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EXHIBIT 10.13
BUSINESS LOAN AGREEMENT
THIS BUSINESS LOAN AGREEMENT (this "Agreement") is entered into as of the date
set forth below between UNION BANK OF CALIFORNIA, N.A., a national banking
association ("Bank") and EVER-TEK COMPUTER CORPORATION ("Borrower") with respect
to each and every extension of credit (whether one or more, collectively
referred to as the "Loan") from Bank to Borrower. In consideration of the Loan,
Bank and Borrower agree to the following terms and conditions:
1. THE LOAN.
1.1 THE NOTE. The Loan is evidenced by one or more promissory notes or
other evidences of indebtedness, including each amendment, extension,
renewal or replacement thereof, which are incorporated herein by this
reference (whether one or more, collectively referred to as the "Note").
1.2 REVOLVING LOAN CLEAN-UP PERIOD. For any portion of the Loan which is
a revolving loan, at least ten (10) consecutive days during each three
(3) month period the principal amount outstanding under such revolving
loan must be zero (0).
1.3 COLLATERAL. The payment and performance of all obligations of
Borrower under the Loan Documents is and shall be during the term of the
Loan secured by a perfected security interest in such real or personal
property collateral as is required by Bank and each security interest
shall rank in first priority unless otherwise specified in writing by
Bank.
1.4 GUARANTY. The payment and performance of all obligations of Borrower
under the Loan Documents are and shall be during the term of the Loan
guaranteed by: Xxxxx Xxxxxx and Xxxxxx Family Trust.
2. CONDITIONS TO AVAILABILITY OF THE LOAN. Before Bank is obligated to
disburse all or any portion of the Loan, Bank must have received (a) the Note
and every other document required by Bank in connection with the Loan, each of
which must be in form and substance satisfactory to Bank (together with this
Agreement, referred to as the "Loan Documents"), (b) confirmation of the
perfection of its security interest in any collateral for the Loan, and (c)
payment of any fee required in connection with the Loan.
3. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants (and
each request for a disbursement of the proceeds of the Loan shall be deemed a
representation and warranty made on the date of such request) that:
3.1 Borrower is an individual or Borrower is duly organized and existing
under the laws of the state of its organization and is duly qualified to
conduct business in each jurisdiction in which its business is
conducted;
3.2 The execution, delivery and performance of the Loan Documents
executed by Borrower are within Borrower's power, have been duly
authorized, are legal, valid and binding obligations of Borrower, and
are not in conflict with the terms of any charter, bylaw, or other
organization papers of Borrower or with any law, indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is bound
or affected;
3.3 All financial statements and other financial information submitted
by Borrower to Bank are true and correct in all material respects, and
there has been no material adverse change in Borrower's financial
condition since the date of the latest of such financial statements;
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3.4 Borrower is properly licensed and in good standing in each state in
which Borrower is doing business, and Borrower has complied with all
laws and regulations affecting Borrower, including without limitation,
each applicable fictitious business name statute;
3.5 There is no event which is, or with notice or lapse of time or both
would be, an Event of Default (as defined in Article 5);
3.6 Borrower is not engaged in the business of extending credit for the
purpose of, and no part of the Loan will be used, directly or
indirectly, for purchasing or carrying margin stock within the meaning
of Federal Reserve Board Regulation U; and
3.7 Borrower is not aware of any fact, occurrence or circumstance which
Borrower has not disclosed to Bank in writing which has, or could
reasonably be expected to have, a material adverse effect on Borrower's
ability to repay the Loan or perform its obligations under the Loan
Documents.
4. COVENANTS. Borrower agrees, so long as the Loan or any commitment to
make any advance under the Loan is outstanding and until full and final payment
of all sums outstanding under any Loan Document, that Borrower will:
4.1 Maintain:
(a) A quick ratio of not less than 1.00:1.00 (As used herein
"quick ratio" means cash plus accounts receivable minus
receivable from Computer Geeks Discount Outlet, Inc. divided by
current liabilities);
(b) Tangible Net Worth of not less than Three Million Dollars
($3,000,000). (As used herein "Tangible Net Worth" means net
worth increased by indebtedness of Borrower subordinated to Bank
and decreased by patents, licenses, trademarks, trade names,
goodwill and other similar intangible assets, organizational
expenses, and monies due from affiliates including officers,
shareholders and directors);
(c) A ratio of total liabilities to Tangible Net Worth of not
greater than 1.00:1.00.;
(d) Eighty percent (80%) of net profit after all tax payments, to
be measured as of the end of each fiscal year end of Borrower,
for the twelve (12) month period immediately preceding the date
of measurement;
(e) Accounts Receivable from Computer Geeks Discount Outlet, Inc.
not to exceed Six Hundred Fifty Thousand Dollars ($650,000).
All accounting terms used in this Agreement shall have the definitions given
them by generally accepted accounting principles, unless otherwise defined
herein.
