13
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement"), dated as of the 3rd day
of April, 1995, is made and entered into on the terms and conditions hereinafter
set forth, by and between RADIO SYSTEMS CORPORATION, a Tennessee corporation
with principal offices in Knoxville, Tennessee ("Borrower"), and FIRST AMERICAN
NATIONAL BANK, a national banking association with principal offices in
Nashville, Tennessee ("Lender").
WHEREAS, Borrower has requested that Lender make available to Borrower
a line of credit in the original principal amount not exceeding $5,000,000 (the
"Line of Credit"; the Line of Credit is sometimes hereinafter referred to as 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 has made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and inducements
of Borrower, 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 and Lender hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the indicated
meanings:
"Borrowing Base" shall mean an aggregate amount equal to the sum of (a)
seventy-five percent (75%) of Eligible Receivables, plus (b) the lesser of forty
percent (40%) of Eligible Inventory or the Inventory Borrowing Limit.
"Collection Days" shall mean two (2) banking days.
"Eligible Receivables" shall mean Receivables arising out of the sale
or other disposition of Borrower's Inventory or the rendering of services to
Borrower's customers, excluding (a) all Receivables that are due and payable
more than one hundred eighty (180) days after the dates of the corresponding
invoices, (b) all Receivables that have been outstanding for more than sixty
(60) days after the due dates of the corresponding invoices, (c) all Receivables
owing from any account debtor if more than 50% of the Receivables owed to
Borrower by such account debtor have been outstanding for more than sixty (60)
days after the due dates of the corresponding invoices, (d) all returns,
allowances, discounts, credits and contra items, (e) all amounts owed from
employees, officers, shareholders, directors or affiliates and all intra-company
items, (f) any Receivables evidenced by instruments or chattel paper that have
not been endorsed and delivered to Lender by Borrower, and (g) all other items
which Lender in its sole discretion determines to be ineligible.
"Eligible Inventory" shall mean Borrower's Inventory of raw materials
and finished goods (excluding Inventory at the locations listed on Exhibit A
attached hereto), valued at the lesser of cost or market, with such adjustments
thereto as Lender in its sole discretion determines to be
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appropriate, including but not limited to adjustments relating to obsolete
Inventory (including obsolescence resulting from the introduction by Borrower of
new product lines).
"Event of Default" shall have the meaning assigned to such term in
Section 7.1 of this Agreement.
"Guarantor" shall mean Xxxxxx Xxxx.
"Guaranty" shall mean that certain Continuing Guaranty of even date
herewith, executed in favor of Lender by Guarantor, pursuant to which
Guarantor's liability is limited to $1,000,000, plus interest and costs of
collection.
"Inventory" shall have the meaning assigned to such term in the Uniform
Commercial Code.
"Inventory Borrowing Limit" shall mean $1,000,000.
"Line of Credit" shall have the meaning assigned to such term in the
preamble of this Agreement.
"Line of Credit Borrowing Limit" shall mean $5,000,000.
"Line of Credit Interest Rate" shall mean an annual rate equal to the
lesser of (a) the maximum contract rate of interest permitted to be charged
under applicable law or (b) the interest rate from time to time designated by
Lender as its "Index Rate" plus one and three-quarters percentage points
(1-3/4%), computed on the basis of a 360-day year, actual number of days
elapsed, adjusted daily as the Index Rate changes.
"Line of Credit Termination Date" shall mean July 3, 1996.
"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 indebtedness evidenced by the
Note.
"Note" shall mean that certain Master Secured Promissory Note of even
date herewith, in the principal amount not exceeding the Line of Credit
Borrowing Limit, made and executed by -Borrower, payable to the order of Lender,
evidencing the indebtedness of Borrower to Lender in connection with the Line of
Credit, together with any and all extensions, modifications, renewals and/or
replacements thereof.
"Permitted Encumbrances" shall mean (a) a lien on certain of Borrower's
assets in favor of Sirrom Capital Corporation which, pursuant to the
requirements of Section 6.5 of this Agreement, is subordinate to the lien of
Lender in such assets pursuant to a subordination agreement satisfactory to
Lender in all respects, and (b) purchase money security interests in certain of
Borrower's equipment, to the extent such liens secure the purchase price of such
equipment.
"Receivables" shall mean accounts, general intangibles, instruments and
chattel paper, as such terms are defined in the Uniform Commercial Code.
"Secured Obligations" shall have the meaning assigned such term in
Section 3.2 of this Agreement.
"Security Instruments" shall mean, collectively, this Agreement, the
Guaranty and any other instruments, documents or agreements now or hereafter
securing the Secured Obligations, whether by specific or general reference.
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"Service Fee" shall mean $6,000, payable upon the execution of this
Agreement and annually thereafter.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect in the State of Tennessee from time to time.
ARTICLE II
THE LOAN
2.1 Advances. Prior to the Line of Credit Termination Date and so long
as no Event of Default (or event that with the giving of notice or the passage
of time or both would constitute an Event of Default) has occurred and is in
existence hereunder, Lender shall advance proceeds under the Line of Credit to
Borrower upon Borrower's request in an aggregate amount outstanding at any one
time not to exceed the lesser of (i) the Borrowing Base in effect from time to
time, or (ii) the Line of Credit Borrowing Limit (with said credit availability
subject to reduction in accordance with the provisions of Section 2.3 of this
Agreement), although Lender may in its sole and absolute discretion permit
advances to exceed such amount. Any such excess advances shall be secured by,
and subject to the terms and conditions of, this Agreement.
