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LOAN AND SECURITY AGREEMENT
dated as of June 9, 1998
between
NationsBank, N.A.
as Lender,
and
▇▇▇▇▇ River Ventures Limited Partnership
as Borrower.
$10,000,000
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TABLE OF CONTENTS
Section Page
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1. DEFINITIONS AND ACCOUNTING TERMS..........................................1
1.1 DEFINITIONS........................................................1
1.2 ACCOUNTING TERMS...................................................6
1.3 USE OF DEFINED TERMS...............................................6
1.4 SECTION AND EXHIBIT REFERENCES, ETC................................6
2. AMOUNT AND TERMS OF THE LOANS.............................................7
2.1 THE LOANS..........................................................7
2.2 REPAYMENT OF THE OBLIGATIONS.......................................7
2.3 INTEREST AND OTHER CHARGES.........................................7
2.4 COMPUTATION OF INTEREST AND OTHER CHARGES..........................8
2.5 CHARGES............................................................9
2.6 PAYMENT............................................................9
2.7 PAYMENT ON NON-BANKING DAYS........................................9
2.8 EFFECTIVE DATE AND TERMINATION.....................................9
2.9 STATEMENTS OF ACCOUNT.............................................10
3. SECURITY INTERESTS.......................................................10
4. CONDITIONS PRECEDENT TO ADVANCES.........................................10
4.1 DOCUMENTS.........................................................11
4.2 OTHER CONDITIONS PRECEDENT........................................11
5. CLOSING PROCEDURES.......................................................12
6. GENERAL REPRESENTATIONS AND WARRANTIES...................................12
6.1 ORGANIZATION, STANDING, ETC.......................................12
6.2 ENFORCEABILITY....................................................13
6.3 QUALIFICATION.....................................................13
6.4 COMPLIANCE WITH CERTIFICATE AND AGREEMENT OF LIMITED
PARTNERSHIP AND OTHER INSTRUMENTS, ETC..........................13
6.5 SUBSIDIARIES; PARTNERS............................................14
6.6 FINANCIAL STATEMENTS..............................................14
6.7 CHANGES IN FINANCIAL CONDITION....................................14
6.8 TAX RETURNS AND PAYMENTS..........................................14
6.9 TITLE TO PROPERTIES AND ASSETS; LIENS; ETC........................14
6.10 PATENTS; TRADEMARKS; FRANCHISES; ETC.............................15
6.11 LITIGATION, ETC..................................................15
6.12 ADVERSE DEVELOPMENTS.............................................15
6.13 DISCLOSURE.......................................................15
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6.14 MARGIN SECURITIES................................................16
6.15 INVESTMENT COMPANY...............................................16
6.16 ERISA............................................................16
6.17 LOCATIONS........................................................16
6.18 SOLVENCY.........................................................16
6.19 NAME CHANGE; MERGER..............................................16
6.20 NECESSARY AUTHORIZATIONS.........................................16
6.21 YEAR 2000 COMPLIANCE.............................................17
7. AFFIRMATIVE COVENANTS....................................................17
7.1 INSURANCE.........................................................17
7.2 TAXES AND LIABILITIES.............................................17
7.3 ACCOUNTING; FINANCIAL STATEMENTS; ETC.............................18
7.4 INSPECTION........................................................19
7.5 MAINTENANCE OF LIMITED PARTNERSHIP EXISTENCE; COMPLIANCE WITH
LAWS............................................................19
7.6 USE OF PROCEEDS...................................................19
7.7 NOTICE OF DEFAULT.................................................19
7.8 MAINTENANCE OF PROPERTIES.........................................20
7.9 NOTICE OF ERISA DEVELOPMENTS......................................20
7.10 NOTICE OF LITIGATION OR ADVERSE CHANGE...........................20
7.11 PAYMENT OF LOANS.................................................20
7.12 NOTIFICATION OF CHANGE OF NAME OR BUSINESS LOCATION..............21
7.13 TANGIBLE NET WORTH...............................................21
7.14 RATIO OF TOTAL LIABILITIES TO TANGIBLE NET WORTH.................21
7.15 INTEREST COVERAGE RATIO..........................................21
7.16 OWNERSHIP........................................................21
7.17 COLLATERAL REPORTING.............................................21
7.18 MAINTENANCE OF NECESSARY AUTHORIZATIONS..........................21
7.19 YEAR 2000 COMPLIANCE.............................................21
8. NEGATIVE COVENANTS.......................................................21
8.1 DEBT..............................................................22
8.2 LIENS.............................................................22
8.3 GUARANTEES........................................................22
8.4 PLAN LIABILITIES..................................................22
8.5 FISCAL YEAR.......................................................23
8.6 OTHER TRANSACTIONS................................................23
8.7 MERGER; SUBSIDIARY; ETC...........................................23
8.8 SALE OF ASSETS....................................................23
8.9 CHANGES IN BUSINESS...............................................23
8.10 DISTRIBUTIONS AND REDEMPTIONS....................................23
8.11 LOANS............................................................23
8.12 PLEDGE OF CREDIT.................................................24
8.13 INVESTMENTS......................................................24
9. POWER OF ATTORNEY........................................................24
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10. REMEDIES................................................................24
11. MISCELLANEOUS...........................................................25
11.1 NO WAIVER; CUMULATIVE REMEDIES...................................25
11.2 AMENDMENTS, ETC..................................................25
11.3 ADDRESSES FOR NOTICES, ETC.......................................26
11.4 COSTS, EXPENSES, AND TAXES.......................................27
11.5 COMMERCIAL TRANSACTION...........................................27
11.6 SUCCESSORS AND ASSIGNS...........................................27
11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.......................27
11.8 TIME IS OF THE ESSENCE...........................................28
11.9 HEADINGS.........................................................28
11.10 ENTIRE AGREEMENT................................................28
11.11 SEVERABILITY....................................................28
11.12 COUNTERPARTS....................................................28
11.13 GOVERNING LAW; CONSENT TO JURISDICTION..........................28
11.14 WAIVER OF TRIAL BY JURY.........................................29
Exhibits:
Exhibit A-1 - - Form of EBCEG's Secretary's Certificate (Section 1.1)
Exhibit A-2 - - Form of EGI's Secretary's Certificate (Section 1.1)
Exhibit B-1 - - Form of EBCEG's President's Certificate (Section 1.1)
Exhibit B-2 - - Form of EGI's President's Certificate (Section 1.1)
Exhibit C - - Form of Opinion (Section 1.1)
Schedules:
Schedule 1 - - Liens (Section 8.2)
Schedule 2 - -Trademarks, Trade Names, Name Changes, etc. (Sections
6.10 and 6.19)
Schedule 3 - - Litigation (Section 6.11)
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LOAN AND SECURITY AGREEMENT
This Agreement is made as of the 9th day of June, 1998 (the "EFFECTIVE
DATE"), between NationsBank, N.A., as lender (the "LENDER"), and ▇▇▇▇▇ River
Ventures Limited Partnership, a South Carolina limited partnership, as
borrower (the "BORROWER").
The Borrower wants the Lender to finance the Borrower's portfolio of
commercial loans, and the Lender is willing to make such financing available
upon the conditions and terms set forth in this Agreement.
The Borrower and the Lender therefore agree as follows:
1. DEFINITIONS AND ACCOUNTING TERMS
1.1 DEFINITIONS. The following terms, when capitalized as in this
Section 1.1, shall have the following meanings:
"ADVANCE": the proceeds of a Loan disbursed by Lender to or for the
benefit of the Borrower.
"AFFILIATE" of any designated Person: another Person controlling,
controlled by, or under common control with such designated Person (but not
including the Lender), and shall include (x) the spouse, parents, brothers,
sisters, children, and grandchildren of such designated Person, (y) any
association, partnership, trust, entity, or enterprise in which such
designated Person is a director, officer, or general partner or in which such
designated Person together with Affiliates of such designated Person own in
the aggregate at least a 10% beneficial interest in assets, profits, or
losses, and (z) any Subsidiary of such designated Person.
"BANKING DAY": a day for dealings by and between banks, excluding
Saturday, Sunday, any legal holiday in Atlanta, Georgia, and any other day on
which banking institutions in Atlanta, Georgia are generally closed.
"BORROWING BASE": defined in Section 2.1(a).
"CLOSING FEE": defined in Section 2.3.
"CODE": the Internal Revenue Code of 1986, as amended.
"COLLATERAL": all property described in Section 3 hereof, and all the
Borrower's other property in which the Lender at any time has a security
interest or which at any time are in the Lender's possession or control.
"DEFAULT": (x) an event, act, or condition that would be an Event of
Default but for the requirement(s) that notice be given or time elapse, or
(y) an Event of Default.
"EARLY TERMINATION DATE": the last Banking Day in the Initial
Warehouse Period, if the Early Termination Event occurs.
"EARLY TERMINATION EVENT": either (i) the Lender and the SBA shall not
have entered into a subordination agreement pursuant to which Liens on the
Collateral in favor of the SBA shall be subordinated to the Lender' Lien on
the Collateral; or (ii) the Borrower shall have notified the Lender in writing
of its election to participate in the "Just in Time" financing program offered
by the SBA.
"EBC": Emergent Business Capital, Inc.
"EBCEG": Emergent Business Capital Equity Group, Inc.
"EBCEG'S PRESIDENT'S CERTIFICATE": the Certificate of EBCEG's
President, substantially in the form of Exhibit B.
"EBCEG'S SECRETARY'S CERTIFICATE": the Certificate of EBCEG's
Secretary, substantially in the form of Exhibit A.
"EBIT": the total earnings of the Borrower and its consolidated
Subsidiaries from all sources, excluding extraordinary items, before
deducting interest or income tax expense, but after deducting depreciation
and amortization expense.
"ECM": Emergent Commercial Mortgage, Inc.
"EGI": Emergent Group, Inc.
"EGI'S PRESIDENT'S CERTIFICATE": the Certificate of EGI's President,
substantially in the form of Exhibit B.
"EGI'S SECRETARY'S CERTIFICATE": the Certificate of EGI's Secretary,
substantially in the form of Exhibit A.
"EFC": Emergent Financial Corp.
"ELIGIBLE LOAN": a commercial loan in respect of which (1) the Borrower
holds the legal documentation evidencing such loan, (2) is not past due more
than 30 days on principal or interest, (3) after the expiration of the Initial
Warehouse Period, has not been warehoused under the facility evidenced by this
Agreement for more than the Warehouse Period applicable to such commercial
loan, and (4) meets all the Lender's other funding requirements which may be
imposed with respect to the loan involved in good faith and in its sole
discretion.
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"ERISA": the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF DEFAULT": any of the following: (1) non-payment, within seven
days after the due date, of any amount payable on any of the Obligations; (2)
failure to perform any material agreement or meet any obligation of the
Borrower or any of its Affiliates contained herein; (3) nonpayment when due of
any premium on any insurance policy required to be maintained under Section
7.1 hereof; (4) the existence of a default under any other agreement between
the Borrower, ECM, EBC or EFC and the Lender or any Affiliate of the Lender;
(5) any statement, representation, or warranty of the Borrower made in writing
herein or in any other writing at any time furnished or made by the Borrower
to the Lender is untrue in any material respect as of the date furnished or
made; (6) suspension of the operation of the Borrower's present business; (7)
any Obligor becomes insolvent or unable to pay debts as they mature, admits in
writing that it is so, makes a conveyance fraudulent as to creditors under any
state or federal law, or makes an assignment for the benefit of creditors, or
a proceeding is instituted by or against any Obligor alleging that such
Obligor is insolvent or unable to pay debts as they mature, or a petition
under any provision of Title 11 of the United States Code (entitled
"Bankruptcy"), as amended, is brought by or against any Obligor; (8) the entry
of any judgment for more than $50,000 against any Obligor other than EGI or
$1,000,000 against EGI; PROVIDED, that the entry of such judgment shall not
constitute an Event of Default so long as the applicable Obligor is both
diligently appealing such judgment through appropriate proceedings and has
created an appropriate reserve in respect of such judgment; (9) creation,
assertion, or filing of any Lien (other than a Permitted Lien) against any of
the property of the Borrower; (10) dissolution, merger, or consolidation of
any Obligor (other than a merger or consolidation of the Borrower with or into
the Guarantor or any wholly owned Subsidiary of the Guarantor); (11)
termination or withdrawal of any guarantee for any of the Obligations, or the
failure for any other reason of any such guarantee or agreement to be
enforceable by the Lender in accordance with its terms; (12) transfer of a
substantial part of the property of any Obligor; (13) sale, transfer, or
exchange, either directly or indirectly, of a controlling interest of the
Borrower, other than to the Guarantor or any wholly-owned Subsidiary of the
Guarantor; (14) appointment of a receiver for the Collateral or for any
property in which the Borrower has an interest; (15) seizure of the Collateral
by any third party; (16) at least 25% (face value) of the Borrower's loan
portfolio are at least 90 days past due, and have remained at least 90 days
past due for at least 30 days; or (17) the Lender in good faith believes that
the prospect of payment or performance of the Obligations has been materially
and adversely impaired.