4.2 Give written notice to Bank within fifteen (15) days of the
following:
(a) Any litigation or arbitration proceeding affecting Borrower
where the amount in controversy is One Hundred Thousand
($100,000) or more;
(b) Any material dispute which may exist between Borrower and any
government regulatory body or law enforcement body;
(c) Any Event of Default or any event which, upon notice, or
lapse of time, or both, would become an Event of Default;
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(d) Any other matter which has resulted or is likely to result in
a material adverse change in Borrower's financial condition or
operation; and
(e) Any change in Borrower's name or the location of 'Borrower's
principal place of business, or the location of any collateral
for the Loan, or the establishment of any new place of business
or the discontinuance of any existing place of business.
4.3 Furnish to Bank an income statement, balance sheet, and statement of
retained earnings, with supportive schedules ("Financial Statement"),
and any other financial information requested by Bank, prepared in
accordance with generally accepted accounting principles and in a form
satisfactory to Bank as follows:
(a) Within thirty (30) days after the close of each quarter
except for the final quarter of each fiscal year, Borrower's
internally prepared balance sheet as of the close of such fiscal
quarter, Borrower's internally prepared income and expense
statement with supportive schedules and statement of retained
earnings for that fiscal quarter;
(b) Within one hundred fifty (150) days after the close of each
fiscal year, a copy of Borrower's statement of financial
condition including at least Borrower's balance sheet as of the
close of such fiscal year, Borrower's income and expense
statement and retained earnings statement for such fiscal year,
examined and prepared on an audited basis by independent
certified public accountants selected by Borrower and reasonably
satisfactory to Bank, in accordance with generally accepted
accounting principles applied on a basis consistent with that of
the previous fiscal year;
(c) Within one hundred twenty (120) days after the close of each
fiscal year, a copy of each guarantor's annual financial
statement;
(d) Within thirty (30) days after each calendar quarter end, a
copy of Borrower's quarterly accounts receivable and accounts
payable agings and inventory reports;
(e) Promptly upon request, any other financial information
requested by Bank;
(f) Within thirty (30) days after the close of each quarter
except for the final quarter of each fiscal year, Computer Geeks
Discount Outlet, Inc.'s internally prepared balance sheet as of
the close of such fiscal quarter, Computer Geeks Discount Outlet,
Inc.'s internally prepared income and expense statement with
supportive schedules and statement of retained earnings for that
fiscal quarter; and
(g) Within one hundred fifty (150) days after the close of each
fiscal year, a copy of Computer Geeks Discount Outlet, Inc.'s
statement of financial condition including at least Computer
Geeks Discount Outlet, Inc.'s balance sheet as of the close of
such fiscal year, Computer Geeks Discount Outlet, Inc.'s income
and expense statement and retained earnings statement for such
fiscal year, examined and prepared on an audited basis by
independent certified public accountants selected by Computer
Geeks Discount Outlet, Inc. and reasonably satisfactory to Bank,
in accordance with generally accepted accounting principles
applied on a basis consistent with that of the previous fiscal
year.
4.4 Furnish to Bank, on Bank's request, a copy of each guarantor's most
recently filed federal income tax return with all accompanying
schedules.
4.5 Pay or reimburse Bank for all costs, expenses and fees incurred by
Bank in preparing and documenting this Agreement and the Loan, and all
amendments and modifications thereof, including but not limited to all
filing and recording fees, costs of appraisals, insurance and attorney's
fees, including the reasonable estimate of the allocated costs and
expenses of in-house legal counsel and staff.
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4.6 Maintain and preserve Borrower's existence, present form of business
and all rights, privileges and franchises necessary or desirable in the
normal course of its business, and keep all of Borrower's properties in
good working order and condition.
4.7 Maintain and keep in force insurance with companies acceptable to
Bank and in such amounts and types, including without limitation fire
and public liability insurance, as is usual in the business carried on
by Borrower, or as Bank may reasonably request. Such insurance policies
must be in form and substance satisfactory to Bank.
4.8 Maintain adequate books, accounts and records and prepare all
financial statements required hereunder in accordance with generally
accepted accounting principles, and in compliance with the regulations
of any governmental regulatory body having jurisdiction over Borrower or
Borrower's business and permit employees or agents of Bank at any
reasonable time to inspect Borrower's assets and properties, and to
examine or audit Borrower's books, accounts and records and make copies
and memoranda thereof.
4.9 At all times comply with, or cause to be complied with, all laws,
statutes, rules, regulations, orders and directions of any governmental
authority having jurisdiction over Borrower or Borrower's business, and
all material agreements to which Borrower is a party.
4.10 Except as provided in this Agreement, or in the ordinary course of
its business as currently conducted, not make any loans or advances,
become a guarantor or surety, pledge its credit or properties in any
manner, or extend credit.
4.11 Not purchase the debt or equity of another person or entity except
for savings accounts and certificates of deposit of Bank, direct U.S.
Government obligations and commercial paper issued by corporations with
top ratings of Xxxxx'x or Standard & Poor's, provided that all such
permitted investments shall mature within one year of purchase.
4.12 Not create, assume or suffer to exist any mortgage, encumbrance,
security interest, pledge or lien ("Lien"') on Borrower's real or
personal property, whether nor owned or hereafter acquired, or upon the
income or profits thereof except the following: (a) Liens in favor of
Bank, (b) Liens for taxes or other items not delinquent or contested in
good faith, or (c) other Liens which do not exceed in the aggregate Five
Hundred Thousand Dollars ($500,000) at any one time.
