EXHIBIT 10.21
SOUTHTRUST REVOLVING LOAN AGREEMENT
SOUTHTRUST BANK
ST CAP FUNDS(SERVICEMARK)
BORROWER: SECURED PARTY:
NOR'EASTER MICRO, INC. SouthTrust Bank
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Post Office Box 2554
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
City County State Zip Attn: Asset Based Lending
Department
This Agreement dated October ___, 2000 (the "Effective Date") made by and
between NOR'EASTER MICRO, INC., a Florida corporation ("Borrower") and
SOUTHTRUST BANK, an Alabama state banking corporation, having its principal
place of business in Birmingham, Alabama ("Bank").
WITNESSETH:
That for valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and in consideration of the mutual promises herein made,
Bank and Borrower, intending to be and being legally bound, hereby agree as
follows:
ARTICLE I - THE REVOLVING LOAN
SECTION 1.1. Bank hereby agrees to lend to Borrower, and Borrower hereby
agrees to borrow from Bank, upon the terms and conditions set forth in this
Agreement, the maximum principal sum of up to the lesser of One Million Five
Hundred Thousand dollars ($1,500,000) (the "Maximum Loan Amount") or the
"Aggregate Loan Values" (defined below in Section 1.2) (the "Revolving Loan").
Borrower's obligation to repay the Revolving Loan and the interest thereon shall
be evidenced by a promissory note (the "Note") in form and substance
satisfactory to Bank. Until the earlier of November 1, 2001, (the "Maturity
Date") or the occurrence of any Event of Default (as defined under Article VI of
this Agreement), or any event that with notice or the lapse of time or both,
would become an Event of Default, Borrower may borrow hereunder, prepay the
principal sum of such loans in whole or in part without penalty, and reborrow
hereunder, so long as the aggregate unpaid principal balance of such loans does
not exceed the maximum principal amount set forth in the preceding sentence of
this Section 1.1. Bank may require at any time that loans be made upon at least
one banking day's notice to Bank. Bank may disburse each loan by credit to
Borrower's transaction account with Bank, by check, or in such other manner as
Borrower and Bank may agree. All interest payable hereunder or under the Note
shall be calculated based on a 360-day year (i.e., computed on the actual number
of days elapsed over a year of 360 days unless reference to a 365 or a 366-day
year is necessary in order not to exceed the highest rate permitted by any
applicable law).
SECTION 1.2. Bank's obligation to advance funds under the Revolving Loan
shall be limited to the lesser of the Maximum Loan Amount or the Aggregate Loan
Values. For purposes of this Agreement, the "Aggregate Loan Values" shall
consist of the sum of the Loan Value of Accounts and the Loan Value of
Inventory. For purposes of this Agreement, Loan Value of Accounts shall mean an
amount no greater than eighty-five percent (85%) of the Eligible Accounts of
Borrower; and Loan Value of Inventory shall mean the lesser of 50% of Borrower's
Eligible Inventory or $750,000. With respect to all Accounts, Borrower
represents and warrants to Bank that Bank may rely, in determining which
Accounts are Eligible Accounts, on all statements and representations made by
Borrower with respect to any Account or Accounts.
SECTION 1.3. Borrower agrees to pay interest on the Revolving Loan at the
rate(s), on the date(s), and calculated by the method, set forth in the Note.
Unless payment is required to be made earlier under the terms of the Note or
pursuant to Section 6.2 of this Agreement following an Event of Default,
Borrower shall pay the unpaid principal balance of the Revolving Loan in full on
the Maturity Date.
SECTION 1.4. Borrower shall submit a Borrower's report in the form
prescribed by the Bank on the date of this Agreement and at least monthly (or at
Bank's request, daily) thereafter during the term of this Agreement. Bank may,
in its sole discretion, require that each advance made under the Revolving Loan
be effected by Borrower's submitting (and the Bank's receiving) a Borrower's
report at least one Business Day prior to the date Borrower desires the advance
to be made. Bank shall, if all the terms and provisions of this Agreement have
been met, including, without limitation, the absence of an Event of Default
hereunder, make such advances. Each such Borrower's report shall be signed by an
officer or employee of Borrower authorized by Borrower to execute such reports,
whose name(s) shall be included in a certificate furnished to the Bank. Each
request for a loan or advance made by Borrower pursuant to this Agreement or any
of the other Loan Documents shall constitute (i) an automatic representation and
warranty by Borrower to Bank that there does not then exist any default or Event
of Default and (ii) a reaffirmation as of the date of said request that all of
the representations and warranties of Borrower contained in this Agreement and
the other Loan Documents are true in all material respects except for any
changes in the nature of Borrower's business or operations that would render the
information contained in any exhibit attached hereto either inaccurate or
incomplete, so long as Bank has consented to such changes or such changes are
expressly permitted by this Agreement.
SECTION 1.5. Borrower shall pay to Bank an annual facility fee in the
amount of $3,750.00 upon closing of the Revolving Loan and on each anniversary
date of the closing (the "Facility Fee"), which fee shall be deemed fully earned
at the closing of the transactions contemplated hereby, shall be paid
concurrently with the initial Loan hereunder and shall not be subject to rebate
except as may be required by any applicable law. The Facility Fee shall
compensate Bank for the costs associated with the origination, structuring,
processing, approving and closing of the transactions contemplated by this
Agreement, including, but not limited to, administrative and general overhead,
but not including any out-of-pocket or other expenses for which Borrower has
agreed to reimburse Bank pursuant to any other provisions of this Agreement or
any of the Loan Documents
SECTION 1.6. During the term of this Agreement and for so long as any
portion of the Loan shall be outstanding, Borrower shall pay to Bank an
administrative fee (the "Administrative Fee") in the amount of $500.00 per
month. The charge due pursuant to the terms of this paragraph shall be payable
monthly, in arrears. The Administrative Fee shall be in addition to all other
charges, interest and fees under this Agreement and shall act to compensate Bank
in part for the costs of administering the Loan account and other services
provided by Bank.
2 __________ initials
SECTION 1.7. From and after the occurrence of an Event of Default, the
Revolving Loan shall bear interest at a per annum rate of four percent (4%) in
excess of the rate provided for in the Note (the "Default Rate"). Borrower
acknowledges and agrees that the provisions herein and in the Note relating to
the Default Rate represent a fair and reasonable estimate by Borrower and Bank
of a fair average compensation for the loss that may be sustained by Bank due to
the failure of Borrower to make timely payments with respect to the Obligations
and for the cost and expenses that may be incurred by Bank by reason of the
occurrence of an Event of Default, the parties recognizing that the damages
caused by such extra administrative expenses and loss of the use of funds is
impracticable or extremely difficult to ascertain or estimate. Interest at the
Default Rate shall be paid without prejudice to the rights of Bank to collect
any other amounts provided to be paid hereunder.
SECTION 1.8. Borrower shall have no right to prepay the indebtedness
represented hereby except for periodic repayments not resulting in termination
of the agreement which arise out of application of funds in the Special
Collection account provided for in Section 1.10 or except as provided in a
separate writing executed by Bank.
SECTION 1.9. The Revolving Loan shall in any event be fully due and
payable upon the Maturity Date. TIME IS OF THE ESSENCE OF THIS AGREEMENT.
SECTION 1.10. Borrower shall open a special collection account (the
"Special Collection Account") with Bank, or with another bank designated by
Bank, in which all funds received by Borrower from any source whatsoever,
including, without limitation, funds received from sales of Inventory, all
refunds of taxes, all remittances by Borrower's Account Debtors, insurance
proceeds, all bank wire transfers from Borrower's Account Debtors, and all other
proceeds of Collateral, shall be deposited no later than the next regular
banking day following receipt thereof. The Bank shall have the exclusive right
to withdraw or debit funds from the Special Collection Account which may be
accomplished by any directive signed by any authorized representative of the
Bank. On a daily basis, the Collected Balance in the Special Collection Account
shall be withdrawn by Bank and applied to the Revolving Loan, or, upon the
occurrence of an Event of Default, to the other Loans. If any Borrower's report
shall show insufficient Aggregate Loan Values to entitle Borrower to maintain
the then current balance owing under the Revolving Loan after applying thereto
the Collected Balance of the Special Collection Account, then Borrower shall
immediately deposit into the Special Collection Account sufficient immediately
available funds from which Bank may draw in order to reduce the principal
balance of the Revolving Loan to the amount allowable under the provisions of
this Agreement. At the request of the Bank, Borrower shall execute documents
provided by the Bank to allow officers or authorized representatives of the Bank
to sign checks drawn on accounts of Borrower maintained in other banks for the
purpose of transferring funds representing proceeds of Collateral to an account
or accounts of Borrower maintained with the Bank or another bank owned by
SouthTrust Corporation, including, without limitation, the Special Collection
Account. At its option, Bank may give Borrower immediate credit for amounts
deposited into the Special Collection Account and charge Borrower on a monthly
basis for interest on the difference between the Ledger Balance and the
Collected Balance for the period of time from the date of deposit until the
funds are collected. "Collected Balance" shall mean the book balance in a bank
account, minus the aggregate amount of all checks and other items of payment in
the process of collection, said amount to be computed in accordance with the
Bank's standard practices. "Ledger Balance" shall mean the balance reflected on
the books of the Bank of the amounts deposited in the Special Collection
Account. In addition to the foregoing charges, Bank shall charge Borrower
customer demand deposit account charges, including, but not limited to, item
charges, bank wire charges, lock box charges, stop payment charges and other
charges associated with demand deposit accounts used in financings of this kind.
