EXHIBIT 10.24
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement"), dated as of the 29th
day of October, 1999, is made and entered into on the terms and conditions
hereinafter set forth, by and among NOR'EASTER MICRO, INC., a Nevada corporation
with principal offices at 000 Xxxxxx Xxxx, Xxxxxxxx, Xxx Xxxxxxxxx 00000
("Borrower"), EUROPEAN MICRO HOLDINGS, INC., a Nevada corporation ("European
Micro"), AMERICAN MICRO COMPUTER CENTER, INC., a Florida corporation ("American
Micro"; European Micro and American Micro are sometimes hereinafter collectively
referred to as "Guarantors"), and SOUTHTRUST BANK, NATIONAL ASSOCIATION, a
national banking association with offices in Nashville, Tennessee ("Lender").
WHEREAS, Borrower has requested that Lender make available to Borrower
a line of credit in the original principal amount not exceeding $1,500,000 (the
"Loan") on the terms and conditions hereinafter set forth, and for the
purpose(s) hereinafter set forth; and
WHEREAS, in order to induce Lender to make the Loan to Borrower,
Borrower and Guarantors have made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and inducements
of Borrower and Guarantors, has agreed to make the Loan upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrower, Guarantors and Lender hereby agree as follows:
ARTICLE
DEFINITIONS
As used in this Agreement, the following terms shall have the indicated
meanings:
"Base Rate" shall mean per annum the rate of interest periodically
designated by Lender as its Base Rate. Base Rate does not necessarily represent
the lowest rate charged by Lender. Any rate of interest calculated using the
Base Rate as a reference shall change to reflect any change in the Base Rate, as
and when the Base Rate changes.
"Borrowing Base" shall mean an aggregate amount equal to the sum of (a)
eighty-five percent (85%) of Eligible Receivables, plus (b) fifty percent (50%)
of Eligible Inventory.
"Compliance Certificate" shall have the meaning assigned to such term
in subsection 5.4(a) of this Agreement.
"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 have been outstanding
for more than ninety (90) days after the dates of the corresponding invoices,
(b) 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 ninety (90) days after the dates of the corresponding invoices, (c)
the amount by which Receivables from any account debtor (or its affiliates)
exceed twenty-five percent (25%) of Borrower's total Receivables, (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, valued at the
lesser of cost or market, with such adjustments thereto as Lender in its sole
discretion determines to be appropriate.
"Event of Default" shall have the meaning assigned to such term in
Section 7.1 of this Agreement.
"Guaranties" shall mean, collectively, one or more Continuing
Guaranties of even date herewith, executed in favor of Lender by Guarantors.
"Inventory" shall have the meaning assigned to such term in the Uniform
Commercial Code.
"Line of Credit Borrowing Limit" shall mean $1,500,000.
"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 Base Rate plus one-half percentage point (1/2%),
computed on the basis of a 360-day year, actual number of days elapsed, adjusted
daily as the Base Rate changes.
"Line of Credit Termination Date" shall mean October __, 2000.
"Loan Documents" shall mean, collectively, the Security Instruments,
together with the Note and any other instruments and documents now or hereafter
evidencing, securing or in any way related to the indebtednesses evidenced by
the Note.
"Note" shall mean that certain 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,
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evidencing the indebtedness of Borrower to Lender in connection with the Loan,
together with any and all extensions, modifications, renewals, restatements
and/or replacements thereof.
"Pledge Agreements" shall mean those two (2) certain Pledge and
Security Agreements of even date herewith, executed by Xxxx X. Xxxxxxxxx and
Xxxxx X. Xxxxxxx, in favor of Lender.
"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
Guaranties, and any other instruments, documents or agreements now or hereafter
securing the Secured Obligations, whether by specific or general reference.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect in the State of Tennessee from time to time.
ARTICLE
THE LOAN
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 Loan to Borrower
upon Borrower's request in an aggregate amount outstanding at any one time not
to exceed the lesser of (a) the Borrowing Base in effect from time to time, or
(b) the Line of Credit Borrowing Limit, 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. In the absence of an Event of Default, Borrower may repay and
reborrow amounts under the Loan in accordance with the terms, conditions and
provisions of this Agreement.
REPAYMENT. The indebtedness of Borrower to Lender in connection with
the Loan shall be evidenced by, and payable in accordance with the terms of, the
Note. Amounts outstanding under the Loan 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 Loan 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
Loan to an amount that is within such limits.
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LETTERS OF CREDIT. If and to the extent that Lender has issued or from
time to time hereafter shall issue letters of credit for the account of Borrower
pursuant to applications submitted to Lender by Borrower, it is understood and
agreed that:
() the credit availability under the Loan shall be reduced by the
aggregate undrawn amount from time to time available under outstanding
letters of credit,
() 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.
Borrower acknowledges and agrees that Lender has made no commitment to Borrower
with respect to the issuance of any such letters of credit.
COMMITMENT FEE. Upon execution of this Agreement, Borrower shall pay
to Lender a non-refundable commitment fee in the amount of $3,750.00.
PURPOSE. The purpose of the Loan shall be to provide working capital to
Borrower on a revolving basis.
ARTICLE
SECURITY
SECURITY. The Secured Obligations are and shall continue to be secured
by the following:
() 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:
() 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;
() 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
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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
() 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.
() Other Security Instruments. The Guaranties, the Pledge
Agreements and the other Security Instruments.