4.13 Not sell or discount any account receivable or evidence of
indebtedness, except to Bank or not borrow any money or become
contingently liable for money borrowed, except pursuant to agreements
made with Bank.
4.14 Neither liquidate, dissolve, enter into any consolidation, merger,
partnership, or other combination; nor convey, sell or lease all or the
greater part of its assets or business; nor purchase or lease all or the
greater part of the assets or business of another.
4.15 Not engage in any business activities or operations substantially
different from or unrelated to present business activities and
operations.
4.16 Not, in any single fiscal year of Borrower, expend or incur
obligations of more than Twenty Five Thousand Dollars ($25,000) for the
acquisition of fixed or capital assets.
4.17 Not, in any single fiscal year of Borrower, enter into any lease of
real or personal property which would cause Borrower's aggregate annual
obligations under all such real and personal property leases to exceed
Twenty Five Thousand Dollars ($25,000).
4.18 Borrower will promptly, upon demand by Bank, take such further
action and execute all such additional documents and instruments in
connection with this Agreement as Bank in its reasonable
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discretion deems necessary, and promptly supply Bank with such other
information concerning its affairs as Bank may request from time to
time.
5. EVENTS OF DEFAULT. The occurrence of any of the following events
("Events of Default") shall terminate any obligation on the part of Bank to make
or continue the Loan and automatically, unless otherwise provided under the Loan
Documents, shall make all sums of interest and principal and any other amounts
owing under the Loan immediately due and payable, without notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor,
or any other notices or demands:
5.1 Borrower shall default in the due and punctual payment of the
principal of or the interest on the Note or any of the Loan Documents;
5.2 Any default shall occur under the Note;
5.3 Borrower shall default in the due performance or observance of any
covenant or condition of the Loan Documents;
5.4 Any guaranty or subordination agreement required hereunder is
breached or becomes ineffective, or any guarantor or subordinating
creditor dies or disavows or attempts to revoke or terminate such
guaranty or subordination agreement; or
5.5 There is a change in ownership or control of ten percent (10%) or
more of the issued and outstanding stock of Borrower or any guarantor,
or (if the Borrower is a partnership) there is a change in ownership or
control of any general partner's interest.
6. MISCELLANEOUS.
6.1 The rights, powers and remedies given to Bank hereunder shall be
cumulative and not alternative and shall be in addition to all rights,
powers, and remedies given to Bank by law against Borrower or any other
person, including but not limited to Bank's rights of setoff or banker's
lien.
6.2 Any forbearance or failure or delay by Bank in exercising any right,
power or remedy hereunder shall not be deemed a waiver thereof and any
single or partial exercise of any right, power or remedy shall not
preclude the further exercise thereof. No waiver shall be effective
unless it is in writing and signed by an officer of Bank.
6.3 The benefits of this Agreement shall inure to the successors and
assigns of Bank and the permitted successors and assignees of Borrower,
and any assignment by Borrower without Bank's consent shall be null and
void.
6.4 This Agreement and all other agreements and instruments required by
Bank in connection herewith shall be governed by and construed according
to the laws of the State of California.
6.5 Should any one or more provisions of this Agreement be determined to
be illegal or unenforceable, all other provisions nevertheless shall be
effective. In the event of conflict between the provisions of this
Agreement and the provisions of any note or reimbursement agreement
evidencing any indebtedness hereunder, the provisions of such note or
reimbursement agreement shall prevail.
6.6 Except for documents and instruments specifically referenced herein,
this Agreement constitutes the entire agreement between Bank and
Borrower regarding the Loan and all prior communications, verbal or
written, between Borrower and Bank shall be of no further effect or
evidentiary value.
6.7 The section and subsection headings herein are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
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6.8 This Agreement may be amended only in writing signed by all parties
hereto.
6.9 Borrower and Bank may execute one or more counterparts to this
Agreement, each of which shall be deemed an original, but taken together
shall be one and the same instrument.
6.10 Any notices or other communications provided for or allowed
hereunder shall be effective only when given by one of the following
methods and addressed to the respective party at its address given with
the signatures at the end of this Agreement and shall be considered to
have been validly given: (a) upon delivery, if delivered personally; (b)
upon receipt, if mailed, first class postage prepaid, with the United
States Postal Service; (c) on the next business day if sent by overnight
courier service of recognized standing; and (d) upon telephoned
confirmation of receipt, if telecopied.
7. ADDITIONAL PROVISIONS. The following additional provision, if any, are
hereby made part of this Agreement:
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
September 15, 1998.
EVER-TEK COMPUTER CORPORATION
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
Title: President
Address to where notices to Borrower are to be sent:
0000 Xxxxxx Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Tel # 000-000-0000
Fax # 000-000-0000
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Xxxxxxx Xxxxxxxx
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Xxxxxxx Xxxxxxxx
Title: Vice President
Address to where notices to Bank are to be sent:
000 "X" Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Tel # 000-000-0000
Fax # 000-000-0000
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