EXHIBIT 10.3.2
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, dated as of December 8, 2000, is entered
into between CAPITAL TEMPFUNDS, INC., a North Carolina corporation ("Capital"),
and STRATUS SERVICES GROUP, INC., a Delaware corporation ("Borrower").
The parties agree as follows:
1 DEFINITIONS
In addition to the defined terms contained in the first paragraph
above, as used herein, the following terms shall have the following definitions:
1.1 "Accounts" means all accounts receivable due to Borrower, book
debts, notes, drafts and acceptances and other forms of obligations now or
hereafter owing to the Borrower, whether arising from the sale or lease of goods
or the rendition of services by the Borrower (including, without limitation, any
obligation that might be characterized as an account, contract right, general
intangible or chattel paper under the Code), all of the Borrower's rights in, to
and under all purchase orders now or hereafter received by the Borrower for
goods and services, all proceed from the sale of Inventory, all monies due or to
become due to the Borrower under all contracts for the sale or lease of goods or
the rendition of services by the Borrower (whether or not yet earned)
(including, without limitation, the right to receive the proceeds of said
purchase orders and contracts), all collateral security and guarantees of any
kind given by any obligor with respect to any of the foregoing, and all goods
returned to or reclaimed by the Borrower that correspond to any of the
foregoing;
1.2 "Agreement" means this Loan and Security Agreement and any
supplements, amendments or modifications to this Loan and Security Agreement.
1.3 "Book Value" means with respect to any Account means the book
value thereof as determined in accordance with GAAP.
1.4 "Borrowing Base Certificate" means the certificate,
substantially in the form of EXHIBIT A, with appropriate insertions, to be
submitted to Capital by Borrower pursuant to this Agreement and certified as
true and correct by the Chief Executive Officer or the Chief Financial Officer
of Borrower.
1.5 "Borrower's Books" means all of Borrower's books and records
including, but not limited to: minute books; ledgers; records indicating,
summarizing or evidencing Borrower's assets, liabilities, and the Accounts; all
information relating to Borrower's business operations; and all computer
programs, disc or tape files, printouts, runs, and other computer prepared
information and the equipment containing such information.
1.6 "Business Day" means any day excluding Saturday, Sunday and any
day which is a legal
holiday under the laws of the State of North Carolina or is a day on which
Capital is otherwise closed for transacting business with the general public.
1.7 "Capital Expenses" means all of the following: (i) taxes and
insurance premiums required to be paid by Borrower under this Agreement or any
of the other Loan Documents which are paid or advanced by Capital; (ii) filing,
recording, publication and search fees paid or incurred by Capital; and (iii)
the costs, fees (including reasonable attorneys' and paralegals' fees) and
expenses incurred by or charged to Capital: (a) to examine Borrower and the
Collateral; (b) to correct any default or enforce any provision of this
Agreement, any of the other Loan Documents and any guaranty of the Obligations,
whether or not litigation is commenced; (c) in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale and/or advertising to sell the Collateral, whether or not a sale is
consummated; (d) in collecting the Accounts and in collecting the Obligations,
whether from Borrower, any guarantor or both; and (e) in structuring, drafting,
reviewing, amending, defending or concerning this Agreement or any of the other
Loan Documents.
1.8 "Code" means the North Carolina Uniform Commercial Code, and any
and all terms used in this Agreement which are defined in the Code and are not
defined herein shall be construed and defined in accordance with the definition
of such terms under the Code.
1.9 "Collateral" means each and all of the following:
A. the Accounts;
B. the Inventory;
C. the Equipment,
D. the General Intangibles;
E. the Negotiable Collateral;
F. the Borrower's Books;
G. any money, deposit accounts or other assets of
Borrower in which Capital receives a security interest or which hereafter come
into the possession, custody or control of Capital; and
H. the proceeds of any of the foregoing, including, but
not limited to, proceeds of insurance covering the Collateral, or any portion
thereof, and any and all Accounts, Inventory, Equipment, General Intangibles,
Negotiable Collateral, the Borrower's Books, money, deposit accounts or other
tangible and intangible property resulting from the sale or other disposition of
the Collateral, or any portion thereof or interest therein, and the proceeds
thereof.
1.10 "Daily Balance" means and refers to the amount determined by
taking the amount of the Obligations owed at the beginning of a given day,
adding any new Obligations advanced
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or incurred on such date, and subtracting any payments or collections which are
deemed to be paid on that date under the provisions of this Agreement.
1.11 "Eligible Accounts" means and includes those Accounts (i) which
have been validly assigned to Capital, (ii) strictly comply with all of
Borrower's warranties, covenants and representations to Capital, (iii) contain
payment terms of not greater than the number of Term Days (as defined on
Schedule 1), or less, from the date of invoice, (iv) are not past due more than
the number of Past Due Days (as defined on Schedule 1) and (v) the invoice date
is less than ten (10) days from the last date of service; PROVIDED, HOWEVER,
that Eligible Accounts shall not include the following: (a) Accounts with
respect to which the account debtor is an officer, employee or agent of
Borrower; (b) Accounts with respect to which services or goods are placed on
consignment, guaranteed sale, or other terms by reason of which the payment by
the account debtor may be conditional (other than that portion of the Accounts
which are subject to retention); (c) Accounts with respect to which the account
debtor is not a resident of the United States; (d) Accounts with respect to
which the account debtor is the United States or any department, agency or
instrumentality of the United States; PROVIDED, however, that an Account shall
not be deemed ineligible by reason of this clause (d) if Borrower has completed
all of the steps necessary, in the sole opinion of Capital, to comply with the
Federal Assignment of Claims Act of 1940 (31 U.S.C. ss.3727) with respect to
such Account; (e) Accounts with respect to which the account debtor is any state
of the United States or any city, town, municipality, county or division
thereof; (f) Accounts where the account debtors are located in New Jersey and/or
Indiana, unless the Borrower shall have qualified to do business or shall have
filed a Business Activity Report with the appropriate state offices in such
jurisdictions, (g) Accounts with respect to which the account debtor is a
subsidiary of, related to, affiliated with, or has common officers or directors
with Borrower; (h) Accounts with respect to which Borrower is or becomes liable
to the account debtor for goods sold or services rendered by the account debtor
to Borrower; (i) those Accounts where Capital has notified the Borrower that, in
Capital's sole discretion, the account or account debtor is not acceptable to
Capital; (j) all of the Accounts owed by an account debtor who is the subject of
an Insolvency Proceeding; (k) all of the Accounts owed by an account debtor
where the Cross Aging Percentage (as defined on Schedule 1) or more of all of
the Accounts owed by that account debtor are past due more than the Past Due
Days from the invoice due date; (l) Accounts for which the services have not yet
been rendered to the account debtor or the goods sold have not yet been
delivered to the account debtor (commonly referred to as "pre-billed accounts");
(m) Accounts not previously approved by Capital where the expected dollar value
for such account debtor is greater than twenty (20%) percent of Borrower's
existing Accounts and (n) COD and cash sales.
1.12 "Equipment" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, motor vehicles, tools, parts, dies, jigs, goods, and any interest in
any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions and improvements thereto, wherever
located.
1.13 "Event of Default" means the occurrence of any one of the
events set forth in Section 9.
1.14 "Fidelity Guarantor" means individually, and "Fidelity
Guarantors" means
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collectively, the persons and entities listed on Schedule 1 as Fidelity
Guarantors.
1.15 "GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination and applied on a consistent
basis.
1.16 "General Intangibles" means all of Borrower's present and
future general intangibles and all other presently owned or hereafter acquired
intangible personal property of Borrower (including, without limitation, any and
all choses or things in action, goodwill, patents, trade names, trademarks,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, infringement claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, deposit accounts,
tax refunds and tax refund claims) other than goods and Accounts, as well as
Borrower's Books relating to any of the foregoing.
1.17 "Governing Rate" shall have the meaning set forth in Section
2.3.5.
1.18 "Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the federal Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including, but not
limited to, assignments for the benefit of creditors, formal or informal
moratoriums, compositions or extensions generally with its creditors.
1.19 "Inventory" means and includes all of Borrower's present and
future inventory in which Borrower has any interest, including, but not limited
to, goods held for sale or lease or to be furnished under a contract of service
and all of Borrower's present and future raw materials, work in process,
finished goods, and packing and shipping materials, wherever located, and any
documents of title representing any of the above.
1.20 "Judicial Officer or Assignee" means any trustee, receiver,
controller, custodian, assignee for the benefit of creditors or any other person
or entity having powers or duties like or similar to the powers and duties of a
trustee, receiver, controller, custodian or assignee for the benefit of
creditors.
1.21 "Loan Account" shall have the meaning set forth in Section
2.3.12
1.22 "Loan Documents" means collectively this Agreement and any
other agreements entered into between Borrower and Capital in connection with
this Agreement.
1.23 "Lock Box" means that certain post office box maintained on
behalf of Capital (as described on Schedule 1) into which the Borrower shall
have instructed all of its account debtors to remit payments.
1.24 "Lock Box Account" means that account owned by Capital into
which all proceeds of Accounts and all other payments received in the Lock Box
are deposited.
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1.25 "Maximum Credit Line" has the meaning set forth on Schedule 1.
1.26 "Negotiable Collateral" means all of Borrower's present and
future letters of credit, advises of credit, notes, drafts, instruments,
documents, leases, and chattel paper, and Borrower's Books relating to any of
the foregoing.
1.27 "Net Worth" means, as of any date, the total assets of Borrower
minus the total liabilities of Borrower calculated in conformity with GAAP.
1.28 "Obligations" means any and all loans, advances, debts,
liabilities (including, without limitation, any and all amounts charged to
Borrower's account pursuant to any agreement authorizing Capital to charge
Borrower's account), obligations, lease payments, guaranties, covenants and
duties owing by Borrower to Capital of any kind and description (whether
advanced pursuant to or evidenced by this Agreement, any of the other Loan
Documents, or any other instrument, or by any other agreement between Capital
and Borrower and whether or not for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including, without limitation, any debt, liability or
obligation owing from Borrower to others which Capital may have obtained by
assignment or otherwise, and further including, without limitation, all interest
not paid when due and all Capital Expenses which Borrower is required to pay or
reimburse by this Agreement, by law, or otherwise.
1.29 "Over Advance" shall have the meaning set forth in Section 2.1.
1.30 "Payment Items" means all checks, drafts and other items of
payment payable to the Borrower, including proceeds of any of the Collateral.
1.31 "Prime Rate" shall mean, at any time, the rate of interest
noted in the Wall Street Journal, Money Rates Section as the "Prime Rate"
(currently defined as the base rate on corporate loans posted by at least 75% of
the nation's thirty (30) largest banks), with the Prime Rate in effect on the
first day of a month being applicable to the entire month. In the event that the
Wall Street Journal quotes more than one rate, or a range of rates as the Prime
Rate, then the Prime Rate shall mean the average of the quoted rates. In the
event that the Wall Street Journal ceases to publish a Prime Rate, then the
Prime Rate shall be the average of the three (3) largest U.S. money center
commercial banks, as determined by Capital. The "Prime Rate" may not be the
lowest or best rate at which Capital calculates interest or extends credit.
1.32 "Tangible Net Worth" means an amount equal to the stockholders'
equity of the Borrower increased by Subordinated Debt and decreased by
intangible assets.
1.33 "Term" shall have the meaning set forth on Schedule 1.
1.34 "Working Capital" means the amount determined by subtracting
the aggregate amount of Borrower's current liabilities from the aggregate amount
of Borrower's current assets. Borrower's current liabilities and current assets
shall be determined in accordance with GAAP
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consistently applied.
1.35 OTHER DEFINITIONAL PROVISIONS. References to "Sections",
"subsections", and "Exhibits" shall be to Sections, subsections, and Exhibits,
respectively, of this Agreement unless otherwise specifically provided. Any of
the terms defined in Section 1 may, unless the context otherwise requires, be
used in the singular or the plural depending on the reference. In this
Agreement, words importing any gender include the other genders; the words
"including," "includes" and "include" shall be deemed to be followed by the
words "without limitation"; references to agreements and other contractual
instruments shall be deemed to include subsequent amendments, assignments, and
other modifications thereto, but only to the extent such amendments, assignments
and other modifications are not prohibited by the terms of this Agreement;
references to any person includes their respective permitted successors and
assigns or people succeeding to the relevant functions of such persons; and all
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations.