SECURED OBLIGATIONS. Without limiting any of the provisions thereof,
the Security Instruments shall secure:
() The full and timely payment of the indebtednesses evidenced by
the Note, together with interest thereon, and any extensions,
modifications and/or renewals thereof and any notes given in payment
thereof,
() The full and prompt performance of all of the obligations of
Borrower to Lender under the Loan Documents,
() The full and prompt payment of all expenses and costs of
whatever kind incident to the collection of the indebtednesses
evidenced by the Note, the perfection, enforcement or protection of the
security interests of the Security Instruments or the exercise by
Lender of any rights or remedies of Lender with respect to the
indebtednesses evidenced by the Note, including but not limited to
reasonable attorney's fees and expenses incurred by Lender, all of
which Borrower agrees to pay to Lender upon demand,
() The full and prompt payment of the indebtednesses and
obligations of Guarantors to Lender evidenced and/or secured by (i)
that certain Loan Agreement of even date herewith, by and among Lender,
Borrower and Guarantors, entered into in connection with that certain
term loan from Lender to European Micro in the original principal
amount of $1,500,000, and (ii) that certain Loan and Security Agreement
of even date herewith, by and among Lender, Borrower and Guarantors,
entered into in connection with that certain line of credit from Lender
to American Micro, in the maximum principal amount of $1,500,000,
together with any and all renewals, amendments and modifications
thereof; and
() The full and prompt payment and performance of any and all
other indebtednesses and other obligations of Borrower or either
Guarantor to Lender, direct or contingent (including but not limited to
obligations incurred as indorser, guarantor or surety), however
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evidenced or denominated, and however and whenever incurred, including
but not limited to indebtednesses incurred pursuant to any present or
future commitment of Lender to Borrower or either Guarantor, together
with interest thereon, and any extensions, modifications and/or
renewals thereof and any notes given in payment thereof.
All of the foregoing indebtedness and other obligations are herein collectively
referred to as the "Secured Obligations".
ARTICLE
REPRESENTATIONS AND WARRANTIES
Borrower and Guarantors hereby represent and warrant to Lender as
follows:
CORPORATE STATUS. Borrower and European Micro are corporations duly
organized, validly existing and in good standing under the laws of the State of
Nevada. American Micro is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida. Borrower and each
Guarantor has the corporate power to own and operate its properties, to carry on
its business as now conducted and to enter into and to perform its obligations
under this Agreement and the other Loan Documents to which it is a party.
Borrower and each Guarantor is duly qualified to do business and in good
standing in each state in which a failure to be so qualified would have a
material adverse effect on its financial position or its ability to conduct its
business in the manner now conducted.
AUTHORIZATION. Borrower and each Guarantor has full legal right, power
and authority to conduct its business and affairs in the manner contemplated by
the Loan Documents, and to enter into and perform its obligations thereunder,
without the consent or approval of any other person, firm, governmental agency
or other legal entity. The execution and delivery of this Agreement, the
borrowing hereunder, the execution and delivery of each Loan Document to which
Borrower or either Guarantor is a party, and the performance by Borrower and
each Guarantor of its obligations thereunder are within the corporate powers of
Borrower or Guarantors and have been duly and properly authorized by all
necessary corporate action, have received all necessary governmental approvals,
if any were required, and do not and will not contravene or conflict with any
provision of law, any applicable judgment, ordinance, regulation or order of any
court or governmental agency, the charters or by-laws of Borrower or Guarantors,
or any agreement binding upon Borrower, Guarantors or their properties. The
officer(s) executing this Agreement and all of the other Loan Documents to which
Borrower and Guarantors are a party are duly authorized to act on behalf of
Borrower and Guarantors.
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.
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OTHER TRANSACTIONS. Except as specifically set forth in this Agreement
and the other Loan Documents, there are no prior loans, liens, security
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 and Guarantors under and by virtue of the Loan Documents
will not result in any breach of, or constitute a default under, any mortgage,
security deed or agreement, deed of trust, lease, bank loan or credit agreement,
corporate charter or by-laws, agreement or certificate of limited partnership,
partnership agreement, license, franchise or any other instrument or agreement
to which Borrower or either Guarantor is a party or by which Borrower,
Guarantors or their properties may be bound or affected.
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 000 Xxxxxx Xxxx, Xxxxxxxx, Xxx
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 Schedule 4.5.
LITIGATION. There are no actions, suits or proceedings pending, or, to
the knowledge of Borrower or either Guarantor, threatened, against or affecting
Borrower or either Guarantor or involving the validity or enforceability of any
of the Loan Documents or the priority of the liens thereof, at law or in equity,
or before any governmental or administrative agency, except actions, suits and
proceedings that are fully covered by insurance and that, if adversely
determined, would not impair the ability of Borrower or Guarantors to perform
each and every one of their respective obligations under and by virtue of the
Loan Documents; and to the knowledge of Borrower and Guarantors, neither
Borrower nor either Guarantor is in default with respect to any order, writ,
injunction, decree or demand of any court or any governmental authority.
FINANCIAL STATEMENTS. The financial statement(s) of Borrower and
Guarantors heretofore delivered to Lender are true and correct in all respects,
have been prepared in accordance with generally accepted accounting principles
consistently applied, and fairly present the financial condition of the subjects
thereof as of the date(s) thereof. No material adverse change has occurred in
the financial condition of Borrower or either Guarantor since the date(s)
thereof, and no additional borrowings have been made by Borrower or either
Guarantor since the date(s) thereof.