"GAAP": generally accepted accounting principles applied in a manner
consistent with the financial statements described in Section 6.6.
"GENERAL PARTNERS": EBCEG and EGI.
"GUARANTEE": the document by that name, dated the date of this
Agreement, of the Guarantor, in favor of the Lender.
"GUARANTOR": EGI.
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"HEREIN", "HEREOF", "HEREUNDER", etc.: in, of, under, etc. this
Agreement (and not merely in, of, under, etc. the section or provision where
that reference appears).
"INCLUDING": containing, embracing, or involving the enumerated
item(s), but not necessarily limited to such item(s).
"INITIAL WAREHOUSE PERIOD": the period beginning on the Effective Date
and ending 270 days from the Effective Date.
"INSURANCE": the policy or policies of insurance described in Section
7.1, including all required endorsements thereto.
"INTEREST": interest expense of the Borrower and its consolidated
Subsidiaries during the period for which such computation is being made.
"LIEN": any mortgage, pledge, deed of trust, assignment, security
interest, encumbrance, hypothecation, lien, or charge of any kind, including
any conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"LOANS": the loan(s) under Section 2.1(a) in the principal amount of up
to $10,000,000, plus any Overadvances, made by the Lender to the Borrower
under this Agreement.
"NECESSARY AUTHORIZATIONS": as defined in Section 6.20.
"OBLIGATIONS": all present and future (a) duties, obligations, and
liabilities of the Borrower to the Lender under this Agreement, or under any
document or agreement executed and delivered pursuant to or in connection with
this Agreement, (b) sums owing to the Lender for goods or services purchased
by the Borrower from any other firm financed by the Lender, (c) obligations
under all notes and contracts of suretyship, guarantee, or accommodation made
by the Borrower in favor of the Lender, and (d) all other obligations of the
Borrower to the Lender, however and whenever created, arising, or evidenced,
whether direct or indirect, through assignment from third parties, absolute,
contingent, or otherwise, primary or secondary, now or hereafter existing, or
due or to become due.
"OBLIGOR": the Borrower, any guarantor, or any other party at any time
primarily or secondarily, directly or indirectly liable on any of the
Obligations.
"OPINION": the legal opinion, of counsel to the Borrower satisfactory
to the Lender, substantially in the form of Exhibit C.
"OR": at least one, but not necessarily only one, of the alternatives
enumerated.
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"OVERADVANCES": loans by the Lender to the Borrower in excess of those
described in Section 2.1(a).
"PERMITTED CONVERSION": as defined in Section 7.5(b).
"PERMITTED LIEN": a Lien permitted by Section 8.2.
"PERSON": any individual, joint venture, partnership, firm,
corporation, limited liability company, trust, unincorporated organization,
or other organization or entity, or a governmental body or any department or
agency thereof.
"PLAN": any present or future employee benefit plan (as defined in
Section 3 of ERISA) and any trust created thereunder, covered by Title I or
Title IV of ERISA, established or maintained for employees of the Borrower or
the Guarantor.
"PRIME RATE": the rate of interest announced by NationsBank, N.A. from
time to time as its "Prime Rate".
"PROJECTIONS": the Borrower's forecasted consolidated and consolidating
balance sheets, profit-and-loss statements, and cash-flow statements, all
prepared on a basis consistent with the Borrower's historical financial
statements, together with appropriate supporting details and a statement of
underlying assumptions.
"REPORTABLE EVENT": as defined in Title IV of ERISA.
"SBA": the Small Business Administration.
"SECURITIES": any share(s) of beneficial or equity interest or capital
stock or any other instrument commonly understood to be a "security",
excluding promissory notes issued for money borrowed in commercial
transactions.
"SOLVENT": has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to engage,
is able to pay its debts as they mature, and owns property having a value,
both at fair valuation and at present fair saleable value, greater than the
amount required to pay its debts.
"SUBSIDIARY" of any designated corporation: any other corporation more
than 20% of the shares of voting stock of which is owned, directly or
indirectly, by such designated corporation, including subsidiary of a
subsidiary.
"TANGIBLE NET WORTH": the total assets of the Borrower and its
consolidated Subsidiaries minus Total Liabilities (excluding from the
definition of total assets the amount of (a) any write-up in the book value of
any asset resulting from a revaluation thereof, (b) treasury stock, (c)
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Receivables and other amounts due from stockholders and other Affiliates, (d)
unamortized debt discount and expense and (e) patents, trademarks, trade
names, goodwill, deferred charges, organizational expenses and other
intangible assets, all determined in accordance with GAAP).
"TOTAL LIABILITIES": all obligations of the Borrower and its
consolidated Subsidiaries to pay money.
"WAREHOUSE PERIOD": for any commercial loan made by the Borrower, a
period of 180 days from the date such loan is disbursed.
1.2 ACCOUNTING TERMS. All accounting terms used herein shall be
construed in accordance with GAAP applied consistently with those principles
applied in the preparation of the financial statements referred to in Section
6.6, and all financial data submitted pursuant to this Agreement shall be
prepared in accordance with GAAP. In the event of ambiguities in GAAP, the
more conservative principle or interpretation shall be used.
1.3 USE OF DEFINED TERMS. Any defined term used in the plural preceded
by "the" encompasses all members of the relevant class. Any defined term used
in the singular preceded by "any" indicates any number of the members of the
relevant class. Any agreement or instrument referred to in Section 1.1, or the
term "Agreement", means such agreement or instrument as from time to time
supplemented and amended. A definition in singular form applies to the plural
form of the term, and vice versa.
1.4 SECTION AND EXHIBIT REFERENCES, ETC. References to sections,
exhibits, and the like refer to those in or attached to this Agreement unless
otherwise specified.
2. AMOUNT AND TERMS OF THE LOANS
2.1 THE LOANS. (a) REVOLVING LOANS. The Lender agrees to make loans to
the Borrower, and the Borrower agrees to borrow from the Lender, upon request
of the Borrower from time to time, up to 75% of the Borrower's Eligible Loans
(the sum of the Eligible Loans being the "BORROWING BASE"); PROVIDED, that the
total amount of all Loans outstanding at any time under this sentence shall
not exceed the lesser of the Borrowing Base and $10,000,000. The amounts of
such Loans shall be determined in the sole discretion of the Lender to be
consistent with the value of the Eligible Loans, taking into account all
fluctuations of the value thereof in light of the Lender's experience and
sound business principles. Such determinations shall be subject to the
requirements of good faith on the Lender's part, the Borrower's undertakings
hereunder, and especially the Borrower's grant to the Lender of a security
interest in the Collateral as security for the Loans and all other Obligations
of the Borrower to the Lender, which will, of necessity, fluctuate in amount,
and to the condition that the Lender at all times be fully secured. To the
extent necessary to reduce the total amount of all Loans outstanding to the
maximum amount then available under this Section 2.1, the Borrower shall pay
to the Lender, on demand, the amount of outstanding Loans in excess of that
maximum amount.
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An Eligible Loan shall be included in the Borrowing Base when the
Borrower has provided the Lender with a copy of the original loan
documentation for that loan (to the extent requested by the Lender), and such
other documentation as the Lender reasonably requests, by fax or otherwise.
(b) OVERADVANCES. The Lender may make Overadvances as, in its sole and
absolute discretion, it determines to lend. Any such Overadvances may be
evidenced by a written agreement between the Lender and the Borrower, which
agreement may provide, at the Lender's option, for interest and fees on such
Overadvances in addition to those specified hereunder. Except to the extent
otherwise provided in any such agreement, any such Overadvances shall be
"Loans", shall be repayable upon demand, and shall in all other respects be
subject to the terms and conditions of this Agreement.
2.2 REPAYMENT OF THE OBLIGATIONS. The Borrower (a) shall pay the then
outstanding principal balance of the Loans, together with all accrued interest
thereon, on the date on which this Agreement is terminated; and (b) shall pay
from time to time such portion of the outstanding principal balance of the
Loans, together with all accrued interest thereon, that exceeds the
limitations contained in Section 2.1 hereof, each such payment of excess
principal being due immediately upon the occurrence of such excess.
2.3 INTEREST AND OTHER CHARGES. The Loans shall bear interest on the
average daily net balance thereof, calculated monthly, at a fluctuating rate
of interest equal to the Prime Rate. Changes in the rate of interest shall be
effected monthly to reflect changes in the Prime Rate, as follows: The rate
shall be adjusted on the first day of each month based on the Prime Rate in
effect at the close of business on the last Banking Day of the preceding
calendar month. Interest shall be due and payable monthly, on the first day of
each month, for the preceding month. The final payment of all accrued and
unpaid interest shall be due and payable on the date that the outstanding
principal amount of the Loans is paid or due and payable in full. After an
Event of Default, interest shall also be due and payable upon the Lender's
demand from time to time.
The Lender shall inform the Borrower of the amount of interest due and
payable as of each payment date set forth in the preceding paragraph, and the
Borrower shall pay the interest when due or the Lender may, in its discretion,
charge such amount to the Borrower's account under this Agreement.
As additional consideration for the credit facility established in
Section 2.1, the Borrower agrees to pay to the Lender (a) a facility fee,
payable on the first day of each month for the preceding month, equal to the
average unused principal portion of the maximum loan facility hereunder (i.e.,
$10,000,000 minus the average daily principal amount of Loans outstanding)
times 0.125% per annum; and (b) a closing fee of $50,000 (the "CLOSING FEE"),
payable in three installments, with the first such installment of $16,700
being payable on the date on which the initial Advance is made hereunder, the
second such installment of $16,700 being payable on June 1, 1999, and the
third such installment of $16,600 being payable on June 1, 2000.
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For interest computation purposes, Borrower's account will be credited
for each remittance received on the day that the underlying funds are
collected; the day of receipt of funds shall be deemed to be the following
Banking Day if the receipt is after the Lender's cutoff time (which is 1:30
p.m. Eastern Standard Time) for receipt of funds or if such day is not a
Banking Day.
If the outstanding principal amount of the Loans becomes due and payable
or if any payment of principal or interest is not timely made, or (unless the
Lender notifies the Borrower to the contrary in writing) following the
occurrence and during the continuance of any Event of Default, interest shall
accrue on the unpaid principal balance of the Loans or on such defaulted
principal payment, from the date that the Loans became so due and payable or
that the defaulted payment was not timely made, as applicable, at a rate of 4%
per annum above the Prime Rate. Changes in the rate shall be effected monthly
to reflect changes in the Prime Rate as follows: The rate shall be adjusted on
the first day of each month based on the Prime Rate in effect at the close of
business on the last Banking Day of the preceding calendar month. Such
interest shall continue to accrue until the date of payment of all principal
and accrued but unpaid interest or such defaulted payment, as applicable, and
shall be due and payable upon demand from time to time by the Lender.