2. LOANS AND TERMS OF PAYMENT
MANNER OF BORROWING ADVANCES (REVOLVING LOANS). Borrowings under the
credit facility established hereunder shall be as follows:
2.1 ADVANCE REQUESTS. A request for an advance (also known as a revolving loan)
shall be made, or shall be deemed to be made, in the following manner: Borrower
may give Capital notice of its intention to borrow, in which notice Borrower
shall specify the amount of the proposed borrowing and the proposed borrowing
date, no later than 11:00 a.m. on the proposed borrowing date. Capital may lend
to Borrower, in Capital's sole discretion, exercised in a commercially
reasonable manner (a) up to the Advance Percentage (as defined on Schedule 1) of
the net amount of Borrower's Eligible Accounts (the "net amount" of Eligible
Accounts means the gross amount of said Eligible Accounts less returns and
discounts based upon the shortest or longest payment terms as Capital may elect,
credits or allowances of any nature at any time issued, owing, claimed by
account debtors, granted or outstanding based upon the Borrowing Base
Certificate which must be submitted to Capital in connection with such request),
not to exceed at any time (b) the Maximum Credit Line; provided, however, that
the maximum advance against Eligible Accounts due from Xxxxx Worldwide Airlines,
Inc. ("Xxxxx") shall not at any time exceed $5,000,000.00. PROVIDED, FURTHER,
that no such request for an advance may be made (i) at a time when there exists
an Event of Default; and (ii) unless payment is otherwise timely made by
Borrower, the becoming due of any amount required to be paid under this
Agreement or any of the other Loan Documents, as principal, accrued interest,
fees or Capital Expenses, shall be deemed irrevocably to be a request by
Borrower from Capital for an advance or revolving loan on the due date of, and
in an aggregate amount required to pay, such principal, accrued interest, fees,
Capital Expenses or other charges and the proceeds of each such advance or
revolving loan may be disbursed by Capital by way of direct payment of the
relevant Obligation and shall bear interest at the rate of interest applicable
to the Daily Balance (whether or not any Event of Default or Over-Advance exists
at the time of or would result from such advance). As an accommodation to
Borrower, Capital may permit electronic transmittal of instructions or requests
for advances, authorizations, agreements or reports to Capital by Borrower,
received from any one or more of the authorized officers of the Borrower
identified on
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EXHIBIT B hereto. In no event shall Capital be obligated to make advances to
Borrower under this Section 2 whenever the aggregate amount of the then
outstanding advances made pursuant to Section 2 exceeds or would exceed as a
result of the requested advance, the Maximum Credit Line. Unless Borrower
specifically directs Capital in writing not to accept or act upon telecopied or
electronic communications from Borrower, Capital shall have no liability to
Borrower for any loss or damage suffered by Borrower as a result of Capital's
honoring of any requests, execution of any instructions, authorizations or
agreements or reliance on any reports communicated to Capital electronically and
purporting to have been sent to Capital by Borrower and Capital shall have no
duty to verify the origin of any such communication or the authority of the
person sending it. All of the advances made pursuant to this Section 2.1 and any
supplement, if any, to this Agreement shall be added to and deemed part of the
Obligations when made. If, at any time and for any reason, the amount of
advances made pursuant to Sections 2.1 and such supplement, if any, exceed the
percentage or dollar limitations set forth in Section 2.1 and in such
supplement, as applicable, or if all of Borrower's Obligations, at any time and
for any reason, exceed the Maximum Credit Line (an "Over Advance"), then
Borrower, upon Capital's election and demand, shall immediately pay to Capital,
in cash, the amount of such excess.
2.2 DISBURSEMENT. Borrower hereby irrevocably authorizes Capital to
disburse the proceeds of each advance requested, or deemed to be requested,
pursuant to Section 2.1 above as follows: (i) the proceeds of each advance
requested under Section 2.1 shall be disbursed by Capital in lawful money of the
United States of America in immediately available funds, in the case of the
initial borrowing, in accordance with the terms of the written disbursement
letter from Borrower, and in the case of each subsequent borrowing, by wire
transfer to such bank account as may be agreed upon by Borrower and Capital from
time to time or elsewhere if pursuant to a written direction from Borrower; and
(ii) the proceeds of each advance requested under Section 2.1 (ii) shall be
disbursed by Capital by way of direct payment of the relevant interest or other
Obligation.
2.3 PAYMENTS. The Borrower promises to repay all Obligations when
due in accordance with the terms of this Agreement or the other Loan Documents.
All payments with respect to any of the Obligations shall be made to Capital on
the date when due, in U.S. Dollars ($) and in immediately available funds,
without any offset or counterclaim. Except where evidenced by notes or other
instruments issued or made by Borrower to Capital specifically containing
payment provisions which are in conflict with this Section 2.3 (in which event
the conflicting provisions of said notes or other instruments shall govern and
control), the Obligations shall be payable as follows:
2.3.1 PRINCIPAL. Principal payable on account of advances
shall be payable by Borrower to Capital immediately upon the earliest of (i) the
receipt by Capital or Borrower of any proceeds of any of the Collateral, to the
extent of said proceeds, (ii) the occurrence of an Event of Default in
consequence of which Capital elects to accelerate the maturity and payment of
the Obligations, (iii) termination of this Agreement pursuant to Section 3
hereof; PROVIDED, HOWEVER, that if an Over Advance condition shall exist at any
time, Borrower shall, ON DEMAND, repay the Obligations to the extent necessary
to eliminate the Over Advance condition.
2.3.2 INTEREST. Interest accrued on the Advances shall be due
and payable on the earliest of (i) the first (1st) calendar day of each month
(for the immediately preceding month),
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computed through the last calendar day of the preceding month; (ii) the
occurrence of an Event of Default in consequence of which Capital elects to
accelerate the maturity and payment of the Obligations; and (iii) termination of
this Agreement pursuant to Section 3 hereof. At its option, Capital may debit
such amounts, which amounts shall thereupon constitute Obligations hereunder and
shall thereafter accrue interest at the rate then provided under this Agreement.
Interest shall at all times be charged on a minimum principal amount of
$4,000,000.00, even in the event that the principal amount outstanding is less
than $4,000,000.00.
2.3.3 COSTS, FEES AND CHARGES. Capital may collect a "late
charge" equal to five percent (5%) of any installment of interest or principal,
or of any taxes, assessments and insurance paid by Capital which is not paid or
reimbursed by the Borrower within ten (10) days of the due date thereof to cover
the extra expense involved in handling such delinquent payment. All costs, fees
charges and Capital Expenses payable pursuant to this Agreement shall be payable
by Borrower as and when incurred, to Capital. At its option, Capital may debit
such amounts, which amounts shall thereupon constitute Obligations hereunder and
shall thereafter accrue interest at the rate then provided under this Agreement.
2.3.4 OTHER OBLIGATIONS. The balance of the Obligations
requiring the payment of money, if any, shall be payable by Borrower to Capital
as and when provided in this Agreement, if no date of payment is otherwise
specified in the Loan Documents, ON DEMAND.
2.3.5 INTEREST RATES. All Obligations owed by Borrower to
Capital shall bear interest, on the average Daily Balance owing, at a rate equal
to the Margin (as defined on Schedule 1) plus the Prime Rate (the "Governing
Rate"). Upon and after the occurrence of an Event of Default and during the
continuation thereof, all Obligations owed by Borrower to Capital shall, at the
election of Capital, without constituting a waiver of any such Event of Default,
bear interest on the average Daily Balance owing, at the rate of eighteen
percent (18%) per annum. All interest chargeable under this Agreement shall be
computed on the basis of a three hundred sixty (360) day year for actual days
elapsed.
2.3.5.1 MAXIMUM INTEREST. Regardless of any provision
contained in this Agreement or any other agreement or document executed in
connection herewith, in no contingency or event whatsoever shall the aggregate
of all amounts that are contracted for, charged or received by Capital pursuant
to the terms of this Agreement or any other Loan Documents and that are deemed
interest under applicable law exceed the highest rate permissible under any
applicable law. No agreements, conditions, provisions or stipulations contained
in this Agreement or any of the other Loan Documents or the exercise by Capital
of the right to accelerate the payment or the maturity of all or any portion of
the Obligations, or the exercise of any option whatsoever contained in any of
the Loan Documents, or the prepayment by Borrower of any of the Obligations, or
the occurrence of any contingency whatsoever, shall entitle Capital to charge or
receive in any event, interest or any charges, amounts premiums or fees deemed
interest by applicable law (such interest, charges, amounts, premiums and fees
referred to herein collectively as "Interest") in excess of the maximum rate
allowable under applicable law and in no event shall Borrower be obligated to
pay Interest exceeding such maximum rate, and all agreements, conditions or
stipulations, if any, which may in any event or
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contingency whatsoever operate to bind, obligate or compel Borrower to pay
Interest exceeding the maximum rate allowable under applicable law shall be
without binding force or effect, at law or in equity, to the extent only of the
excess of Interest over such maximum rate. If any Interest is charged or
received in excess of the maximum rate allowable under applicable law
("Excess"), Borrower acknowledges and stipulates that any such charge or receipt
shall be the result of an accident and bona fide error, and such Excess, to the
extent received, shall be applied first to reduce the principal Obligations and
the balance, if any, returned to Borrower, it being the intent of the parties
hereto not to enter into a usurious or otherwise illegal relationship. The right
to accelerate the maturity of any of the Obligations does not include the right
to accelerate any interest that has not otherwise accrued on the date of such
acceleration, and Capital does not intend to collect any unearned interest in
the event of any such acceleration. Borrower recognizes that, with fluctuations
in the rates of interest set forth in Section 2 of this Agreement and the
maximum rate of interest allowable under applicable law, such an unintentional
result could inadvertently occur. All monies paid to Capital hereunder or under
any other Loan Documents, whether at maturity or by prepayment, shall be subject
to any rebate of unearned interest as and to the extent required by applicable
law. By the execution of this Agreement, Borrower covenants that (i) the credit
or return of any Excess shall constitute the acceptance by Borrower of such
Excess, and (ii) Borrower shall not seek or pursue any other remedy, legal or
equitable, against Capital, based in whole or in part upon contracting for,
charging or receiving any Interest in excess of the maximum rate allowable under
applicable law. For the purpose of determining whether or not any Excess has
been contracted for, charged or received by Capital, all interest at any time
contracted for, charged or received from Borrower in connection with this
Agreement and any other agreement or document executed in connection herewith,
any of the Loan Documents shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread in equal parts throughout the full
term of the Obligations. Borrower and Capital shall, to the maximum extent
permitted under applicable law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as Interest and (ii) exclude voluntary
prepayments and the effects thereof. The provisions of this Section shall be
deemed to be incorporated into every Loan Document (whether or not any provision
of this Section is referred to therein). All such Loan Documents and
communications relating to any Interest owed by Borrower and all figures set
forth therein shall, for the sole purpose of computing the extent of
Obligations, be automatically recommitted by Borrower, and by any court
considering the same, to give effect to the adjustments or credits required by
this Section.
2.3.5.2 PAYMENT OF INTEREST. In the event that the Prime Rate
announced is, from time to time hereafter, changed, adjustment in the rate of
interest payable by Borrower shall be made as of 12:01 a.m. on the first (1st)
day of the calendar month following such change and shall be based on the Prime
Rate in effect as of the last day of the immediately preceding calendar month.
All interest payable by Borrower shall be due and payable on the first (1st) day
of each calendar month during the term of this Agreement and Capital shall, at
its option, charge such interest and any and all Capital Expenses to Borrower's
loan account with Capital, which amounts shall thereupon constitute Obligations
hereunder and shall thereafter accrue interest at the rate then provided under
this Agreement.
2.3.6 BORROWING BASE CERTIFICATE AND AUTHORIZATIONS.
Concurrent with the execution of this Agreement by Borrower and concurrent with
each request for an advance pursuant to
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Section 2.1, but at least on once during each Reporting Period (as defined on
Schedule 1) during the term of this Agreement, Borrower shall deliver to Capital
a fully completed Borrowing Base Certificate certified by the Chief Executive
Officer or Chief Financial Officer of Borrower as being true and correct.
Concurrent with the delivery of the Borrowing Base Certificate, Borrower shall
provide a written report to Capital of all returns and all material disputes and
claims, together with sales and other reports relating to the Accounts and
Inventory as required by Capital. If Borrower fails to deliver to Capital the
Borrowing Base Certificate on the date when due, then notwithstanding any of the
provisions contained in Section 2.1 or in any other Loan Document to the
contrary, Capital shall not make any advances to Borrower until the Borrowing
Base Certificate is delivered to Capital. Notwithstanding the foregoing, after
the initial Term of this Agreement, no Borrowing Base Certificate will be
required. At such time, the Borrower is to provide EDI transmissions of all
invoices relating to the Eligible Accounts for which the Borrower will be
seeking funding. In the event that the Borrower fails to provide the EDI
transmissions, then the Borrower will be required to provide Borrowing Base
Certificates to Capital, as provided above. Capital is hereby authorized to make
the loan and the extensions of credit provided for in this Agreement based upon
telecopied or other instructions and transaction reports received from any one
of the authorized personnel of Borrower identified on EXHIBIT B, or, at the
discretion of Capital, if such extensions of credit are necessary to satisfy any
Obligations of Borrower to Capital. Although Capital shall make a reasonable
effort to determine the person's identity, Capital shall not be responsible for
determining the authenticity of any such telecopied instructions and Capital may
act on the instructions of anyone it perceives to be one of the authorized
personnel identified on EXHIBIT B.