3 __________ initials
SECTION 1.11. Borrower shall have no right to prepay the indebtedness
represented hereby (i) except for periodic repayments not resulting in
termination of the agreement which arise out of application of funds in the
Special Collection Account provided for in Section 1.10 and (ii) except for
prepayment accompanied by termination of the Agreement in accordance with
Section below 1.12 and accompanied by the Termination Fees provided for therein.
SECTION 1.12. This Agreement shall remain in force and effect until the
Loan and the Obligations, and any renewals or extensions, and all interest
thereon and costs provided for herein with regard to either of them have been
indefeasibly paid or satisfied in full and until the Bank has no further
obligation to advance funds to the Borrower hereunder. Subject to the foregoing
sentence, Borrower shall have the right to terminate this Agreement prior to the
Maturity Date upon payment of all outstanding principal, accrued interest and
other charges owing under the terms of this Agreement accompanied by payment of
a Termination Fee as follows: (i) If termination, or if any portion is prepaid
from the loan proceeds of another lender to Borrower occurs on or before
November 1, 2001, Borrower shall pay to Bank a termination fee in the amount of
$15,000; (ii) if termination occurs on or after November 1, 2001, there shall be
no termination fee. The indemnities provided for in Section 8.10 shall survive
the payment in full of the Loan and the Obligations and the termination of this
Agreement. Any termination will be evidenced by a termination letter executed by
Borrower which shall include such indemnifications and releases in favor of Bank
as shall be required by Bank.
SECTION 1.13. All sums paid to the Bank by Borrower hereunder shall be
paid directly to the Bank in immediately available funds no later than 2:00
P.M., Birmingham, Alabama time on the date on which payment is due, except if
such date is not a Business Day such payment shall then be due on the first
Business Day after such date, but interest shall continue to accrue until the
date payment is received. Any payment received after 2:00 p.m. Birmingham,
Alabama, time shall be deemed to have been received on the immediately following
Business Day for all purposes, including, without limitation, the accrual of
interest on principal. The Bank shall send Borrower statements of all amounts
due hereunder, which statements shall be considered correct and conclusively
binding on the Borrower unless the Borrower notifies the Bank to the contrary
within ten (10) days of its receipt of any statement which it deems to be
incorrect. The Bank may, in its sole discretion, (a) charge against any deposit
account of the Borrower all or any part of any amount due hereunder, any
advances made by Bank to protect the Collateral, and any commitment or servicing
fee due the Bank, and (b) advance to Borrower, and charge to the Loan, a sum
sufficient each month to pay all interest accrued on the Loan and fees and
expenses due under this Agreement, any advances made by Bank to protect the
Collateral, and any commitment or servicing fee due the Bank, during or for the
immediately preceding month or any month prior. Borrower shall be deemed to have
requested an advance under the Loan upon the occurrence of an overdraft in any
of Borrower's checking accounts maintained with the Bank or another bank owned
by SouthTrust Corporation.
SECTION 1.14. Borrower irrevocably waives the right to direct the
application of any and all payments and collections at any time or times
hereafter received by Bank from or on behalf of Borrower or from any of the
Collateral, and Borrower does hereby irrevocably agree that Bank shall have the
continuing exclusive right to apply such payments and collections received at
any time or times hereafter by Bank or its agent against the Obligations, in
such manner as Bank may deem advisable, notwithstanding any entry by Bank upon
any of its books and records. If as the result of collections of Accounts or for
any other reason, 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 Event of Default exists.
ARTICLE II - COLLATERAL
4 __________ initials
SECTION 2.1. The repayment by Borrower of the indebtedness under the
Revolving Loan and the Note, and the performance by Borrower of the Obligations,
are and shall be secured by every mortgage, deed of trust, assignment, pledge,
deed to secure debt and security agreement (whether one or more, the "Separate
Agreements") which secures an obligation so defined as to include the Revolving
Loan or the Note (including, without limitation, those Separate Agreements
described below), and by all property of Borrower now or hereafter in the
possession, control or custody of Bank (in which property Borrower hereby grants
Bank a security interest to secure such indebtedness and obligations) and by all
property in which Bank has or hereafter acquires a lien, security interest, or
other right, including, without limitation, the property described below (in
which property Borrower hereby grants Bank a security interest to secure such
indebtedness and obligations) [describe property and Separate Agreements]:
1. Security Agreement between Borrower and Bank dated ______________, or
if no date is listed, bearing even date herewith (the "Security Agreement").
2. Loan Agreement dated October 28, 1999, as amended, between European
Micro Holdings, Inc., a Nevada corporation, American Micro Computers Centers,
Inc., a Florida corporation, Nor-easter Micro, Inc., a Nevada corporation and
SouthTrust Bank, and all "Security Instruments" referenced therein.
3. Guaranty Agreements bearing even date herewith executed by ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (the "Guaranty Agreements").
4. Agreement to Maintain Liquid Assets bearing even date herewith executed
by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Liquidity Agreement").
5. All existing and future security agreements, pledge agreements,
mortgages, deeds of trust, collateral assignments, and other similar security
instruments executed by Borrower or any Affiliate of Borrower, including
Nor'easter Micro, Inc., a corporation, and European Micro Holdings, Inc., a
corporation.
The Separate Agreements are hereby incorporated herein by this reference. The
property described above and the property described in every Separate Agreement
is individually and collectively referred to in this Agreement as the
"Collateral".
SECTION 2.2. Borrower shall execute and deliver, or shall cause to be
executed and delivered, such documents relating to the Collateral as Bank may
from time to time request.
ARTICLE III -
REPRESENTATIONS AND WARRANTIES; CONDITIONS PRECEDENT
Borrower represents and warrants to Bank that:
SECTION 3.1. Borrower is a Nevada corporation duly organized and existing
under the laws of the State of Nevada, County of ______________, and is
qualified to do business in New Hampshire, Tennessee, and _________________,
that Borrower's Federal Taxpayer Identification Number is ▇▇-▇▇▇▇▇▇▇ and that
Borrower is qualified to do business in all jurisdictions in which it conducts
its business. Borrower's principal place of business is at ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Borrower has not changed its name or been known by
any other name within the last five (5) years nor has it been the surviving
corporation in a merger effected within the last five (5)years. Borrower does
not now use nor has it ever used any trade or fictitious name in the conduct of
its business.
5 __________ initials
SECTION 3.2. The execution and delivery of Borrower of, and the
performance by Borrower of its obligations under, this Agreement, the Note and
the Separate Agreements have been duly authorized by all requisite action on the
part of Borrower and do not and will not (i) violate any provision of Borrower's
articles of incorporation, by-laws, or other organizational documents, any law
or any judgment, order or ruling of any court or governmental agency, or (ii) be
in conflict with, result in a breach of, or constitute, following notice or
lapse of time or both, a default under any indenture, agreement or other
instrument to which Borrower is a party or by which Borrower or any of its
property is bound.
SECTION 3.3. Each of this Agreement and the Note is the legal, valid and
binding agreement of Borrower enforceable against Borrower in accordance with
its terms.
SECTION 3.4. Except for the case of BIG BLUE EUROPE AND ▇▇▇▇ AND ▇▇▇▇▇
ALNWICK V. EUROPEAN MICRO HOLDINGS, INC., Borrower's parent, Case No.
99-CV-7380, United States Court for the Eastern District of New York, (the "Big
Blue Litigation"), there are no pending or threatened actions or proceedings
before any court or administrative or governmental agency that may, individually
or collectively, adversely affect the financial condition or business operations
of Borrower.
SECTION 3.5. All financial statements of Borrower previously delivered by
Borrower to Bank fairly and accurately presents the financial condition of
Borrower as of such date and has been prepared in accordance with generally
accepted accounting principles consistently applied or, if not so prepared,
setting forth the manner in which such financial statement departs from
generally accepted accounting principles. Since the date of said financial
statements, there has been no material adverse change in the financial condition
of Borrower, and, after due inquiry, there exists no material contingent
liability or obligation assertable against Borrower.