2.2 Interest Rate: Repayment. The indebtedness of Borrower to Lender in
connection with the Line of Credit shall be evidenced by, and payable in
accordance with the terms of, the Note. Amounts outstanding under the Line of
Credit shall bear interest at the Line of Credit Interest Rate. In addition,
Borrower covenants and agrees to maintain Eligible Receivables and Eligible
Inventory in an aggregate amount sufficient to keep the aggregate outstanding
principal balance of the advances made in respect of the Line of Credit within
the limits specified in Section 2.1 of this Agreement. If at any time such
limits are exceeded, Borrower shall immediately pay to Lender an amount
sufficient to reduce the aggregate outstanding principal balance of the Line of
Credit to an amount that is within such limits.
2.3 Letters of Credit. Prior to the Line of Credit Termination Date, so
long as no Event of Default (or event that with the giving of notice or the
passage of time or both would constitute an Event of Default) has occurred and
is continuing hereunder and to the extent of Borrower's credit availability
under the Line of Credit, Lender shall, at Borrower's request, issue letters of
credit for the account of Borrower pursuant to applications submitted to Lender
by Borrower, subject to the following terms and conditions:
(i) in no event shall the aggregate, outstanding face amount
of any such letters of credit exceed $500,000,
(ii) any such letters of credit shall be issued on terms
satisfactory to Lender in all respects, and shall be conditioned upon
payment of Lender's customary fees and expenses,
(iii) the credit availability under the Line of Credit shall
be reduced by the aggregate undrawn amount from time to time available
under outstanding letters of credit, and
(iv) any amounts paid by Lender under any such letters of
credit shall be deemed to be advances against the Note, and the
indebtedness of Borrower to Lender in connection therewith shall
constitute a part of the Secured Obligations and shall be secured as
hereinafter set forth in the same manner as all other advances made by
Lender against the Note.
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2.4 Purpose. The purpose of the Line of Credit shall be to provide
working capital to Borrower on a revolving basis.
ARTICLE III
SECURITY
3.1 Security. The Secured Obligations are and shall continue to be
secured by the following:
(a) Personal Property. Borrower hereby grants to Lender a
security interest in the following described property and interests in
property, together with all proceeds (including but not limited to
insurance proceeds) and products thereof and all accessions thereto, as
applicable:
(i) Equipment. All equipment of Borrower of every kind
and description, whether now owned or . hereafter acquired and
wherever located, together with all parts, accessories and
attachments and all replacements thereof and additions
thereto;
(ii) Inventory. Accounts, Chattel Paper, Instruments.
Documents and General Intangibles. All of Borrower's
inventory, whether held for lease, sale or for furnishing
under contracts of service, all agreements for lease of same
and rentals therefrom, and all of Borrower's accounts,
accounts receivable, chattel paper, instruments, documents and
general intangibles (including but not limited to trade marks,
copyrights and patents), whether now in existence or owned or
hereafter acquired, entered into, created or arising, and
wherever located; and
(iii) Books and Records. All of Borrower's right, title
and interest to all of the books, records, files and all other
data and documents of Borrower of all kinds in whatever form,
whether computerized or otherwise and including but not
limited to computer disks, tapes and printouts, relating to
the above-described collateral.
(b) Other Security Instruments. The Deed of Trust, the
Guaranty, the Assignment of Life Insurance and the other Security
Instruments.
3.2 Secured Obligations. Without limiting any of the provisions
thereof, the Security Instruments shall secure:
(a) The full and timely payment of the indebtedness 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 indebtedness 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 indebtedness 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, and
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(d) The full and prompt payment and performance of any and all
other indebtedness and other obligations of Borrower 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
indebtedness incurred pursuant to any present or future commitment of
Lender to Borrower, 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".
3.3 Assignment Of Life Insurance. Borrower may, at its option,
collaterally assign to Lender a life insurance policy on the life of Guarantor
in an amount not less than $1,000,000, as collateral security for the Secured
Obligations. Any such collateral assignment and policy shall be in form and
substance satisfactory to Lender in all respects. Upon Guarantor's death, in the
event Lender receives the proceeds of such policy and said proceeds are not
subject to any avoidance claim or action or similar claim in connection with any
pending or threatened bankruptcy, insolvency or similar proceeding, Lender will
not pursue any rights it may have against the estate of Guarantor and will
release any claim it has filed against the estate of Guarantor. Pending receipt
of such proceeds, Lender may file a claim against the estate of Guarantor and
take whatever other actions it deems necessary to protect its interests.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
4.1 Corporate Status. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Tennessee; and 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 is not
required under applicable law to be qualified to do business in any other state.
4.2 Authorization. Borrower 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 is
a party, and the performance by Borrower of its obligations thereunder are
within the corporate powers of Borrower 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 charter or by-laws
of Borrower, or any agreement binding upon Borrower or its properties. The
officer(s) executing this Agreement and all of the other Loan Documents to which
Borrower is a party are duly authorized to act on behalf of Borrower.
4.3 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.
4.4 Other Transactions. Except as specifically set forth in this
Agreement and the other Loan Documents and except for Permitted Encumbrances,
there are no prior loans, liens, security
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interests, agreements or other financings upon which Borrower is obligated or by
which Borrower is bound that will in any way permit any third person to have or
obtain priority over Lender as to any of the security interests or liens granted
to Lender pursuant to this Agreement and the other Security Instruments.
Consummation of the transactions hereby contemplated and the performance of the
obligations of Borrower 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 is a party or by which Borrower or its properties may be bound
or affected.
4.5 Places of Business. The records with respect to all intangible
personal property constituting a part of the collateral security for the Secured
Obligations are maintained at Borrower's chief place of business and chief
executive office, which has the address of 0000 Xxxxxxxx Xxxxx, Xxxxxxxxx,
Xxxxxxxxx 00000. All tangible personal property constituting a part of the
collateral security for the Secured Obligations is or will be located at
Borrower's chief place of business and chief executive office and/or at any
specific locations set forth in attached Exhibit A.