2.3.7 COLLECTIONS. Borrower shall instruct all of its account
debtors to make payments to the Lock Box. Capital or Capital's designee may, at
any time, notify customers or account debtors of Borrower that the Accounts have
been assigned to Capital and that Capital has a security interest therein.
Capital will endeavor to provide notice to Borrower after the notification of
customers or account debtors by Capital, but the failure to provide such notice
shall not affect the right of Capital to give such notice and to collect such
Accounts. Capital may at any time confirm the validity and/or amount of the
Accounts, collect them directly, and charge the collection costs and expenses to
Borrower's loan account, but, unless and until Capital does so or gives Borrower
other written instructions, the collection of the Accounts shall be made in
accordance with the terms and conditions of this Agreement. The parties
acknowledge and agree that Borrower and Capital shall notify Xxxxx of the
assignment of Borrower's Accounts to Capital, and that Capital will verify the
Borrower's xxxxxxxx to Xxxxx prior to any funding of advances under this
Agreement. All invoices issued by Borrower to Xxxxx shall contain a notice, in
form satisfactory to Capital, that all payments are to be made directly to
Capital, and are payable to Capital only. Borrower agrees that all payments
received by Borrower in connection with the Accounts and any other Collateral
shall be held in trust for Capital as Capital's trustee. The receipt of any wire
transfer of funds, check, or other item of payment by Capital shall be applied
to conditionally reduce Borrower's Obligations, but shall not be considered a
payment on account unless such wire transfer is of immediately available federal
funds and is made to the appropriate deposit account of Capital or unless and
until such check or other item of payment is honored when presented for payment.
The receipt of any wire transfer, check or other item of payment by Capital
shall be deemed to have been paid to Capital within the Collection Day Period
(as defined on Schedule 1) after the date Capital actually receives possession
of such wire transfer of funds, check
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or other item of payment.
2.3.8 MONTHLY STATEMENTS. Capital shall render monthly
statements of the Obligations owing by Borrower to Capital, including statements
of all principal, interest, and Capital Expenses owing, and such statements
shall be conclusively presumed to be correct and accurate and constitute an
account stated between Borrower and Capital unless, within thirty (30) days
after receipt thereof by Borrower, Borrower shall deliver to Capital, by
registered or certified mail, at Capital's address indicated in Section 13,
written objection thereto specifying the error or errors, if any, contained in
any such statement and Capital in its good faith discretion determines such
exceptions are accurate and makes an appropriate adjustment. In the event that
Borrower fails to receive such monthly statement for a particular month,
Borrower hereby agrees and acknowledges that it shall likewise be obligated to
notify Capital in writing no later than 45 days from the end of each such month.
If Borrower fails to so notify Capital of same then said monthly statement shall
be deemed to have been sent and delivered to Borrower and shall be final and
conclusive on Borrower. At Capital's request, Borrower shall execute and deliver
to Capital from time to time, promissory notes in form and content satisfactory
to Capital to evidence the balances owing in Borrower's Loan Account, but
notwithstanding any such request for or delivery of such notes, such statements
of account shall be prima facie evidence of the loans and, to the extent
intended by Capital to be included therein, other Obligations owing to Capital
by Borrower.
2.3.9 FEES AND REIMBURSEMENT OF EXPENSES
A. FEES. Borrower will pay to Capital those fees set
forth on Schedule 1.
B. Borrower shall reimburse Capital for all reasonable
costs and expenses incurred in connection with examinations and appraisals of
Borrower's books, records and assets and such other matters as Capital shall
deem reasonable and appropriate.
C. If, at any time or times regardless of whether or not
an Event of Default then exists, Capital incurs legal or accounting expenses or
any other costs or out-of-pocket expenses in connection with the loan
transaction described herein, including, without limitation: (i) the negotiation
and preparation of any amendment of or modification of this Agreement or any of
the other Loan Documents; (ii) the administration of this Agreement or any of
the other Loan Documents and the transactions contemplated hereby and thereby,
including, without limitation, those items described in C above; (iii) any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Capital; Borrower or any other person) in any way relating to the Collateral,
this Agreement or any of the other Loan Documents or Borrower's affairs; (iv)
any attempt to enforce any rights of Capital against Borrower or any other
person which may be obligated to Capital by virtue of this Agreement or any of
the other Loan Documents, including any account debtor or guarantor of
Borrower's Obligations; (v) any consultations regarding this Agreement or any
other Loan Documents or preparation therefore, or the financing extended
hereunder or (vi) any attempt to inspect, verify, protect, preserve, perfect or
continue the perfection of Capital's liens upon, restore, collect, sell,
liquidate or otherwise dispose of or realize upon the Collateral; then all such
legal and accounting expenses, other reasonable costs and
11
out-of-pocket expenses of Capital shall be charged to Borrower. Some of the
above charges may also be described in Section 4.2. All amounts chargeable to
Borrower under this Section 2.3.9C shall be Obligations secured by all of the
Collateral, shall be payable on demand to Capital, and shall bear interest from
the date such demand is made until paid in full at the rate applicable to the
Daily Balance from time to time.
D. Borrower shall pay to Capital, ON DEMAND, any and all
reasonable fees, costs or expenses which Capital pays to a bank or other similar
institution arising out of or in connection with (i) the forwarding to Borrower
or any other person or entity on behalf of Borrower, by Capital, of proceeds of
advances made by Capital to Borrower pursuant to this Agreement and (ii) the
depositing for collection, by Borrower, of any check or item of payment received
or delivered to Capital on account of the Obligations.
E. In the event of the existence of an Over Advance, the
Borrower shall pay to Capital an Over Advance Fee of .0685 % of the amount of
the Over Advance for each day that the Over Advance is outstanding. Nothing
provided herein shall constitute a consent by Capital to such Over Advance.
2.3.10 APPLICATION OF PAYMENTS AND COLLECTIONS. Borrower
irrevocably waives the right to direct the application of any and all payments
and collections at any time or times hereafter received by Capital from or on
behalf of Borrower, and Borrower does hereby irrevocably agree that Capital
shall have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Capital or
its agent against the Obligations, in such manner as Capital may deem advisable.
If as the result of collections of Borrower's advances and Accounts a credit
balance exists in the Loan Account, such credit balance shall not accrue
interest in favor of Borrower, but shall be available to Borrower at any time or
times for so long as no Default or Event of Default exists.
2.3.11 ALL ADVANCES TO CONSTITUTE ONE OBLIGATION. The advances
shall constitute one general Obligation of Borrower, and shall be secured by
Capital's lien upon all of the Collateral.
2.3.12 LOAN ACCOUNT. Capital shall establish an account on its
books (the "Loan Account") and shall enter all advances as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrower
on any Obligations and all proceeds of Collateral which are finally paid to
Capital, and may record therein, in accordance with customary accounting
practice, other debits and credits, including interest and all charges and
expenses properly chargeable to Borrower.
3 TERM AND PREPAYMENT
3.1 TERM.
A. The Agreement will have a term equal to the Term.
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B. Notwithstanding the Term, upon the occurrence of an Event
of Default, Capital may terminate this Agreement without notice. In addition,
should either Capital or Borrower become insolvent or is unable to meet its
debts as they mature, then the other party shall have the right to terminate
this Agreement at any time without notice. On the date of a termination by
Borrower or Capital, all Obligations shall become immediately due and payable
without notice or demand and shall be paid to Capital in cash or by a wire
transfer of immediately available funds.
C. When Capital has received payment and performance in full
of all Obligations and an acknowledgment from Borrower that it is no longer
entitled to request any advances from Capital under this Agreement, Capital
shall execute a termination of all security interests given by Borrower to
Capital, upon the execution and delivery of general releases by Borrower, any
guarantor or surety of Borrower's Obligations to Capital.
4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Capital a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations owed by Borrower to Capital and in order to secure prompt
performance by Borrower of each and all of its covenants and obligations under
this Agreement and otherwise created. Capital's security interest in the
Collateral shall attach to all Collateral without further act on the part of
Capital or Borrower. In the event that any Collateral, including proceeds, is
evidenced by or consists of Negotiable Collateral, Borrower shall, immediately
upon written request therefore from Capital, endorse and assign such Negotiable
Collateral over to Capital and deliver actual physical possession of the
Negotiable Collateral to Capital.
4.2 RIGHT TO EXAMINE AND INSPECT. In order to verify the validity of
any Borrowing Base Certificate, Borrower shall, upon the request of Capital,
promptly furnish Capital with copies of Borrower's purchase orders, sales
journals, invoices, chattel paper, customer's purchase orders, or the
equivalent, and original shipping or delivery receipts for all Inventory
purchased and goods sold, and Borrower shall warrant the genuineness thereof. In
addition, Capital shall be entitled to conduct from time to time during the term
of this Agreement, examinations of Borrower's Books, business operations and
Inventory and to check and test the same as to quality, quantity, value and
condition. Borrower shall pay to Capital all costs and expenses incurred by
Capital in connection with such examinations, including examination costs,
travel, etc., and $800.00 per man day for such examinations and inspections, and
the amount charged shall be deemed included in the "Obligations" when incurred,
and shall thereafter accrue interest at the rate then provided under this
Agreement. So long as there is no Event of Default hereunder, Borrower shall
only be responsible for payment of four (4) examinations per year. After the
occurrence of an Event of Default, Borrower shall be responsible for payment of
the cost of all examinations.
4.3 SETOFF. All sums at any time standing to the Borrower's credit
on the Capital's books and all of the Borrower's property at any time in the
Capital's possession, or upon or in which Capital has a lien or security
interest shall be security for all Obligations. In addition to and not in
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limitation of the above, with respect to any deposits or property of the
Borrower in Capital's possession or control, now or in the future, Capital shall
have the right to setoff all or any portion thereof, at any time, against any
Obligations hereunder, even though unmatured, without prior notice or demand to
the Borrower.
4.4 CONTINUATION OF SECURITY INTEREST. Notwithstanding termination
of this Agreement, until all Obligations, contingent or otherwise, have been
fully repaid and performed, Capital shall retain its security interest in all
presently owned and hereafter arising or acquired Collateral, and Borrower shall
continue to immediately deliver to Capital, in kind, all collections received
respecting the Accounts.
4.5 PERFECTION OF SECURITY INTEREST. Borrower shall execute and
deliver to Capital, concurrent with Borrower's execution of this Agreement, and
at any time or times hereafter at the request of Capital, all financing
statements, continuation financing statements, security agreements, assignments,
endorsements, affidavits, reports, notices, schedules of accounts, letters of
authority and all other documents that Capital may reasonably request, in form
satisfactory to Capital, to perfect and maintain perfected Capital's security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under this Agreement.
4.6 ACCESS TO BORROWER'S BOOKS. Capital (through any of its
officers, employees or agents) shall have the right, at any time or times
hereafter, during Borrower's usual business hours, or during the usual business
hours of any third party having control over the records of Borrower, to inspect
and verify Borrower's Books in order to verify the amount or condition of, or
any other matter relating to, the Collateral and Borrower's financial condition.
4.7 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes and appoints Capital (and any of Capital's officers, employees or
agents designated by Capital) as Borrower's true and lawful attorney with power:
A. Upon Borrower's failure or refusal to comply with its
undertakings contained in Section 4.5, to sign the name of Borrower on any of
the documents described in that section or on any other similar documents which
need to be executed, recorded and/or filed in order to perfect or continue
perfected Capital's security interest in the Collateral;
B. To endorse Borrower's name on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into Capital's possession;
C. To sign Borrower's name on drafts against account debtors,
on schedules and assignments of Accounts, on notices to account debtors, on any
invoice or xxxx of lading relating to any Account;
D. After the occurrence of an Event of Default, to notify the
post office authorities to change the address for delivery of Borrower's mail to
an address designated by Capital, to receive and open all mail addressed to
Borrower, and to retain all mail relating to the Collateral and
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forward, within two (2) business days of Capital's receipt thereof, all other
mail to Borrower;
E. To send requests for verification of Accounts, and to
contact account debtors in any other manner in order to verify the Accounts.
F. To do all things necessary to carry out this Agreement.
The appointment of Capital as Borrower's attorney, and each and
every one of Capital's rights and powers, being coupled with an interest, are
irrevocable so long as any Accounts in which Capital has a security interest
remain unpaid and until all of the Obligations have been fully paid and
performed. The Borrower ratifies and approves all acts of the attorney. Neither
Capital nor its employees, officers or agents shall be liable for any acts or
omissions or for any error in judgment or mistake of fact or law made in good
faith except for gross negligence or willful misconduct. Capital may file one or
more financing statements disclosing Capital's security interest without the
Borrower's signature appearing thereon.