NO DEFAULTS. No default or event of default by Borrower or Guarantors
exists under this Agreement or any of the other Loan Documents, or under any
other instrument or agreement to which Borrower or either Guarantor is a party
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or by which Borrower, Guarantors or their properties may be bound or affected,
and no event has occurred and is existing that with notice or the passage of
time or both would constitute a default or event of default thereunder.
COMPLIANCE WITH LAW. Borrower and Guarantors have obtained all
necessary licenses, permits and governmental approvals and authorizations
necessary or proper in order to conduct their business and affairs as heretofore
conducted and as intended to be conducted hereafter. To the knowledge of
Borrower and Guarantors, Borrower and Guarantors are in compliance with all
laws, regulations, decrees and orders applicable to them (including but not
limited to laws, regulations, decrees and orders relating to occupational and
health standards and controls, antitrust, monopoly, restraint of trade or unfair
competition). Neither Borrower nor either Guarantor has received, nor expects to
receive, any order or notice of any violation or claim of violation of any law,
regulation, decree, rule, judgment or order of any governmental authority or
agency relating to the ownership and/or operation of its properties, as to which
the cost of compliance is or might be material and the consequences of
noncompliance would or might be materially adverse to its business, operations,
property or financial condition, or which would or might impair its ability to
perform its obligations under the Loan Documents to which it is a party.
ENVIRONMENTAL MATTERS.
() 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 and Guarantors' assets, both
real and personal, tangible and intangible, now existing or hereafter
acquired and wherever located, and all of Borrower's and Guarantors'
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
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the use, handling or disposal of asbestos, polychlorinated biphenyls,
petroleum, petroleum derivatives or by-products, other hydrocarbons or
urea formaldehyde, to the treatment, storage, disposal or management of
Hazardous Materials, to exposure to Hazardous Materials, to the
transportation, storage, disposal, management or release of gaseous or
liquid substances, and any regulation, order, injunction, judgment,
declaration, notice or demand issued thereunder.
"HAZARDOUS MATERIALS" means any hazardous, toxic or dangerous
materials, substances, chemicals, waste or pollutants that from time to
time are defined by or pursuant to or are regulated under any
Environmental Laws, including without limitation asbestos,
polychlorinated biphenyls, petroleum, petroleum derivatives or
by-products, other hydrocarbons, urea formaldehyde and any material,
substance, pollutant or waste that is defined as a hazardous waste
under RCRA or defined as a hazardous substance under CERCLA.
"HAZARDOUS WASTES" means Hazardous Materials that are or become
"wastes" or "solid wastes" as such terms are used in RCRA.
"PROPERTY" means all real property now or hereafter constituting
a part of, or otherwise used or operated by Borrower or Guarantors in
connection with, the Business.
() Borrower and Guarantors represent and warrant to Lender as
follows:
() The Property is being operated by Borrower and Guarantors
in full compliance with Environmental Laws, and Borrower and
Guarantors have obtained, maintained and is in good standing
under all approvals, consents, certificates, licenses and permits
required by Environmental Laws with respect to the Property.
() To the knowledge of Borrower and Guarantors, the Property
is free of all Hazardous Wastes and is free of all Hazardous
Materials other than those maintained therein or thereon in full
compliance with Environmental Laws. Borrower and Guarantors have
not caused or permitted the Property to be used to generate,
manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce or process Hazardous Materials except in full
compliance with Environmental Laws.
() Neither Borrower nor either Guarantor has received
notice, nor has knowledge, of any noncompliance with or violation
of any Environmental Laws with respect to the Property or the
Business.
NO BURDENSOME RESTRICTIONS. No instrument, document or agreement to
which Borrower or either Guarantor is a party or by which it or its properties
may be bound or affected materially adversely affects, or may reasonably be
expected so to affect, its business, operations, property or financial
condition.
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TAXES. Borrower and each Guarantor has filed or caused to be filed all
tax returns that to its knowledge are required to be filed (except for returns
that are not yet due), and has paid all taxes shown to be due and payable on
said returns and all other taxes, impositions, assessments, fees or other
charges imposed on it by any governmental authority, agency or instrumentality,
prior to any delinquency with respect thereto (other than taxes, impositions,
assessments, fees and charges currently being contested in good faith by
appropriate proceedings, for which appropriate amounts have been reserved). No
tax liens have been filed against Borrower, Guarantors or any of their property.
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. 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.
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 no other
person or entity has any right, title, interest, security interest, claim or
lien with respect thereto.
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 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.
EFFECT OF REQUEST FOR ADVANCE. Each request by Borrower for an advance
of proceeds of the Loan shall constitute an affirmation by Borrower and
Guarantors 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
COVENANTS AND AGREEMENTS
Borrower and Guarantors covenant and agree that during the term of this
Agreement:
PAYMENT OF SECURED OBLIGATIONS. Borrower shall pay the indebtednesses
evidenced by the Note according to the terms thereof, and shall timely pay or
perform, as the case may be, all of the other Secured Obligations.
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, 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.
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.