4.6 Litigation. Except as set forth in that certain letter from
Xxxxxxxxx, Xxxxxx & Xxxxxxx to Coopers & Xxxxxxx, L.L.P. dated January 30, 1995,
a copy of which is attached hereto as Exhibit B, there are no actions, suits or
proceedings pending, or, to the knowledge of Borrower, 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 and Guarantor to perform
each and every one of their respective obligations under and by virtue of the
Loan Documents; and to Borrower's knowledge, Borrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or any
governmental authority.
4.7 Financial Statements. The financial statement(s) of Borrower and
each Guarantor 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 since
the date(s) thereof.
4.8 No Defaults. No default or event of default by Borrower exists
under this Agreement or any of the other Loan Documents, or under any other
instrument or agreement to which Borrower is a party or by which Borrower or its
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.
4.9 Compliance With Law. Borrower has obtained all necessary licenses,
permits and governmental approvals and authorizations necessary or proper in
order to conduct its business and affairs as heretofore conducted and as
intended to be conducted hereafter. To Borrower's knowledge, Borrower is
in-compliance with all laws, regulations, decrees and orders applicable to it
(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). Borrower has not received, and does not expect
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.
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4.10 Environmental Matters. (a) As used in this Section 4.10 and
in Section 5.12 hereof, the following terms shall have the indicated meanings:
"Business" means all of Borrower's assets, both real and
personal, tangible and intangible, now existing or hereafter acquired
and wherever located, and all of Borrower's current and future business
operations at all locations and in all jurisdictions.
"Environmental Authorities" means all federal, state and local
governmental bodies, authorities or agencies and all public
corporations created and/or empowered to administer, regulate and/or
enforce Environmental Laws, including without limitation the U.S.
Environmental Protection Agency.
"Environmental Laws" means any and all federal, state,
regional, county or local laws, statutes, rules, regulations or
ordinances relating 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 in
connection with, the Business.
(b) Borrower represents and warrants to Lender as follows:
(i) The Property is being operated by Borrower in
full compliance with Environmental Laws, and Borrower has
obtained, maintained and is in good standing under all
approvals, consents, certificates, licenses and permits
required by Environmental Laws with respect to the Property.
(ii) To Borrower's knowledge, the Property is free of
all Hazardous Wastes and is free of all Hazardous Materials
other than those maintained therein or
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thereon in full compliance with Environmental Laws. Borrower
has 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) Except as set forth on Exhibit C attached
hereto, Borrower has not received notice, and has no
knowledge, of any noncompliance with or violation of any
Environmental Laws with respect to the Property or the
Business.
4.11 No Burdensome Restrictions. No instrument, document or agreement
to which Borrower 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, the business, operations, property or financial condition of Borrower.
4.12 Taxes. Borrower 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 or any of its property.
4.13 Equipment. The equipment constituting a part of the collateral for
the Secured Obligations is owned solely by Borrower, and Borrower has full
right, power and authority to grant to Lender a valid and enforceable security
interest therein. Except for Permitted Encumbrances, Lender's security interest
in such equipment constitutes a first and prior lien upon and security interest
in such equipment, and no other person or entity has any right, title, interest,
security interest, claim or lien with respect thereto.
4.14 Inventory. The Inventory constituting a part of the collateral for
the Secured Obligations is owned solely by Borrower, and Borrower has all
necessary right, power and authority to grant to Lender a valid and enforceable
security interest therein. Lender's security interest in such Inventory
constitutes a first and prior lien upon and security interest in such Inventory,
and, except for Permitted Encumbrances, no other person or entity has any right,
title, interest, security interest, claim or lien with respect thereto.
4.15 Receivables, Etc. With respect to the Receivables, (a) each
Receivable is a valid and bona fide existing obligation created by or arising
out of the sale and delivery or other disposition of Borrower's Inventory or the
rendition by Borrower of services to Borrower's customers in the ordinary course
of business, (b) the Receivables are owned solely by Borrower and Borrower has
all necessary right, power and authority to grant to Lender a valid and
enforceable security interest therein, (c) Lender's security interest in such
Receivables constitutes a first and prior lien upon and security interest in
such Receivables, and, except for Permitted Encumbrances, no other person or
entity has any right, title, interest, security interest, claim or lien with
respect thereto; (d) each Receivable constituting an Eligible Receivable will at
all times be unconditionally owed to Borrower and enforceable against the
obligor(s) with respect thereto without dispute of any kind, and (e) each
Receivable constituting an Eligible Receivable is an "account" as defined in the
Uniform Commercial Code and is not evidenced by any instrument or document
(except as specifically disclosed to Lender and accepted by Lender as an
Eligible Receivable) that would in any way change or alter its character as an
account. -
4.16 Effect of Request for Advance. Each request by Borrower for an
advance of proceeds of the Line of Credit shall constitute an affirmation by
Borrower that the representations and warranties of this Article IV remain true
and correct on and as of the date of such request.
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ARTICLE V
COVENANTS AND AGREEMENTS
Borrower covenants and agrees that during the term of this Agreement:
5.1 Payment of Secured Obligations. Borrower shall pay the indebtedness
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.
5.2 Sales of and Encumbrances on Collateral. Borrower will not sell,
exchange, lease, negotiate, pledge, assign or grant any security interest in or
otherwise dispose of the collateral described in the Security Instruments to
anyone other than Lender, nor permit any other lien of any kind to attach
thereto (other than Permitted Encumbrances), nor permit same to be attached to
or commingled with other goods or property, without Lender's prior written
consent; provided, however, that prior to the occurrence of an Event of Default
hereunder, Borrower shall have the right to process and sell its Inventory in
the ordinary course of business as herein provided and sell Inventory to its
suppliers to be processed and sold back to Borrower.