4.8 SALE OF INVENTORY. Until the occurrence of an Event of Default
by Borrower under this Agreement, Borrower may, subject to the provisions hereof
and consistent herewith, sell or lease the Inventory, but only in the ordinary
course of Borrower's business. A sale or lease of Inventory in Borrower's
ordinary course of business does not include an exchange or a transfer in
partial or total satisfaction of a debt owing by Borrower, nor does it include
an exchange for less than reasonably equivalent value.
5 CONDITIONS PRECEDENT AND SUBSEQUENT
5.1 CONDITIONS PRECEDENT. As conditions precedent to any advances by
Capital hereunder or any other Loan Documents, Borrower shall execute and
deliver, or cause to be executed and delivered, to Capital, in form and
substance satisfactory to Capital and its counsel, the following:
A. Financing statements (form UCC-1) in form satisfactory for
filing and recording with the appropriate governmental authorities.
B. Certified extracts from the minutes of the meetings of
Borrower's members authorizing the borrowings and the granting of the security
interest provided for herein and authorizing specific officers to execute and
deliver the agreements provided for herein.
C. A certified copy of Borrower's Certificate of Formation and
any amendments thereto, a certificate of good standing showing that Borrower is
in good standing under the laws of the State of its formation and certificates
indicating that Borrower has qualified to transact business and is in good
standing in any other state in which the conduct of its business or its
ownership of property requires that it be so qualified.
D. UCC searches, tax lien and litigation searches, fictitious
business
15
statement filings, insurance certificates, notices or other similar documents
which Capital may require and in such form as Capital may require, in order to
reflect, perfect or protect the priority of Capital's security interests in the
Collateral and in order to fully consummate all of the transactions contemplated
under this Agreement.
E. Prior to any funding requested hereunder, a fully completed
Borrowing Base Certificate, dated as of the date of any requested funding, and
certified as being true and correct by the Chief Executive Officer or Chief
Financial Officer.
F. A separate fidelity guaranty, in a form acceptable to
Capital in its sole discretion, duly executed and delivered by each of the
Fidelity Guarantors, respectively, to Capital.
G. Evidence satisfactory to Capital that Borrower has obtained
insurance policies or binders, with such insurers and in such amounts as may be
acceptable to Capital, respecting the tangible personal property comprising the
Collateral and naming Capital as a loss payee on a lender's loss payee
endorsement acceptable to Capital in its sole discretion.
H. Evidence satisfactory to Capital that Borrower has, after
request from Capital, obtained business interruption insurance and any insurance
maintained on Borrower's Accounts, with such insurers and in such amounts as may
be acceptable to Capital, covering and naming Capital as a loss payee on a
lender's loss payee endorsement acceptable to Capital in its sole discretion.
I. Evidence satisfactory to Capital, in its sole discretion,
that Borrower has recorded fictitious business name statements in the
appropriate governmental offices regarding all of the trade names used by
Borrower in its business.
J. The Loan Documents.
K. A legal opinion from Borrower's outside counsel in form and
content acceptable to Capital.
L. Landlord Waivers for all of Borrower's Manalapan, New
Jersey location.
M. Copies of Borrower's most recent quarterly and annual
statements filed with the Securities and Exchange Commission ("SEC").
N. Such other matters set forth on Schedule 1.
6. BORROWER'S REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties which
shall be deemed to be continuing representations and warranties so long as any
credit hereunder shall be available and until the Obligations have been repaid
in full:
6.1 EXISTENCE AND RIGHTS.
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A. The chief executive office of Borrower is at the address
specified on Schedule 1;
B. Borrower is an entity described on Schedule 1 duly
organized and existing under the laws of the State of Incorporation (as defined
on Schedule 1) and is qualified and licensed to do business and is in good
standing in any state in which the conduct of its business or its ownership of
property requires that it be so qualified;
C. Borrower has the right and power to enter into this
Agreement and each of the other Loan Documents;
D. Borrower has the power, authority, rights and franchises to
own its property and to carry on its business as now conducted;
E. Borrower has no investment in any other business entity.
6.2 AGREEMENT AUTHORIZED. The execution, delivery and performance by
Borrower of this Agreement and each of the other Loan Documents: (a) have been
duly authorized and do not require the consent or approval of any governmental
body or other regulatory authority; and (b) shall not constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws.
6.3 BINDING AGREEMENT. This Agreement is the valid, binding and
legally enforceable obligation of Borrower in accordance with its terms.
6.4 NO CONFLICT. The execution, delivery and performance by Borrower
of this Agreement and each of the other Loan Documents: (a) shall not constitute
an event of default under any agreement, indenture or undertakings to which
Borrower is a party or by which it or any of its property may be bound or
affected; (b) are not in contravention of or in conflict with any law or
regulation; and (c) do not cause any lien, charge or other encumbrance to be
created or imposed upon any such property by reason thereof other than the
security interests granted to Capital in the Collateral.
6.5 LITIGATION. Except as set forth on EXHIBIT C, there are no
actions or proceedings pending by or against Borrower or any guarantor of
Borrower before any court or administrative agency, and Borrower has no
knowledge or belief of any pending, threatened or imminent litigation,
governmental investigations or claims, complaints, actions or prosecutions
involving Borrower or any guarantor of Borrower, except for ongoing collection
matters in which Borrower is the plaintiff and except as heretofore disclosed,
in writing, to Capital. Borrower is not in default with respect to any order,
writ, injunction, decree or demand of any court or any governmental or
regulatory authority.
6.6 FINANCIAL CONDITION. All monthly financial statements which have
been delivered by Borrower to Capital have been prepared in accordance with
GAAP, unless otherwise stated therein, and fairly and reasonably present
Borrower's financial condition in all material respects as of the dates thereof.
All other financial statements and information relating to Borrower which have
been
17
delivered by Borrower to Capital have been prepared in accordance with GAAP,
unless otherwise stated therein, and fairly and reasonably present Borrower's
financial condition as of the dates thereof. There has been no material adverse
change in the financial condition of Borrower since the date of the most recent
of such financial statements submitted to Capital. Borrower has no knowledge of
any liabilities, contingent or otherwise, which are not reflected in such
financial statements and information, except for trade payables incurred in the
ordinary course of Borrower's business, and as set forth on EXHIBIT F, and
Borrower has not entered into any special commitments or contracts which are not
reflected in such financial statements or information which may have a
materially adverse effect upon Borrower's financial condition, operations or
business as now conducted.
6.7 TAX STATUS. Borrower has no liability for any delinquent state,
local or federal taxes.
6.8 TITLE TO ASSETS. Borrower has good title to its assets and the
same are not subject to any liens or encumbrances other than those permitted by
Section 6.11A.
6.9 TRADEMARKS AND PATENTS. Borrower, as of the date hereof,
possesses all necessary trademarks, trade names, copyrights, patents, patent
rights and licenses to conduct its business as now operated, without any known
conflict with the valid trademarks, trade names, copyrights, patents and license
rights of others.
6.10 ENVIRONMENTAL QUALITY. Borrower has in the past and is
currently in compliance with any and all federal, state and local statutes, laws
and regulations concerning the preservation of the environment and the use and
disposal of hazardous and toxic materials and substances. Borrower is not aware
that it is under investigation by any state or federal agency designed to
enforce any of such laws or regulations.
6.11 ACCOUNTS, GENERAL INTANGIBLES AND NEGOTIABLE COLLATERAL.
A. Borrower has good and marketable title to the Accounts, the
General Intangibles and the Negotiable Collateral, free and clear of liens,
claims, security interests, or encumbrances (except as held by Capital, and
except as may be specifically consented to, in advance and in writing, by
Capital); at the time of their assignment to Capital the Accounts will be bona
fide existing obligations created by the sale or lease of goods or the rendition
of services to account debtors in the ordinary and usual course of business and
will be owed to Borrower without any known defenses, disputes, offsets or
counterclaims, or any rights of return or cancellation; Borrower shall have
received no notice of actual or imminent bankruptcy or insolvency of any account
debtor at the time the Account due from such account debtor is created; and in
accordance with prudent credit policies, the account debtor shall be able to
timely discharge all of its indebtedness to Borrower;
B. Borrower shall deliver to Capital, as Capital may from time
to time require, original delivery receipts, time cards, weekly summaries,
customer's purchase orders, shipping instructions, bills of lading and other
documentation respecting shipment arrangements as applicable to each purchase by
Borrower of an Account. Absent such a request by Capital, copies of all such
18
documentation shall be held by Borrower as custodian for Capital;
C. At the time each Eligible Account is assigned to Capital,
such Eligible Account will be due and payable in accordance with the terms set
forth in Section 1.14, or on such other terms approved, in writing, by Capital
in advance of the creation of such Account, and such terms shall be expressly
set forth on the face of the invoice for such Account. No Eligible Account will
be past due at the time it is assigned to Capital.
6.12 INVENTORY AND EQUIPMENT.
A. The Inventory and Equipment are currently located
only at the locations identified on EXHIBIT E ;
B. All Inventory is now and at all times hereafter shall
be of good and merchantable quality, free from defects;
C. The Inventory and Equipment are and shall remain free
from all liens, claims, encumbrances, and security interests (except as held by
Capital, and except as may be specifically consented, in advance and in writing,
by Capital and listed on Schedule 1);
D. The Inventory is not now stored with a bailee,
warehouseman or similar party; and
E. Borrower currently keeps correct and accurate records
itemizing and describing the kind, type, quality and quantity of the Inventory,
and its cost therefore.
6.13 BROKERS There has been no mortgage or loan broker in connection
with this loan transaction other than as set forth on Schedule 1, and the
Borrower agrees to indemnify and hold the Lender harmless from any claim of
compensation payable to any mortgage or loan broker in connection with this loan
transaction.
6.14 COMPLIANCE WITH LAWS. Borrower is in compliance with all laws,
rules and regulations applicable to its business, including without limitation,
equal employment, fair labor practices and similar laws.
7 BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as any credit hereunder
shall be available and until the Obligations have been repaid in full, unless
Capital shall otherwise consent in writing, Borrower shall do all of the
following:
7.1 ASSIGNMENT SCHEDULES AND INVOICES. At the time of each
assignment of Accounts to Capital, Borrower shall deliver to Capital: (1) an
assignment schedule of all Accounts
19
created by Borrower since the delivery of the immediately preceding assignment
schedule required hereunder; (2) copies of invoices evidencing such sales and
provision of labor and shipping evidence or proofs of delivery relating thereto
as applicable to each sale which results in an Account; and (3) such other
documentation as Capital may request from time to time including but not limited
to Borrower's proof of verification on each invoice.
7.2 RIGHTS AND FACILITIES. Borrower shall maintain and preserve all
rights, franchises and other authority adequate for the conduct of its business.
Borrower shall also maintain its properties, equipment and facilities in good
order and repair and conduct its business in an orderly manner without voluntary
interruption and maintain and preserve its existence.
7.3 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and Equipment
shall be located only at locations listed on EXHIBIT E or such other locations
as shall have been approved by Capital.
7.4 INVENTORY RECORDS. Borrower shall keep correct and accurate
records itemizing and describing the kind, type, quality and quantity of the
Inventory, and its cost thereof, all of which records shall be available upon
demand to any of Capital's officers, agents and employees for inspection and
copying.
7.5 INSURANCE. Borrower, at its expense, shall keep and maintain its
assets insured against loss or damage by fire, theft, explosion, sprinklers and
all other hazards and risks ordinarily insured against by other owners who use
such properties in similar businesses for the full insurable value thereof.
Borrower shall deliver to Capital certified copies of such policies of insurance
and evidence of the payments of all premiums therefore. Borrower shall also keep
and maintain business interruption, public liability, and property damage
insurance relating to Borrower's ownership and use of the Inventory, the
Equipment and its other assets. All such policies of insurance shall be in such
form, with such companies, and in such amounts as may be satisfactory to
Capital. All such policies of insurance (except those of public liability and
property damage) shall contain an endorsement in a form satisfactory to Capital
showing Capital as a loss payee thereof, and all proceeds payable thereunder
shall be payable to Capital and, upon receipt by Capital, shall be applied on
account of the Obligations owing to Capital. To secure the payment of the
Obligations, Borrower grants Capital a security interest in and to all such
policies of insurance (except those of public liability and property damage) and
the proceeds thereof, and Borrower shall direct all insurers under such policies
of insurance to pay all proceeds thereof directly to Capital. In addition, the
Borrower shall maintain worker's compensation insurance in accordance with
applicable law. Capital shall be named as certificate holder on such policies.
7.6 NOTICE OF LITIGATION. If at any time during the term of this
Agreement any litigation, governmental investigations or claims, complaints,
actions or prosecutions involving Borrower or any guarantor of Borrower shall be
commenced or threatened, Borrower shall immediately notify Capital in writing of
such event.