2.4 COMPUTATION OF INTEREST AND OTHER CHARGES. Interest on the Loans,
and other periodic charges hereunder, shall be computed on the basis of a
360-day year and actual days lapsed.
2.5 CHARGES. The Borrower and the Lender hereby agree that the only
charges imposed by the Lender upon the Borrower for the use of money in
connection herewith are and shall be the interest described in Section 2.2.
All other charges imposed by the Lender upon the Borrower in connection with
the Loans, any commitment fees, collection fees, letter of credit fees,
facility fees, origination fees, prepayment charges or early termination fees,
default charges, late charges, attorneys' fees, and reimbursement for costs
and expenses paid by the Lender to third parties, or for damages incurred by
Lender, are and shall be deemed to be charges made to compensate the Lender
for underwriting or administrative services and costs and other services or
costs performed and incurred, and to be performed and incurred, by the Lender
in connection with the Loans, and shall under no circumstances be deemed to be
charges for the use of money.
In no event shall the amount of interest due or payable hereunder exceed
the maximum rate of interest allowed by applicable law, and if any such
payment is made by the Borrower or received by the Lender, then such excess
sum shall be credited as a payment of principal, unless the Borrower notifies
the Lender, in writing, that the Borrower elects to have such excess sum
returned to it forthwith. It is the express intent hereof that the Borrower
not pay and the Lender not receive, directly or indirectly, in any manner
whatsoever, interest in excess of that which may be lawfully paid by the
Borrower under applicable law.
2.6 PAYMENT. All payments by the Borrower shall be made to the Lender at
its address referred to in Section 11.3 hereof in lawful money of the United
States of America and in immediately available funds.
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2.7 PAYMENT ON NON-BANKING DAYS. Except as expressly set forth herein to
the contrary, whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Banking Day, such payment shall be made on the
following Banking Day, and such extension of time shall be included in the
computation of interest.
2.8 EFFECTIVE DATE AND TERMINATION. This Agreement shall be effective on
the Effective Date, and shall continue in full force and effect until December
29, 2000 and from year to year thereafter unless terminated on December 29,
2000 or any anniversary thereof by either party's giving to the other not less
than 60 days' prior written notice. Notwithstanding the foregoing, (i) the
Borrower shall have the right to terminate this Agreement by giving the Lender
not less than 30 days' prior written notice; and (ii) this Agreement shall
automatically terminate on the Early Termination Date if the Early Termination
Event occurs. If Borrower shall terminate this Agreement prior to December 29,
2000, Borrower shall pay the Lender an early termination fee equal to $35,000
for any termination before December 29, 1998, $17,500 for any termination on
or after December 29, 1998 but before December 29, 1999, and $8,750 for any
termination on or after December 29, 1999 but before December 29, 2000. No
termination fee shall be payable for any termination of this Agreement on or
after December 29, 2000, or if this Agreement is replaced by a new credit
agreement with the Lender, or if this Agreement terminates as a result of the
Early Termination Event.
Upon the occurrence and during the continuance of an Event of Default,
the Lender shall have the right to terminate this Agreement at any time
without notice.
Notwithstanding any termination of this Agreement, the Lender shall
retain all of its rights and remedies hereunder (including its security
interest in the Collateral), and the Borrower shall continue to be bound by
all the terms, conditions, and provisions hereof until all of the Obligations
of every nature have been fully disposed of, concluded, finally paid,
satisfied, and liquidated.
2.9 STATEMENTS OF ACCOUNT. The Lender shall render a statement of
account monthly, and, absent manifest error, such statement rendered by the
Lender shall bind the Borrower and the Lender (unless the Borrower or the
Lender notifies the other in writing to the contrary within 60 days after the
date of each statement rendered; and any such notice shall be deemed an
objection only to those items specifically objected to therein).
3. SECURITY INTERESTS
As security for the full payment and performance of the Obligations, the
Borrower hereby grants to the Lender a security interest in all of the
following property and interests in property of the Borrower, whether now
owned or existing or acquired or arising in the future or in which the
Borrower now has or in the future acquires any rights, and wherever located:
(a) all right, title, and interest in any loan made by the Borrower,
including all related documentation, and all guarantees, collateral, and other
security therefor,
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(b) all of the Borrower's accounts, inventory, general intangibles,
instruments, chattel paper, documents, equipment, and other goods,
(c) all accessions to, substitutions for, and replacements, products,
and proceeds of any of the foregoing, including insurance proceeds and rental
payments, and
(d) all books and records (including customer lists, credit files,
computer programs, print-outs, and other computer materials and records)
pertaining to any of the foregoing.
The Borrower shall execute and deliver all supplemental documentation
that the Lender from time to time requests to perfect or maintain the
perfection of the security interest granted in this Section, and shall pay (or
reimburse the Lender for) the cost of filing or recording any such
documentation, on demand.
4. CONDITIONS PRECEDENT TO ADVANCES
4.1 DOCUMENTS. The determination by the Lender to make Advances is
subject to the Lender's having received the following, in form and substance
satisfactory to the Lender:
(a) the Guaranty,
(b) EBCEG's Secretary's Certificate,
(c) EGI's Secretary's Certificate,
(d) EBCEG's President's Certificate,
(e) EGI's President's Certificate,
(f) certified copies of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to
this Agreement,
(g) the Opinion,
(h) appropriate UCC-1 financing statements,
(i) the documentation described in Section 5.1 for each loan for
which an Advance is made, and
(j) such other documentation as the Lender reasonably requests.
4.2 OTHER CONDITIONS PRECEDENT. In addition to the foregoing, any
obligation of the Lender to make each Advance is subject to the following
conditions precedent: (a) the
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representations and warranties contained in Section 6 (except 6.13, 6.17, and
6.19) hereof shall be correct on and as of the date of the Advances with the
same effect as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier date; (b) since
the date of the statements referred to in Section 6.6 hereof, no materially
adverse change shall have occurred in the Borrower's business, prospects,
condition, affairs, operations, or assets, nor in its right or ability to carry
on its operations; (c) no Default shall exist or would result from the Advance;
(d) the Lender in its reasonable discretion determines that such Advance will be
fully secured, as provided for in Section 2.1, and will not cause the
outstanding balance of the Loans to exceed the limits described in Section 2.1;
(e) the Lender shall be satisfied in its reasonable discretion that all
necessary approvals have been obtained from the SBA for such Advance; and (f) in
the case of the first Advance, the Lender shall have received from the Borrower
the first installment of the Closing Fee (which may be paid by the Lender's
deducting that amount from the first Advance hereunder). The Closing Fee shall
be non-refundable; provided, however, that if the Borrower shall be required to
repay the outstanding principal balance of the Loans following an Early
Termination Event, then (i) the Lender agrees that it shall refund an amount
equal to $16,700 multiplied by a fraction, (x) the numerator of which shall be
twelve (12) minus the number of months that have elapsed from the Effective Date
to the date of such prepayment, rounded up to the next whole month, and (y) the
denominator of which shall be twelve (12); and (ii) the Borrower's obligation to
pay the remaining installments of the Closing Fee shall terminate.
5. CLOSING PROCEDURES.
Before the Lender funds an Advance for an Eligible Loan, the Borrower
shall provide the Lender with a copy of all original loan documentation for
that loan (to the extent requested by the Lender), and such other
documentation as Lender reasonably requests, by fax or otherwise. The Borrower
shall deliver the original of each underlying note to the Lender by the fifth
Banking Day following the closing for the related Eligible Loan. In addition,
if the Borrower requests a Loan for which the Borrowing Base would be
insufficient without the Lender's having a perfected security interest in the
related underlying note, then if and to the extent that the Lender so
requests, the Borrower shall execute and deliver to the Lender the underlying
note and all other documents relating to that Eligible Loan, and properly
executed assignments of each such document, in recordable form acceptable to
the Lender in its sole discretion.
The originals of all such collateral, loan, and other documents shall be
held by the Borrower (other than the note(s), which shall be held by the
Lender) unless specifically requested by the Lender. The Lender may hold any
such specifically-requested documents until the Lender releases its security
interest in such Collateral (unless an Event of Default exists, in which case
the Lender shall have its right to pursue the rights and remedies).
Neither the Lender's execution of this Agreement nor its taking of any
action contemplated or permitted hereunder shall constitute or be deemed to be
an assumption of any of the Borrower's liabilities or obligations.
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6. GENERAL REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender to enter into this Agreement and to make
Advances hereunder, the Borrower represents and warrants the following:
6.1 ORGANIZATION, STANDING, ETC. The Borrower is a limited partnership
(or, following a Permitted Conversion, a corporation) duly organized, validly
existing, and in good standing under the laws of South Carolina, and has all
requisite power and authority (limited partnership and otherwise) to own and
operate its properties and to carry on its business as now conducted and
proposed to be conducted; and the Borrower has all requisite power and
authority (limited partnership and otherwise) to execute, deliver, and perform
its obligations under this Agreement and all other documents executed in
connection therewith.
6.2 ENFORCEABILITY. This Agreement, and all other documents executed in
connection with the Loans, when delivered for value received, shall constitute
valid and binding obligations of the Borrower enforceable in accordance with
their terms.
6.3 QUALIFICATION. The Borrower is duly qualified, licensed, or
domesticated, and in good standing as a foreign limited partnership (or,
following a Permitted Conversion, a foreign corporation) duly authorized to do
business, in all jurisdictions in which the character of its properties owned
or the nature of its activities conducted makes such qualification, licensing,
or domestication necessary, except where the failure to be so qualified,
licensed or domesticated could not reasonably be expected to have a materially
adverse effect on (i) the Borrower's condition (financial or otherwise),
Collateral or any other assets or properties; (ii) the ability of the Borrower
to perform its obligations hereunder or under any other document, agreement or
instrument executed in connection herewith; or (iii) the Lender's rights and
remedies hereunder.
6.4 COMPLIANCE WITH CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP AND
OTHER INSTRUMENTS, ETC. (a) The Borrower is not in violation of any material
term of its certificate and agreement of limited partnership or other
organizational document (including, following a Permitted Conversion, the
Borrower's articles or certificate of incorporation and bylaws), and no event,
status, or condition has occurred or exists which upon notice or lapse of
time, or both, would constitute a violation thereof; (b) to the best of its
knowledge, the Borrower is not in violation of any material term of any
mortgage, indenture, or agreement relating to outstanding borrowings to which
it is a party, or of any judgment, decree, or order to which it is subject, or
of any other instrument, lease, contract, or agreement to which it is a party,
or of any statute, or governmental rule or regulation applicable to it, and no
event, status, or condition has occurred or exists which upon the giving of
notice or lapse of time, or both, would constitute a material violation of any
such term; (c) the Borrower's execution, delivery, and performance of this
Agreement and the other instruments and agreements provided for by this
Agreement to which the Borrower is, or is to be, a party, and the carrying out
of the transactions contemplated hereby and thereby have been duly authorized
by all requisite action on the part of the Borrower (limited partnership and
otherwise) and will not result in any violation of the certificate
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and agreement of limited partnership or any other organizational documents of
the Borrower (including, following a Permitted Conversion, the Borrower's
articles or certificate of incorporation and bylaws), or violate or constitute a
default under any term of anything described in clause (b) above, or result in
the creation of any mortgage, lien, encumbrance or charge upon any of the
properties or assets of the Borrower pursuant to any term of anything
described in clause (b) above; and (d) there is no term of anything described
in clause (b) above which materially adversely affects or in the future may
(so far as the Borrower can now foresee) materially adversely affect the
Borrower's business, prospects, condition, affairs, operations, properties, or
assets.
6.5 SUBSIDIARIES; PARTNERS. The Borrower has no Subsidiary. EGI owns,
directly or indirectly, 100% of the of the Borrower. The General Partners are
the only general partners of the Borrower.