5.3 Further Assurances. Borrower will take all actions requested by
Lender to create and maintain in Lender's favor valid liens upon, security
titles to and/or perfected security interests in any collateral described in the
Security Instruments and all other collateral for the Secured Obligations now or
hereafter held by or for Lender. Without limiting the foregoing, Borrower agrees
to execute such further instruments (including financing statements and
continuation statements) as may be required or permitted by any law relating to
notices of, or affidavits in connection with, the perfection of Lender's
security interests or liens, to cooperate with Lender in the filing or recording
and renewal thereof, and, upon Lender's request, to immediately place notations
upon its books of account to disclose Lender's security interest in all
Receivables granted in this Agreement.
5.4 Financial Statements and Reports. Borrower shall furnish to Lender
such financial data as Lender may reasonably request. Without limiting the
foregoing, Borrower shall furnish to Lender (or cause to be furnished to Lender)
the following:
(a) as soon as practicable and in any event within one hundred
twenty (120) days after the end of each fiscal year of Borrower, a
balance sheet of Borrower as of the close of such fiscal year, a
statement of earnings and retained earnings of Borrower as of the close
of such fiscal year, and a statement of cash flows for Borrower 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, and accompanied by
the unqualified favorable opinion of such accountants and a certificate
of the chief executive or chief financial officer of Borrower, stating
that, to the best of the knowledge of such officer, Borrower has 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
proposes to take in connection therewith);
(b) within thirty (30) days of the end of each calendar month,
a balance sheet of Borrower as of the close of such month and a
statement of earnings and retained earnings of Borrower as of the close
of such month, all in reasonable detail, and prepared substantially in
accordance with generally accepted accounting principles consistently
applied;
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(c) on a daily basis, a daily report, an assignment of
invoices, a report of collections and adjustments and a certification
of inventory, duly completed, in form satisfactory to Lender, together
with, at Lender's request, copies of Borrower's customers' invoices or
the equivalent, together with original shipping or delivery receipts
for all merchandise sold, and/or the original of all contracts,
mortgages and other documents executed by the customers and/or all
notes, bills, acceptances or other evidences of their indebtedness,
duly endorsed in blank by Borrower, together with any other information
or documents Lender from time to time may request Borrower to submit,
but Lender's failure to request any or all of the foregoing and/or
Borrower's failure to deliver same shall not affect Lender's security
interest in or rights to the Receivables;
(d) promptly upon receipt thereof, copies of all accountants'
reports and accompanying financial reports submitted to Borrower by
independent accountants in connection with each annual examination of
Borrower; and
(e) from time to time, personal financial statements of each
Guarantor, in form satisfactory to Lender, such that at all times
Lender shall have personal financial statements of each Guarantor on
file that are not more than one (1) year old.
5.5 Maintenance of Books and Records: Inspection. Borrower shall
maintain its books, accounts and records in accordance with generally accepted
accounting principles consistently applied, and permit Lender, its officers and
employees and any professionals designated by Lender in writing, at any time to
visit and inspect any of its properties (including but not limited to the
collateral security described in the Security Instruments), corporate books and
financial records, and to discuss its accounts, affairs and finances with any
employee, officer, director or shareholder of Borrower and with any Guarantor
(including any officer, director or shareholder of any corporate Guarantor).~
5.6 Insurance. Without limiting any of the requirements of any of the
other Loan Documents, Borrower shall maintain, in amounts satisfactory to Lender
(a) public liability insurance, (b) worker's compensation insurance (or maintain
a legally sufficient amount of self insurance against worker's compensation
liabilities, with adequate reserves, under a plan approved by Lender), and (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. 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. 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
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prior to payment in full of the indebtedness evidenced by the Note and
performance of all of the obligations of Borrower to Lender in connection
therewith.
5.7 Taxes and Assessments: Tax Indemnity. Borrower 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,
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 in good faith may
contest any such tax, assessment, governmental charge or levy described in the
foregoing clauses (b) and (c) so long as appropriate reserves are maintained
with respect thereto. If any tax is or may be imposed by any governmental entity
in respect of sales of Borrower's Inventory or the merchandise that is the
subject of such sales, or as a result of any other transaction of Borrower,
which tax Lender is or may be required to withhold or pay, Borrower agrees to
indemnify and hold harmless Lender in connection with such taxes (including
penalties and interest), and Borrower shall immediately reimburse Lender for any
such amounts paid by Lender, and such amounts shall be added to the Secured
Obligations pursuant to the terms hereof.
5.8 Corporate Existence. Borrower 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.
5.9 Compliance with Law and Other Agreements. Borrower 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 is a party or by which Borrower or any of its
properties is bound. Without limiting the foregoing, Borrower shall pay all of
its indebtedness promptly in accordance with the terms thereof.
5.10 Notice of Default. Borrower shall give written notice to Lender of
the occurrence of any Event of Default under this Agreement or any other Loan
Document promptly upon the occurrence thereof.
5.11 Notice of Litigation. Borrower shall give notice, in writing, to
Lender of (a) any actions, suits or proceedings wherein the amount at issue is
in excess of 5100,000, 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 on the one hand and any governmental or regulatory body on the
other hand, which might interfere with the normal operations of Borrower.
5.12 Environmental Matters.
(a) Except for matters disclosed on Exhibit C attached hereto,
Borrower 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. Borrower will not 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 will notify Lender immediately if it receives any
notice or obtains knowledge of any noncompliance with or violation of
any Environmental Laws with respect to the Property or the Business.