7.7 SUBMISSION OF RECORDS AND REPORTS.
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A. Borrower shall execute and deliver to Capital within five
(5) days after the end of each month during the term of this Agreement,
reflecting the status as of the end of each month, certified by the Chief
Executive Officer or Chief Operating Officer of Borrower as being true and
correct, (i) a current detailed aging, by total and by customer, of Borrower's
Accounts, (ii) a current detailed aging, by total and by vendor, of Borrower's
accounts payable and (iii) a Compliance Certificate in the form of EXHIBIT D
from the Chief Executive Officer or Chief Operating Officer of Borrower
certifying that no Event of Default currently exists under this Agreement, all
of which shall be set forth in a form and shall contain such information as is
acceptable to Capital;
B. Borrower shall promptly supply Capital with such other
information concerning its affairs as Capital may request from time to time
hereafter, and shall promptly notify Capital of any material adverse change in
Borrower's financial condition and of any condition or event which constitutes a
breach of, or an event which constitutes an Event of Default under, this
Agreement.
7.8 TAXES. All assessments and taxes, whether real, personal or
otherwise, due or payable by, or imposed, levied or assessed against Borrower or
any of its property shall be paid in full, before delinquency or before the
expiration of any extension period, unless being contest in good faith, and, in
the event of taxes and/or assessments in excess of $10,000.00 being contested in
good faith, sufficient reserves shall have been deposited with Capital for the
payment of such taxes and/or assessments. Borrower shall make due and timely
payment or deposit of all federal, state and local taxes, assessments or
contributions required of it by law, and will execute and deliver to Capital, on
demand, appropriate certificates attesting to the payment or deposit thereof.
Borrower will make timely payment or deposit of all F.I.C.A. payments and
withholding taxes required of it by applicable laws, and will furnish Capital
with proof satisfactory to Capital indicating that Borrower has made such
payments or deposits.
7.9 FINANCIAL STATEMENTS.
A. Borrower shall maintain a standard and modern system of
accounting in accordance with GAAP with ledger and account cards and/or computer
tapes, discs, printouts, and records pertaining to the Collateral which contain
information as may from time to time be requested by Capital. Borrower shall not
modify or change its method of accounting or enter into, modify or terminate any
agreement presently existing, or at any time hereafter entered into with any
third party accounting firm and/or service bureau for the preparation and/or
storage of Borrower's accounting records without said accounting firm and/or
service bureau agreeing to provide to Capital information regarding the
Collateral and Borrower's financial condition. Borrower agrees to permit Capital
and any of its employees, officers or agents, upon demand, during Borrower's
usual business hours, or the usual business hours of third persons having
control thereof, to have access to and examine all of Borrower's Books relating
to the Collateral, the Obligations, Borrower's financial condition and the
results of Borrower's operations, and, in connection therewith, permit Capital
or any of its agents, employees or officers to copy and make extracts therefrom.
B. For each of Borrower's fiscal years during the term of this
Agreement,
21
Borrower shall deliver to Capital:
(i) within the Monthly Reporting Period (as defined on
Schedule 1), a statement of the financial condition of Borrower for such monthly
period on a Monthly Reporting Level (as defined on Schedule 1), including, but
not limited to, a balance sheet, a profit and loss statement, and a cash flow
statement, and any other report requested by Capital relating to the Collateral
and the financial condition of Borrower, and a certificate signed by the Chief
Executive Officer or Chief Operating Officer of Borrower, to the effect that all
statements and reports delivered or caused to be delivered to Capital under this
subsection, fairly and thoroughly present the financial condition of Borrower,
are true and correct as of the last day of the immediately preceding calendar
month and that there exists on the date of delivery to Capital no condition or
event which constitutes an Event of Default under this Agreement or which, with
the giving of notice or the passage of time or both, would constitute an Event
of Default under this Agreement;
(ii) within the Quarterly Reporting Period (as defined
on Schedule 1), a statement of the financial condition of Borrower for such
fiscal quarter, on a Quarterly Reporting Level (as defined on Schedule 1) basis,
including, but not limited to, a balance sheet, a profit and loss statement, and
a cash flow statement, and any other report requested by Capital relating to the
Collateral and the financial condition of Borrower, and a certificate signed by
the Chief Executive Officer or Chief Operating Officer of Borrower, to the
effect that all reports, statements, computer disc or tape files, printouts,
runs, or other computer prepared information of any kind or nature relating to
the foregoing or documents delivered or caused to be delivered to Capital under
this subsection, fairly and thoroughly present the financial condition of
Borrower and that there exists on the date of delivery to Capital no condition
or event which constitutes an Event of Default under this Agreement or which,
with the giving of notice or the passage of time or both, would constitute an
Event of Default under this Agreement;
(iii) within the Annual Reporting Period (as defined on
Schedule 1), a statement of the financial condition of Borrower for such fiscal
year, on an Annual Reporting Level (as defined on Schedule 1) basis, including,
but not limited to, a balance sheet, a profit and loss statement, and a cash
flow statement, and any other report requested by Capital relating to the
Collateral and the financial condition of Borrower, and a certificate signed by
the Chief Executive Officer or Chief Operating Officer of Borrower, to the
effect that all reports, statements, computer disc or tape files, printouts,
runs, or other computer prepared information of any kind or nature relating to
the foregoing or documents delivered or caused to be delivered to Capital under
this subsection, fairly and thoroughly present the financial condition of
Borrower and that there exists on the date of delivery to Capital no condition
or event which constitutes an Event of Default under this Agreement or which,
with the giving of notice or the passage of time or both, would constitute an
Event of Default under this Agreement.
7.10 FINANCIAL COVENANTS. Borrower shall maintain at all times
during the term of this Agreement the Financial Covenants set forth on Schedule
1.
7.11 TAX RETURNS. Borrower shall deliver to Capital copies of each
of Borrower's
22
future federal and state income tax returns, and any amendments thereto, within
fifteen (15) calendar days following the filing thereof with the Internal
Revenue Service and with the appropriate state offices. Upon the written request
of Capital, Borrower further agrees to promptly deliver to Capital copies of all
receipts issued to Borrower for the payment of federal and state withholding
taxes required of it.
7.12 PAYMENT OF DEBTS. Borrower shall be at all times hereafter
solvent and able to pay its debts (including trade debts) as they mature.
7.13 COMPLIANCE WITH ENVIRONMENTAL LAWS. Borrower shall comply with
any and all federal, state and local statutes, laws and regulations concerning
the preservation of the environment and the use and disposal of hazardous and
toxic materials and substances.
7.14 REIMBURSEMENT FOR CAPITAL EXPENSES. Upon the demand of Capital,
Borrower shall immediately reimburse Capital for all sums expended by Capital
which constitute Capital Expenses, and Borrower hereby authorizes and approves
all advances and payments by Capital for items constituting Capital Expenses.
7.15 CHANGE IN STOCK OWNERSHIP. Borrower will notify Capital of any
change in the stock ownership of Borrower which involves any one person or
entity, individually or beneficially, owning forty nine percent (49%) or more of
the capital stock of Borrower.
8 BORROWER'S NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any credit hereunder
shall be available and until the Obligations have been repaid in full, unless
Capital shall otherwise consent in writing, Borrower shall not do any of the
following:
8.1 RELOCATE OF CHIEF EXECUTIVE OFFICE. Borrower will not, without
thirty (30) days prior written notification to Capital, relocate its chief
executive office.
8.2 AGREEMENTS WITH ACCOUNT DEBTORS. After an Event of Default
hereunder, no discount, credit or allowance shall be granted by Borrower to any
account debtor and no return of merchandise shall be accepted by Borrower
without Capital's consent. Capital may, after an Event of Default, settle or
adjust disputes and claims directly with account debtors for amounts and upon
terms which Capital considers advisable, and in such cases, Capital will credit
Borrower's account with only the net amounts received by Capital in payment of
such disputed Accounts, after deducting all Capital Expenses incurred or
expended in connection therewith.
8.3 STORAGE OF INVENTORY. The Inventory shall not at any time or
times hereafter be stored with a bailee, warehouseman or similar party without
Capital's prior written consent, and, in such event, Borrower will, concurrent
therewith, cause any such bailee, warehouseman or similar party to issue and
deliver to Capital, in a form acceptable to Capital, warehouse receipts in
Capital's name evidencing the storage of the Inventory.
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8.4 BUSINESS STRUCTURE AND OPERATIONS. Borrower shall not, without
Capital's prior written consent:
A. Sell, lease, or otherwise dispose of, move, relocate
(except in connection with a relocation of Borrower's business facility) or
transfer, whether by sale or otherwise, any of Borrower's assets, except sales
of Inventory in the ordinary and usual course of Borrower's business as
presently conducted;
B. Change Borrower's name or form of entity, or add any new
fictitious name;
C. Acquire, merge or consolidate with or into any other
business organization, provided, however, that Borrower may acquire other
businesses and pay or promise to pay consideration in connection with such
acquisitions so long as such acquisitions are asset acquisitions and so long as
such acquisitions are legal and binding and provide that Borrower will own the
assets of the business(es) purchased, free and clear of all liens and
encumbrances, and so long as the assets acquired by Borrower will be subject
only to Capital's first priority perfected security interest, and so long as any
notes or other obligations of Borrower in connection with such acquisition are
subject and subordinate to the interests of Capital, upon terms and conditions
acceptable to Capital, and so long as there is no Event of Default under this
Agreement and so long as the entering into of such acquisition does not create
an Event of Default hereunder, and so long as Borrower is in compliance with any
of the terms and conditions of this Agreement, including, without limitation,
all covenants set forth herein, and so long as Capital is provided with copies
of all acquisition documents, prior to the acquisitions, and an opinion of
counsel, to be delivered prior to the acquisitions, opining to such matters as
may be reasonably required by Capital.
D. Enter into any transaction not in the ordinary and usual
course of Borrower's business;
E. Guarantee or otherwise become in any way liable with
respect to the obligations of any third party except by endorsement of
instruments or items of payment for deposit to the general account of Borrower
or which are transmitted or turned over to Capital;
F. Make any change in the Borrower's financial structure or in
any of its business objectives, purposes or operations which could adversely
affect the ability of Borrower to repay the Obligations;
G. Incur any debts outside the ordinary and usual course of
Borrower's business in excess of $1,000,000.00, in the aggregate on an annual,
non-cumulative basis, so long as such debts are subject and subordinate to the
interests of Capital, upon terms and conditions acceptable to Capital;
H. Make any advance or loan to any person or entity in excess
of $25,000.00
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in the aggregate on an annual, non-cumulative basis;
I. Prepay any existing indebtedness owing to any third party;
J. Cause, permit or suffer any change, direct or indirect, in
Borrower's capital ownership which will result in any one person or entity,
individually or beneficially, owning forty nine percent (49%) or more of the
capital stock of Borrower;
K. Make any distribution or declare or pay any dividends (in
cash or in stock) on, or purchase, acquire, redeem or retire any of its common
stock, of any class, whether now or hereafter outstanding, in excess of
$250,000.00 in the aggregate on an annual, non-cumulative basis, and provided,
further that making such distributions, dividends, purchases, acquisitions,
redemptions or retirement does not create an Over Advance or an Event of
Default;
L. Suspend or go out of business;
M. Make any loans, advances, intercompany transfers or cash
flow between the Borrower and any subsidiary, related entity or affiliate of the
Borrower or with any company that has common officers or directors with the
Borrower;
N. Cause, permit or suffer any change, in the employment of
either Xxxxxx X. Xxxxxxx or Xxxxxxx X. Xxxxxxxx, such that either or both cease
to be employed by Borrower in capacities similar to those in effect as of the
date of this Agreement.
8.5 ERISA.
A. If applicable, no employee benefit plan established or
maintained by the Borrower (including any multiemployer plan to which the
Borrower contributes) which is subject to Part 3 of Subtitle B or Title I of
ERISA had a material accumulated funding deficiency (as such term is defined in
Section 302 of ERISA) as of the last day of the most recent fiscal year of such
plan ended prior to the date hereof, or would have had an accumulated funding
deficiency (as so defined) on such day if such year were the first year of such
plan to which Part 3 of Subtitle B of Title I of ERISA applied, and no material
liability to the Pension Benefit Guaranty Corporation, has been or is expected
by the Borrower to be, incurred with respect to any such plan by the Borrower.
B. The Borrower is not required to contribute to or is not
contributing to a "Multiemployer Pension Plan" (as such term is defined in the
Multiemployer Pension Plan Amendments Act of l980). The Borrower has no
"withdrawal liability" (as also defined in such Act) to any multiemployer
pension plan, nor has any reportable event referred to in section 4043(b) of the
Employee Retirement Income Security Act of 1974 ("ERISA") occurred that has
resulted or could result in liability of the Borrower; and the Borrower does not
have any reason to believe that any other event has occurred that has resulted
or could result in liability of the Borrower as set forth above.
