EXHIBIT 10.20
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT ("Amendment"), dated as of
this ___ day of October, 2000, made and entered into on the terms and conditions
hereinafter set forth, by and among EUROPEAN MICRO HOLDINGS, INC., a Nevada
corporation ("Borrower"), AMERICAN MICRO COMPUTER CENTER, INC., a Florida
corporation ("American Micro"), NOR'EASTER MICRO, INC., a Nevada corporation
("Nor'easter"; American Micro and Nor'easter are sometimes hereinafter
collectively referred to as "Corporate Guarantors"), and SOUTHTRUST BANK, an
Alabama banking corporation, formerly known as SouthTrust Bank, National
Association ("Lender");
W I T N E S S E T H:
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WHEREAS, Borrower, Corporate Guarantors and Lender entered into that
certain Loan Agreement dated October 28, 1999, pursuant to which Lender made a
term loan to Borrower in the original principal amount of $1,500,000 ("Loan
Agreement"); and
WHEREAS, at the request of Borrower and Corporate Guarantors, Lender
has agreed to modify the Agreement in certain respects;
NOW, THEREFORE, in consideration of the foregoing and other mutual
covenants and agreements hereinafter set forth, the receipt and sufficiency of
which are hereby acknowledged, Borrower, Corporate Guarantors and Lender hereby
agree as follows:
1. DEFINITIONS. ARTICLE I of the Agreement is hereby amended
by adding the following new definition and substituting the following
definitions for the existing definitions of the following terms (as applicable):
"Guaranties" shall mean, collectively, those certain
Guaranty Agreements dated October 28, 1999, executed by Corporate Guarantors, in
favor of Lender, and those certain Amended and Restated Unlimited Guaranty
Agreements dated October __, 2000, executed by Individual Guarantors, in favor
of Lender.
"New Pledge Agreement" shall mean that certain Assignment
and Security Agreement dated October __, 2000, executed by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, in
favor of Lender.
"Pledge Agreements" shall mean, collectively, those two
certain Pledge and Security Agreements dated October 28, 1999, executed by
Individual Guarantors, in favor of Lender, and the New Pledge Agreement.
2. VALUE OF PLEDGED SECURITIES. SECTION 3.2 (VALUE OF PLEDGED
SECURITIES) of the Agreement is hereby deleted; PROVIDED, HOWEVER, nothing
contained herein shall limit the provisions contained in the New Pledge
Agreement regarding the required minimum value of the collateral covered
thereby.
3. FINANCIAL COVENANTS. SECTIONS 6.1 (Net Worth Requirements),
6.2 (Debt To Worth Ratio) and 6.3 (Interest Coverage Ratio) of the Agreement are
hereby deleted in the following SECTIONS 6.1, 6.2 and 6.3 are substituted in
lieu thereof:
6.1 NET WORTH REQUIREMENTS. Borrower and
Corporate Guarantors shall maintain a minimum tangible net worth of
$7,000,000 as of September 30, 2000; $6,250,000 as of December 31,
2000; $6,500,000 as of March 31, 2001; and $6,750,000 at all times
thereafter, calculated on a consolidated basis; PROVIDED, HOWEVER,
the foregoing minimum tangible net worth requirements shall be
increased by an amount equal to the amount of any equity injections
into Borrower or any Corporate Guarantor or any subordinated loans to
Borrower or any Corporate Guarantor, occurring on or after October
__, 2000. For purposes of this covenant, "tangible net worth" shall
refer to the excess of Borrower's and Corporate Guarantors' total
assets above the sum of their intangible assets plus total
liabilities (exclusive of any debt subordinated to indebtedness of
Borrower or Corporate Guarantors to Lender), all determined in
accordance with generally accepted accounting principles consistently
applied.
6.2 DEBT TO WORTH RATIO. Borrower and Corporate
Guarantors shall at all times maintain a ratio of total liabilities
(exclusive of any debt subordinated to indebtedness of Borrower or
Corporate Guarantor to Lender) to tangible net worth of not more than
2.25 to 1.0 as of September 30, 2000; 2.35 to 1.0 as of December 31,
2000; 2.85 to 1.0 as of March 31, 2001; 2.85 to 1.0 as of June 30,
2001; 2.75 to 1.0 as of September 30, 2001; and 2.5 to 1.0 at all
time thereafter, calculated on a consolidated basis. For purposes of
this covenant, "tangible net worth" shall have the meaning set forth
in SECTION 6.1 hereof.
6.3 FIXED CHARGE COVERAGE RATIO. Borrower and
Corporate Guarantors shall maintain a ratio of (i) the sum of
earnings before interest and taxes plus lease payments plus
depreciation plus amortization, to (ii) the sum of interest expense
plus lease payments plus current maturities of long-term debt plus
cash equity payouts or other distributions of any form to Borrower's
shareholders, all determined in accordance with generally accepted
accounting principles consistently applied, calculated on a
consolidated basis, of not less than .95 to 1.0 as of December 31,
2000; 1.0 to 1.0 as of March 31, 2001; and 1.20 to 1.0 as of the last
day of each fiscal quarter thereafter. This covenant shall be
calculated on an annualized fiscal year-to-date basis for the
calculations as of December 31, 2000, and March 31, 2001, and
thereafter for the then-previous twelve-month period. For purposes of
this covenant, (i) an amount not exceeding $400,000 of actual
expenses incurred by Borrower in connection with stock options
granted to Persia Consulting may be added to earnings; (ii) an amount
not exceeding $350,000 of actual expenses incurred by Borrower in
connection with capitalized software development costs may be added
to earnings; and (iii) an amount not exceeding $250,000 of penalties
assessed by Cap Gemini and paid by Borrower for discontinued projects
may be added to earnings.
4. WAIVER. Lender hereby waives compliance by Borrower with
SECTION 6.1 (Net Worth Requirements), SECTION 6.2 (Debt to Worth Ratio), SECTION
6.3 (Interest Coverage Ratio) and SECTION 3.2 (VALUE OF PLEDGED SECURITIES) for
the period ended June 30, 2000. This does not constitute a waiver by Lender of
compliance with any other provisions of the Agreement, nor a waiver of these
Sections for any other period.
5. WAIVER FEE. Upon execution of this Amendment, Borrower
shall pay to Lender a non-refundable covenant waiver fee in the amount of
$20,000.
6. MISCELLANEOUS. Except as amended hereby, the Agreement
shall remain in full force and effect. Except as expressly set forth herein,
this Amendment does not constitute a waiver of any default or Event of Default
under the Agreement, whether or not Lender is aware of any such default or Event
of Default. Borrower and Corporate Guarantors hereby affirm that the
representations and warranties set forth in ARTICLE IV of the Agreement remain
true and correct on and as of the date hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
BORROWER: EUROPEAN MICRO HOLDINGS, INC.
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By:
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Title:
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CORPORATE GUARANTOR: AMERICAN MICRO COMPUTER CENTER, INC.
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By:
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Title:
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NOR'EASTER MICRO, INC.
By:
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Title:
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LENDER: SOUTHTRUST BANK
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By:
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Title:
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