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(c) In the event that Hazardous Materials unrelated to the
Business, or Hazardous Wastes, are discovered on or are brought onto
the Property, Borrower will cause such Hazardous Materials or Hazardous
Wastes to be removed and disposed of promptly and in full compliance
with Environmental Laws. Borrower will provide Lender prior written
notice of such removal and disposal actions.
(d) Borrower will comply with all Environmental Laws in all
jurisdictions in which Borrower 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.
5.13 Mergers, Consolidations, Acquisitions and Sales. Without the prior
express written consent of Lender, Borrower shall not (a) be a party to any
merger, consolidation or corporate reorganization (other than the contemplated
merger of Borrower and Xxxxxx-Xxxxxx Corporation, in which Borrower shall be the
surviving corporation), (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.
5.14 Management. Ownership. Borrower shall not permit any significant
change in the ownership, executive staff or management of Borrower without the
prior written consent of Lender. For purposes of this agreement, a significant
change in the executive staff or management of Borrower shall mean a change
involving Xxxxxx Xxxx or Xxxxx X. Xxxxxx. The ownership, executive staff and
management of Borrower are material factors in Lender's willingness to institute
and maintain a lending relationship with Borrower.
5.15 Dividends Etc. Borrower shall not declare or pay any dividend of
any kind, in cash or in property, on any class of the capital stock of Borrower,
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, which consent shall not be
unreasonably withheld.
5.16 Guaranties: Loans. Borrower shall not 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 for deposit or collection in the ordinary course of
business. Borrower shall not make any loan, advance or extension of credit to
any person other than in the normal course of its business.
5.17 Debt. Other than (a) the indebtedness evidenced by the Note, (b)
indebtedness reflected on Borrower's most recent financial statement delivered
to Lender prior to the date of this Agreement (which financial statement
indebtedness includes capital lease obligations of approximately $300,000),
other than indebtedness to be repaid in connection with the closing of the Loan,
(c) trade accounts payable and accrued expenses incurred in the ordinary course
of business and (d) the indorsement of negotiable instruments payable to
Borrower for deposit or collection in the ordinary course of business, Borrower
shall not create, incur, assume or suffer to exist indebtedness of any
description whatsoever in an aggregate amount in excess of $500,000.
5.18 Conduct of Business. Borrower will 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.
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5.19 Maintenance of Collateral. Borrower will maintain all tangible
personal property constituting any part of the collateral described in the
Security Instruments in good condition and repair and will pay all costs and
expenses incurred in the maintenance of same, and will not permit any act or
occurrence that may impair the value thereof. Prior to the occurrence of an
Event of Default, Borrower shall be entitled to possession of such tangible
collateral and to use same in any lawful manner permitted hereunder, provided
that such use does not cause excessive wear and tear to such collateral, nor
cause it to decline in value at an excessive rate, nor violate the terms of any
policy of insurance thereon.
5.20 Sale of Inventory. Borrower will not sell, lease, exchange or
otherwise dispose of any of that portion of the collateral that consists of
Inventory, nor remove the same from its place(s) of business as described
herein, without the prior written consent of Lender, except in the ordinary
course of business for cash or on open account or on terms of payment ordinarily
extended to its customers and except for sales to its suppliers of Inventory to
be processed and sold back to Borrower. Upon the sale, exchange or other
disposition of said Inventory, the security interest and lien created and
provided for herein, without break in continuity and without further formality
or act, shall continue in and attach to any proceeds thereof, including but not
limited to accounts, chattel paper, contract rights, shipping documents,
documents of title and cash or non-cash proceeds, and in the event of any
unauthorized sale, shall also continue in said Inventory itself. All chattel
paper shall be delivered to Lender promptly upon receipt.
5.21 Special Agreements of Borrower With Respect to Receivables and
Inventory.
(a) By the execution of this Agreement, Lender shall not be
obligated to do or perform any of the acts or things to be done or
performed by Borrower pursuant to any contracts in which Lender has a
security interest, but Lender may, at its election, perform some or all
of the obligations provided in said contracts to be performed by
Borrower, and if Lender incurs any liability or expenses by reason
thereof, same shall be payable by Borrower upon demand and same shall
also be secured by this Agreement and the other Loan Documents. Lender
shall be subrogated to all guaranties and security now or hereafter in
Borrower's possession or favor.
(b) If requested by Lender, Borrower shall immediately notify
all account debtors to direct payments to Lender or to a lockbox in
accordance with a Lockbox Service Agreement to be entered into between
Borrower and Lender at Lender's request. Borrower will forthwith on
receipt of all checks, drafts, cash and other remittances in payment of
inventory sold, or in payment on account of Borrower's Receivables,
deposit the same in a special bank account maintained with Lender over
which Lender alone has power of withdrawal. Said proceeds shall be
deposited in precisely the form received, except for the indorsement of
Borrower where necessary to permit collection of items, which
indorsement Borrower agrees to make, and which Lender is also hereby
authorized to make on Borrower's behalf. Pending such deposit, Borrower
agrees that it will not commingle any such checks, drafts, cash or
other remittances with any of Borrower's other funds or property, but
will hold them separate and apart therefrom and in trust for Lender
until deposit thereof is made in the special account. The funds in said
account and any funds collected by Lender under a Lockbox Service
Agreement shall be held by Lender as additional security for the
Secured Obligations. Lender may on a daily basis apply the whole or any
part of the collected funds on deposit in the special account and from
the lockbox against the Secured Obligations, and the amount, order and
method of such application shall be in the discretion of Lender;
provided, however, that so long as no Event of Default (or event that
with the giving of notice or the passage of time or both would
constitute an Event of Default) has occurred and is existing, said
collected funds will be applied first to the outstanding principal
balance of, and accrued and unpaid interest on, the Line of Credit, in
such order of priority as Lender shall determine. Any
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portion of said funds on deposit in the special account and from the
lockbox that Lender elects not to so apply may be paid over by Lender
to Borrower.