6.6 FINANCIAL STATEMENTS. The Borrower has furnished the Lender with
copies of the fiscal year-end consolidated and consolidating balance sheet of
EGI and its consolidated subsidiaries as at December 31, 1997, and the
consolidated and consolidating statements of income and of cash flows of such
corporations for such fiscal year, which annual financial statements have been
audited by KPMG Peat Marwick LLP, independent certified public accountants;
and copies of such financial statements for each month thereafter through
March 31, 1998, duly certified by the chief financial officer of EGI. Such
financial statements are complete and have been prepared in accordance with
GAAP applied on a basis consistent with the accounting principles applied in
the preceding fiscal period, and present fairly the financial condition of EGI
as at the dates indicated and the results of the operations of EGI for such
periods. Such financial statements show all liabilities (direct, indirect, and
contingent, including guarantee and surety obligations) of the Borrower and
the Guarantor as of the respective dates thereof, except those arising in the
ordinary course of business since the date of the last of such financial
statements.
6.7 CHANGES IN FINANCIAL CONDITION. Since the date of the March 31, 1998
financial statements referenced in Section 6.6, there has been no change in
the assets, liabilities, or financial condition of the Borrower or the
Guarantor from that set forth or reflected in the fiscal year-end balance
sheet referred to in Section 6.6, other than changes in the ordinary course of
business, none of which has been, either in any case or in the aggregate,
materially adverse.
6.8 TAX RETURNS AND PAYMENTS. All federal, state, and local tax returns
and reports of the Borrower or the Guarantor required to be filed have been
filed, and all taxes, assessments, fees, and other governmental charges upon
the Borrower or the Guarantor, or upon any of the properties, assets, incomes,
or franchises of either, which are due and payable in accordance with such
returns and reports, have been paid, other than those presently (a) payable
without penalty or interest, or (b) contested in good faith and by appropriate
and lawful proceedings prosecuted diligently. The aggregate amount of the
taxes, assessments, charges, and levies so contested is not material to the
condition (financial or otherwise) and operations of the Borrower or the
Guarantor. The charges, accruals, and reserves on the books of the Borrower
and the Guarantor in respect of federal, state, and local taxes for all fiscal
periods to date are adequate, and the
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Borrower knows of no unpaid assessment for additional federal, state, or local
taxes for any such fiscal period or of any basis therefor.
6.9 TITLE TO PROPERTIES AND ASSETS; LIENS; ETC. The Borrower has (a)
good and marketable title to its properties and assets, including the
Collateral and the properties and assets reflected in the fiscal year-end
balance sheet referred to in Section 6.6, except properties and assets
disposed of since the date of such balance sheet in the ordinary course of
business, and (b) good and marketable title to its leasehold estates and such
properties, assets, and leasehold interests are subject to no covenant,
restriction, easement, right, lease, or Lien, other than Permitted Liens.
6.10 PATENTS; TRADEMARKS; FRANCHISES; ETC. The Borrower owns or has the
right to use all of the patents, trademarks, service marks, trade names,
copyrights, franchises, and licenses, and rights with respect thereto,
necessary for the conduct of its business as now conducted, without any known
conflict with the rights of others, and, in each case, subject to no Lien,
lease, license, or option, except as specified on Schedule 2. Each such asset
or agreement is in full force and effect, and the holder thereof has fulfilled
and performed all of its obligations with respect thereto. No event has
occurred or exists which permits, or after notice or lapse of time or both
would permit, revocation or termination, or which materially adversely affects
or in the future may materially adversely affect, the rights of such holder
thereof with respect thereto. No other license or franchise is necessary to
the operations of the business of the Borrower as now conducted or proposed to
be conducted. The Borrower does not do business (and has not done business
since the date that it was formed) under any trade names or tradestyles other
than those listed on Schedule 2.
6.11 LITIGATION, ETC. Except as specified on Schedule 3, there are no
actions, proceedings, or investigations, however described or denominated,
pending or (to the knowledge of the Borrower) threatened (or any basis
therefor known to the Borrower) which, either in any case or in the aggregate,
might result in any materially adverse change in the Borrower's or the
Guarantor's business, prospects, condition, affairs, operations, properties,
or assets, or in its right or ability to carry on its operations as now
conducted or proposed to be conducted, or might result in any material
liability on the part of the Borrower or the Guarantor, and none which
questions the validity of this Agreement or any of the other instruments or
agreements provided for by this Agreement or of any action taken or to be
taken in connection with the transactions contemplated hereby or thereby.
6.12 ADVERSE DEVELOPMENTS. Since the date of the latest financial
statements referred to in Section 6.6, neither the financial condition,
business operations, affairs, or prospects of the Borrower or the Guarantor,
nor the properties or assets of either, have been materially adversely
affected in any way as the result of any legislative or regulatory change, or
any revocation, amendment, or termination, or any pending or threatened such
action, or any franchise or license or right to do business, or any fire,
explosion, flood, drought, windstorm, earthquake, accident, casualty, labor
trouble, riot, condemnation, requisition, embargo or Act of God or the public
enemy or of armed forces, or otherwise, whether or not insured against.
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6.13 DISCLOSURE. Neither this Agreement nor the financial statements
referred to in Section 6.6 nor any other document, certificate or statement
furnished to Lender by or on behalf of the Borrower or the Guarantor in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein or herein not misleading.
6.14 MARGIN SECURITIES. The Borrower is not engaged principally or as
one of its important activities in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System). No part
of the proceeds of the Loans has been or will be used, directly or indirectly,
to purchase or carry any margin securities within the meaning of Regulation U.
6.15 INVESTMENT COMPANY. The Borrower is not an "investment company"
within the meaning of Section 3 of the Investment Company Act of 1940, as
amended.
6.16 ERISA. The Borrower, the Guarantor, and each Plan is in compliance
with those portions of ERISA and the Code pertaining to each Plan. No Plan
that is subject to the minimum funding standards of ERISA or the Code has
incurred any accumulated funding deficiency within the meaning of ERISA or the
Code. Neither the Borrower nor the Guarantor has incurred, and no facts lead
the Borrower to believe it or the Guarantor will incur, any liability to the
Pension Benefit Guaranty Corporation in connection with any Plan. The assets
of each Plan that is subject to Title IV of ERISA are sufficient to provide
the benefits under such Plan which the Pension Benefit Guaranty Corporation
would guarantee the payment thereof if such Plan terminated, and are also
sufficient to provide all other benefits due under the Plan. No Reportable
Event has occurred and is continuing with respect to any Plan. No Plan nor any
trust created under a Plan, nor any trustee or administrator thereof, has
engaged in a "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) which would subject any Plan, any trust created
thereunder, or any trustee or administrator thereof, or any party dealing with
any Plan or any such trust, to the tax or penalty on "prohibited transactions"
imposed by Section 502 of ERISA or Section 4975 of the Code.
Neither the Borrower nor the Guarantor is required to contribute to or
is contributing to a "multiemployer pension plan" (as defined in the
Multiemployer Pension Plan Amendments Act of 1980), and neither the Borrower
nor the Guarantor has any "withdrawal liability" (as defined in such Act) to
any multiemployer pension plan.
6.17 LOCATIONS. The Borrower's principal place of business and chief
executive office is located at its address specified in Section 11.3.
6.18 SOLVENCY. The Borrower is Solvent.
6.19 NAME CHANGE; MERGER. During the past five years, the Borrower has
not changed its corporate name or been party to a merger or consolidation,
except as specified in Schedule 2.
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6.20 NECESSARY AUTHORIZATIONS. The Borrower has been duly licensed as a
Small Business Investment Company by the SBA, and has all other material
permits, licenses, franchises, consents, authorizations and approvals from all
governmental authorities, including, without limitation, the SBA, and all
other Persons in each case necessary or desirable for the conduct of the
Borrower's business (collectively, the "NECESSARY AUTHORIZATIONS"). Each such
Necessary Authorization is in full force and effect, and the Borrower has
fulfilled and performed all of its obligations with respect thereto. No event
has occurred or exists which permits, or after notice or lapse of time or both
would permit, revocation or termination, or which materially adversely affects
or in the future may materially adversely affect, the rights of the Borrower
with respect to any Necessary Authorizations. No other material license or
franchise is necessary to the operations of the business of the Borrower as
currently conducted.
6.21 YEAR 2000 COMPLIANCE. EGI has (a) initiated a review and assessment
of all areas within its and each of its Subsidiaries' (including the
Borrower's) business and operations (including those affected by suppliers,
vendors and customers) that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by the Borrower or
any of its Subsidiaries (or suppliers, vendors and customers) may be unable to
recognize and perform properly date-sensitive functions involving certain
dates prior to and any date after December 31, 1999), (b) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (c) to
date, implemented that plan in accordance with that timetable. Based on the
foregoing, the Borrower believes that all computer applications (including
those of its suppliers, vendors and customers) that are material to its or any
of its Subsidiaries' business and operations are reasonably expected on a
timely basis to be able to perform properly date-sensitive functions for all
dates before and after January 1, 2000 (that is, be "YEAR 2000 COMPLIANT").
7. AFFIRMATIVE COVENANTS.
The Borrower covenants, for so long as any Loan is outstanding or any of
the other Obligations remains unpaid or unperformed, as follows:
7.1 INSURANCE. The Borrower shall insure its property against all risks
to which it is exposed, including loss, damage, fire, theft, and all other
such risks, and in such amounts, as would be prudent for similar businesses
similarly situated, including loss, damage, fire, theft, and all other such
risks, and in such amounts, with such companies, under such policies, and in
such form as shall be reasonably satisfactory to the Lender. In addition, the
Borrower will maintain comprehensive public liability and worker's
compensation insurance and such other insurance against loss or damage as are
customarily carried by corporations similarly situated, with reputable
insurers, in such amounts, with such deductibles, and by such methods as shall
be adequate and in any event in amounts of not less than the amounts generally
maintained by other companies engaged in similar businesses.
7.2 TAXES AND LIABILITIES. The Borrower shall pay and discharge, when
due, all taxes, assessments, and governmental charges or levies imposed upon
it or its income or profits, or
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against its properties, and all lawful claims which, if unpaid, might become a
lien or charge upon any of its properties; PROVIDED, that the Borrower shall not
be required to pay any such tax, assessment, charge, levy, or claim so long as
it is being contested in good faith and by appropriate and lawful proceedings
diligently pursued and with respect to which adequate reserves have been set
aside on its books.
7.3 ACCOUNTING; FINANCIAL STATEMENTS; ETC. The Borrower will deliver to
Lender:
(a) within 30 days after the end of each of the first 11 months in
each fiscal year of the Borrower a consolidating balance sheet of the Borrower
and its consolidated Subsidiaries together with a separate balance sheet for
EBCEG, if such balance sheet has not been combined with the Borrower's balance
sheet, in each case as at the end of such period and statements of income and
of cash flows of such corporations for such period and for the year-to-date
period then ended, setting forth in each case in comparative form the figures
for the corresponding period of the previous fiscal year, in form and detail
as reasonably required by the Lender, and certified as complete and correct by
the Vice President/Finance of EBCEG, together with a certificate by the
President of each General Partner stating that, as of the date of such
certification, no Default exists (or, if any Default exists, specifying the
nature thereof and what action the Borrower has taken, is taking or proposes
to take with respect thereto);
(b) within 90 days after the end of each fiscal year, a
consolidated balance sheet of EGI and a consolidating balance sheet of EGI and
its consolidated subsidiaries (including the Borrower) as at the end of such
fiscal year, and statements of profit and loss, shareholders' equity, and
changes in cash flows of such corporations for such year, setting forth in
each case in comparative form the figures for the previous fiscal year in form
and detail as reasonably required by the Lender, and accompanied by an
unqualified report and opinion on such financial statements (including on the
supplemental schedules) from KPMG Peat Marwick LLP (or other certified public
accountants reasonably satisfactory to the Lender), which report and opinion
shall be prepared in accordance with GAAP, together with a certificate by the
chief financial officer of EGI of the character specified in Section 7.3(a),
and a certificate by such accountants stating whether or not their examination
has disclosed the occurrence or existence of any Default, and, if their
examination has disclosed a Default, specifying the nature and period of
existence thereof, and demonstrating as at the end of such accounting period
in reasonable detail compliance during such accounting period with Sections
6.18, 7.6, 7.13, 7.14, 7.15, 8.10, 8.11, and 8.13;
(c) copies of all other statements or reports prepared by or
supplied to the Borrower by its accountants or auditors reflecting the
financial position of the Borrower;
(d) within 30 days after the end of each fiscal year, Projections
for the next three years, year-by-year; and
(e) with reasonable promptness, such other data and information as
the Lender from time to time reasonably requests.