FINANCIAL STATEMENTS AND REPORTS. Borrower and Guarantors shall furnish
to Lender such financial data as Lender may reasonably request. Without limiting
the foregoing, Borrower and Guarantors shall furnish to Lender (or cause to be
furnished to Lender) the following:
() as soon as practicable and in any event within ninety (90)
days after the end of each fiscal year of Borrower and Guarantors,
consolidated and consolidating balance sheets of Borrower and
Guarantors as of the close of such fiscal year, consolidated and
consolidating statements of earnings and retained earnings of Borrower
and Guarantors as of the close of such fiscal year, and consolidated
and consolidating statements of cash flows for Borrower and Guarantors
for such fiscal year, all in reasonable detail, prepared in accordance
with generally accepted accounting principles consistently applied,
audited in accordance with generally accepted auditing standards by
independent certified public accountants satisfactory to Lender in its
reasonable judgment, and accompanied by the unqualified favorable
opinion of such accountants and a certificate of the chief executive or
chief financial officers of Borrower and Guarantors, stating that, to
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the best of the knowledge of such officers, Borrower and Guarantors
have kept, observed, performed and fulfilled each covenant, term and
condition of this Agreement and the other Loan Documents during such
fiscal year and that no Event of Default hereunder has occurred and is
continuing (or if an Event of Default has occurred and is continuing,
specifying the nature of same, the period of existence of same and the
action Borrower and Guarantors propose to take in connection
therewith), and setting forth calculations of the financial covenants
set forth in Article VI of this Agreement (a "Compliance Certificate");
() within forty-five (45) days of the end of the first three
(3) fiscal quarters of each fiscal year of Borrower and Guarantors,
consolidated and consolidating balance sheets of Borrower and
Guarantors as of the close of such quarter and consolidated and
consolidating statements of earnings and retained earnings of Borrower
and Guarantors as of the close of such quarter, all in reasonable
detail, and prepared substantially in accordance with generally
accepted accounting principles consistently applied, certified by the
chief executive or chief financial officers of Borrower and Guarantors
as being true and correct, and accompanied by a Compliance Certificate;
() within thirty (30) days of the end of each calendar month,
non- consolidated balance sheets of Borrower and each Guarantor as of
the close of such month, and non-consolidated statements of earnings
and retained earnings of Borrower and each Guarantor as of the close of
such month, all in reasonable detail, and prepared substantially in
accordance with generally accepted accounting principles consistently
applied, certified by the chief executive or chief financial officers
of Borrower and Guarantors as being true and correct, and accompanied
by a Compliance Certificate;
() within fifteen (15) days of the end of each calendar month,
accounts receivable and accounts payable listings of Borrower, with
agings, and a certification of inventory of Borrower, all as of the
close of such month and all in form satisfactory to Lender, and
accompanied by a certificate in form satisfactory to Lender setting
forth a calculation of the Borrowing Base as of the close of such
month; and
() promptly upon receipt thereof, copies of all accountants'
reports and accompanying financial reports submitted to Borrower or
either Guarantor by independent accountants in connection with each
annual examination of Borrower and Guarantors.
Maintenance of Books and Records; Inspection. Borrower and Guarantors
shall maintain their 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 their properties (including but not limited
to the collateral security described in the Security Instruments), corporate
books and financial records, and to discuss their accounts, affairs and finances
with any employee, officer or director thereof.
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INSURANCE. Without limiting any of the requirements of any of the other
Loan Documents, Borrower shall maintain, in amounts satisfactory to Lender (a)
public liability insurance, (b) worker's compensation insurance (or maintain a
legally sufficient amount of self insurance against worker's compensation
liabilities, with adequate reserves, under a plan approved by Lender), (c) fire
and "all risk" casualty insurance on its properties (including but not limited
to the collateral security now or hereafter securing payment and performance of
the Secured Obligations), against such hazards and in at least such amounts as
are customary in the type of business in which Borrower is engaged, and (d) rent
or business interruption insurance against loss of income arising out of damage
or destruction by such hazards as presently are included in so called "all risk
coverage". At the request of Lender, Borrower will deliver forthwith a
certificate, executed by a duly authorized representative of the insurer(s),
specifying the details of such insurance in effect.
All policies of insurance shall provide that at least thirty (30) days'
prior written notice of cancellation or modification of the policy shall be
given to Lender by the insurer, and all policies of casualty insurance covering
any tangible security for the Secured Obligations shall be payable to Borrower
and Lender as their respective interests may appear. Borrower agrees that there
shall be no recourse against Lender for the payment of premiums, commissions,
assessments or advances in respect of any such policy, and at Lender's request
shall provide Lender with the agreement of the insurer(s) to this effect.
At the request of Lender, all policies of casualty insurance covering
any tangible security for the Secured Obligations shall be delivered to and held
by Lender. Borrower shall act expeditiously in the adjustment and settlement of
claims under such policies in order to preserve the greatest possible value
reasonably obtainable in respect of such claims. Following the occurrence of an
Event of Default, Lender may, at its option, act as attorney in fact for
Borrower in adjusting and settling claims under such insurance and endorsing any
drafts with respect thereto, and this power, being coupled with an interest,
shall be irrevocable prior to payment in full of the indebtednesses evidenced by
the Note and performance of all of the obligations of Borrower to Lender in
connection therewith, and any insurer is hereby instructed to rely upon Lender's
representation that an Event of Default has occurred hereunder without further
inquiry or investigation.
TAXES AND ASSESSMENTS; TAX INDEMNITY. Borrower and each Guarantor shall
(a) file all tax returns and appropriate schedules thereto that are required to
be filed under applicable law, prior to the date of delinquency, (b) pay and
discharge all taxes, assessments and governmental charges or levies imposed upon
Borrower or either Guarantor, upon its income and profits or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and (c)
pay all taxes, assessments and governmental charges or levies that, if unpaid,
might become a lien or charge upon any of its properties; provided, however,
that Borrower and Guarantors in good faith may contest any such tax, assessment,
governmental charge or levy described in the foregoing clauses (b) and (c) so
long as appropriate reserves are maintained with respect thereto. 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
13
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.