(c) Without limiting the provisions of subsection 5.21(b)
hereof, Borrower acknowledges and agrees that, upon the occurrence of
an Event of Default hereunder, Lender shall have the right to notify
the account debtors obligated on any or all of Borrower's Receivables
to make payment thereof direct to Lender, and to take control of all
proceeds of any such Receivables, and charge the collection costs and
expenses to Borrower. Until Lender gives Borrower other instructions,
Borrower shall continue to make collections of all Receivables for
Lender. All payments on account of Receivables, or as proceeds of any
collateral, whether such payments are made by check, draft, cash, money
order, wire transfer, or otherwise, shall be the specific property of
Lender. Borrower shall receive such payments as trustee for Lender and
shall immediately deliver them to Lender in their original form as
received. After allowing the Collection Days, Lender will credit all
such payments to the Line of Credit (other than items which are
returned to Lender unpaid); however, increases in loan availability by
virtue of the deposit of such items will be effective immediately upon
deposit.
(d) Lender shall be privileged to enjoy all the rights and
remedies of Borrower as to the Receivables and shall be and become
subrogated to all guaranties and securities possessed by Borrower or
due to come into Borrower's hands, but Lender shall not be liable in
any manner for exercising or refusing to exercise any rights thereby
bestowed.
(e) Borrower shall notify Lender promptly of all returns and
recoveries of merchandise and of all disputes and claims wherein the
amount at issue exceeds $100,000, and Borrower shall settle or adjust
disputes and claims directly with customers for amounts and upon terms
it considers advisable and dispose of merchandise returns as it sees
fit, unless Lender directs Borrower to make such settlements,
adjustments and disposals subject to Lender's approval. In all cases
Lender will credit the Line of Credit with only the net amounts
received by Borrower in payment of Receivables.
(f) Borrower hereby appoints the officers of Lender and/or any
other person whom Lender may designate as Borrower's
attorney(s)-in-fact with full power to endorse Borrower's name on any
checks, notes, acceptances, money orders, drafts or other forms of
payment or security that may come in Lender's possession; to sign
Borrower's name on any invoice or xxxx of lading relating to any
Receivable, on drafts against customers, on schedules of assignments of
Receivables, on notices of assignment, on financing statements,
applications for noting of liens on certificates of title and other
public records or documents of any kind as necessary or desirable to
insure perfection or enforceability of Lender's security interests in
or liens on property of Borrower granted hereunder or otherwise, on
verification of accounts and on notices to customers; to notify the
post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender; to receive, open
and dispose of all mail addressed to Borrower; to send requests for
verifications of accounts-to customers; and to do all other things
Lender deems necessary to carry out this Agreement. Borrower hereby
ratifies and approves all acts of the attorney(s) and neither Lender
nor the attorney(s) for Lender will be liable for any acts of
commission or omission, nor for any error of judgment or mistake of
fact or law, unless caused by Lender's gross negligence or willful
misconduct. This power, being coupled with an interest, is irrevocable
so long as any money remains owing to Lender from Borrower.
(g) Borrower shall pay to Lender the Service Fee in order to
compensate Lender for services rendered and to be rendered and the
costs and expenses incurred and to be incurred by Lender's officers and
employees in its routine inspection and verification of the collateral
for the Loan and the collection of Receivables. If for any reason the
amount of the
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Service Fee should exceed the fair and reasonable cost of such services
and expenses, an appropriate adjustment shall be made and the excess
portion of the Service Fee shall be refunded to Borrower.
(h) Lender will be entitled to hold all sums at any time
standing to Borrower's credit on Lender's books and all of Borrower's
property at any time in Lender's possession, or upon or in which Lender
at any time has a lien or security interest, as security for all of
Borrower's obligations at any time owing to Lender, its parent
corporation, subsidiary, co-subsidiary or affiliate, whether such
obligations are direct or indirect, absolute or contingent, under this
Agreement or otherwise. Such obligations shall include without
limitation, all loans, advances, debts, liabilities, obligations for
purchases made by Borrower from other clients factored or financed by
Lender or from any such parent, subsidiary, co-subsidiary or affiliate,
whether such obligations are absolute or contingent, or under this
Agreement or otherwise, no matter how or when arising and whether due
or to become due, and further including all interest, fees, charges,
expenses and attorney's fees chargeable to Borrower's loan account or
incurred in connection with Borrower's loan account whether provided
for herein or in any other agreement between Borrower and Lender, and
Lender shall have the right to charge to Borrower's loan account the
amounts of all such obligations and pay over such amounts to such
parent, subsidiary, co-subsidiary or affiliate.
(i) Lender shall periodically render to Borrower a -statement
of Borrower's loan account which shall be deemed correct and accepted
by and binding upon Borrower unless Lender receives a written statement
of Borrower's exceptions thereto within fifteen (15) days of the
mailing thereof. The monthly statements and books of account of Lender
shall constitute prima facie evidence of the balance in Borrower's loan
account.
5.22 Places of Business: Mobile Goods. Borrower will not change the
location of its chief place of business, chief executive office or any place of
business disclosed to Lender pursuant to Section 4.5 hereof, nor will Borrower
move any of the tangible personal property constituting a part of the collateral
for the Secured Obligations to any other location(s) (except during temporary
periods in the normal and customary use thereof), nor will Borrower change the
location at which it maintains its records concerning the intangible collateral
for the Secured Obligations, without thirty (30) days' prior written notice to
Lender in each instance. If any of the tangible collateral for the Secured
Obligations constitutes goods of a type normally used in more than one state
(whether or not actually so used), Borrower will contemporaneously with the
execution hereof furnish to Lender a list of all states in which '. J such goods
are or will be used, and hereafter will notify Lender in writing of any other
state(s) in which such goods are or will be so used.