SECTION 3.6. All federal, state and other tax returns of Borrower required
by law to be filed have been completed in full and have been duly filed, and all
taxes, assessments and withholdings shown on such returns or billed to Borrower
have been paid, and Borrower maintains adequate reserves and accruals in respect
of all such federal, state and other taxes, assessments and withholdings. There
are no unpaid assessments pending against Borrower for any taxes or
withholdings, and Borrower knows of no basis therefor.
SECTION 3.7. Borrower has no subsidiaries. Borrower is not a partner or
joint venturer with any other Person or a participant in any business enterprise
other than its own for which it is generally liable, nor does Borrower have any
contingent liabilities of any description other than as indicated in the
financial statements heretofore delivered to Bank. Borrower is not obligated as
guarantor, surety or indemnitor under any indemnity, guaranty, surety or similar
bond or other contract issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
Person, except that Borrower has guaranteed certain indebtedness of its parent,
European Micro Holdings, Inc., to Bank. No authorization or approval or other
action by, and no notice to or filing with, any federal, state, or local
government body, agency, or authority is required for the due execution,
delivery, and performance by Borrower of this Agreement, the Note, or any of the
Separate Agreements.
SECTION 3.8. Borrower possesses all permits, memberships, franchises,
contracts, licenses, trademark rights, trade names, patents, and other
authorizations necessary to enable it to conduct its business operations as now
conducted, and no filing with, and no consent, permission, authorization, order
or license of, any individual, entity, or governmental authority is necessary in
connection with the execution, delivery, performance or enforcement of this
Agreement or the Note.
6 __________ initials
SECTION 3.9. No event has occurred and is continuing which is, or which
with the giving of notice or lapse of time or both would be, an Event of Default
(as defined in Article VI) of this Agreement.
SECTION 3.10. Borrower has good and marketable title to all of its
properties and assets including, without limitation, the Collateral and the
properties and assets reflected in the financial statements referenced in
Section 3.5.
SECTION 3.11. The minimum funding standards of Section 302 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") have been met at
all times with respect to all "plans" of Borrower to which such standards apply;
Borrower has not made a "partial withdrawal" or a "complete withdrawal" from any
"multi-employer plan"; and no "reportable event" or "prohibited transaction" has
occurred with respect to any such "plan" (as all of the quoted terms are defined
in ERISA).
SECTION 3.12. Except as otherwise expressly disclosed by Borrower to Bank
in writing on the date of this Agreement: No "hazardous substance" (as that term
is defined in Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ["CERCLA"]) has been
released, discharged, disposed of, or stored on any of Borrower's owned or
leased real or personal property by Borrower, by any third party, or by any
predecessor in interest or title to Borrower; Borrower and all of Borrower's
properties are in compliance with all applicable local, state and federal
environmental laws and regulations; no notice has been served on Borrower by any
governmental authority or any individual or entity claiming violation of any
environmental protection law or regulation, or demanding compliance with any
environmental protection law or regulation, or demanding payment, indemnity, or
contribution for any environmental damage or injury to natural resources; no
"hazardous substance" (as defined in CERCLA) is produced or used in Borrower's
business; and no improvement on any real property owned or leased by Borrower
contains any asbestos, including, without limitation, asbestos insulation on
ceilings, piping or structural members or supports.
SECTION 3.13. All Inventory has been produced, and during the term hereof
will be produced, in compliance with the requirements of the Federal Fair Labor
Standards Act. No Inventory is now, nor shall any Inventory at any time or times
hereafter be, stored with a bailee, warehouseman or similar party.
SECTION 3.14. Borrower is not engaged in any activity that might
constitute a pattern of racketeering activity or in any other conduct that might
subject all or a material portion of Borrower's assets to forfeiture.
SECTION 3.15. All information furnished by Borrower to the Bank concerning
the Borrower, its financial condition, the Collateral, or otherwise for the
purpose of obtaining credit or an extension of credit, is, or will be at the
time the same is furnished, accurate and correct in all material respects and
complete insofar as completeness may be necessary to give the Bank a true and
accurate knowledge of the subject matter.
SECTION 3.16. Bank shall not be obligated to make any advance under the
Revolving Loan until Borrower shall have furnished to Bank, at Borrower's
expense, such evidence as Bank from time to time may require regarding the truth
or continued truth of the foregoing representations and warranties, including,
without limitation, opinions of Borrower's outside legal counsel, opinions and
certificates of Borrower's independent certified public accountants, surveys,
appraisals, environmental audits by qualified environmental engineers selected
by Bank, report of other independent consultants selected by Bank, and
certificates of Borrower's officers. All such evidence must be in form and
content satisfactory to Bank.
7 __________ initials
SECTION 3.17. No Collateral or other property or interests of Borrower is
or shall be located at any place other than as set forth in the Security
Agreement.
ARTICLE IV - AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as it may borrow under this
Agreement or so long as any indebtedness remains outstanding under the Revolving
Loan or under the Note, Borrower shall:
SECTION 4.1. Deliver to Bank (i) within 30 days after each month an
unaudited financial statement including a balance sheet and statements of income
and cash flows, certified by Borrower's chief executive or chief financial
officer to be correct and complete, (ii) within 90 days after the end of each
fiscal year a financial statement including a balance sheet of Borrower as of
the end of such year and statements of income, cash flows and changes in equity
for such year, setting forth in each case in comparative form the corresponding
figures for the previous year, together with accompanying schedules and
footnotes, certified or compiled (at Bank's election) by the present independent
certified public accountants of Borrower or by another firm of independent
certified public accountants designated by Borrower which is satisfactory to
Bank, such financial statement to be prepared in accordance with generally
accepted accounting principles applied in a manner consistent with the financial
statements previously furnished to Bank, or if not so prepared, setting forth
the manner in which such financial statement departs from generally accepted
accounting principles or from previous financial statements furnished to Bank by
Borrower, and (iii) with reasonable promptness, such other information
(including limitation, copies of tax returns and amendments thereto filed by
Borrower) as Bank may request. Each said financial statement shall be
accompanied by a Compliance Certificate in the form set forth in Exhibit "B".
SECTION 4.2. Furnish the Bank with a copy of each letter written to the
Borrower by its independent certified public accountant concerning internal
controls and management review immediately upon receipt of same and any comments
made by the Borrower with respect thereto and permit Bank to communicate
directly with said accountants and with Borrower's insurance representatives and
agents regarding the financial affairs and condition of Borrower, the books and
records of Borrower, and insurance matters pertaining to Borrower's business.
SECTION 4.3. Maintain its books, accounts and records in accordance with
generally accepted accounting principles or, if not so maintained, setting forth
the manner in which such books, accounts and records depart from generally
accepted accounting principles, applied in a manner consistent with the
financial statements previously furnished to the Bank, and shall permit any
person or entity designated in writing by Bank to visit and inspect any of its
properties, books and financial records, and to make copies thereof and take
extracts therefrom, and to discuss Borrower's financial affairs with Borrower's
financial officers and accountants.
SECTION 4.4. Pay and discharge all taxes, assessments, fees, withholdings
and other governmental charges or levies imposed upon it, or upon its income and
profits, or upon any property belonging to it, prior to the date on which
penalties attach thereto, unless the legality thereof shall be promptly and
actively contested in good faith by appropriate proceedings, and unless adequate
reserves for such liability are maintained by Borrower pending determination of
such contest.
SECTION 4.5. Maintain its existence in good standing in the state of its
organization or incorporation and its qualification and good standing in all
jurisdictions where such qualification is required under applicable law, and
8 __________ initials
conduct its business in the manner in which it is now conducted subject only to
changes made in the ordinary course of business.
SECTION 4.6. Promptly notify Bank in writing of the occurrence of any
Event of Default or an event that with notice of the lapse of time or both,
would become an Event of Default or of any pending or threatened litigation
claiming damages in excess of $10,000 or seeking relief that, if granted, would
adversely affect the financial condition or business operations of Borrower.
SECTION 4.7. Maintain and keep in force at all times insurance of the
types and in the amounts customarily carried in lines of business similar to
Borrower's and such other insurance as Bank may require, including, without
limitation, fire, public liability, casualty, property damage, wind damage,
flood damage, and worker's compensation insurance, which insurance shall be
carried with companies and in amounts satisfactory to Bank. All casualty and
property damage insurance shall name Bank as mortgagee or loss payee, as
appropriate, and shall provide for a minimum of ten (10) days' written notice to
Bank before cancellation or amendment. Borrower shall deliver to Bank from time
to time at Bank's request copies of all such insurance policies and certificates
of insurance and schedules setting forth all insurance then in effect. Borrower
hereby appoints Bank the attorney-in-fact for Borrower for purposes of
obtaining, adjusting, settling, and canceling such insurance and endorsing in
Borrower's name and giving receipt for checks and drafts issued in payment of
losses and as returned premiums. Borrower hereby assigns all insurance policies
at any time covering property that is Collateral for the Note and all returned
and unearned premiums thereon to Bank as additional Collateral for the Note.