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7.4 INSPECTION. The Borrower will permit authorized representatives
designated by the Lender (a) to visit and inspect any of the properties of the
Borrower, including its books and records (and to make extracts therefrom),
and to discuss its affairs, finances, and accounts with its officers,
directors, employees, and accountants, all at such reasonable times and as
often as the Lender reasonably requests, and (b) to attend the Borrower's
credit committee meetings. The Borrower will at all times keep accurate and
complete records with respect to the Collateral.
7.5 MAINTENANCE OF LIMITED PARTNERSHIP EXISTENCE; COMPLIANCE WITH LAWS.
(a) The Borrower shall at all times preserve and maintain in full force and
effect its limited partnership (or, following a Permitted Conversion,
corporate) existence, powers, rights, licenses, permits, and franchises in the
jurisdiction of its organization, and shall operate in full compliance with
all applicable laws, statutes, regulations, certificates of authority, and
orders in respect of the conduct of its business, and shall qualify and remain
qualified as a foreign limited partnership in each jurisdiction in which such
qualification is necessary or appropriate in view of its business and
operations.
(b) The Borrower has advised the Lender that, in order to comply with
regulatory requirements of the SBA applicable to the Borrower, it intends to
convert from a limited partnership to a corporation, which may occur through a
merger, asset transfer or otherwise. The Lender agrees that it shall not
unreasonably withhold its consent to such conversion, so long as (i) the
Borrower, or the Borrower's successor-in-interest, as the case may be,
executes and delivers, or causes to be executed and delivered, such
agreements, documents and instruments as the Lender may require to confirm the
enforceability of the this Agreement against the Borrower or the Borrower's
successor in interest, as the case may be (including, without limitation, the
enforceability of the obligation to pay or perform the Obligations), the
validity, perfection and priority of the Lender's Lien in the Collateral, the
enforceability of the Guarantee, and such other matters in connection
therewith as the Lender, in its sole judgment, may require (including, without
limitation, such opinions of counsel as the Lender may require); and (ii) such
conversion, in the sole judgment of the Lender, otherwise does not adversely
impact the Obligations, the Collateral, the validity, perfection or priority
of the Lender's Lien in the Collateral, or the Lender's rights hereunder or
under the Guarantee or any other Loan Document. A conversion by the Borrower
from a limited partnership to a corporation that has been consented to in
writing by the Lender is a "PERMITTED CONVERSION".
7.6 USE OF PROCEEDS. The proceeds of the Loans will be used solely for
repaying existing debt, for funding commercial loans and for general corporate
purposes. No part of the proceeds will be used to cause a violation of Section
6.14.
7.7 NOTICE OF DEFAULT. The Borrower shall promptly notify the Lender in
writing upon the occurrence or existence of any known Default, and shall
provide to the Lender with such written notice a detailed statement by a
responsible officer of the Borrower of all relevant facts and the action being
taken or proposed to be taken by the Borrower with respect thereto.
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7.8 MAINTENANCE OF PROPERTIES. The Borrower shall maintain or cause to
be maintained in good repair, working order, and condition all properties used
or useful in its business, and from time to time will make or cause to be made
all appropriate repairs, renewals, and replacement thereof. The Borrower will
not do or permit any act or thing which might impair the value or commit or
permit any waste of its properties or any part thereof or permit any unlawful
occupation, business, or trade to be conducted on or from any of its
properties.
7.9 NOTICE OF ERISA DEVELOPMENTS. As soon as possible and in any event
within 30 days after the Borrower knows or has reason to know of any
Reportable Event or "prohibited transaction" (as defined in Section 6.16) with
respect to any Plan or that the Pension Benefit Guaranty Corporation or the
Borrower has instituted or will institute proceedings under ERISA to terminate
a Plan subject to Title IV of ERISA, or a partial termination of a Plan has or
is alleged to have occurred, or any litigation regarding a Plan or naming the
trustee of a Plan or the Borrower or the Guarantor with respect to a Plan is
threatened or instituted, the Borrower shall provide to the Lender the written
statement of the chief financial officer of the Borrower setting forth details
of such Reportable Event, prohibited transaction, termination proceeding,
partial termination, or litigation and the action being or proposed to be
taken with respect thereto, together with copies of the notice of such
Reportable Event or any other notices, applications, or forms submitted to the
Pension Benefit Guaranty Corporation, Internal Revenue Service, or United
States Department of Labor, and copies of any notices or correspondence
received from the Pension Benefit Guaranty Corporation, Internal Revenue
Service, or United States Department of Labor, and copies of any pleadings,
notices, or other documents relating to such litigation.
7.10 NOTICE OF LITIGATION OR ADVERSE CHANGE. The Borrower shall promptly
give to the Lender written notice (a) of all threatened or actual actions,
suits, investigations, or proceedings by or before any court, arbitrator, or
governmental department, commission, board, bureau, agency or other
instrumentality (state, federal, or foreign), affecting the Borrower or the
Guarantor or the rights or other properties of the Borrower or the Guarantor,
except any litigation or proceedings which is not likely to materially affect
the financial condition of the Borrower or the Guarantor or to impair the
right or ability of the Borrower or the Guarantor to discharge the
Obligations; (b) of any materially adverse change in the condition (financial
or otherwise) of the Borrower or the Guarantor; and (c) of any seizure or levy
upon any part of any of the Borrower's properties under any process or by a
receiver, which properties have an aggregate value equal to or in excess of
$5000.
7.11 PAYMENT OF LOANS. The Borrower shall punctually pay the principal
and interest on the Loans, and all other sums falling due hereunder or under
any other documents executed in connection with the Loans, in accordance with
the terms hereof and thereof.
7.12 NOTIFICATION OF CHANGE OF NAME OR BUSINESS LOCATION. The Borrower
shall notify the Lender immediately of each change in the Borrower's name and
trade names, in the location of the Borrower's principal place of business, in
each location where any of the Collateral is kept, and the office where the
Borrower's books and records are kept.
-19-
7.13 TANGIBLE NET WORTH. The Borrower shall maintain at all times a
Tangible Net Worth of not less than $5,000,000 during 1998, $10,000,000 during
1999, and continuing to increase by $1,000,000 each fiscal year thereafter.
7.14 RATIO OF TOTAL LIABILITIES TO TANGIBLE NET WORTH. The Borrower
shall maintain at all times a ratio of Total Liabilities to Tangible Net Worth
of not more than 4 to 1.
7.15 INTEREST COVERAGE RATIO. The Borrower shall maintain for the
four-quarter period concluding at the end of each fiscal year of the Borrower,
a ratio of EBIT to Interest of at least 1.5 to 1.
7.16 OWNERSHIP. EGI shall, directly or through a wholly owned
Subsidiary, own all of the interests (whether general partnership, limited
partnership, corporate or otherwise) of the Borrower.
7.17 COLLATERAL REPORTING. The Borrower shall provide to the Lender, on
a weekly basis, a borrowing base certificate in form acceptable to the Lender.
The Borrower shall provide to the Lender such other collateral reports as the
Lender may request from time to time.
7.18 MAINTENANCE OF NECESSARY AUTHORIZATIONS. The Borrower shall at all
times preserve and maintain in full force and effect each of its Necessary
Authorizations, including, without limitation, its Small Business Investment
Company license, and shall operate in full compliance with such Necessary
Authorizations.
7.19 YEAR 2000 COMPLIANCE. The Borrower will promptly notify the Lender
in the event the Borrower discovers or determines that any computer
application (including those of its suppliers, vendors and customers) that is
material to its or any of its Subsidiaries' business and operations will not
be Year 2000 Compliant (as defined in Section 6.21).
8. NEGATIVE COVENANTS.
The Borrower covenants, for so long as any of the Loans is outstanding
or any of the other Obligations remains unpaid or unperformed, as follows:
8.1 DEBT. The Borrower will not obtain or attempt to obtain from any
party (other than for the purpose of repaying the Obligations in full upon the
termination of this Agreement) any loans, advances, or other financial
accommodations or arrangements other than (a) the Obligations, (b) debt
underlying any purchase money security interest permitted by Section 8.2 not
to exceed, in aggregated principal amount, $100,000, (c) unsecured borrowings
not to exceed in the aggregate $500,000 minus any such debt owed by EBC, EFC
or ECM at any one time outstanding, (d) unsecured trade credit, incurred in
the ordinary course of business, having commercially customary terms, (e) debt
arising in connection with the issuance of debentures guaranteed by the SBA;
PROVIDED, that such debentures are fully subordinated to the Obligations on
terms and conditions satisfactory to the Lender, and (f) unsecured borrowings
from EGI or any Affiliate of EGI;
-20-
PROVIDED, that such borrowings are fully subordinated to the Obligations on
terms and conditions satisfactory to the Lender.
8.2 LIENS. The Borrower shall not create, incur, assume, or suffer to
exist any Lien of any kind upon any of its property or assets (including the
Collateral), whether now owned or hereafter acquired, except (a) Liens in
favor of the Lender; (b) Liens existing on the date hereof and specified on
Schedule 1; (c) Liens on property securing all or part of the purchase price
of such property if (1) such Lien is created contemporaneously with the
acquisition of such property, (2) such Lien attaches only to the specific
item(s) of property so acquired, (3) such Lien secures only the debt incurred
to acquire such property, and (4) the debt secured by such Lien is permitted
by Section 8.1; (d) Liens for taxes, or for other claims, that are not then
due, and (e) Liens in favor of the SBA; PROVIDED ,that such Liens are fully
subordinated to the Liens in favor of the Lender on terms and conditions
satisfactory to the Lender.
8.3 GUARANTEES. The Borrower shall not guarantee, endorse, become surety
with respect to, or otherwise become directly or contingently liable for or in
connection with the obligations of any other Person, except by endorsement of
negotiable instruments for deposit or collection and similar transactions in
the ordinary course of business.
8.4 PLAN LIABILITIES. The Borrower shall not permit the aggregate
present value of accrued benefits of any Plan subject to Title IV of ERISA,
computed in accordance with actuarial principles and assumptions applied on a
uniform and consistent basis by an enrolled actuary of recognized standing
acceptable to the Lender, to exceed the aggregate value of assets of the Plan,
computed on a fair market value basis, or permit the aggregate present value
of vested benefits of any Plan subject to Title IV of ERISA, computed in
accordance with actuarial principles and assumptions applied on a uniform and
consistent basis by an enrolled actuary of recognized standing acceptable to
the Lender, to exceed the aggregate value of assets of the Plan, computed on a
fair market value basis.
8.5 FISCAL YEAR. The Borrower will not change its fiscal year from a
year ending on December 31 without prior written notice to the Lender.
8.6 OTHER TRANSACTIONS. The Borrower will not engage in any transaction
with any of its officers, directors, employees, or Affiliates, except for an
"arms-length" transaction on terms no more favorable to the other party than
would be granted to an unaffiliated Person, which transaction shall be
approved by its disinterested directors and shall be disclosed in a timely
manner to the Lender before being consummated.