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C. Borrower shall not withdraw from participation in, permit
the termination or partial termination of, or permit the occurrence of any other
event with respect to any deferred compensation plan maintained for the benefit
of Borrower's employees under circumstances that could result in liability to
the Pension Benefit Guaranty Corporation, or any of its successors or assigns,
or to any entity which provides funds for such deferred compensation plan.
D. Borrower shall not withdraw from any multi-employer plan
described in Section 4001(a)(3) of ERISA which covers Borrower's employees.
9. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
9.1 FAILURE TO PAY OBLIGATIONS. If Borrower fails to pay when due
and payable or when declared due and payable all or any portion of the
Obligations owing to Capital (whether of principal, taxes, reimbursement of
Capital Expenses, or otherwise);
9.2 FAILURE TO PERFORM. If Borrower fails or neglects to perform,
keep or observe any term, provision, condition, covenant, agreement, warranty or
representation contained in this Agreement, in any of the other Loan Documents,
or in any other present or future agreement between Borrower and Capital;
9.3 INACCURATE INFORMATION. If any representation, statement,
report, or certificate made or delivered by Borrower, or any of its officers,
employees or agents, to Capital is not true and correct, in any material
respect, including, but not limited to, any Borrowing Base Certificate delivered
to Capital pursuant to this Agreement;
9.4 THIRD PARTY CLAIM. If all or a material portion of Borrower's
assets are attached, seized, subjected to a writ or distress warrant, or are
levied upon, or come into the possession of any Judicial Officer or Assignee;
9.5 IMPAIRMENT. If there is a material impairment of the prospect of
repayment of all or any portion of the Obligations owing to Capital or a
material impairment of the value or priority of Capital's security interests in
the Collateral;
9.6 VOLUNTARY INSOLVENCY PROCEEDING. If an Insolvency Proceeding is
commenced by Borrower;
9.7 INVOLUNTARY INSOLVENCY PROCEEDING. If an Insolvency Proceeding
is commenced against Borrower;
9.8 INTERRUPTION OF BUSINESS. If Borrower is enjoined, restrained or
in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
26
9.9 GOVERNMENTAL LIEN. If a notice of lien, levy or assessment is
filed of record with respect to any or all of Borrower's assets by the United
States Government, or any department, agency or instrumentality thereof, or by
any state, county, municipal or other governmental agency, or if any tax or debt
owing at any time hereafter to any one or more of such entities becomes a lien,
whether xxxxxx or otherwise, upon any or all of the Borrower's assets and the
same is not paid on the payment date thereof;
9.10 LIENS. If a judgment or other claim becomes a lien or
encumbrance upon all or a material portion of Borrower's assets;
9.11 DEFAULT IN AGREEMENT WITH THIRD PARTY. If there is a default,
after the expiration of all applicable cure periods, in any loan agreement,
mortgage, indenture or other material agreement to which Borrower is a party
with third parties, and Capital determines that such default shall have a
materially adverse effect on Borrower's business or the prospects for repayment
of the Obligations;
9.12 MISREPRESENTATION. If any misrepresentation exists now or
hereafter in any warranty or representation made to Capital by Borrower or any
officer or director of Borrower, or if any such warranty or representation is
withdrawn by Borrower or by any officer or director of Borrower;
9.13 IMPAIRMENT OF GUARANTY. If any guarantor of Borrower's
indebtedness to Capital dies, terminates its guaranty, defaults in the payment
or performance of any obligations of guarantor owing to Capital, or becomes the
subject of an Insolvency Proceeding;
9.14 REPORTABLE EVENT UNDER ERISA. If any reportable event, which
Capital determines, in its sole and absolute discretion, will have a material
adverse effect on the financial condition of Borrower or which Capital
determines constitutes grounds for the termination of any deferred compensation
plan by the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to administer any such
plan, shall have occurred and be continuing thirty (30) days after written
notice of such determination shall have been given to Borrower by Capital, or
any such Plan shall be terminated within the meaning of Title IV of ERISA, or a
trustee shall be appointed by the appropriate United States District Court to
administer any such plan, or the Pension Benefit Guaranty Corporation shall
institute proceedings to terminate any plan and in case of any event described
in this Section 9.14, the aggregate amount of the Borrower's liability to the
Pension Benefit Guaranty Corporation under Sections 4062, 4063 or 4064 of ERISA
shall exceed five percent (5%) of Borrower's Tangible Net Worth; or
9.15 WITHDRAWAL FROM MULTI-EMPLOYER PLAN. Borrower shall have
withdrawn from a multi-employer plan described in Section 4001(a)(3) of ERISA
and incurs withdrawal liability as a result thereof.
9.16 SEC ACTION. In the event that the SEC or any state securities
authority takes or threatens to take any action against the Borrower, and in the
case of the voluntary rescission offer commenced by Borrower in June 2000 only,
in the event that the SEC or any state securities authority
27
takes or threatens to take any action against the Borrower, which would have a
materially adverse effect on Borrower's business, the ability of Borrower's
common stock to be traded on NASDAQ, or the prospects for the repayment of the
Obligations.
9.17 BREACH OF THE TERMS OF DEBENTURES. In the event that Borrower
breaches the terms of those certain 6% Convertible Debentures due December 1,
2005 or any other debentures of Borrower.
10 CAPITAL'S RIGHTS AND REMEDIES
10.1 REMEDIES. Upon the occurrence of an Event of Default by
Borrower under this Agreement, Capital may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
A. Declare all Obligations, whether arising pursuant to this
Agreement or otherwise, immediately due and payable;
B. Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Capital;
C. Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Capital, but without
affecting Capital's rights and security interest in the Collateral and without
affecting the Obligations owing by Borrower to Capital;
D. Capital or Capital's designee may notify customers, account
debtors or lessees of Borrower that the Accounts have been assigned to Capital
and that Capital has a security interest therein, collect them directly, and
charge the collection costs and expenses to Borrower's loan account;
E. Without notice to or demand upon Borrower or any Guarantor,
make such payments and do such acts as Capital considers necessary or reasonable
to protect its security interest in the Collateral. Borrower agrees to assemble
the Collateral if Capital so requires, and to make the Collateral available to
Capital as Capital may designate. Borrower authorizes Capital to enter the
premises where the Collateral is located, take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest or compromise any
encumbrance, charge or lien which in the opinion of Capital appears to be prior
or superior to its security interest and to pay all expenses incurred in
connection therewith;
F. Capital is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale and selling any Collateral and Borrower's
rights under all licenses, and all franchise agreements shall insure to
Capital's benefit;
28
G. Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale and sell (in the manner provided for
herein) the Collateral;
H. Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms. It
is not necessary that the Collateral be present at any such sale;
I. In connection with any such sale, the standard of
commercial reasonableness will be deemed satisfied if Capital does the
following:
(i) LOCATION OF SALE(S). The sale(s) may be conducted at
Borrower's premises, Capital's premises, the premises of any third party located
in or adjacent to any county in which any of the collateral is located, or any
other location which Capital believes is reasonably convenient to potential
purchasers. The selection of any such location(s) shall be in the sole and
absolute discretion of Capital.
(ii) NOTICE OF SALE. Capital shall give notice of the
disposition of the Collateral as follows:
(a) Capital shall give Borrower and each
holder of a security interest in the Collateral who has filed with Capital a
written request for notice, a notice in writing of the time and place of public
sale, or, if the sale is a private sale or some other disposition other than a
public sale is to be made of the Collateral, the time on or after which the
private sale or other disposition is to be made;
(b) The notice shall be personally
delivered or mailed, postage prepaid, to Borrower as provided in Section 13, at
least ten (10) calendar days before the date fixed for the sale, or at least ten
(10) calendar days before the date on or after which the private sale or other
disposition is to be made, unless the Collateral is perishable or threatens to
decline speedily in value. Notice to persons other than Borrower claiming an
interest in the Collateral shall be sent to such addresses as they have
furnished to Capital;
(c) If the sale is to be a public sale,
Capital shall also give notice of the time and place by publishing a notice one
time at least ten (10) calendar days before the date of the sale in a newspaper
of general circulation in the county in which the sale is to be held;
J. Capital may credit bid and purchase at any public sale;
K. Borrower shall pay all Capital Expenses incurred in
connection with Capital's enforcement and exercise of any of its rights and
remedies as herein provided, whether or not suit is commenced by Capital;
L. Any deficiency which exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third parties,
to Borrower by Capital.
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10.2 CUMULATIVE RIGHTS. Capital's rights and remedies under this
Agreement and all other agreements shall be cumulative. Capital shall have all
other rights and remedies not inconsistent herewith as provided under the Code,
by law, or in equity. No exercise by Capital of one right or remedy shall be
deemed an election, and no waiver by Capital of any default on Borrower's part
shall be deemed a continuing waiver. No delay by Capital shall constitute a
waiver, election or acquiescence by it.
11 TAXES AND EXPENSES REGARDING THE COLLATERAL
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or otherwise) due to third persons or entities, or fails to
make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then Capital may, to the extent that
it determines in its sole discretion that such failure by Borrower could have a
material adverse change on Capital's interests in the Collateral, in its
discretion and without prior notice to Borrower, (i) make payment of the same or
any part thereof; (ii) set up such reserves in Borrower's loan account as
Capital deems necessary to protect Capital from the exposure created by such
failure; or (iii) both. Any amounts paid or deposited by Capital shall
constitute Capital Expenses, shall be immediately charged to Borrower's loan
account and become additional Obligations owing to Capital, shall bear interest
at the applicable rate set forth in Section 2.3.5, and shall be secured by the
Collateral. Any payments made by Capital shall not constitute: (i) an agreement
by Capital to make similar payments in the future, or (ii) a waiver by Capital
of any Event of Default under this Agreement. Capital need not inquire as to, or
contest the validity of, any such expense, tax, security interest, encumbrance
or lien, and the receipt of the usual official notice for the payment thereof
shall be conclusive evidence that the same was validly due and owing.
12 WAIVERS
12.1 APPLICATION OF PAYMENTS. Borrower waives the right to direct
the application of any and all payments at any time or times hereafter received
by Capital on account of any Obligations owed by Borrower to Capital, and
Borrower agrees that Capital shall have the continuing exclusive right to apply
and reapply such payments in any manner as Capital may deem advisable,
notwithstanding any entry by Capital upon its books.
12.2 DEMAND, PROTEST, DEFAULT, ETC. Except as otherwise provided
herein, Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of nonpayment at maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, documents, instruments, chattel paper, and guarantees at any
time held by Capital on which Borrower may in any way be liable.
12.3 MAINTENANCE OF COLLATERAL. So long as Capital complies with its
obligations, if any, under Section 9-207 of the Code, Capital shall not in any
way or manner be liable or responsible for: (a) the safekeeping of the Inventory
and/or Equipment; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency
or other person whomsoever.
30
All risk or loss, damage or destruction of the Inventory and Equipment shall be
borne by Borrower.
12.4 CONFIDENTIAL RELATIONSHIP. Borrower waives the right to assert
a confidential relationship, if any, it may have with any accounting firm and/or
service bureau in connection with any information requested by Capital pursuant
to or in accordance with this Agreement, and agrees that Capital may contact
directly any such accounting firm and/or service bureau in order to obtain such
information.
13 NOTICES
Unless otherwise specifically provided herein, all notices and
service of any process shall be in writing addressed to the respective party as
set forth below and may be personally served, telecopied or sent by overnight
courier service or United States mail and shall be deemed to have been given:
(a) if delivered in person, when delivered; (b) if delivered by telecopy, on the
date of transmission if confirmed and if transmitted on a Business Day before
4:00 p.m. (eastern standard time) or, if not, on the next succeeding Business
Day; (c) if delivered by overnight courier, two days after delivery to such
courier properly addressed; or (d) if by U.S. Mail, four Business Days after
depositing in the United States mail, with postage prepaid and properly
addressed.
If to Borrower: At the address specified on Schedule 1
If to Capital: CAPITAL TEMPFUNDS, INC.,
c/o Capital Factors, Inc., Servicing Agent
0000 X. Xxxxxxx Xxxx Xxxx.
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Senior Vice President
Telecopier Number (000) 000-0000
With a copy to: Xxxxxxx X. Xxxxxx, Esq.
Senior Vice President
Capital Factors, Inc.
000 X. Xxxxxxxx Xxxx Xxxx
Xxxx Xxxxx, XX 00000
Telecopier Number (000) 000-0000
and
Xxxx X. Xxxxxx, Esq.
Xxxx X. Xxxxxx, P.A.