CORPORATE EXISTENCE. Borrower and each Guarantor shall maintain its
corporate existence and good standing in the state of its incorporation, and its
qualification and good standing as a foreign corporation in each jurisdiction in
which such qualification is necessary pursuant to applicable law.
COMPLIANCE WITH LAW AND OTHER AGREEMENTS. Borrower and each Guarantor
shall maintain its business operations and property owned or used in connection
therewith in compliance with (a) all applicable federal, state and local laws,
regulations and ordinances governing such business operations and the use and
ownership of such property, and (b) all agreements, licenses, franchises,
indentures and mortgages to which Borrower or either Guarantor is a party or by
which Borrower, either Guarantor or any of their properties is bound. Without
limiting the foregoing, Borrower and each Guarantor shall pay all of its
indebtedness promptly in accordance with the terms thereof.
NOTICE OF DEFAULT. Borrower and Guarantors shall give written notice to
Lender of the occurrence of any default, event of default or Event of Default
under this Agreement or any other Loan Document promptly upon the occurrence
thereof.
NOTICE OF LITIGATION. Borrower and Guarantors shall give notice, in
writing, to Lender of (a) any actions, suits or proceedings wherein the amount
at issue is in excess of $250,000, instituted by any persons against Borrower or
either Guarantor, or affecting any of the assets of Borrower or either
Guarantor, and (b) any dispute, not resolved within sixty (60) days of the
commencement thereof, between Borrower or either Guarantor on the one hand and
any governmental or regulatory body on the other hand, which might reasonably be
expected to have a material adverse effect on the business operations or
financial condition of Borrower or either Guarantor.
ENVIRONMENTAL MATTERS.
() Borrower and Guarantors will cause the Property to remain free
of all Hazardous Wastes, and to remain free of all Hazardous Materials
other than those maintained therein or thereon in full compliance with
Environmental Laws. Neither Borrower nor either Guarantor will cause or
permit the Property to be used to generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce or process
Hazardous Materials except in full compliance with Environmental Laws.
() Borrower and Guarantors will notify Lender immediately if they
receive any notice or obtain knowledge of any noncompliance with or
violation of any Environmental Laws with respect to the Property or the
Business.
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() In the event that Hazardous Materials unrelated to the
Business, or Hazardous Wastes, are discovered on or are brought onto
the Property, Borrower and Guarantors will cause such Hazardous
Materials or Hazardous Wastes to be removed and disposed of promptly
and in full compliance with Environmental Laws. Borrower and Guarantors
will provide Lender prior written notice of such removal and disposal
actions.
() Borrower and Guarantors will comply with all Environmental
Laws in all jurisdictions in which Borrower or either Guarantor
operates, now or in the future, and will comply with all Environmental
Laws that in the future become applicable to the Property or the
Business.
MERGERS, CONSOLIDATIONS, ACQUISITIONS AND SALES. Without the prior
express written consent of Lender, neither Borrower nor either Guarantor shall
(a) be a party to any merger, consolidation or corporate reorganization, (b)
purchase or otherwise acquire all or substantially all of the assets or stock
of, or any partnership or joint venture interest in, any other person, firm or
entity, (c) sell, transfer, convey, grant a security interest in or lease all or
any substantial part of its assets, nor (d) create any subsidiaries nor convey
any of its assets to any subsidiary; provided, however, Borrower or either
Guarantor may make acquisitions of all or substantially all of the stock or
assets of other entities, so long as (i) no Event of Default exists hereunder,
(ii) the purchase price payable in connection with each such acquisition,
including the fair market value of any non-cash consideration, does not exceed
$5,000,000, and (iii) any subsidiary of Borrower or either Corporate Guarantor
created or acquired in connection with any such acquisition shall guarantee the
indebtedness of Borrower to Lender and grant Lender a security interest in all
of its assets to secure its obligations and the obligations of Borrower to
Lender, all pursuant to documentation in form and substance satisfactory to
Lender in all respects.
MANAGEMENT, OWNERSHIP. Neither Borrower nor either Guarantor shall
permit any significant change in its ownership, executive staff or management
without the prior written consent of Lender. The ownership, executive staff and
management of Borrower and Guarantors are material factors in Lender's
willingness to institute and maintain a lending relationship with Borrower.
DIVIDENDS, ETC. Neither Borrower nor either Guarantor shall declare or
pay any dividend of any kind, in cash or in property, on any class of its
capital stock, nor purchase, redeem, retire or otherwise acquire for value any
shares of such stock, nor make any distribution of any kind in respect thereof,
nor make any return of capital to shareholders, nor make any payments in respect
of any pension, profit sharing, retirement, stock option, stock bonus, incentive
compensation or similar plan (except as required or permitted hereunder),
without the prior written consent of Lender. Without limiting the foregoing, not
less than seventy-five percent (75%) of the net proceeds of any equity offering
by Borrower or either Guarantor shall be retained and shall not be paid out as
dividends or otherwise distributed to shareholders.