SECTION 4.8. Keep all of its properties in good repair and condition, and
from time to time make necessary repairs, renewals and replacements thereto so
that Borrower's property shall be fully and efficiently preserved and
maintained.
SECTION 4.9. Perform or take, on request of Bank, such action as may be
necessary or advisable to perfect any lien or security interest in the
Collateral or otherwise to carry out the intent of this Agreement.
SECTION 4.10. Pay or reimburse Bank on demand for any out-of-pocket
expenses, including reasonable attorneys' fees, incurred by Bank in preparing or
enforcing this Agreement, the Note, and the Separate Agreements, or in preparing
or enforcing any amendment thereto, or in collecting the Revolving Loan and any
other sum due under the Note or this Agreement after default by Borrower in the
payment thereof.
SECTION 4.11. Fund all of its "plans" to which the minimum funding
standards of Section 302 of ERISA apply in accordance with such standards;
furnish Bank, promptly upon Bank's request, copies of all reports or other
statements filed with, or received from, the United States Department of Labor,
the Internal Revenue Service, or the Pension Benefit Guaranty Corporation with
respect to all of Borrower's "plans"; and promptly advise Bank of the occurrence
of any "reportable event" or "prohibited transaction" with respect to any such
"plan" (as all of the quoted terms are defined in ERISA).
SECTION 4.12. Comply with all applicable present and future local, state
and federal laws and regulations having application to the Borrower, to the
Borrower's business or property, or to any of the Collateral, including, without
limitation, all environmental protection or clean-up laws and regulations and
all laws and regulations providing protection to persons with disabilities;
notify Bank immediately if any "hazardous substance" (as defined in CERCLA) is
released, discharged, disposed of, stored, or discovered on any real or personal
property owned or leased by Borrower; notify Bank in writing within three days
after Borrower receives notice from any governmental authority or any individual
or entity claiming violation of any environmental protection law or regulation,
9 __________ initials
or demanding compliance with any environmental protection law or regulation, or
demanding payment, indemnity, or contribution for any environmental damage or
injury to natural resources; and permit Bank from time to time to observe
Borrower's operations and to perform tests (including soil tests and ground
water tests) for "hazardous substances" on any real or personal property owned
or leased by Borrower.
SECTION 4.13. Use the proceeds of the Revolving Loan only for repayment of
existing working capital indebtedness existing as of Effective Date and
thereafter for working capital purposes.
SECTION 4.14. Furnish to Bank at least weekly (and more frequently if
requested by Bank) a detailed accounts receivable aging report, a detailed
accounts payable aging report, and an inventory report, all in form and
substance, and containing such detail and information, as Bank shall request,
and furnish to Bank copies of all physical inventory listings when prepared by
Borrower.
SECTION 4.15. Diligently pursue collection of all Accounts and other
amounts due Borrower by others, including Affiliates of Borrower.
SECTION 4.16. Provide Bank with a debt subordination agreement, in form
and substance satisfactory to Bank, executed by Borrower and any Person who is
an officer, director, shareholder, partner, member, owner or Affiliate of
Borrower to whom Borrower is or hereafter becomes indebted, subordinating in
right of payment and claim all of Debt owed by Borrower to any said Person and
any future advances thereon to the full and final payment of the Obligations.
SECTION 4.17. [reserved]
ARTICLE V - NEGATIVE COVENANTS
Borrower covenants and agrees that, without the prior written consent of
Bank, so long as it may borrow under this Agreement or so long as any
indebtedness remains outstanding under the Revolving Loan or under the Note,
Borrower shall not:
SECTION 5.1. [reserved]
SECTION 5.2. Create, incur, assume, or suffer to exist any indebtedness of
any description whatsoever not existing as of the date of this Agreement, except
(i) indebtedness incurred under this Agreement, and (ii) any trade indebtedness
incurred in the ordinary course of business payable within 60 days of its
incurrence.
SECTION 5.3. Merge, consolidate or enter into a partnership or joint
venture with any other person or entity; or sell, lease, transfer or otherwise
dispose of all or any substantial portion of its assets, except sales of
inventory in the ordinary course of business; or change its name; or change the
location of its chief executive office or principal place of business.
SECTION 5.4. Guarantee or become contingently liable for any obligation or
indebtedness of any other person or entity, except that Borrower may endorse
negotiable instruments for collection in the ordinary course of business.
SECTION 5.5. Make any loans, advances or extensions of credit to any
person or entity.
10 __________ initials
SECTION 5.6. Pay or declare any dividend on any of its capital stock after
the date hereof, provided, however, that if Borrower is an S Corporation, it may
pay dividends not to exceed the amount of income taxes payable by its
shareholders attributable to Borrower's income.
SECTION 5.7. Grant any lien on or security interest in, or otherwise
encumber, any of its properties or assets including, without limitation, the
Collateral, and, except for liens for taxes not yet due and payable or which are
being actively contested in good faith by appropriate proceedings and for which
adequate reserves are being maintained by Borrower and those liens disclosed to
Bank by Borrower in writing prior to the execution of this Agreement, Borrower
shall not permit to exist any lien, security interest or other encumbrance on
any of its properties or assets.
SECTION 5.8. Take, or fail to take, any act if such act or failure to act
results in the imposition of withdrawal liability under Title IV of ERISA.
SECTION 5.9. Release, discharge, dispose of, store, accept or receive for
storage or disposal, or allow to be stored or disposed of, any "hazardous
substance" (as defined in CERCLA) on or in any real or personal property owned
or leased by Borrower, except as otherwise expressly consented to by Bank in
writing; or release, discharge, use, transport, or dispose of any "hazardous
substance" in an unlawful manner.
SECTION 5.10. Purchase, acquire or lease property from, or sell, transfer
or lease any inventory, materials, goods, equipment, assets, rights or property
to, any Affiliate of Borrower, except in the ordinary course of Borrower's
business and under terms and conditions which would apply if disinterested
parties were involved.
SECTION 5.11. Change the locations at which the Collateral is maintained;
change the name, identity, or corporate structure of Borrower; adopt or make use
of any fictitious or trade name not disclosed elsewhere in this Agreement; or
change the location of its chief executive office.
SECTION 5.12. Enter into any merger or consolidation or acquire all or
substantially all of the assets of any Person; or sell, lease, or otherwise
dispose of any of its assets in an aggregate amount exceeding $50,000 during any
fiscal year, except sales in the ordinary course of its business; purchase or
acquire the obligations or stock of or any other interest in any Person, except
direct obligations of the United States of America or certificates of deposit or
other investments issued by the Bank or by any bank designated in writing by the
Bank; enter into any sale and lease-back arrangement, either directly or
indirectly; hereafter create any Subsidiary or divest itself of any material
assets by transferring them to any Subsidiary; transfer, sell, pledge, encumber
or otherwise assign any shares of stock or other interest in any Subsidiary or
permit any Subsidiary to sell or otherwise dispose of all or substantially all
of its assets; or become or agree to become a general or limited partner in any
general or limited partnership or a joint venturer in any joint venture.
SECTION 5.13. Prepay any Debt except Debt to the Bank; provided, however,
the Borrower may take ordinary trade discounts on purchases made in the ordinary
course of business.
SECTION 5.14. Enter into any sale and lease-back arrangement, either
directly or indirectly.
SECTION 5.15. Increase the salary and fringe benefits of any officer or
director or shareholder or any Affiliate of any officer or director or
shareholder of Borrower by more than _____% in any fiscal year from the amount
paid in the previous fiscal year.
11 __________ initials
SECTION 5.16. Deposit proceeds of the Collateral into any account other
than the Special Collection Account.
SECTION 5.17. Make any payment (principal or interest) with respect to
Subordinated Debt, or with respect to any Debt that would be Subordinated Debt
but for the absence of a subordination agreement in effect with respect thereto,
if the making of such payment or the financial condition of Borrower immediately
after said payment would violate the financial covenants contained in the Loan
Agreement dated October 28, 1999, as amended, between European Micro Holdings,
Inc., a Nevada corporation, American Micro Computers Centers, Inc., a Florida
corporation, Nor'easter Micro, Inc., a Nevada corporation and SouthTrust Bank,
except that Borrower shall be entitled to make payments with respect to such
Debt to the extent provided in any subordination agreement in effect with
respect thereto, but only during such time as no default or Event of Default
exists hereunder.