8.7 MERGER; SUBSIDIARY; ETC. The Borrower will not merge or consolidate
with any other Person, form or acquire any Subsidiary, or issue any additional
partnership interests or capital stock to any Person other than EGI or a
wholly owned Subsidiary of EGI.
8.8 SALE OF ASSETS. The Borrower will not sell, lease or otherwise
transfer all or any substantial part of its assets material to its operations,
except in the ordinary course of its
-21-
business; PROVIDED, that it may in any calendar year dispose of items of
equipment having an aggregate market value of not more than $250,000, minus any
such equipment disposed of by EBC, EFC or ECM, if the Borrower uses the proceeds
of such disposition to acquire property of a similar nature.
8.9 CHANGES IN BUSINESS. The Borrower will not engage in any business
other than the business presently conducted by it on the date of this
Agreement and business of substantially the same type or directly related
thereto.
8.10 DISTRIBUTIONS AND REDEMPTIONS. The Borrower will not declare or pay
any dividends or distributions to any holder of any partnership interest,
capital stock or other ownership interest of the Borrower, or apply any of its
property or assets to the purchase, redemption, or other retirement of, or set
apart any sum for the payment of any distributions in respect of, or for the
purchase, redemption, or other retirement of, or make any other distribution
by reduction of capital or otherwise in respect of, any partnership interest,
capital stock or other ownership interest of the Borrower; PROVIDED, that the
Borrower may make declare and pay dividends and other distributions in respect
of partnership interests or capital stock of the Borrower owned by EGI so long
as (i) there shall not then exist and be continuing any Default or Event of
Default; (ii) no Default or Event of Default shall result from such
declaration, payment or distribution; and (iii) the Guarantee executed by EGI
remains at all times in full force and effect.
8.11 LOANS. The Borrower will not make any loans or advances to or
extend any credit to any Person except (a) the extension of trade credit in
the ordinary course of business, (b) advances to employees not to exceed to
any one employee an outstanding total of $5,000 minus any advances to such
employee by EBC, EFC or ECM, and (c) loans which, in the reasonable and good
faith determination of the Borrower, constitute Eligible Loans when made.
8.12 PLEDGE OF CREDIT. The Borrower will not pledge the Lender's credit
for any purpose whatsoever.
8.13 INVESTMENTS. The Borrower shall not purchase, acquire, or otherwise
invest in any Person except: (a) loans which, in the reasonable and good faith
determination of the Borrower, constitute Eligible Loans when made, (b) equity
investments in borrowers of Eligible Loans, (c) direct obligations of the
United States of America maturing within one year from the acquisition
thereof, (d) certificates of deposit issued by, or investment accounts in,
banks or financial institutions having a net worth of not less than
$50,000,000, (e) commercial paper rated A-1 by Standard & Poor's Corporation
or P-1 by ▇▇▇▇▇'▇ Investors Service, Inc., (e) overnight repurchase agreements
issued by the Lender, any corporate Affiliate of the Lender, or any other bank
having a net worth of $50,000,000 or more, or (f) assets received from
foreclosing on a loan.
9. POWER OF ATTORNEY.
The Borrower hereby appoints and constitutes the Lender as its
attorney-in-fact to do any of the following if an Event of Default exists: to
receive, open, and dispose of all mail addressed to
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the Borrower pertaining to Collateral (or appearing to the Lender possibly to
pertain to Collateral); to notify the postal authorities to change the address
and delivery of mail addressed to the Borrower to such address as the Lender
shall designate; to endorse the Borrower's name upon any notes, acceptances,
checks, drafts, money orders, and other forms of payment that come into the
Lender's possession, and to deposit or otherwise collect the same; to sign the
Borrower's name on any document relating to any Collateral; to execute in the
name of the Borrower any affidavits and notices with regard to any and all lien
rights; and to do all other acts and things necessary to carry out this
Agreement. The Borrower hereby waives notice of presentment, protest, and
dishonor of any instrument so endorsed by the Lender.
All the Lender's acts as attorney-in-fact are hereby authorized,
ratified, and approved by the Borrower, and the Borrower agrees that, as
attorney-in-fact, the Lender shall not be liable for any acts of omission or
commission, nor for any error of judgment or mistake of fact or law, except to
the extent of loss or damage caused directly and primarily by the Lender's
gross negligence or willful misconduct. This power, being coupled with an
interest, is irrevocable so long as this Agreement remains in effect or any of
the Obligations remains outstanding.
10. REMEDIES.
Upon the occurrence and during the continuance of any Event of Default,
the entire outstanding principal amount of the Loans, together with all
accrued but unpaid interest thereon, and all other of the Obligations shall,
at the option of the Lender, immediately become absolute and due and payable,
without presentation, demand of payment, protest, notice for demand of
payment, protest and notice of nonpayment, or any other notice of any kind
with respect thereto, all of which are hereby expressly waived by the Borrower
to the full extent permitted by law. The Lender may exercise from time to time
any rights and remedies available to it under the Uniform Commercial Code and
other applicable law in Georgia or any other applicable jurisdiction. The
Borrower agrees, after the occurrence of any Event of Default, immediately to
assemble at the Borrower's expense all the Collateral at a convenient place
acceptable to the Lender, and to surrender such property to the Lender. The
Borrower agrees to pay all reasonable and documented costs that the Lender
pays or incurs to collect the Obligations or enforce its rights hereunder. The
Borrower agrees that the Lender may charge the Borrower's account for, and
that the Borrower will pay on demand, all reasonable and documented costs and
expenses, including 15% of the total amount involved as attorneys' fees (not
to exceed the amount of attorneys' fees actually incurred), incurred: (i) to
liquidate any Collateral, (ii) to obtain or enforce payment of any
Obligations, or (iii) to prosecute or defend any action or proceeding either
against the Lender or against the Borrower concerning any matter growing out
of or connected with this Agreement or any Receivable or any Obligation. The
Borrower agrees that the Lender may apply any proceeds from disposing of the
Collateral first to any security interest(s), lien(s), or encumbrance(s) prior
to the Lender's security interest.
Upon the occurrence and during the continuance of an Event of Default,
the Lender shall be entitled to hold or set off any sums and all other
property of the Borrower's, at any time to the credit
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of the Borrower or in the possession of the Lender, whether by pledge or
otherwise, or upon or in which the Lender may have a lien or security interest.
Recourse to security shall not at any time be required, and the Borrower
shall at all times remain liable for the repayment to the Lender of all
Obligations in accordance with their terms, regardless of the existence or
non-existence of any Event of Default.
11. MISCELLANEOUS.
11.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of
the Lender in exercising any right, power, or remedy hereunder, or under any
other document or agreement given by the Borrower or received by the Lender in
connection herewith, shall operate as a waiver thereof, and no waiver shall be
valid unless in writing signed by the Lender (and then only to the extent
therein stated); nor shall any single or partial exercise of any such right,
power, or remedy preclude any other or further exercise thereof or the
exercise of any other right, power, or remedy hereunder or thereunder. The
remedies herein and therein provided are cumulative and not exclusive of any
remedies provided by law or in equity.
11.2 AMENDMENTS, ETC. No amendment, modification, termination, or waiver
of any provision of this Agreement or of any other document or agreement given
by the Lender or received by the Borrower in connection herewith, nor consent
to any departure by the Borrower therefrom, shall in any event be effective
unless it is in writing and signed by the Lender and the Borrower (and then
such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given). No notice to or demand on the
Borrower in any case shall entitle the Borrower to any other or further notice
or demand in similar or other circumstances.
11.3 ADDRESSES FOR NOTICES, ETC. All notices, requests, demands, and
other communications provided for hereunder, other than routine communications
in the ordinary course of business, shall be in writing (including telecopies)
and mailed, telecopied, or delivered as follows:
if to the Borrower:
▇▇▇▇▇ River Ventures Limited Partnership
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Legal Counsel
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Wyche, Burgess, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
-▇▇-
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Lender:
NationsBank, N.A.
Business Credit Division
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or, as to each party, at such other address as it designates in a written
notice to the other party complying as to the delivery with the terms of this
Section. Except as otherwise expressly provided in this Agreement, all such
notices, requests, demands, and other communications shall, when mailed or
telecopied, be effective five Banking Days after being deposited in the mails
(postage paid) or when sent over a telecopier owned or operated by a party
hereto with an answerback response set forth on the sender's copy of the
document, addressed as aforesaid, and otherwise shall be effective upon
receipt.
11.4 COSTS, EXPENSES, AND TAXES. The Borrower shall pay to the Lender,
on demand, all reasonable costs and expenses paid or incurred by the Lender in
connection with the preparation, reproduction, execution, delivery,
administration, or enforcement of this Agreement and other instruments and
documents from time to time delivered in connection with this Agreement,
including the reasonable and documented fees and expenses of outside counsel
for the Lender, and in connection with the Lender's initial evaluation of the
line of credit contemplated by this Agreement (including travel and field exam
expenses). The Lender's attorneys' fees (exclusive of expenses) incurred in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the other instruments and documents executed and delivered on
the Effective Date shall not exceed $14,000, so long as (i) the Effective Date
occurs on or before May 1, 1998, (ii) Lender's attorneys devote no more than
twenty (20) hours to matters related to the SBA, and (iii) no unforeseen
issues arise and no additional time is spent negotiating this Agreement. In
addition, the Borrower shall pay any and all stamp and other taxes and
recording and filing fees payable or determined to be payable in connection
with the execution and delivery of this Agreement and all other instruments
and documents from time to time delivered in connection with this Agreement,
and shall save and hold harmless the Lender from and against any and all
liabilities with respect to or resulting from any delay in paying or failure
to pay such taxes or fees.
11.5 COMMERCIAL TRANSACTION. THE BORROWER HEREBY ACKNOWLEDGES THAT THE
OBLIGATIONS AROSE OUT OF A "COMMERCIAL TRANSACTION" (AS DEFINED IN O.C.G.A.
ss. 44-14-260(1), CONCERNING FORECLOSURE OF INTERESTS IN PERSONAL PROPERTY),
AND AGREES THAT AFTER ANY EVENT OF DEFAULT (AS "Event of Default" IS DEFINED
IN SECTION 1.1),
-25-
THE LENDER SHALL HAVE THE RIGHT TO AN IMMEDIATE WRIT OF POSSESSION WITHOUT
NOTICE OR HEARING. THE BORROWER KNOWINGLY AND INTELLIGENTLY WAIVES ANY AND ALL
RIGHTS IT MAY HAVE TO ANY NOTICE OR POSTING OF A BOND BY THE LENDER PRIOR TO
SEIZURE BY THE LENDER (OR THE LENDER'S TRANSFEREES, ASSIGNS, OR SUCCESSORS IN
INTEREST) OF THE COLLATERAL OR ANY PORTION THEREOF. THIS IS INTENDED BY THE
BORROWER AS A "WAIVER" AS DEFINED IN O.C.G.A. ss. 44-14-260(3) (RELATING TO
FORECLOSURE OF INTERESTS IN PERSONAL PROPERTY).
11.6 SUCCESSORS AND ASSIGNS. All of the terms of this Agreement, and
each of the documents and agreements executed and delivered pursuant to this
Agreement, shall bind, benefit, and be enforceable by the successors and
assignees of the parties hereto, whether so expressed or not. The Borrower
shall not assign or transfer this Agreement, or any of its rights hereunder,
without the prior written consent of the Lender. The Lender shall not assign
or transfer this Agreement, or any of its rights hereunder, without the prior
written consent of the Borrower.
11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, covenants, and agreements contained herein or made in writing by
the Borrower in connection herewith shall survive the execution and delivery
of this Agreement and any and all other documents and instruments relating to
or arising out of any of the foregoing.
11.8 TIME IS OF THE ESSENCE. Time is of the essence of this Agreement.
11.9 HEADINGS. The headings in this Agreement are for convenience of
reference only, and are not a substantive part of the agreement.
11.10 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersede all prior agreements
and understandings relating to the subject matter hereof and thereof.