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GUARANTIES; LOANS. Neither Borrower nor either Guarantor shall
guarantee nor be liable in any manner, whether directly or indirectly, or become
contingently liable after the date of this Agreement in connection with the
obligations or indebtedness of any person or persons, except for the indorsement
of negotiable instruments payable to Borrower or Guarantors for deposit or
collection in the ordinary course of business. Neither Borrower nor either
Guarantor shall make any loan, advance or extension of credit to any person
other than in the normal course of its business.
DEBT. Neither Borrower nor either Guarantor shall create, incur, assume
or suffer to exist indebtedness of any description whatsoever in an aggregate
amount in excess of $250,000 (excluding the indebtedness evidenced by the Note,
trade accounts payable and accrued expenses incurred in the ordinary course of
business and the indorsement of negotiable instruments payable to Borrower or
Guarantors for deposit or collection in the ordinary course of business).
CONDUCT OF BUSINESS. Borrower and Guarantors will continue to engage,
in an efficient and economical manner, in a business of the same general type as
conducted by them on the date of this Agreement.
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.
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. 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.
SPECIAL AGREEMENTS OF BORROWER WITH RESPECT TO RECEIVABLES AND
INVENTORY.
() 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
16
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.
() If requested by Lender following the occurrence of an Event
of Default, 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 Loan, in such order of priority as Lender shall determine. Any
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.
() Without limiting the provisions of subsection 5.21(b)
hereof, Borrower acknowledges and agrees that, upon the occurrences of
an Event of Default, 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.
() Lender shall be privileged to enjoy all the rights and
remedies of Borrower as to the Receivables and shall be and become
18
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.
() Borrower shall notify Lender promptly of all returns and
recoveries of merchandise and of all disputes and claims where the
amount at issue exceeds $25,000 in the aggregate, 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 Loan with only the net
amounts received by Borrower in payment of Receivables.
() 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. This power, being coupled with an interest, is irrevocable
so long as any money remains owing to Lender from Borrower.
() 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
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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.
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 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.
ERISA PLAN. If Borrower has in effect, or hereafter institutes (with
Lender's consent, as hereinafter provided), a pension plan that is subject to
the requirements of Title IV of the Employee Retirement Income Security Act of
1974, Pub. L. No. 93 406, September 2, 1974, 00 Xxxx. 000, 00 X.X.X.X. ss. 1001
et seq. (1975), as amended from time to time ("ERISA"), then the following
warranty and covenants shall be applicable during such period as any such plan
(the "Plan") shall be in effect: (a) Borrower hereby warrants that no fact that
might constitute grounds for the involuntary termination of the Plan, or for the
appointment by the appropriate United States District Court of a trustee to
administer the Plan, exists at the time of execution of this Agreement, (b)
Borrower hereby covenants that throughout the existence of the Plan, Borrower's
contributions under the Plan will meet the minimum funding standards required by
ERISA and Borrower will not institute a distress termination of the Plan, (c)
Borrower hereby covenants that the Plan's annual financial and actuarial
statements and the Plan's annual Form 5500 information return will be filed with
Lender within thirty (30) days of the preparation thereof, and (d) Borrower
covenants that it will send to Lender a copy of any notice of a reportable event
(as defined in ERISA) required by ERISA to be filed with the Labor Department or
the Pension Benefit Guaranty Corporation, at the time that such notice is so
filed.
No Plan shall be instituted by Borrower unless Lender shall have given
its written consent thereto.
ARTICLE
FINANCIAL COVENANTS
NET WORTH REQUIREMENTS. Borrower and Guarantors shall at all times
maintain a minimum tangible net worth of $12,000,000, calculated on a
consolidated basis. For purposes of this covenant, "tangible net worth" shall
refer to the excess of Borrower's and Guarantors' total assets above the sum of
their intangible assets plus total liabilities (exclusive of any debt
19
subordinated to indebtedness of Borrower or Guarantors to Lender), all
determined in accordance with generally accepted accounting principles
consistently applied.
DEBT TO WORTH RATIO. Borrower and Guarantors shall at all times
maintain a ratio of total liabilities (exclusive of any debt subordinated to
indebtedness of Borrower or Guarantors to Lender) to tangible net worth of not
more than 2.0 to 1.0, calculated on a consolidated basis. For purposes of this
covenant, "tangible net worth" shall have the meaning set forth in Section 6.1
hereof.
INTEREST COVERAGE RATIO. Borrower and Guarantors shall maintain a ratio
of earnings before interest and taxes to interest expense, all determined in
accordance with generally accepted accounting principles consistently applied,
calculated on a consolidated basis as of the last day of each September,
December, March and June, for the then-previous twelve-month period (beginning
September 30, 1999), of not less than 4.0 to 1.0.