SECTION 5.18. Enter into any transaction, or permit any Subsidiary to
enter into any transaction, which materially and adversely affects or may
materially and adversely affect the Collateral or Borrower's ability to repay
the Obligations or permit or agree to any material extension, compromise or
settlement or make any change or modification of any kind or nature with respect
to any Account, including any of the terms relating thereto, other than
discounts and allowances in the ordinary course of business.
ARTICLE VI - EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Any one or more of the following shall constitute an Event of
Default hereunder by Borrower:
(a) Failure to pay when due any payment of principal or interest due on
the Note or any fee, expense, other sum due hereunder; or
(b) Failure to pay when due any payment of principal or interest due on
any other obligation for money borrowed or the deferred purchase
price of goods or services; or
(c) Default under any Separate Agreement or any other document, note,
agreement, mortgage, security agreement, instrument, or
understanding with, held by, or executed in favor of Bank; or
(d) Should any representation or warranty contained herein or made by or
furnished on behalf of Borrower in connection herewith be false or
misleading in any material respect as of the date made; or
(e) Failure to perform or observe any covenant or agreement contained
in Articles IV or V of this Agreement; or
(f) Failure to pay its debts generally as they become due; or
(g) Borrower's or any guarantor's making or taking any action to make
an assignment for the benefit of creditors, or petitioning or
taking any action to petition any tribunal for the appointment of a
custodian, receiver or any trustee for it or a substantial part of
its assets, or commencing or taking any action to commence any
proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or debt or relief
12 __________ initials
law or statute of any jurisdiction, whether now or hereafter in
effect, including, without limitation, any chapter of the federal
Bankruptcy Code; or, if there shall have been filed or commenced
against Borrower or any Guarantor any such petition, application or
proceeding which is not dismissed within 30 days or in which an
order for relief is entered; or should Borrower or any such
Guarantor by any act or omission indicate its approval of or
acquiescence in any such petition, application or proceeding or
order for relief or the appointment of a custodian, receiver or any
trustee for it or any substantial part of any of its properties; or
should Borrower or any such guarantor suffer to exist any such
custodianship, receivership or trusteeship; or
(h) Borrower's or any Guarantor's concealing, removing, or permitting
to be concealed or removed, any part of its property, with intent
to hinder, delay or defraud its creditors or any of them, or making
or suffering a transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or making any transfer of its property to or for the benefit
of a creditor at a time when other creditors similarly situated
have not been paid, or suffering or permitting, while insolvent,
any creditor to obtain a lien upon any of its property through
legal proceedings or distraint which is not vacated within 30 days
after the date thereof; or
(i) Occurrence of any of the following with respect to Borrower or any
Guarantor: death (if an individual), death, withdrawal or removal of
a general partner (if a partnership), death of a member or manager
(if a limited liability company), dissolution or cessation of
business (if a general partnership, limited partnership or limited
liability partnership, corporation, limited liability company or
other organization), or insolvency; or
(j) If the cancellation, termination or limitation of any guaranty of
Borrower's obligations under this Agreement or the Loans shall
occur, or if any such guarantor shall be in default under or breach
the terms of any guaranty agreement between the Bank and such
guarantor; or if any such guarantor should die; or if any
subordination agreement executed by any creditor of Borrower or of
any such guarantor in favor of the Bank should be canceled,
terminated, or breached; or if any Guarantor's financial condition
as represented in the last personal financial statement delivered
to and received by Bank is substantially impaired; or
(k) If Borrower or any Guarantor is a corporation and the ownership or
power to vote more than fifty percent (50%) of the voting stock of
such corporation is transferred, directly or indirectly (including
through any voting trust, irrevocable proxy or the like), during any
twelve (12) month period; or
(l) If a final judgment for the payment of money in excess of $10,000
shall be rendered against the Borrower, or in the case of the Big
Blue Litigation a final judgment for the payment of money in excess
of reserves carried on the books of Borrower for said purpose, and
the same shall remain undischarged for a period of 30 days during
which execution shall not be effectively stayed, unless such
judgment is fully covered by collectible insurance; or
(m) If Borrower or any Guarantor shall be criminally indicted or
convicted under any law that could lead to a forfeiture of any
property of the Borrower or such Guarantor or the indictment of
either Borrower or any Guarantor shall impair their respective
abilities to do business; or
13 __________ initials
(n) Any material loss, theft, damage or destruction not fully covered by
insurance (as required by this Agreement and subject to such
deductibles as Bank shall have agreed to in writing), or sale, lease
or encumbrance of any of the Collateral or the making of any levy,
seizure, or attachment thereof or thereon except in all cases as may
be specifically permitted by other provisions of this Agreement; or
(o) There shall occur any material adverse change in the financial
condition or business prospects of Borrower or any Guarantor; or
(p) If a creditor of Borrower shall obtain possession of any of the
Collateral by any legal means; or
(q) Should their occur any breach, default or "Event of Default" under
or with respect to that certain Loan Agreement between American
Micro Computer Center, Inc., a Florida corporation and Bank bearing
even date herewith or any "Loan Document" referenced therein, or
should said agreement terminate or cease to be in force and effect
for any reason, including the repayment in full of the indebtedness
referenced therein; or
(r) Should there occur any "Event of Default" under that Loan Agreement
dated October 28, 1999, as amended, between European Micro
Holdings, Inc., a Nevada corporation, American Micro Computers
Centers, Inc., a Florida corporation, Nor'easter Micro, Inc., a
Nevada corporation and SouthTrust Bank, or any "Security
Instrument" as defined therein, and without limiting the generality
of the foregoing, should any financial covenant therein contained
be breached, or should said Loan Agreement terminate for any
reason, including the repayment in full of the indebtedness
referenced therein; or
(s) Should there occur any breach or event of default under or with
respect to the Guaranty Agreements or the Liquidity Agreement; or
(t) Should there occur any breach or default or "Event of Default" under
or with respect to any other loan agreement, note, debt, instrument,
agreement, indebtedness, pledge, or other obligation or undertaking
of (i) European Micro Holdings, Inc., a Nevada corporation, (ii)
American Micro Computer Center, Inc., a Florida corporation or (iii)
any Affiliate of either said entity, to Bank.
SECTION 6.2. Upon the occurrence and continuation of an Event of Default,
Bank may (i) terminate all obligations of Bank to Borrower, including, without
limitation, all obligations to lend money under this Agreement, (ii) declare
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, the Note and any
other note of Borrower held by Bank, including, without limitation, principal,
accrued interest and costs of collection (including, without limitation,
reasonable attorneys' fees, if collected by or through attorney(s) who is/are
not salaried employee(s) of Bank in bankruptcy or in other judicial proceedings)
and (iii) pursue any remedy available to it under this Agreement, under the
Note, under any other note of Borrower held by Bank, or available at law or in
equity.
SECTION 6.3. Upon and after the occurrence of any Event of Default, Bank
may, and is hereby authorized by Borrower, at any time and from time to time, to
the fullest extent permitted by applicable laws, and without advance notice to
Borrower (any such notice being expressly waived by Borrower), set-off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and any other indebtedness at any time owing by Bank to, or for
14 __________ initials
the credit or the account of, Borrower against any or all of the Loans and
Obligations and other liabilities and obligations of Borrower now or hereafter
existing whether or not such obligations have matured and irrespective of
whether Bank has exercised any other rights that it has or may have with respect
to such Loans and Obligations and other liabilities and obligations, including,
without limitation, any acceleration rights. The aforesaid right of set-off may
be exercised by Bank against Borrower or against any trustee in bankruptcy,
debtor in possession, assignee for the benefit of the creditors, receiver, or
execution, judgment or attachment creditor of Borrower, notwithstanding the fact
that such right of set-off shall not have been exercised by Bank prior to the
making, filing or issuance, or service upon Bank of, or of notice of, any such
petition; assignment for the benefit of creditors; appointment or application
for the appointment of a receiver; or issuance of execution, subpoena, order or
warrant. Bank agrees to notify Borrower after any such set-off and application,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of Bank under this Section are in
addition to the other rights and remedies (including, without limitation, other
rights of setoff) which Bank may have.
ARTICLE VII - DEFINITIONS
SECTION 7.1. As used in this Agreement, the following terms shall have the
meanings set forth below:
(a) Accounting terms used herein but not specifically defined herein
shall have the meanings normally given them by, and shall be
calculated, both as to amounts and classification of items, in
accordance with generally accepted accounting principles applied in
a consistent manner from period to period.
(b) "Account Debtor" means any Person who is or may become obligated
under or on account of an Account.