11.11 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. In case any one or more of the provisions in this Agreement
shall for any reason be held to be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
11.12 COUNTERPARTS. This Agreement may be executed in separate
counterparts.
11.13 GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT AND THE
OTHER DOCUMENTS AND AGREEMENTS EXECUTED IN CONNECTION HEREWITH (UNLESS
SPECIFICALLY STIPULATED TO THE CONTRARY IN SUCH DOCUMENT OR AGREEMENT), AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER, SHALL BE
GOVERNED BY, AND
-26-
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF GEORGIA (DISREGARDING
ANY CONFLICTS-OF-LAWS RULE THAT WOULD APPLY THE LAW OF ANY OTHER JURISDICTION).
THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR STATE COURT SITTING IN ATLANTA, GEORGIA, IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER
DOCUMENTS OR AGREEMENTS DESCRIBED OR CONTEMPLATED HEREIN, AND THE BORROWER
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH UNITED STATES FEDERAL OR
STATE COURT. SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER
PROCESS WHICH MAY BE SERVED ON THE BORROWER IN ANY SUCH ACTION OR PROCEEDING MAY
BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO THE BORROWER IN
ACCORDANCE WITH SECTION 11.3 HEREOF.
11.14 WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE BORROWER AND THE LENDER EACH WAIVE ALL RIGHTS TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING RELATING TO TRANSACTIONS ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS DESCRIBED OR CONTEMPLATED
HEREIN.
-27-
IN WITNESS WHEREOF, the Borrower and the Lender have executed this Loan
and Security Agreement.
▇▇▇▇▇ RIVER VENTURES LIMITED
PARTNERSHIP
[Seal]
By: Emergent Group, Inc.,
Its General Partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Attest: /s/ C. ▇▇▇▇▇▇ ▇▇▇▇▇
Name: C. ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Secretary
By: Emergent Business Capital Equity
Group, Inc.,
Its General Partner
By: /s/ Capers Easterby
Name: Capers Easterby
Title: President
Attest: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Secretary
Accepted this 9th day of June, 1998, in Atlanta, Georgia.
NATIONSBANK, N.A.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇?
Title: Senior Vice President
EXHIBIT A-1
EBCEG's Secretary's Certificate
for the Benefit of
NationsBank, N.A.
I, ▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary of EMERGENT BUSINESS CAPITAL EQUITY GROUP,
INC., a South Carolina corporation (the "GENERAL PARTNER"), hereby certify
that:
1. The General Partner is one of the general partners of ▇▇▇▇▇ River
Ventures Limited Partnership, a South Carolina limited partnership (the
"Borrower")
2. Attached hereto as Exhibit 1 is a certified copy of the articles of
---------
incorporation of the General Partner as originally filed, together with all
amendments thereto.
3. Attached hereto as Exhibit 2 is a true and correct copy of the
---------
by-laws of the General Partner. Those by-laws have not been amended, modified,
or revoked, and are in full force and effect as of the date hereof.
4. Attached hereto as Exhibit 3 is a good standing certificate for the
---------
General Partner issued by the South Carolina Secretary of State on
_______________, 1998.
5. The General Partner has since the date of the certificate referred to
in paragraph 4 above through the date hereof remained in good standing under the
laws of the state of South Carolina.
6. Attached hereto as Exhibit 4 is a certified copy of the certificate
---------
and agreement of limited partnership of the Borrower as originally filed,
together with all amendments thereto. Such certificate and agreement of
limited partnership is the only agreement among the Borrower's general
partners and limited partners concerning the governance and capitalization of
the Borrower, and has not been further amended, modified or revoked and is in
full force and effect as of the date hereof.
7. Attached hereto as Exhibit 5 is a good standing certificate for the
---------
Borrower issued by the South Carolina Secretary of State on _______________,
1998.
8. No suit or proceeding for the dissolution or liquidation of the
Borrower has been instituted or is now threatened.
9. Attached hereto as Exhibit 6 is a true and complete copy of
---------
resolutions of the Board of Directors of the General Partner, duly adopted by
unanimous written consent of the Board of Directors of the General Partner.
The corporate action in adopting those resolutions was duly taken
at that meeting in accordance with the provisions of law and of the General
Partner's articles of incorporation and by-laws, and those resolutions are now
in full force and effect and have not been modified in any respect.
10. The resolutions referred to in paragraph 9 authorized the General
Partner, and its officers referred to therein, to execute and deliver on behalf
of the Borrower, and to do all things necessary or appropriate for the payment
and performance of all the Borrower's obligations under, the Loan and Security
Agreement (the "AGREEMENT") dated as of _______________, 1998, between
NationsBank, N.A. (the "LENDER") and the Borrower, and all certificates,
agreements and other documents to be executed and delivered to the Lender by
the Borrower pursuant to the Agreement, and pursuant to the specific
resolutions referred to in paragraph 9.
11. The following persons have been duly elected, have duly qualified,
as of the date of the execution of the Agreement were, and on the date hereof
are, officers of the General Partner, holding the offices set opposite their
names below, and the signatures set opposite their names below are their
genuine signatures:
Name Title Signature
---- ----- ---------
--------------------- -------------------- -------------------------
--------------------- -------------------- -------------------------
--------------------- -------------------- -------------------------
IN WITNESS WHEREOF, I have signed this Certificate and affixed to it the
General Partner's seal on ________________, 1998.
------------------------------------
Secretary
[Seal]
-2-
EXHIBIT A-2
EGI's Secretary's Certificate
for the Benefit of
NationsBank, N.A.
I, C. ▇▇▇▇▇▇ ▇▇▇▇▇, Secretary of EMERGENT GROUP, INC., a South Carolina
corporation (the "GENERAL PARTNER"), hereby certify that:
1. The General Partner is one of the general partners of ▇▇▇▇▇ River
Ventures Limited Partnership, a South Carolina limited partnership (the
"Borrower")
2. Attached hereto as Exhibit 1 is a certified copy of the articles of
---------
incorporation of the General Partner as originally filed, together with all
amendments thereto.
3. Attached hereto as Exhibit 2 is a true and correct copy of the
---------
by-laws of the General Partner. Those by-laws have not been amended, modified,
or revoked, and are in full force and effect as of the date hereof.
4. Attached hereto as Exhibit 3 is a good standing certificate for the
---------
General Partner issued by the South Carolina Secretary of State on
_______________, 1998.
5. The General Partner has since the date of the certificate referred to
in paragraph 4 above through the date hereof remained in good standing under the
laws of the state of South Carolina.
6. Attached hereto as Exhibit 4 is a certified copy of the certificate
---------
and agreement of limited partnership of the Borrower as originally filed,
together with all amendments thereto. Such certificate and agreement of
limited partnership is the only agreement among the Borrower's general
partners and limited partners concerning the governance and capitalization of
the Borrower, and has not been further amended, modified or revoked and is in
full force and effect as of the date hereof.
7. Attached hereto as Exhibit 5 is a good standing certificate for the
---------
Borrower issued by the South Carolina Secretary of State on _______________,
1998.
8. No suit or proceeding for the dissolution or liquidation of the
Borrower has been instituted or is now threatened.
9. Attached hereto as Exhibit 6 is a true and complete copy of
---------
resolutions of the Board of Directors of the General Partner, duly adopted by
unanimous written consent of the Board of Directors of the General Partner.
The corporate action in adopting those resolutions was duly taken
in accordance with the provisions of law and of the General Partner's articles
of incorporation and by-laws, and those resolutions are now in full force and
effect and have not been modified in any respect.
10. The resolutions referred to in paragraph 9 authorized the General
Partner, and its officers referred to therein, to execute and deliver on behalf
of the Borrower, and to do all things necessary or appropriate for the payment
and performance of all the Borrower's obligations under, the Loan and Security
Agreement (the "AGREEMENT") dated as of _______________, 1998, between
NationsBank, N.A. (the "LENDER") and the Borrower, and all certificates,
agreements and other documents to be executed and delivered to the Lender by the
Borrower pursuant to the Agreement, and pursuant to the specific resolutions
referred to in paragraph 9.
11. The following persons have been duly elected, have duly qualified,
as of the date of the execution of the Agreement were, and on the date hereof
are, officers of the General Partner, holding the offices set opposite their
names below, and the signatures set opposite their names below are their
genuine signatures:
Name Title Signature
---- ----- ---------
---------------------- ---------------------------- --------------------------
---------------------- ---------------------------- --------------------------
---------------------- ---------------------------- --------------------------
IN WITNESS WHEREOF, I have signed this Certificate and affixed to it the
General Partner's seal on June ____, 1998.
---------------------------
Secretary
[Seal]
-2-
EXHIBIT 4
----
Board of Directors' Resolutions
----
RESOLVED, that the officers of this Corporation be and they hereby are
jointly and severally authorized and directed to take all actions necessary or
desirable on behalf of the Corporation, to cause ▇▇▇▇▇ River Ventures Limited
Partnership, a South Carolina limited partnership (the "Borrower") to borrow
from NationsBank, N.A. ("NATIONSBANK"), from time to time such sums as they or
any of them may deem necessary or desirable in connection with the operation
of the business of the Borrower, upon such terms and conditions as shall be
obtained through negotiation with NationsBank, and to execute one or more or
financing agreements and promissory notes in respect thereto in the name of
the Borrower for the payment of such amounts so borrowed, and further to
extend, renew, renegotiate, refinance, or otherwise modify such terms and
conditions by agreement with NationsBank.
FURTHER RESOLVED, that the officers of this Corporation be and they
hereby are jointly and severally authorized and directed to request, from time
to time, on behalf of this Corporation, as they deem necessary or desirable
for the operation of the business of the Borrower, that NationsBank make
advances and overadvances to the Borrower, such advances and overadvances to
become subject to the terms and conditions of any agreement with regard to the
loan financing of accounts receivable existing at the time of such request or
any modification, extension, renewal, or renegotiation thereof.
FURTHER RESOLVED, that the officers of this Corporation be and they
hereby are jointly and severally authorized and directed, from time to time,
on behalf of this Corporation, to secure any such loans, advances,
overadvances, or other indebtedness of the Borrower to NationsBank however
arising, by pledging, or by granting full lien rights and full security title
and security interest in and to, any and all of the assets of the Borrower,
both real and personal, and such officers are jointly and severally authorized
to execute any and all instruments necessary or desired by NationsBank in any
manner as may now or hereafter be recognized by the laws of the United States
or any state, or of any foreign state.
FURTHER RESOLVED, that any such officers of this Corporation be and are
hereby jointly and severally authorized and directed, on behalf of this
Corporation, to do such other things and to execute such other documents as
may be necessary or desirable to effect the foregoing transactions, including
the execution of financing statements and such other notices or instruments as
may be necessary or requested by NationsBank.
FURTHER RESOLVED, that all acts and deeds of any officer of this
Corporation heretofore performed on behalf of this Corporation to enter into,
execute perform, carry out, or otherwise pertaining to the arrangements and
intentions authorized by these resolutions be and they hereby are ratified,
approved, confirmed, and declared binding upon the Borrower.
FURTHER RESOLVED, that the Secretary of this Corporation shall certify
to NationsBank the names of the presently duly elected and qualified officers
of this Corporation and shall from time to time hereafter as each change in
identity of those officers is made, immediately certify such change to
NationsBank, and NationsBank shall be fully protected in relying on such
certification(s) (or the absence thereof), and shall be indemnified and saved
harmless by this Corporation from any claim, demand, expense, loss, or damage
resulting from or growing out of honoring the signature of any officer so
certified or for refusing to honor any signature not so certified.
FURTHER RESOLVED, that the foregoing resolutions shall remain in full
force and effect until the close of business on the banking day after written
notice of their amendment or rescission shall have been received by
NationsBank and that receipt of such notice shall not affect any action taken
by NationsBank prior thereto.