ARTICLE
DEFAULT AND REMEDIES
EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an Event of Default hereunder:
() Failure to make payment of the principal of or interest on the
indebtedness evidenced by the Note within five (5) days of when due;
() Any misrepresentation by Borrower or either Guarantor as to
any material matter hereunder or under any of the other Loan Documents,
or delivery by Borrower or either Guarantor of any schedule, statement,
resolution, report, certificate, notice or writing to Lender that is
untrue in any material respect on the date as of which the facts set
forth therein are stated or certified;
() Failure of Borrower or any Guarantor to perform any of its
obligations under Sections 5.7, 5.9 or 5.12 of this Agreement within
fifteen (15) days after the earlier of (i) written notice from Lender
to Borrower of such failure to perform, or (ii) the date Borrower
becomes aware of such failure to perform;
() Failure of Borrower or either Guarantor to perform any other
of its obligations under this Agreement, the Note, any of the Security
Instruments or any of the other Loan Documents;
() Borrower or either 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,
20
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; or (iv) shall have had any such petition or
application filed or any such proceeding or case commenced against it
in which an order for relief is entered or an adjudication or
appointment is made; or (v) shall indicate, by any act or omission, its
consent to, approval of or acquiescence in any such petition,
application, case, proceeding or order for relief or the appointment of
a custodian, receiver or trustee for it or a substantial part of its
assets; or (vi) shall suffer any such custodianship, receivership or
trusteeship to continue undischarged for a period of thirty (30) days
or more;
() Borrower or either Guarantor shall be liquidated, dissolved,
partitioned or terminated, or the charter or certificate of authority
thereof shall expire or be revoked;
() A default or event of default shall occur under any of the
other Loan Documents;
() Borrower or either 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 either
Guarantor now or hereafter owed to Lender;
() Lender shall reasonably suspect the occurrence of one or more
of the aforesaid events of default and Borrower, upon the written
request of Lender, shall fail to provide evidence reasonably
satisfactory to Lender that such event or events of default have not in
fact occurred; or
() Lender in good faith shall deem itself insecure.
ACCELERATION OF MATURITY; REMEDIES. Upon the occurrence of any Event of
Default described in subsection 7.1(d) hereof as it relates to Borrower, the
indebtednesses evidenced by the Note as well as any and all other indebtedness
of Borrower to Lender shall be immediately due and payable in full; and upon the
occurrence of any other Event of Default described above (including but not
limited to subsection 7.1(d) hereof as it relates to any Guarantor), Lender at
any time thereafter may at its option accelerate the maturity of the
indebtednesses evidenced by the Note as well as any and all other indebtedness
of Borrower to Lender; all without notice of any kind. Upon the occurrence of
any such Event of Default and the acceleration of the maturity of the
indebtednesses evidenced by the Note:
() any obligation of Lender to advance any proceeds under the
Loan 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;
() Lender shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code; and
21
() Lender shall have any and all other rights and remedies that
Lender may now or hereafter possess at law, in equity or by statute.
RIGHT OF SETOFF. Without limitation of the foregoing, upon the
occurrence and during the continuance of any Event of Default, Lender is hereby
authorized at any time and from time to time, without notice to Borrower or
Guarantors (any such notice being expressly waived by Borrower and Guarantors),
to set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by Lender or any of its affiliates, and
any other indebtedness at any time owing by Lender or its affiliates to or for
the credit or the account of Borrower or Guarantors, against any and all of the
Secured Obligations, irrespective of whether Lender shall have made any demand
under this Agreement or the Note or any other Loan Document and although such
obligations may be unmatured. Lender agrees to notify Borrower or Guarantors (as
applicable) within a reasonable time after any such setoff and application;
provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of Lender under this Section 7.3 are in
addition to any other rights and remedies (including, without limitation, other
rights of setoff) that Lender may have.
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.
PROCEEDS OF REMEDIES. Any or all proceeds resulting from the exercise
of any or all of the foregoing remedies shall be applied as set forth in the
Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
First, to the costs and expenses, including reasonable
attorney's fees and expenses, incurred by Lender in connection with the
exercise of its remedies;
Second, to the expenses of curing the default that has
occurred, in the event that Lender elects, in its sole discretion, to
cure the default that has occurred;
Third, to the payment of the Secured Obligations, including
but not limited to the payment of the principal of and interest on the
indebtednesses evidenced by the Note, in such order of priority as
Lender shall determine in its sole discretion; and
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Fourth, the remainder, if any, to Borrower or to any other
person lawfully thereunto entitled.
ARTICLE
MISCELLANEOUS
INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or otherwise would be within the limitations of, another covenant shall not
avoid the occurrence of an Event of Default if such action is taken or condition
exists.
PERFORMANCE BY LENDER.
() 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.
() If Borrower or Guarantors shall default in the payment,
performance or observance of any covenant, term or condition of this
Agreement, Lender may, at its option, pay, perform or observe the same,
and all payments made or costs or expenses incurred by Lender in
connection therewith (including but not limited to reasonable
attorney's fees and expenses), with interest thereon at the default
rate provided in the Note (if none, then at the maximum rate from time
to time allowed by applicable law), shall be immediately repaid to
Lender by Borrower and Guarantors and shall constitute a part of the
Secured Obligations and be secured hereby until fully repaid. Lender
shall determine at its sole discretion the necessity for any such
actions and of the amounts to be paid.
COSTS AND EXPENSES. Borrower agrees to pay all costs and expenses
incurred by Lender in connection with the making of the Loan, including but not
limited to filing fees, recording taxes and reasonable attorney's fees and
expenses, promptly upon demand of Lender. Borrower further agrees to pay all
premiums for insurance required to be maintained pursuant to the terms of the
Loan Documents and all of the out-of-pocket costs and expenses incurred by
Lender in connection with the administration, servicing and/or collection of the
Loan, including but not limited to reasonable attorney's fees and expenses,
promptly upon demand of Lender.
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
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such holder and/or assignee of the same shall succeed to and be possessed of the
rights and powers of Lender under all of the same to the extent transferred and
assigned. Lender may grant participations in all or any portion of its interest
in the indebtednesses evidenced by the Note. Borrower shall not assign any of
its rights nor delegate any of its duties hereunder or under any of the other
Loan Documents without the prior express written consent of Lender.
SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Subject to the provisions
of Section 8.4 hereof, whenever in this Agreement one of the parties hereto is
named or referred to, the heirs, legal representatives, successors,
successors-in-title and assigns of such parties shall be included, and all
covenants and agreements contained in this Agreement by or on behalf of Borrower
or by or on behalf of Lender shall bind and inure to the benefit of their
respective heirs, legal representatives, successors-in-title and assigns,
whether so expressed or not.
THIRD PARTY BENEFICIARIES. This Agreement and the other Loan Documents
are intended for the sole and exclusive benefit of the parties hereto and their
respective successors and permitted assigns, and shall not serve to confer any
rights or benefits in favor of any person not a party hereto. No other person
shall have any right to rely on this Agreement or the other Loan Documents, or
to derive any benefit herefrom.
TIME OF THE ESSENCE. Time is of the essence with respect to each and
every covenant, agreement and obligation of Borrower and Guarantors hereunder
and under all of the other Loan Documents.
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.
INTEREST AND LOAN CHARGES NOT TO EXCEED MAXIMUM ALLOWED BY LAW.
Anything in this Agreement, the Note, the Security Instruments or any of the
other Loan Documents to the contrary notwithstanding, in no event whatsoever,
whether by reason of advancement of proceeds of the Loan, acceleration of the
maturity of the unpaid balance of the Loan or otherwise, shall the interest and
loan charges agreed to be paid to Lender for the use of the money advanced or to
be advanced hereunder exceed the maximum amounts collectible under applicable
laws in effect from time to time. It is understood and agreed by the parties
that, if for any reason whatsoever the interest or loan charges paid or
contracted to be paid by Borrower in respect of the indebtednesses evidenced by
the Note shall exceed the maximum amounts collectible under applicable laws in
effect from time to time, then ipso facto, the obligation to pay such interest
and/or loan charges shall be reduced to the maximum amounts collectible under
applicable laws in effect from time to time, and any amounts collected by Lender
that exceed such maximum amounts shall be applied to the reduction of the
principal balance(s) of the indebtednesses evidenced by the Note and/or refunded
to Borrower so that at no time shall the interest or loan charges paid or
payable in respect of the indebtednesses evidenced by the Note exceed the
maximum amounts permitted from time to time by applicable law.
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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.
NOTICES. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing and shall be
delivered personally, telecopied or sent by certified mail or nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
by the party whose address is being changed and of which receipt has been
acknowledged in writing. The date of personal delivery or telecopy or the date
of mailing (or delivery to such courier service), as the case may be, shall be
the date of such notice, election or demand. For the purposes of this Agreement:
The address of Lender is:
SouthTrust Bank, National Association
000 Xxxxxx Xxxxxx Xxxxx
0xx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Telecopy Number: 615/880-4004
with a copy to:
Bass, Xxxxx & Xxxx PLC
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, III
Telecopy Number: 615/742-2728
The address of Borrower is:
Nor'easter Micro, Inc.
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxx Xxxx
Telecopy Number: 615/254-9318
with a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
Miami Center, 20th Floor
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopy Number: 305/358-7095
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The addresses of Guarantors are:
European Micro Holdings, Inc.
0000 X.X. 000xx Xxxxxx, Xxxx X-00
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxx
Telecopy Number: 305/825-7774
American Micro Computer Center, Inc.
0000 X.X. 000xx Xxxxxx, Xxxx X-00
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxx
Telecopy Number: 305/825-7774
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.
INDEMNITY. Borrower and Guarantors hereby agree to defend, indemnify,
and hold Lender harmless from and against any and all claims, damages,
judgments, penalties, costs and expenses (including reasonable attorney's fees
and expenses and court costs now or hereafter arising from the aforesaid
enforcement of this clause) arising directly or indirectly from the activities
of Borrower or Guarantors, their predecessors in interests, or third parties
with whom they have a contractual relationship, or arising directly or
indirectly from the violation of any law, whether such claims are asserted by
any governmental agency or any other person. This indemnity shall survive the
termination of this Agreement.
JURY TRIAL WAIVER. BORROWER, GUARANTORS AND LENDER HEREBY WAIVE TRIAL
BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTER-CLAIM, WHETHER IN CONTRACT
IN TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS
AGREEMENT OR THE LOAN DOCUMENTS.
VENUE. All actions or proceedings in any way, manner or respect arising
out of or from or related to this Agreement shall be litigated in courts having
situs within the City of Nashville, State of Tennessee. Borrower and Guarantors
hereby consent and submit to the jurisdiction of any local, state or federal
courts located within said city and state.
MISCELLANEOUS. This Agreement shall be construed and enforced under the
laws of the State of Tennessee. No amendment, modification, termination or
waiver of any provision of any Loan Document to which Borrower or either
Guarantor is a party, nor consent to any departure by Borrower or either
Guarantor from compliance with the terms of any Loan Document to which it is a
party, shall be effective unless the same shall be in writing and signed on
behalf of Lender by a duly authorized officer of Lender, and then such waiver or
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consent shall be effective only in the specific instance and for the specific
purpose for which given.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER:
SOUTHTRUST BANK, NATIONAL ASSOCIATION
By:____________________________
Title:_________________________
BORROWER:
NOR'EASTER MICRO, INC.
By:_____________________________
Title:__________________________
GUARANTORS:
EUROPEAN MICRO HOLDINGS, INC.
By:_____________________________
Title:__________________________
AMERICAN MICRO COMPUTER CENTER, INC.
By:_____________________________
Title:__________________________
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