(c) "Accounts" means all accounts, accounts receivable, chattel paper,
chattel mortgages, leases, instruments, documents, promissory
notes, contracts for receipt of money, conditional sales contracts,
and evidences of Debt of or owing to or acquired by Borrower
whether now existing or hereafter arising, including, without
limitation, (i) all accounts and other rights to payment of money
which arise or result from Borrower's selling or other disposition
of Borrower's goods or the providing of services by the Borrower,
(ii) the proceeds of any insurance covering the Collateral, and
(iii) the return of unearned insurance premiums.
(d) [reserved]
(e) "Affiliate" shall mean any director or officer of Borrower or any
Person who, directly, indirectly or beneficially, owns 5% or more of
the capital stock of Borrower or any member of the immediate family
of any such officer, director or stockholder, or any corporation or
other entity which is controlled by, controls, or is under common
control with the Borrower, including, without limitation, the
Guarantors.
(f) "Agreement" means this Revolving Loan Agreement, as amended or
supplemented in writing from time to time.
15 __________ initials
(g) "Bank" means the banking corporation or association named in the
first sentence of this Agreement and which executes this Agreement
below as "Bank".
(h) "Borrower" means the person or entity named in the first sentence of
this Agreement and who executes this Agreement below as "Borrower,"
for purposes of Section 3.11, 4.11, and 5.8, such term also includes
any member of a "controlled group" (as defined in ERISA) of which
the named Borrower is a member.
(i) [reserved]
(j) "Capitalized Lease Obligations" means any Debt represented by
obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP, and the amount
of such Debt shall be the capitalized amount of such obligations
determined in accordance with GAAP.
(k) "CERCLA" is defined in Section 3.12.
(l) "Collateral" is defined in Section 2.1.
(m) "Commitment Period means the period from the date of initial funding
hereunder until the earlier to occur of the Maturity Date or the
occurrence of an Event of Default.
(n) "Debt" means the sum of (i) indebtedness for borrowed money or for
the deferred purchase price of property or services, (ii)
Capitalized Lease Obligations, (iii) all other items which in
accordance with GAAP would be included in determining total
liabilities as shown on a balance sheet of a person as at the date
as of which Debt is to be determined.
(o) "Eligible Accounts" shall include only Accounts arising in the
ordinary course of Borrower's business from the sale of goods or
rendition of services which Bank, in its sole credit judgment, deems
to be an Eligible Account. Examples of Accounts which are not under
any circumstance deemed to be Eligible Accounts by Bank are set
forth on Exhibit "A" hereto.
(p) "Eligible Inventory" shall mean Inventory valued at the lesser of
cost or current market value, all of which Inventory is, at any
given time, (a) not damaged or defective in any way; (b) not sold
or segregated for sale and reflected as an Account of Borrower; (c)
not consigned Inventory; (d) not inventory-in-transit or located in
a place other than at the locations listed in Section 3.17; (e) not
work-in-process Inventory; (f) not constituting packaging materials
and supplies; (g) not Inventory evidenced by negotiable warehouse
receipts or by non-negotiable warehouse receipts or documents of
title which have not been issued in the name of Bank; (h) not
subject to a document of title such as a warehouse receipt or ▇▇▇▇
of lading; and (i) not Inventory deemed ineligible by Bank in its
sole discretion.
(q) "ERISA" is defined in Section 3.11.
(r) "Event of Default" is defined in Section 6.1.
(s) [reserved]
16 __________ initials
(t) "Governing State" shall mean the State of Alabama.
(u) "Guarantor" means any person or entity who endorses the Note or who
now or hereafter guarantees payment or collection of the Revolving
Loan in whole or in part.
(v) "Inventory" shall mean all inventory of whatever kind or nature of
Borrower, now owned or hereafter acquired by Borrower, and wherever
located, including, without limitation, all goods held for sale or
lease or furnished or to be furnished under contracts, and any raw
materials, goods in transit, work in process or finished goods,
supplies, returned or repossessed goods, together with all goods and
materials used or consumed in Borrower's business
(w) "Loan Documents" shall mean this Agreement, the Note, the Security
Agreement, each Separate Agreement, the guaranty agreements of
guarantors, and each and every mortgage, deed of trust, guarantee,
reimbursement agreement, credit agreement, loan agreement, note,
security agreement, financing statement or other instrument
executed and delivered to evidence the Loans or any other
Obligation, to constitute collateral for the Loans or any other
Obligation, or to evidence security for the Loans or any other
Obligation, and any and all other agreements, instruments, and
documents heretofore, now or hereafter, executed by Borrower and
delivered to Bank in respect to the transactions contemplated by
this Agreement.
(x) "Maturity Date" is defined in Section 1.1.
(y) "Note" is defined in Section 1.1 and includes any promissory note or
notes given in extension or renewal of, or in substitution for, the
original Note.
(z) "Obligation(s)" shall mean the "Obligations" as defined in the
Security Agreement, together with all loans and all other advances,
debts, liabilities, obligations, covenants and duties owing,
arising, due or payable from Borrower to Bank of any kind or
nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, whether arising under this Agreement
or any of the other Loan Documents or otherwise, whether direct or
indirect (including those acquired by assignment), absolute or
contingent, primary or secondary, due or to become due, now
existing or hereafter arising and however evidenced or acquired.
The term includes, without limitation, all interest, charges,
expenses, fees, attorneys' fees and any other sums chargeable to
Borrower under any of the Loan Documents and all rights Bank may at
any time or times have to reimbursement in connection with any
letter of credit or guaranty issued for Borrower's benefit.
(aa) "Person" means an individual, partnership, corporation, joint stock
company, firm, land trust, business trust, limited liability
company, limited liability partnership, unincorporated organization,
or other business entity, or a government or agency or political
subdivision thereof.
(bb) "Revolving Loan" is defined in Section 1.1.
(cc) "Separate Agreement" is defined in Section 2.1.
(dd) "Subordinated Debt" means the Debt of the Borrower which is fully
subordinated to the Loan (including principal, interest, and agreed
charges) in a manner satisfactory to the Bank (which may be either
17 __________ initials
according to its terms or by separate agreement) and which Debt
arises from the Borrower's actual receipt of cash and not from "in
kind" or non cash consideration.
(ee) "Subsidiary" means any corporate entity or partnership, or other
business entity, controlling interest of which is owned by the
Borrower.
(ff) [reserved]
ARTICLE VIII - MISCELLANEOUS
SECTION 8.1. No delay or failure on the part of Bank in the exercise of
any right, power or privilege granted under this Agreement or the Note, or
available at law or in equity, shall impair any such right, power or privilege
or be construed as a waiver of any Event of Default or any acquiescence therein.
No single or partial exercise of any such right, power or privilege shall
preclude the further exercise of such right, power or privilege. No waiver shall
be valid against Bank unless made in writing and signed by Bank, and then only
to the extent expressly specified therein.
SECTION 8.2. All notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed to have been given or made (i)
when actually received, if delivered by hand or sent by facsimile or telegraphic
transmission, or (ii) upon the earlier of the actual receipt or five (5) days
after mailing, if sent by certified or registered mail, postage or prepaid,
return receipt requested, and addressed to Borrower or to Bank as the case may
be at the addresses listed on the first page of this Agreement. Either Borrower
or Bank, or both, may change its address or facsimile number for notice purposes
by notice to the other party in the manner provided herein.
SECTION 8.3. This Agreement and the Note shall be governed by and
construed and enforced in accordance with the substantive laws of the Governing
State, without regard to that state's rules governing conflicts of law. Borrower
consents to the nonexclusive jurisdiction of any court of original jurisdiction
located in the Governing State, and, to the extent permitted by applicable law,
waives any objection based on venue or forum non conveniens with respect to any
action instituted in any such court. Borrower agrees that process in any such
action will be sufficient if served on Borrower by certified mail, return
receipt requested, or in any other manner provided by law. Notwithstanding the
foregoing, Bank shall have the right to bring any action or proceeding against
Borrower, or against the property of Borrower, in the courts of any other
jurisdiction Bank deems necessary or appropriate in order to enforce the
obligations of Borrower under this Agreement, and the Note, and any Separate
Agreements.
SECTION 8.4. All representations and warranties contained in this
Agreement or made or furnished on behalf of Borrower in connection herewith
shall survive the execution and delivery of this Agreement and the Note, shall
be deemed to be made anew each time Borrower requests a loan under this
Agreement, and shall survive until the Revolving Loan and all interest thereon
are paid in full.
SECTION 8.5. This Agreement shall bind and inure to the benefit of
Borrower and Bank, and their respective successors and assigns; provided,
however, Borrower shall have no right to assign its rights or obligations
hereunder to any person or entity.
SECTION 8.6. Time is of the essence in the payment and performance of
every term and covenant of this Agreement and the Note.