5.23 ERISA Plan. If Borrower has in effect, or hereafter institutes
(with Lender's consent, as hereinafter provided), a pension plan that is subject
to the requirements of Title IV of the Employee Retirement Income Security Act
of 1974, Pub. L. No. 93 406, September 2, 1974, 00 Xxxx. 000, 00 X.X.X.X. ss.
1001 et seq. (1975), as amended from time to time ("ERISA"), then the following
warranty and covenants shall be applicable during such period as any such plan
(the "Plan") shall be in effect: (a) Borrower hereby warrants that no fact that
might constitute grounds for the involuntary termination of the Plan, or for the
appointment by the appropriate United States District Court of a trustee to
administer the Plan, exists at the time of execution of this Agreement, (b)
Borrower hereby covenants that throughout the existence of the Plan, Borrower's
contributions under the Plan will meet the minimum funding standards required by
ERISA and Borrower will not institute a distress termination of the Plan, (c)
Borrower hereby covenants that the Plan's annual financial and actuarial
statements and the Plan's annual Form 5500 information return will be filed with
Lender within thirty (30) days of the preparation thereof, and (d) Borrower
covenants that it will send to Lender a copy of any notice of a reportable event
(as defined in ERISA) required by ERISA to be filed with the Labor Department or
the Pension Benefit Guaranty Corporation, at the time that such notice is so
filed.
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No Plan shall be instituted by Borrower unless Lender shall have given
its written consent thereto.
ARTICLE VI
FINANCIAL COVENANTS
6.1 Current Ratio. Borrower shall at all times maintain a ratio of
current assets to current liabilities of not less than 1.0 to 1.0. For purposes
of this covenant, "current assets" shall refer to cash, inventory, accounts
receivable, marketable securities, notes receivable (other than notes receivable
from employees and shareholders of Borrower) and deferred taxes, and "current
liabilities" shall refer to any indebtedness due and payable within one fiscal
year from the date of Borrower's most recent balance sheet (excluding
indebtedness of Borrower to Sirrom Capital Corporation), all determined in
accordance with generally accepted accounting principles consistently applied.
6.2 Net Worth Requirements. Borrower shall at all times maintain a
minimum tangible net worth of $2,250,000 from the date hereof through May 31,
1995; $2,500,000 from June 1, 1995 through November 30, 1995; and $3,750,000
thereafter. For purposes of this covenant, "tangible net worth" shall refer to
Borrower's total assets minus total liabilities minus prepaids, intangibles and
amounts due from affiliates plus any debt subordinated to indebtedness of
Borrower to Lender pursuant to subordination agreements satisfactory to Lender,
all determined in accordance with generally accepted accounting principles
consistently applied.
6.3 Debt to Worth Ratio. Borrower shall at all times maintain a ratio
of total liabilities (exclusive of any debt subordinated to indebtedness of
Borrower to Lender pursuant to subordination agreements satisfactory to Lender)
to tangible net worth of not more than 2.0 to 1.0 for the month ending February
28, 1995; 3.0 to 1.0 from March 1, 1995, through June 30, 1995; 3.5 to 1.0 from
July 1, 1995, through November 30, 1995; and 1.75 to 1.0 thereafter. For
purposes of this covenant, "tangible net worth" shall have the meaning set forth
in Section 6.2 hereof.
6.4 Interest Coverage Ratio. Borrower shall maintain a ratio of income
before interest and taxes to interest expense, all determined in accordance with
generally accepted accounting principles consistently applied, calculated
annually as of Borrower's fiscal year-end, of not less than 1.25 to 1.0.
6.5 Subordinated Debt. Any and all indebtedness of Borrower to Sirrom
Capital Corporation and all security therefor shall be subordinated to the
indebtedness of Borrower to lender pursuant to a subordination agreement
satisfactory to Lender in all respects.
ARTICLE VII
DEFAULT AND REMEDIES
7.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Failure to make payment of interest on the indebtedness
evidenced by the Note within ten (10) days of when due;
(b) Failure to make payment of the principal of the
indebtedness evidenced by the Note in accordance with the terms of the
Note;
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(c) Any misrepresentation by Borrower as to any material
matter hereunder or under any of the other Loan Documents, or delivery
by Borrower 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;
(d) Failure of Borrower to perform any of its obligations
under Sections 5.3, 5.6, 5.7, 5.8, 5.9, 5.11, 5.12, 5.16, 5.17, 5.18 or
5.19 of this Agreement within the earlier of (i) ten (10) days after
written notice from Lender to Borrower or (ii) ten (10) days after the
date Borrower becomes aware of such failure to perform;
(e) Failure of Borrower to perform any of its other
obligations under this Agreement, the Note, any of the Security
Instruments or any of the other Loan Documents;
(f) 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 sixty (60) days or
more;
(g) Borrower or any Guarantor shall die or be liquidated,
dissolved, partitioned or terminated, or the charter or certificate of
authority thereof shall expire or be revoked;
(h) A default or event of default shall occur under any of the
other Loan Documents; or
(i) 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.