FURTHER RESOLVED, that the Secretary of this Corporation be, and hereby
is, authorized and directed to certify to NationsBank the foregoing
resolutions and that the provisions thereof are in accordance with the
provisions of law and of the articles of incorporation and by-laws of this
Corporation.
-2-
EXHIBIT B-1
General Partner's President's Certificate
for the Benefit of
NationsBank, N.A.
I, Capers Easterby, President of Emergent Business Capital Equity Group,
Inc., a South Carolina corporation (the "GENERAL PARTNER"), do hereby certify,
pursuant to Section 4.1 of the Loan and Security Agreement (the "AGREEMENT")
between NationsBank, N.A. (the "LENDER") and ▇▇▇▇▇ River Ventures Limited
Partnership, a South Carolina limited partnership (the "BORROWER"), dated as
of ______________, 1998, that _____________________ has been duly elected, has
duly qualified, as of the date of the execution of the Agreement was, and on
the date hereof is, the Secretary of the General Partner, and that the
signature appearing below is a true specimen of his signature.
---------------------------------
[Name], Secretary
June ___, 1998.
---------------------------------
Capers Easterby
President
EXHIBIT B-2
General Partner's President's Certificate
for the Benefit of
NationsBank, N.A.
I, ▇▇▇▇▇ ▇▇▇▇▇▇▇, President of Emergent Group, Inc., a South Carolina
corporation (the "GENERAL PARTNER"), do hereby certify, pursuant to Section
4.1 of the Loan and Security Agreement (the "AGREEMENT") between NationsBank,
N.A. (the "LENDER") and ▇▇▇▇▇ River Ventures Limited Partnership, a South
Carolina limited partnership (the "BORROWER"), dated as of ______________,
1998, that _____________________ has been duly elected, has duly qualified, as
of the date of the execution of the Agreement was, and on the date hereof is,
the Secretary of the General Partner, and that the signature appearing below
is a true specimen of his signature.
---------------------------------
[Name], Secretary
June ___, 1998.
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
President
EXHIBIT C
[To Be Retyped on Letterhead
of Counsel to the Borrower]
June ____, 1998
NationsBank, N.A.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: ▇▇▇▇▇ River Ventures Limited Partnership
Ladies and Gentlemen:
We have acted as counsel to ▇▇▇▇▇ River Ventures Limited Partnership, a
South Carolina limited partnership (the "BORROWER"), in connection with its
execution and delivery of the that certain Loan and Security Agreement dated
as of June __, 1998 (the "LOAN AGREEMENT") between the Borrower and
NationsBank, N.A. (the "LENDER") and certain related documents. Unless
otherwise specified in this opinion letter, the terms used herein have the
same meanings as in the Loan Agreement.
We also have acted as counsel to Emergent Group, Inc. in connection
with its execution and delivery of the Guarantee.
In so acting, we have examined the Loan Agreement, the Guaranty, and
originals or copies of all other documents that we deemed relevant and
necessary as a basis for the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that:
(1) The Borrower is a limited partnership duly organized and
validly existing in good standing under the laws of South Carolina, and has
all requisite power and authority to conduct its business, to own and operate
its properties, and to execute, deliver, and perform all of its obligations
under the Loan Agreement. The Borrower has no Subsidiary. The Borrower is duly
qualified, licensed, or domesticated and in good standing as a foreign limited
partnership duly authorized to do business in all jurisdictions in which the
character of its properties owned or the nature of its activities conducted
makes such qualification, licensing, or domestication necessary (as set forth
in Section 7.3 of the Loan Agreement).
(2) The Borrower's execution, delivery, and performance of the
Loan Agreement have been duly authorized by all necessary action and do not
and will not (a) require any consent or approval of the limited partners of
the Borrower or violate the certificate and agreement of limited partnership
or other organizational documents of the Borrower, (b) violate any provision
of any law, rule, or regulation (including Regulation X of the Board of
Governors of the Federal Reserve System) of the United States or of South
Carolina, or, to the best of our knowledge, any order, judgment, injunction,
decree, determination, or award of any court, arbitrator, or governmental
department, agency, or other instrumentality, (c) to the best of our
knowledge, result in a breach of or constitute a default under any agreement
or instrument to which the Borrower is a party or by which it or its
properties may be bound or affected, or (d) result in, or require, to the best
of our knowledge, the creation or imposition of any Lien upon or with respect
to any of the properties now owned or hereafter acquired by the Borrower
(other than the Liens created by the Loan Agreement). To the best of our
knowledge, the Borrower is not in violation of any provision of any of the
items described in clause (b) of this paragraph or in default under any
provision of any of the items described in clause (c) of this paragraph.
(3) No authorization, consent, approval, license, or exemption of,
or filing or registration with, the any court or governmental department,
agency, or other instrumentality of the United States (including the Small
Business Administration) or of the State of South Carolina is or will be
necessary to the Borrower's valid execution, delivery, or performance of the
Loan Agreement or for the payment to the Lender of all sums due and payable
thereunder.
(4) The Loan Agreement has been duly executed and delivered by the
Borrower, and constitutes the Borrower's legal, valid, and binding obligation,
enforceable against the Borrower in accordance with its terms.
(5) To the best of our knowledge, there are no actions, suits, or
proceedings pending or threatened against or affecting the Borrower or the
Guarantor or the properties of the Borrower or the Guarantor before any court,
arbitrator, or governmental department, commission, board, bureau, agency, or
other instrumentality (state, federal, or foreign) which, if determined
adversely to the Borrower or the Guarantor, would have a materially adverse
effect on the financial condition, properties, or operations of the Borrower
or the Guarantor, or create a Lien on any property of the Borrower or the
Guarantor.
(6) You should perfect all the security interests granted under
the Loan Agreement (in Collateral for which a security interest can be
perfected by filing UCC-1 financing statements) by filing a UCC-1 financing
statement in the attached form with the South Carolina Secretary of State.
Upon the filing of such financing statement, you will have a perfected
first-priority security interest in such Collateral, and no further recording
or filing in South Carolina or any other jurisdiction is necessary or
advisable in order to establish and perfect such first-priority security
interest.
-2-
(7) The Guarantee has been duly authorized, executed, and
delivered by the Guarantor, and constitutes the Guarantor's legal, valid, and
binding obligations, enforceable against the Guarantor in accordance with its
terms.
This opinion is limited to the laws of the United States and of South
Carolina. The opinions in paragraphs nos. 4, 7, and 8 are given as if the laws
of South Carolina governed the Loan Agreement and the Guarantees, despite
their express choice of Georgia law as the law governing their construction
and interpretation. No opinion is given as to the validity of the choice of
law in the Loan Agreement and the Guarantee.
Our opinions set forth herein as to the validity, binding effect, and
enforceability of the Loan Agreement and the Guarantee are specifically
qualified to the extent that the validity, binding effect, or enforceability
of any obligations of the Borrower and the Guarantor thereunder or the
availability or enforceability of any of the remedies provided therein, may be
subject to or limited by (i) applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium, and other statutory or
decisional laws, heretofore or hereafter enacted or in effect, affecting the
rights of creditors generally to the extent the same may constitutionally be
applied including, without limitation, decisional or statutory law concerning
recourse by creditors to security in the absence of notice of a hearing; (ii)
the exercise of judicial or administrative discretion in accordance with
general equitable principles; (iii) the possible unenforceability of any
provision requiring or in effect requiring that waivers or amendments of any
provision of the Loan Agreement or the Guarantee, or any related document, may
be effected only in writing; (iv) the possible unenforceability of provisions
imposing increased interest rates or late payment charges upon delinquency in
payment or default, to the extent that any such provision is deemed a
"penalty"; (v) limitations imposed by rules and statutes regarding forum,
venue, pleading, service of process, qualification to do business, and
statutes of limitation; or (vi) limitations on the availability or
enforceability of the remedies of specific performance or injunctive relief
and of waivers contained in the Loan Agreement or the Guarantee, all of which
may be limited by equitable principles or applicable laws, rules, regulations,
court decisions, and constitutional requirements.
All opinions rendered herein are limited to the existing laws of the
State of South Carolina and laws of the United States of America, all as in
effect on the date hereof, and we express no opinion as to any other laws,
rules, or regulations of such jurisdictions or matters governed by such laws,
rules, or regulations; nor do we undertake, by delivery hereof or otherwise,
to advise you of any changes in such laws, rules, or regulations.
This opinion is made as of the date hereof, and we undertake no (and
hereby disclaim any) obligation to advise you of any change in any matter set
forth herein. This opinion is limited to the matters expressly set forth
herein and no opinion is implied or may be inferred beyond the matters
-3-
expressly stated herein. This opinion is solely for your benefit in connection
with the Loan Agreement and the Guarantee and may not be relied upon in any
manner by any other person.
Very truly yours,
WYCHE, BURGESS, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, P.A.
By:_______________________________
▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
-4-
SCHEDULE 1
Liens
-----
NONE
SCHEDULE 2
Trademarks, Tradenames, Name Changes, etc.
------------------------------------------
Tradenames:
1. ▇▇▇▇▇ River Ventures
2. Emergent Equity Advisors
3. Emergent Business Capital
4. Emergent Equity Group
5. Emergent SBIC
Name Changes:
The Borrower's original name was ▇▇▇▇▇ River Ventures. On October 5, 1995, the
Borrower amended its certificate and agreement of limited partnership to
change its name to ▇▇▇▇▇ River Ventures Limited Partnership.
SCHEDULE 3
Current Litigation List
--------------------------------------------------------------------------------
▇▇▇▇▇ Matter
------------
In July, 1997, an action was commenced against Emergent Group, Inc., Emergent
Mortgage Corp., and Carolina Investors, Inc. (collective, the "Company") in the
United States District Court for the District of Puerto Rico. The complaint
alleges that the Company breached the terms of a confidentiality agreement with
the plaintiff concerning the possibility of commencing residential mortgage loan
operations in Puerto Rico. The complaint also alleges that the Company breached
an employment agreement with the plaintiff and a development agreement with him
to begin operations in Puerto Rico. The Company, through its counsel in Puerto
Rico, filed a motion to dismiss all of these claims, which motion was granted
by the Court on January 26, 1998. The plaintiff has filed a notice of appeal
from this order.
▇▇▇▇▇ River Matter
------------------
▇▇▇▇▇ River Ventures, L.P. ("▇▇▇▇▇ River"), is a third party defendant in an
action pending in U.S. District Court for the district of South Carolina,
Greenville Division, captioned Southern Weaving Company, Azalea Capital, L.L.C.,
-------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Associates, Inc., LEG
---------------------------------------------------------------------------
Partners SBIC, L.P., and LEG Partners, ▇.▇. ▇. ▇▇▇▇▇ River Ventures, Ltd.
-------------------------------------------------------------------------
Partners. The plaintiffs allege that in 1996-1997, they pursued the purchase of
---------
the assets of a division of Woven Electronics Corporation. In connection with
that purchase, they sought financing from the defendants. The plaintiffs allege
that the defendants did not act in good faith and decided not to go forward
with the financing, and, ultimately, ▇▇▇▇▇ River provided financing to the
plaintiffs for the transaction. The plaintiffs and defendants have asserted a
variety of claims and actions against each other, and the defendants also
brought a third party claim against ▇▇▇▇▇ River alleging that ▇▇▇▇▇ River
tortiously interfered with their actual and prospective contractual relations
with the plaintiffs. ▇▇▇▇▇ River believes the claims stated against it are
encompassed by an indemnity provision in a Loan and Security Agreement
between ▇▇▇▇▇ River and WEC Acquisition Corporation and has given notice under
that provision. ▇▇▇▇▇ River has denied the defendant's claims and is vigorously
contesting the case. At this point, discovery in the case has just begun, and
the defendants have not set out a calculation of their claimed damages.
The Borrower believes that neither of the above-referenced matters has or is
reasonably expected to have a material adverse effect on the business,
operations, condition (financial or otherwise), assets, liabilities, prospects,
or properties of the Borrower.