0000 Xxxxxxxxx Xxxxxxxxx, X.X.
Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
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Telecopier Number (000) 000-0000
The parties hereto may change the address at which they are to
receive notices and the telecopier number at which they are to receive
telecopies hereunder, by notice in writing in the foregoing manner given to the
other.
14 DESTRUCTION OF BORROWER'S DOCUMENTS
Any documents, schedules, invoices or other papers delivered to
Capital may be destroyed or otherwise disposed of by Capital four (4) months
after they are delivered to or received by Capital, unless Borrower requests, in
writing, the return of the said documents, schedules, invoices or other papers
and makes arrangements, at Borrower's expense, for their return.
15 CHOICE OF LAW, FORUM SELECTION.
(a) This Agreement has been negotiated, executed and delivered at and
shall be deemed to have been made in Charlotte, North Carolina and the validity,
construction, interpretation and enforcement, as well as the rights of the
parties hereunder and relating to the Collateral, shall be determined under,
governed by and construed in accordance with the laws of the State of North
Carolina; PROVIDED, however, that if any of the Collateral shall be located in
any jurisdiction other than North Carolina, the laws of such jurisdiction shall
govern the method, manner and procedure for foreclosure of Capital's security
interest upon such Collateral and the enforcement of Capital's other remedies in
respect of such Collateral to the extent that the laws of such jurisdiction are
different from or inconsistent with the laws of North Carolina.
(b) As part of the consideration for new value received, and regardless of
any present or future domicile or principal place of business of Borrower or
Capital, Borrower hereby consents and agrees that the State Courts of the State
of North Carolina, located in Charlotte, North Carolina, or, at Capital's
option, the United States District Court for the Western District of North
Carolina, Charlotte Division, shall have jurisdiction to hear and determine any
claims or disputes between Borrower and Capital pertaining to this Agreement or
to any matter arising out of or related to this Agreement. Borrower expressly
submits and consents in advance to such jurisdiction in any action or suit
commenced in any such Court, and Borrower hereby waives any objection which
Borrower may have based upon lack of personal jurisdiction, improper venue or
FORUM NON CONVENIENS and hereby consents to the granting of such legal or
equitable relief as is deemed appropriate by such Court. Borrower hereby waives
personal service of the summons, complaint and other process issued in any such
action or suit and agrees that service of such summons, complaint and other
process may be made by registered or certified mail addressed to Borrower at the
address set forth in this Agreement and that service so made shall be deemed
completed upon the earlier of Borrower's actual receipt thereof or 3 days after
deposit in the U.S. mails, proper postage prepaid. Nothing in this Agreement
shall be deemed or operate to affect the right of Capital to serve legal process
in any other manner permitted by law, or to preclude the enforcement by Capital
of any judgment or order obtained in such forum or the taking of any action
under this Agreement to enforce same in any other appropriate forum or
jurisdiction.
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16 CONCERNING REVISED ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE. The
parties acknowledge and agree to the following provisions of this Agreement in
anticipation of the possible application, in one or more jurisdictions to the
transactions contemplated hereby, of the revised Article 9 of the Uniform
Commercial Code in the form or substantially in the form approved by the
American Law Institute and the National Conference of Commissioners on Uniform
State Law and contained in the 1999 Official Text of the Uniform Commercial Code
("REVISED ARTICLE 9").
a. ATTACHMENT. In applying the law of any jurisdiction in
which Revised Article 9 is in effect, the Collateral is substantially all
assets of the Borrower, whether or not within the scope of Revised Article
9. The Collateral shall include, without limitation, the following
categories of assets as defined in Revised Article 9: goods (including
inventory and any accessions thereto), equipment, instruments (including
promissory notes), documents, accounts (including health-care-insurance
receivables), chattel paper (whether tangible or electronic), deposit
accounts, letter-of-credit rights (whether or not the letter of credit is
evidenced by a writing), commercial tort claims, securities and all other
investment property, general intangibles (including payment intangibles
and software), supporting obligations and any and an proceeds of any
thereof, wherever located, whether now owned and hereafter acquired. If
the Borrower shall at any time, whether or not Revised Article 9 is in
effect in any particular jurisdiction, acquire a commercial tort claim, as
defined in Revised Article 9, the Borrower shall immediately notify
Capital in a writing signed by the Borrower of the brief details thereof
and grant to Capital in such writing a security interest therein and in
the proceeds thereof, all upon the terms of this Agreement, with such
writing to be in form and substance satisfactory to Capital.
b. PERFECTION BY FILING. Capital may at any time and from time
to time, pursuant to the provisions of Section 4.7, file financing
statements, continuation statements and amendments thereto that describe
the Collateral as all assets of the Borrower or words of similar effect
and which contain any other information required by Part 5 of Revised
Article 9 for the sufficiency or filing office acceptance of any financing
statement, continuation statement or amendment, including whether the
Borrower is an organization, the type of organization and any organization
identification number issued to the Borrower. The Borrower agrees to
furnish any such information to Capital promptly upon request. Any such
financing statements, continuation statements or amendments may be signed
by Capital on behalf of the Borrower, as provided in Section 4.7, and may
be filed at any time in any jurisdiction whether or not Revised Article 9
is then in effect in that jurisdiction.
c. OTHER PERFECTION, ETC. The Borrower shall at any time and
from time to time, whether or not Revised Article 9 is in effect in any
particular jurisdiction, take such steps as Capital may reasonably request
for Capital (a) to obtain an acknowledgment, in form and substance
satisfactory to Capital, of any bailee having possession of any of the
Collateral that the bailee holds such Collateral for Capital, (b) to
obtain "control" of any investment property, deposit accounts,
letter-of-credit rights or electronic chattel paper (as such terms are
defined in Revised Article 9 with corresponding provisions in Rev.
Sections 9-104, 9-105, 9106 and 9-107
33
relating to what constitutes "control" for such items of Collateral), with
any agreements establishing control to be in form and substance
satisfactory to Capital, and (c) otherwise to insure the continued
perfection and priority of Capital's security interest in any of the
Collateral and of the preservation of its rights therein, whether in
anticipation and following the effectiveness of Revised Article 9 in any
jurisdiction.
d. SAVINGS CLAUSE. Nothing contained in this Article 16 shall
be construed to narrow the scope of Capital's security interest in any of
the Collateral or the perfection or priority thereof or to impair or
otherwise limit any of the rights, powers, privileges or remedies of
Capital hereunder except (and then only to the extent) mandated by Revised
Article 9 to the extent then applicable.
17. GENERAL PROVISIONS
17.1 REPRESENTATIONS AND WARRANTIES REPEATED. Each
representation, warranty and agreement contained in this Agreement shall be
automatically deemed repeated with each advance and shall be conclusively
presumed to have been relied on by Capital regardless of any investigation made
or information possessed by Capital. The warranties, representations and
agreements set forth herein shall be cumulative and in addition to any and all
other warranties, representations and agreements which Borrower shall give, or
cause to be given, to Capital, either now or hereafter.
17.2 BINDING AGREEMENT. This Agreement shall be binding
and deemed effective when executed by Borrower and accepted and executed by
Capital.
17.3 RIGHT TO GRANT PARTICIPATIONS. This Agreement shall
bind and inure to the benefit of the respective successors and assigns of each
of the parties; PROVIDED, HOWEVER , that Borrower may not assign this Agreement
or any rights hereunder without Capital's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment by
Capital shall release Borrower from its Obligations to Capital. Capital may
assign this Agreement and its rights and duties hereunder. Capital reserves the
right to sell, assign, transfer, negotiate or grant participations in all or any
part of, or any interest in, Capital's rights and benefits hereunder.
17.4 INDEMNIFICATION. In consideration of the execution
and delivery of this Agreement and the extension of financial accommodations by
Capital to Borrower pursuant to this Agreement, Borrower agrees to indemnify,
save, exonerate, and hold Capital, and each of the officers, directors,
employees and agents of Capital (herein collectively called the "Indemnitees"
and individually called an "Indemnitee") free and harmless from and against any
and all actions, claims, causes of action, suits, losses, liabilities, damages,
and expenses, including, without limitation, reasonable attorneys' fees
(including allocated costs for in-house legal services provided and attorneys'
fees in all bankruptcy proceedings) and disbursements (herein collectively
called the "Indemnified Liabilities"), which may be incurred by or asserted
against the Indemnitees or any Indemnitee as a result of, or arising out of, or
34
relating to, or in connection with, any investigation, litigation, or proceeding
related to any use made or proposed to be made by Borrower of the proceeds of
any advance or loan made hereunder, or the consummation of the transactions
contemplated hereby, whether or not any such Indemnitee is a party thereto, and,
if and to the extent that the foregoing undertaking may be unenforceable for any
reason, Borrower hereby agrees to make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities as is permissible under
applicable law.
If any action, suit, or proceeding arising from
any of the foregoing is brought against Capital, or any Indemnitee or affiliate
of an Indemnitee indemnified or intended to be indemnified pursuant to this
Section 17.4, Borrower, to the extent and in the manner directed by the
Indemnitee or intended Indemnitee, shall resist and defend such action, suit, or
proceeding or cause the same to be resisted and defended by counsel designated
by Borrower (which counsel shall be reasonably satisfactory to the Indemnitee or
intended Indemnitee). Each Indemnitee shall use its best efforts to cooperate in
the defense of any such action, writ, or proceeding. Borrower shall have no
obligation to any Indemnitee under this Section 16.4 to the extent that the
Indemnified Liabilities resulted from the gross negligence or willful misconduct
on the part of any Indemnitee. The Obligations of Borrower under this Section
16.4 shall survive the termination of this Agreement and the discharge of the
Borrower's other Obligations hereunder.
17.5 TAX INDEMNIFICATION. The Borrower agrees to pay and
save Capital harmless against any liability for payment of any state documentary
stamp taxes, intangible taxes or similar taxes (including interest or penalties,
if any) which may now or hereafter be determined to be payable in respect to the
execution, delivery or recording of any Loan Document or the making of any
advance, whether originally thought to be due or not, and regardless of any
mistake of fact or law on the part of Capital or the Borrower with respect to
the applicability of such tax. The provisions of this section shall survive
payment in full of the Obligations and termination of this Agreement.
17.6 SECTION HEADINGS. Section headings and section
numbers have been set forth herein for convenience only. Unless the contrary is
compelled by the context, everything contained in each section applies equally
to this entire Agreement.
17.7 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against Capital
or Borrower, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.
17.8 SEVERABILITY. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
35
17.9 MODIFICATION AND MERGER. This Agreement cannot be
changed or terminated orally. All prior agreements, understandings,
representations, warranties and negotiations, if any, are merged into this
Agreement.
17.10 COMPLIANCE. The Borrower, for and in consideration
of the making of the loan described herein and future advance funding, agree if
requested by Capital or its counsel, Borrower will fully cooperate and execute
and/or re-execute any document or documents due to clerical errors, scrivener's
errors or relating to additional matters due to receipt and review of
miscellaneous required items post closing, or otherwise on any or all of the
closing documentation for the loan if deemed necessary, using reasonable
discretion of Capital and its counsel.
17.11 CAPITAL'S COUNSEL. In the event that Capital has
utilized counsel in connection with the closing of the transaction described in
this Agreement, such counsel ("Capital Counsel") has (1) prepared certain
documents relating to the Loan, including, among other documents, this
Agreement; (2) examined such documents as Capital Counsel deemed necessary in
connection with this transaction; and (3) supervised the closing of the Loan.
Capital Counsel's fee for providing these services is stated on the Loan Closing
Statement. These legal services have been performed on behalf of Capital and NOT
on behalf of Borrower, and Capital Counsel's fees are being reimbursed to Lender
by Borrower.
17.12 JURY TRIAL. CAPITAL, THE BORROWER AND THE
GUARANTORS ACKNOWLEDGE THAT THE TRANSACTIONS AND MATTERS SET FORTH IN THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE COMPLEX IN NATURE AND THAT ANY
LITIGATION ARISING THEREFROM WOULD BE MOST APPROPRIATELY, ECONOMICALLY AND
SPEEDILY RESOLVED BY A NON-JURY TRIAL. THE BORROWER, CAPITAL AND THE GUARANTORS
THEREFOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT THAT
THEY MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION, DIRECTLY OR
INDIRECTLY, BASED ON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS OR THE LOANS AND FACILITIES CONTEMPLATED
HEREBY, OR IN ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER
WRITTEN OR ORAL) OR ACTIONS OR OMISSIONS OF ANY PARTY TO THIS AGREEMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR CAPITAL'S ENTERING INTO THIS AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. BORROWER AND CAPITAL EACH
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OF THE LOAN DOCUMENTS.