18 __________ initials
SECTION 8.7. This Agreement may be amended or modified, and Borrower may
take any action herein prohibited, or omit to perform any action required to be
performed by it, only if Borrower shall obtain the prior written consent of Bank
to such amendment, modification, action or omission to act, and no course of
dealing between Borrower and Bank shall operate as a waiver of any right, power
or privilege granted under this Agreement, under the Note or the course of
dealing between Borrower and Bank shall operate as a waiver of any right, power
or privilege granted under this Agreement, under the Note or the Separate
Agreements, or available at law or in equity. This Agreement, the Note, and the
Separate Agreements contain the entire agreement between Borrower and Bank
regarding the Revolving Loan and the Collateral. No oral representations or
statements shall be binding on Bank, and no agent of Bank has the authority to
vary the terms of this Agreement except in writing on the face hereof or on a
separate page attached hereto.
SECTION 8.8. All rights, powers and privileges granted hereunder shall be
cumulative, and shall not be exclusive of any other rights, powers and
privileges granted by the Note or any other document or agreement, or available
at law or in equity.
SECTION 8.9. Upon the occurrence and during the continuation of an Event
of Default, Borrower recognizes Bank's right, without notice or demand, to apply
any indebtedness due or to become due to Borrower from Bank in satisfaction of
any of the indebtedness, liabilities or obligations of Borrower under this
Agreement, under the Note, or under any other note, instrument, agreement,
document or writing of Borrower held by or executed in favor of Bank, including,
without limitation, the right to set off against any deposits or cash collateral
of Borrower held by Bank. In addition to the right of setoff, as additional
collateral for the Revolving Loan, Borrower hereby grants to Bank a continuing
lien on and security interest in all deposit accounts of Borrower now or
hereafter held by Bank, including all certificates of deposit now or hereafter
issued to Borrower by Bank.
SECTION 8.10. Borrower hereby agrees to indemnify Bank and its officers,
directors, agents and attorneys against, and to hold Bank and all such other
persons harmless from, any claims, demands, liabilities, costs, damages, and
judgments (including, without limitation, liability under CERCLA, the Federal
Resource Conservation and Recovery Act, or other environmental law or
regulation, and costs of defense and attorneys' fees) resulting from Borrower's
breach of any of the covenants set forth in Articles IV or V of this Agreement.
In addition, Borrower will indemnify and hold Bank harmless from and against any
liability, claim, cost or expense incurred by Bank or imposed against Bank for
any stamp tax, intangible tax, or other tax, fee or charge imposed by any
governmental entity arising out of or relating to the Note(s), the Security
Agreement, or this Agreement or the transactions anticipated herein. These
agreements of indemnity shall be continuing agreements and shall survive payment
of the Revolving Loan and the Note and termination of this Agreement.
SECTION 8.11. The provisions of this Agreement are independent of and
separable from each other, and no such provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other
such provision shall be invalid or unenforceable in whole or in part. If any
provision of this Agreement is prohibited or unenforceable in any jurisdiction,
such provision shall be ineffective in such jurisdiction only to the extent of
such prohibition or unenforceability, and such prohibition or unenforceability
shall not invalidate the balance of such provision to the extent it is not
prohibited or unenforceable nor render prohibited or unenforceable such
provision in any other jurisdiction.
SECTION 8.12. A photocopy of this agreement may be filed as a financing
statement in any public office.
19 __________ initials
SECTION 8.13. All obligations of each Person named as Borrower shall be
joint and several obligations of all such Persons.
SECTION 8.14. To the fullest extent permitted by applicable law, Borrower
waives (i) presentment, demand and protest and notice of presentment, protest,
default, nonpayment, maturity, release, compromise, settlement, extension or
renewal of any or all commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by Bank on which
Borrower may in any way be liable; (ii) notice prior to Bank's taking possession
or control of any of the Collateral or any bond or security which might be
required by any court prior to allowing Bank to exercise any of Bank's remedies,
including the issuance of an immediate writ of possession; (iii) the benefit of
all valuation, appraisement and exemption laws; (iv) any right Borrower may have
upon payment in full of the Obligations to require Bank to terminate its
security interest in the Collateral until the execution by Borrower of an
agreement indemnifying Bank from any loss or damage Bank may incur as the result
of dishonored checks or other items of payment received by Bank from Borrower or
any Account Debtor and applied to the Obligations; and (v) notice of Bank's
acceptance hereof or of any Separate Agreement.
SECTION 8.15. Borrower hereby irrevocably designates, makes, constitutes
and appoints Bank (and all Persons designated by Bank) as Borrower's true and
lawful attorney (and agent-in-fact) and Bank, or Bank's agent, may, without
notice to Borrower and in either Borrower's or Bank's name, but at the cost and
expense of Borrower:
8.15.1. At such time or times hereafter as Bank or said agent, in
its sole discretion, may determine, endorse Borrower's name on any checks,
notes, acceptances, drafts, money orders or any other evidence of payment or
proceeds of the Collateral which come into the possession of Bank or under
Bank's control; and
8.15.2. At such time or times as Bank or its agent in its sole
discretion may determine (and irrespective of whether an Event of Default
exists): (i) demand payment of the Accounts from the Account Debtors, enforce
payment of the Accounts by legal proceedings or otherwise, and generally
exercise all of Borrower's rights and remedies with respect to the collection of
the Accounts; (ii) settle, adjust, compromise, discharge or release any of the
Accounts or other Collateral; (iii) sell or collect any of the Accounts or other
Collateral upon such terms, and for such amounts and at such time or times as
Bank deems advisable; (iv) take possession, in any manner, of any item of
payment or proceeds relating to any Collateral and apply the same to the
Obligations; (v) prepare, file and sign Borrower's name to a proof of claim in
bankruptcy or similar document against any Account Debtor or to any notice of
lien, assignment or satisfaction of lien or similar document in connection with
any of the Collateral; (vi) during such time as a lock box arrangement may be in
effect, if any, receive, open and dispose of all mail addressed to Borrower and
to notify postal authorities to change the address for delivery thereof to such
address as Bank may designate; (vii) endorse the name of Borrower upon any of
the items of payment or proceeds relating to any Collateral and deposit the same
to the account of Bank or any other bank on account of the Obligations; (viii)
endorse the name of Borrower upon any chattel paper, document, instrument,
invoice, freight ▇▇▇▇, ▇▇▇▇ of lading or similar document or agreement relating
to the Accounts, Inventory and any other Collateral; (ix) use Borrower's
stationery and sign the name of Borrower to verifications of the Accounts and
notices thereof to Account Debtors; (x) use the information recorded on or
contained in any data processing equipment and computer hardware and software
relating to the Accounts, Inventory, and any other Collateral and to which
Borrower has access; (xi) make and adjust claims under policies of insurance;
and (xii) for and in the name of Borrower to give instructions and direct any
bank or financial institution in which proceeds of the Collateral are deposited
to turn over said proceeds to Bank; and (xiii) do all other acts and things
20 __________ initials
necessary, in Bank's determination, to fulfill Borrower's obligations under this
Agreement.
SECTION 8.16. Borrower will at all times keep accurate and complete
records of the Collateral, and the Bank or its agents shall have the right to
call at Borrower's place or places of business at intervals to be determined by
Bank, upon reasonable notice and during Borrower's regular business hours, and
without hindrance or delay, to inspect and examine the Inventory and the
Equipment and to inspect, audit, check, and make abstracts from the books,
records, journals, orders, receipts, computer printouts, correspondence and
other data relating to the Collateral or to any other transactions between the
parties hereto. If requested by Bank, Borrower agrees to make its books,
records, journals, orders, receipts, computer printouts, correspondence, and
other data relating to the Collateral available at the Bank's main office for
inspection, audit and checking by the Bank or its agents.