7.2 Acceleration of Maturity: Remedies. Upon the occurrence of any
Event of Default described in subsection 7.1(f) hereof as it relates to
Borrower, the indebtedness 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(f) hereof as it relates to any Guarantor),
Lender at any time thereafter may at its option accelerate the maturity of the
indebtedness evidenced by the Note as well as any and all other indebtedness of
Borrower to Lender; all without notice of any kind; provided, however, upon the
occurrence of an Event of Default described in subsection 7.1(g) hereof
resulting from the death of a Guarantor, Lender may not accelerate said
indebtedness until ninety (90) days has elapsed since the date of death of such
Guarantor. Upon the occurrence of any such Event of Default and the acceleration
of the maturity of the indebtedness evidenced by the Note:
(a) any obligation of Lender to advance any proceeds under the
Line of Credit shall immediately cease and be of no further force nor
effect, and Lender shall be immediately entitled to exercise any and
all rights and remedies possessed by Lender pursuant to the terms of
the Security Instruments and all of the other Loan Documents;
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(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.
7.3 Remedies Cumulative, No Waiver. No right, power or remedy
conferred upon or reserved to Lender by this Agreement or any of the other Loan
Documents is intended to be exclusive of any other right, power or remedy, but
each and every such right, power and remedy shall be cumulative and concurrent
and shall be in addition to any other right, power and remedy given hereunder,
under any of the other Loan Documents or now or hereafter existing at law, in
equity or by statute. No delay or omission by Lender to exercise any right,
power or remedy accruing upon the occurrence of any Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein, and every right,
power and remedy given by this Agreement and the other Loan Documents to Lender
may be exercised from time to time and as often as may be deemed necessary by
Lender.
7.4 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 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
indebtedness evidenced by the Notes, 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 "hereunto entitled.
ARTICLE VIII
MISCELLANEOUS
8.1 Performance By Lender.
(a) Lender may file one or more financing statements
disclosing Lender's security interests under this Agreement and the
other Loan Documents without the signature of Borrower appearing
thereon, and Borrower shall pay the costs of, or incidental to, any
recording or filing of any financing statements concerning the
collateral security described in the Security Instruments. Borrower
agrees that a carbon, photographic, photostatic or other reproduction
of this Agreement or any other Security Instrument or of a financing
statement is sufficient as a financing statement.
(b) If Borrower 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 attorney's fees and expenses), with
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interest thereon at the highest 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 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.
8.2 Successors and Assigns Included in Parties. 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.
8.3 Costs and Expenses. Borrower agrees to pay all costs and expenses
incurred by Lender in connection with the making of the loans that are the
subject of this Agreement, including but not limited to filing fees, recording
taxes and reasonable attorney's fees and expenses, promptly upon demand of
Lender. Borrower further agrees to pay all premiums for insurance required to be
maintained pursuant to the terms of the Loan Documents and all of the
out-of-pocket costs and expenses incurred by Lender in connection with the
administration, servicing and/or collection of the loans that are the subject of
this Agreement, including but not limited to reasonable attorney's fees and
expenses, promptly upon demand of Lender. Lender acknowledges receipt of $1,500
for the field examination conducted by Lender prior to the closing of the Loan
and the initial $6,000 annual Service Fee and that, in the absence of an Event
of Default hereunder, no other fees will be charged during the term of the Loan
for the costs and expenses of Lender described in subsection 5.21(g) of this
Agreement (other than the $6,000 Service Fee, which is due and payable
annually). Lender is authorized to retain possession of collateral or proceeds
thereof for a reasonable period of time of not less than ninety (90) days after
payment of all the Secured Obligations and to apply the same to the payment of
such costs and expenses.
8.4 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 indebtedness 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.
8.5 Disposition of Records. Any documents, schedules, invoices or other
papers delivered to Lender by Borrower, may be destroyed or otherwise disposed
of by Lender six (6) months after they are delivered to or received by Lender,
unless Borrower requests, in writing, the return of said documents, schedules,
invoices or other papers and makes arrangements, at Borrower's expense, for
their delivery.
8.6 Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Borrower hereunder and under all
of the other Loan Documents.
8.7 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.
8.8 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
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the Loan, acceleration of the maturity of the unpaid balance of said loans 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 indebtedness 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 indebtedness
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 indebtedness
evidenced by the Note exceed the maximum amounts permitted from time to time by
applicable law.
8.9 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.
8.10 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:
First American National Bank
Asset Based Lending Division
First American Center
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Telecopy Number: 615/736-6174
with a copy to:
Bass, Xxxxx & Xxxx
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, III
Telecopy Number: 615/742-6293
The Address of Borrower is:
Radio Systems Corporation
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx Xxxx and Xxxxx X. Xxxxxx
Telecopy Number: 615/637-8219
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with a copy to:
Xxxxxxxxx, Xxxxx & XxXxxxx
Xxxxx 000, 000 Xxxxx Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. XxXxxxx
Telecopy Number: 615/522-8879
8.11 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.
8.12 Indemnity. Borrower hereby agrees to defend, indemnify, and hold
Lender harmless from and against any and all claims, damages, judgments,
penalties, costs and expenses (including reasonable attorneys 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, its
predecessors in interests, or third parties to whom it has 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.
8.13 Jury Trial Waiver. BORROWER 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 ANY WAY RELATED TO THIS AGREEMENT OR THE
LOAN DOCUMENTS.
8.14 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 hereby
consents and submits to the jurisdiction of any local, state or federal courts
located within said city and state.
8.15 Miscellaneous. This Agreement shall be construed and enforced
under the laws of the State of Tennessee. No amendment or modification hereof
shall be effective except in a writing executed by each of the parties hereto.
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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:
FIRST AMERICAN NATIONAL BANK
By: /s/ Xxxxx X. Xxxx
---------------------------------------
Title: Assistant Vice-President
--------------------------------
BORROWER:
RADIO SYSTEMS CORPORATION
By: /s/ Xxxxx Xxxx
---------------------------------------
Title: President
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