17.13 AUTOMATIC RELIEF FROM STAY AND OTHER BANKRUPTCY
WAIVERS. THE BORROWER AGREES THAT IF ANY PROCEEDING IS COMMENCED UNDER TITLE 11
OF THE UNITED STATES
36
CODE RELATIVE TO IT, CAPITAL SHALL BE AUTOMATICALLY ENTITLED TO IMMEDIATE RELIEF
FROM STAY UNDER 11 U.S.C. SS.362 WITHOUT ESTABLISHING EQUITY OR NEED OR LACK OF
NEED FOR THE PROPERTY SECURING THE LOANS OR CAUSE OR LACK OF CAUSE, AND THE
BORROWER HEREBY CONSENTS TO SUCH RELIEF, IT BEING EXPRESSLY ACKNOWLEDGED THAT
THIS PROVISION WAS SPECIFICALLY NEGOTIATED AND CONSTITUTES A MATERIAL INDUCEMENT
TO CAPITAL ENTERING INTO THIS AGREEMENT AND MAKING FINANCIAL AND OTHER
ACCOMMODATIONS AND ADDITIONAL ADVANCES CONTEMPLATED HEREIN.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
to be effective on the date first set forth above.
Witnesses: STRATUS SERVICES GROUP, INC.
________________________ By: /s/ XXXXXX X. XXXXXXX
-----------------------
________________________ Its: PRESIDENT & CEO
-------------------
CAPITAL TEMPFUNDS, INC.
__________________________ By: XXXX X. XXXXXX
--------------
__________________________ Senior Vice President
STATE OF )
) SS:
COUNTY OF )
The foregoing instrument was acknowledged before me this 8th day of
December, 2000 by Xxxxxx X. Xxxxxxx as President of STRATUS SERVICES GROUP,
INC., a Delaware corporation, on behalf of the corporation. He [ ] is personally
known to me or [X] has produced satisfactory evidence, as identification.
LOAN X. XXXXX
-------------
Notary Public,
37
My Commission Expires: 12/22/00
Print Name: Loan X. Xxxxx
Commission Number: 1120554
[NOTARIAL SEAL]
STATE OF )
) SS:
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of
December, 2000 by ____________________, as Senior Vice President of CAPITAL
TEMPFUNDS, INC., a North Carolina corporation, on behalf of the corporation. He
[ ] is personally known to me or [ ] has produced
________________________________, as identification.
_____________________________________
Notary Public,
My Commission Expires:
Print Name: _________________________
Commission Number:_________________
[NOTARIAL SEAL]
38
SCHEDULE 1
1. "Term Days" as referred to in Section 1.11 means 60 days
from invoice date.
2. "Past Due Days" as referred to in Section 1.11 means 90 days from
invoice date for all Accounts with the exception of Consolidated
Edison, Inc. ("Con Ed"), and means 120 days from invoice date for
Con Ed.
3. "Cross Aging Percentage" as referred to in Section 1.11 means
50%.
4. "Fidelity Guarantor" and "Fidelity Guarantors" as referred to in
Section 1.14 means:
Xx. Xxxxxx X. Xxxxxxx
5. "Lock Box" as referred to in Section 1.23 means:
Operations Center
Xxxx Xxxxxx Xxx 000000
Xxxxxxxxx, XX 00000-0000
6. "Maximum Credit Line" as referred to in Section 1.25 means TWELVE
MILLION DOLLARS ($12,000,000.00).
7. INTENTIONALLY OMITTED
8. "Term" as referred to in Section 1.33 means sixty (60) days from
the date hereof. The Term shall thereafter be automatically renewed
(a "Renewal Term") for successive periods of sixty (60) days unless
terminated by either party as set forth below, which termination
shall be effective upon the effective date of termination set forth
in the notice described below, which shall be not less than sixty
(60) days from the date such notice is sent as provided in Section
13. Notice of such termination shall be effectuated by the mailing
of a certified letter, return receipt requested, not less than sixty
(60) days immediately prior to the effective date of such
termination, addressed to the other party in the manner and the
address referred to in Section 13.
9. "Advance Percentage" as referred to in Section 2.1 means
eighty-five percent (85%).
10. "Margin" as referred to in Section 2.3.5 means one and one-half
percent (1.5%). The Governing Rate on the date hereof is equal to eleven percent
(11%) (The Margin plus the Prime Rate).
11. "Reporting Period" as referred to in Section 2.3.6 means week.
39
12. "Collection Day Period" as referred to in Section 2.3.7 means 3
days.
13. The Borrower will pay the following fees to Capital, which fees
shall be fully earned when due and shall not be refundable to the Borrower in
any event:
a. LOAN ADMINISTRATION FEE. Borrower will pay Capital a Loan
Administration Fee in the amount of $1000.00 per month during the term of
this Agreement. The initial payment shall be due on the date hereof, and
subsequent payments shall be due on the first calendar day of every month
thereafter.
b. FACILITY FEE. Borrower will pay Capital a Facility Fee in the
amount of $120,000.00 which shall be payable as follows:
(a). $100,000.00 upon the date hereof; and
(b). $20,000.00 when the total of all Obligations exceeds
$10,000,000.00.
In the event that the Term is extended beyond the original Term, no
additional Facility Fee shall be payable unless the Term is extended
beyond one (1) year from the date hereof, in which case there shall be a
renewal fee of one (1) percent of the Maximum Credit Line which shall be
payable upon the anniversary of the execution of this Agreement.
14. The Borrower's chief executive office, as referred to in Section
6.1A is:
000 Xxxxx Xxxx, #000
Xxxxxxxxx, XX 00000
--
15. The Borrower is a ___X__corporation, _____limited liability
company _______limited partnership ______general partnership ______sole
proprietor, for the purposes of Section 6.1 B (check one)
16. "State of Incorporation" as referred to in Section 6.1 B. is
Delaware.
17. The Inventory and the Equipment may be subject to the following
liens and encumbrances:
a. Sun Financial Group, Inc., #1884680, 1/22/99, Lease on Computer
Equipment
b. Gatx Technology Services Corporation, #1879782, 1/5/99, Lease on
Computer Software
NOTE: As to the interest listed above, the listing thereof in this Loan and
Security Agreement shall not, in any manner whatsoever, be deemed to be an
acknowledgement by Capital as to the perfection, priority, validity or
enforceability thereof.
40
18. "Broker" as referred to in Section 6.13 is none.
19. "Monthly Reporting Period" as referred to in Section 7.9 B. (i)
means thirty (30) days after the end of each month.
20. "Monthly Reporting Level" as referred to in Section 7.9 B. (i)
means: internally prepared financial statements certified by Borrower's
management.
21. "Quarterly Reporting Period" as referred to in Section 7.9 B.
(ii) means forty-five (45) days after the end of each fiscal quarter.
22. "Quarterly Reporting Level" as referred to in Section 7.9 B.
(ii) means: internally prepared financial statements certified by Borrower's
management.
23. "Annual Reporting Period" as referred to in Section 7.9 B. (iii)
means ninety (90) days after the end of each of the Borrower's fiscal years.
24. "Annual Reporting Level" as referred to in Section 7.9 B. (iii)
means Audited financial statements prepared by a Certified Public Accountant
acceptable to Capital.
25. The Borrower shall at all times maintain the following financial
covenants:
1. Borrower's total Obligations under the Agreement shall not exceed six (6)
times the Borrower's Tangible Net Worth.
26. Notices to the Borrower under Section 13 shall be sent to:
If to Borrower: STRATUS SERVICES GROUP, INC.
000 Xxxxx Xxxx, #000
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx
Telecopier Number (000) 000-0000
27. The following additional terms and conditions are made a part of
this Agreement:
a. Sections 1.14 (d) is deleted in its entirety, and
the following is substituted in its place:
"(d) Accounts with respect to which the account debtor is the
United States or any department, agency or instrumentality of
the United States; PROVIDED, HOWEVER, that an Account shall
not be deemed ineligible by reason of this clause (d) if the
aggregate amount of such Accounts does not exceed five percent
(5%) of the total of Borrower's Accounts outstanding, or in
the event aggregate amount of such Accounts does exceed five
percent (5%) of the total of Borrower's Accounts
41
outstanding, that Borrower has completed all of the steps
necessary, in the sole opinion of Capital, to comply with the
Federal Assignment of Claims Act of 1940 (31 U.S.C. ss.3727)
with respect to such Account;"
b. The following is added as Section 6.14:
"6.14 SECURITIES COMPLIANCE The Borrower is in
compliance with all federal and state laws and regulations with respect to the
issuance of securities, including but not limited to, disclosure and reporting
obligations and all other matters relative thereto."
c. The following is added at the end of Section 7.9:
"C. The Borrower will provide to Capital, promptly upon
receipt thereof, copies of any reports submitted by independent certified public
accountants in connection with examination of the financial statements of the
Borrower or any subsidiary or any Guarantor made by such accountants.
D. The Borrower will provide to Capital, promptly after
the furnishing thereof, copies of any statement or report furnished to any other
party pursuant to the terms of any indenture, loan, credit or similar agreement
and not otherwise required to be furnished to Capital.
E. The Borrower will provide to Capital, promptly after
the sending or filing thereof, copies of all proxy statements, financial
statements and reports which the Borrower or any subsidiary sends to its
stockholders, and copies of all regular, periodic and special reports, and all
registration statements which the Borrower or any subsidiary files with the SEC
or any governmental authority which may be substituted therefore, or with any
national security exchange."
28. The Borrower presently conducts its business under the following
trade names:
1. Stratus Service Grp.
The Borrower shall immediately furnish written notification to
Capital of any change of corporate name of the Borrower or the
use of any trade name.
THIS SCHEDULE 1 IS MADE A PART OF AND INCORPORATED INTO THE LOAN AND
SECURITY AGREEMENT.
42
INDEX TO EXHIBITS
A. Borrowing Base Certificate
B. List of Borrower's Officers
C. Litigation Listing
D. Compliance Certificate
E. Inventory Locations
F. Financial Events
43
EXHIBIT A
OPENING BORROWING BASE CERTIFICATE
INTENTIONALLY OMITTED
44
EXHIBIT B
OFFICERS
ALL OFFICERS OF BORROWER ARE LISTED BELOW:
Xxxxxx X. Xxxxxxx, President, Chairman & CEO
J. Xxxx Xxxxxxx, Secretary
Xxxxxxx X. Xxxxxxxx, Treasurer & CFO
45
EXHIBIT C
LITIGATION
ALL LITIGATION OF BORROWER, ITS OFFICERS, DIRECTORS OR SHAREHOLDERS,
AND GUARANTORS, WHETHER AS PLAINTIFF OR DEFENDANT, ARE LISTED BELOW:
Mirthala Bosrera v. Xxxxxxxxx Xxxxxxxx, et al, No. 2000-29281 in the
000xx Xxxxxxxx Xxxxxxxx Xxxxx xx Xxxxxx Xxxxxx, Xxxxx
46
EXHIBIT D
STRATUS SERVICES GROUP, INC.
000 Xxxxx Xxxx, #000
Xxxxxxxxx, XX 00000
____ , 2000
CAPITAL TEMPFUNDS, INC.
One Xxxxxxx Xxxxx
00000 Xxxx X. Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000-0000
The undersigned, the of STRATUS SERVICES GROUP, INC., a Delaware
corporation ("Borrower"), gives this certificate to CAPITAL TEMPFUNDS, INC.
("Lender") in accordance with the requirements of that certain Loan and Security
Agreement dated as of December , 2000, between Borrower and Lender ("Loan
Agreement"). Capitalized terms used in this Certificate, unless otherwise
defined herein, shall have the meanings ascribed to them in the Loan Agreement.
Based upon my review of the balance sheets and statements of income
of the Borrower for the [fiscal year] [monthly period] ending , 200_, copies of
which are attached hereto, I hereby certify that:
The Borrower's total Obligations under the Loan Agreement are $ ,
and the Borrower's Tangible Net Worth is $ . The Borrower's total Obligations
under the Loan Agreement [do] [do not] exceed six (6) times the Borrower's
Tangible Net Worth
No Event of Default exists on the date hereof, other than:________________
[if none, so state].
As of the date hereof, Borrower is current in its payment of all accrued
rent and other charges to Persons who own or lease any premises where
any of the Collateral is located, and there are no pending disputes or
claims regarding Borrower's failure to pay or delay in payment of any
such rent or other charges.
Yours truly,
--------------------------
Name/title
47
EXHIBIT E
INVENTORY LOCATIONS
INVENTORY OF BORROWER MAY BE LOCATED AT THE FOLLOWING LOCATIONS, INCLUDING BUT
NOT LIMITED TO THOSE LOCATIONS OWNED, RENTED, LEASED OR OCCUPIED BY THE BORROWER
(INCLUDING INVENTORY LOCATED OR STORED AT LOCATIONS OF CUSTOMERS, VENDERS,
PUBLIC WAREHOUSES, OR OTHER):
000 Xxxxx Xxxx, #000
Xxxxxxxxx, XX 00000
and the locations on the attached Exhibit E-1
48