SECTION 8.17. Regardless of any provision contained in this Agreement or
any of the Separate Agreements, in no event shall the aggregate of all amounts
that are contracted for, charged or collected pursuant to the terms of this
Agreement, the Note or any of the Separate Agreements, and that are deemed
interest under applicable law, exceed the Maximum Rate. No provision of this
Agreement or in any of the Separate Agreements or the exercise by Bank of any
right hereunder or under any Separate Agreement or the prepayment by Borrower of
any of the Obligations or the occurrence of any contingency whatsoever, shall
entitle Bank to charge or receive, or to require Borrower to pay, interest or
any amounts deemed interest by applicable law (such amounts being referred to
herein collectively as "Interest") in excess of the Maximum Rate, and all
provisions hereof or in any Separate Agreement which may purport to require
Borrower to pay Interest exceeding the Maximum Rate shall be without binding
force or effect to the extent only of the excess of Interest over such Maximum
Rate. Any Interest charged or received in excess of the Maximum Rate ("Excess"),
shall be conclusively presumed to be the result of an accident and bona fide
error, and shall, to the extent received by Bank, at the option of Bank, either
be applied to reduce the principal amount of the Obligations or returned to
Borrower. The right to accelerate the maturity of any of the Obligations does
not include the right to accelerate unaccrued interest, and no such interest
will be collected by Bank. All monies paid to Bank hereunder or under any of the
Separate Agreements 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 Bank, based in whole or in
part upon contracting for, charging or receiving any Interest in excess of the
Maximum Rate. For the purpose of determining whether or not any Excess has been
contracted for, charged or received by Bank, all interest at any time contracted
for, charged or received from Borrower in connection with this Agreement 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
Bank 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 the Note and
each Separate Agreement (whether or not any provision of this Section is
referred to therein). "Maximum Rate" shall be the maximum non-usurious rate of
interest permitted by applicable law that any time, or from time to time, may be
contracted for, taken, reserved, charged or received on the Debt in question or,
to the extent permitted by applicable law, under such applicable laws that may
hereafter be in effect and which allow a higher maximum non-usurious interest
rate than applicable laws now allow. Notwithstanding any other provision hereof,
the Maximum Rate shall be calculated on a daily basis (computed on the actual
number of days elapsed over a year of 365 or 366 days, as the case may be).
21 __________ initials
SECTION 8.18. WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER AND BANK HEREBY
WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND,
ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY PERTAINING OR
RELATING TO THIS AGREEMENT, THE NOTES, THE LOAN DOCUMENTS, OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS
AGREEMENT OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR
INCIDENTAL TO ANY DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT,
THE NOTES, THE LOAN DOCUMENTS, OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR IN CONNECTION WITH THE
TRANSACTIONS RELATED THERETO OR CONTEMPLATED THEREBY OR THE EXERCISE OF EITHER
PARTY'S RIGHTS AND REMEDIES THEREUNDER, IN ALL OF THE FOREGOING CASES WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. BORROWER AND BANK AGREE THAT EITHER OR BOTH OF THEM MAY FILE A COPY
OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY
AND BARGAINED AGREEMENT BETWEEN THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY,
AND THAT ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN THEM SHALL INSTEAD BE
TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
SECTION 8.19. This Agreement and the credit facilities described herein
are intended to be an amendment and restatement of Borrower's existing
indebtedness to Bank. This Agreement is not intended to be, nor shall it be
construed to create, a novation or accord and satisfaction of Borrower's
indebtedness to Bank.
WITNESS the hand of the parties hereto on or as of the date first above
written.
BORROWER:
NOR'EASTER MICRO, INC., a Nevada corporation
By:
--------------------------------------
Title:
-----------------------------------
Attest:
------------------------
Title:
------------------------
[CORPORATE SEAL]
BANK:
SOUTHTRUST BANK
By:
--------------------------------------
Its:
-------------------------------------
22 __________ initials
EXHIBIT "A"
EXAMPLES OF ACCOUNTS DISQUALIFIED AS ELIGIBLE ACCOUNTS
Examples of Accounts which are not under any circumstance deemed to be Eligible
Accounts by Bank include the following:
(i) it arises out of a sale made by Borrower to a Subsidiary or to an
Affiliate of Borrower or to a Person controlled by an Affiliate or
Subsidiary of Borrower; or
(ii) it is unpaid for the lesser of (i) more than sixty (60) days after
the original due date shown on the invoice or (ii) more than ninety
(90) days after the original invoice date; or
(iii) fifty percent (50%) or more of the Accounts from the Account Debtor
are not deemed Eligible Accounts hereunder; or
(iv) the total unpaid Accounts of the Account Debtor exceed twenty-five
percent (25%) of the net amount of all Accounts, to the extent of
such excess; or
(v) any covenant, representation or warranty contained in this
Agreement with respect to such Account has been breached; or
(vi) the Account Debtor is also Borrower's or an Affiliate's creditor or
supplier, or has disputed liability with respect to such Account,
or has made any claim with respect to any other Account due from
such Account Debtor to Borrower or an Affiliate, or the Account
otherwise is or may become subject to any right of setoff by the
Account Debtor or an Affiliate of the Account Debtor; or
(vii) the Account Debtor has commenced a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or made
an assignment for the benefit of creditors, or a decree or order
for relief under the federal bankruptcy laws has been filed against
the Account Debtor, or if the Account Debtor has failed, suspended
business, ceased to be solvent, or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed of it or
for all or a significant portion of its assets or affairs; or
(viii) it arises from a sale to the Account Debtor on a ▇▇▇▇-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or
any other repurchase or return basis; or
(ix) Bank believes, in its sole judgment, that collection of such
Account is insecure or that payment thereof is doubtful or will be
delayed by reason of the Account Debtor's financial condition; or
(x) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless Borrower
assigns its right to payment of such Account to Bank, in form and
substance satisfactory to Bank, so as to comply with the Assignment
of Claims Act of 1940, as amended; or
Exhibit "A" - 1 __________ initials
(xi) the Account is subject to a lien; or
(xii) the goods giving rise to such Account have not been delivered to
and accepted by the Account Debtor or the services giving rise to
such Account have not been performed by Borrower and accepted by
the Account Debtor or the Account otherwise does not represent a
final sale; or
(xiii) the total unpaid Accounts of the Account Debtor exceed a credit
limit determined by Bank, in its sole discretion, to the extent
such Account exceeds such limit; or
(xiv) the Account is evidenced by chattel paper, a note, or an instrument
of any kind, or has been reduced to judgment; or
(xv) Borrower has made any agreement with the Account Debtor for any
deduction therefrom, except for discounts or allowances which are
made in the ordinary course of business for prompt payment and
which discounts or allowances are reflected in the calculation of
the face value of each invoice related to such Account; or
(xvi) Borrower has made an agreement with the Account Debtor to extend
the time of payment thereof; or
(xvii) the Account arises from a retail sale of goods to a Person who is
purchasing same primarily for personal, family or household
purposes; or
(xviii) the Account Debtor is not a resident citizen of the United States
or a corporate entity or partnership formed and existing under the
laws of the United States or a political subdivision thereof or the
Account arises from a sale to an Account Debtor outside the United
States or it arises out of a shipment of Inventory, goods or
products to an address other than an address in the United States,
unless in each case the Account is covered by credit insurance or a
letter of credit acceptable to Bank in the exercise of its sole
discretion; or
(xix) the Account is deemed ineligible by the Bank in its sole judgment
and discretion.
In addition, Eligible Account shall not include any portion of an Account
which consists of service charges, late charges or penalties, interest of
Account Debtors, or other charges relating to the extension of credit by
the Borrower or the timing of payment by Account Debtor.
In determining the aggregate amount of Eligible Accounts, there shall be
excluded from consideration any credit balance of an Account Debtor which
is more than 90 days old as measured from the date of original posting of
said credit balance to Borrower's books and records.
Exhibit "A" - 2 __________ initials
EXHIBIT "B"
COMPLIANCE CERTIFICATE
SouthTrust ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Asset-Based Lending Department
In accordance with the requirements of that certain Loan and Security
Agreement ("Loan Agreement") dated ___________, 2000, between
_____________________________ ("Borrower") and SouthTrust Bank, the undersigned
officer(s) of ("Borrower"), based upon my (our) review of the balance sheets and
statements of income of the Borrower for the (month, quarter, fiscal year)
ending _____________, ______, DO HEREBY CERTIFY THAT:
(1) We are in compliance with all financial covenants set forth in the
Loan Agreement.
(2) To the best of my (our) knowledge, Borrower has kept, observed,
performed, and fulfilled each and every undertaking contained in the Loan
Agreement and is not at this time in default in the observance or performance of
any terms or conditions of the Loan Agreement, on the date hereof, except as
follows:
----------------------------------------------------.
(if none, so state)
(3) And, no Event of Default has occurred and is continuing that, with the
giving of notice or the passage of time or both, would be an Event of Default,
on the date hereof, except as follows:
----------------------------------------------------------------------.
(if none, so state)
Without limiting the generality of the foregoing, Borrower is solvent as of the
date hereof.
I (we) further certify to you that:
No material adverse change has occurred in either the financial condition
or the business of the Borrower since the date of the Loan Agreement and that
all representations and warranties set forth within the Loan Agreement are true
as of the date hereof.
During the period noted above, Borrower has not changed its name, its
place of business, principal executive officers, nor has it become a surviving
corporation in a merger, nor has it changed the places where the Collateral is
located.
Executed this ____ day of _______________, 20____.
Exhibit "B" - 1 __________ initials
Signed:
------------------------------
Print Name:
------------------------------
Print Title:
------------------------------
Signed:
------------------------------
Print Name:
------------------------------
Print Title:
------------------------------
ON BEHALF OF:
------------------------------------------
("Borrower")
Exhibit "B" - 2 __________ initials