EXHIBIT 4(b)
PROMISSORY NOTE
Date: February 28, 2002
THE UNDERSIGNED REPRESENT THAT THE LOAN EVIDENCED HEREBY IS BEING OBTAINED FOR
BUSINESS/COMMERCIAL OR AGRICULTURAL PURPOSES. For value received, the
undersigned, jointly and severally, if more than one (the "Borrowers"), promise
to pay to ALAN ZIMMER, HERBERT ZIMMER, and JEFFREY ZIMMER (collectively, the
"Lenders") the sum of TWO MILLION Dollars ($2,000,000), in immediately available
coin or currency of the United States of America. Interest shall accrue from the
date hereof on the unpaid principal balance outstanding from time to time in the
following manner:
Payment of Interest. Interest shall be payable monthly on the fifth day of each
month, and shall initially bear interest at a rate equal to the Prime Rate of
Branch Banking and Trust Company (the "Bank") plus 6.0%.
Mandatory Principal Payments. To the extent permitted under that certain Credit
Agreement among the Borrowers, Bank of America, N.A. ("Bank of America"), and
the other lenders party thereto (the "B of A Agreement"), the Borrowers are
required to make payments of principal in an amount equal to 100% of the amount
permitted to be made in accordance with the B of A Agreement.
Any remaining amount of principal, along with accrued interest, is due in full
at maturity on February 28, 2005.
In addition, the undersigned promises to pay to Lenders, or order, a late fee in
the amount of two percent (2%) of any installment past due. When any installment
payment is past due, subsequent payments shall first be applied to the past due
balance; nonetheless, in all cases, payments shall be applied first to interest
and other charges and then to principal. All interest shall be computed and
charged for the actual number of days elapsed on the basis of a year consisting
of three hundred sixty (360) days. In the event periodic accruals of interest
shall exceed any periodic fixed payment amount described above, the fixed
payment amount shall be immediately increased, or additional supplemental
interest payments required on the same periodic basis as specified above
(increased fixed payments or supplemental payments to be determined in the
Lenders' sole discretion), in such amounts and at such times as shall be
necessary to pay all accruals of interest for the period and all accruals of
unpaid interest from previous periods. Such adjustments to the fixed payment
amount or supplemental payments shall remain in effect for so long as the
interest accruals shall exceed the original fixed payment amount and shall be
further adjusted upward or downward to reflect changes in the variable interest
rate. In no event shall the fixed payment amount be reduced below the original
fixed payment amount specified above.
This note ("NOTE") is given by the undersigned in connection with the following
agreements (if any) between the undersigned and the Lenders:
Security Agreement conveying a security interest in favor of the Lenders dated
the date hereof given by the undersigned.
All of the terms, conditions and covenants of the above described agreements
(the "Agreements") are expressly made a part of this Note by reference in the
same manner and with the same effect as if set forth herein at length and any
holder of this Note is entitled to the benefits of and remedies provided in the
Agreements and any other agreements by and between the undersigned and the
Lenders.
No delay or omission on the part of the holder in exercising any right hereunder
shall operate as a waiver of such right or of any other right of such holder,
nor shall any delay, omission or waiver on any one occasion be deemed a bar to
or waiver of the same or of any other right on any future occasion. Every one of
the undersigned and every endorser or guarantor of this note regardless of the
time, order or place of signing waives presentment, demand, protest and notices
of every kind and assents to any one or more extensions or postponements of the
time of payment or any other indulgences, to any substitutions, exchanges or
releases of collateral if at any time there be available to the holder
collateral for this Note, and to the additions or releases of any other parties
or persons primarily or secondarily liable.
The failure to pay any part of the principal or interest when due on this Note
or to fully perform any covenant, obligation or warranty on this or any other
liability to the Lenders by any one or more of the undersigned, by any affiliate
of the undersigned (as defined in 11 USC Section (101)(2)), or by any guarantor
or surety of this Note (said affiliate, guarantor, and surety are herein called
Obligor), or if any financial statement or other representation made to the
Lenders by any of the undersigned or any Obligor shall be found to be materially
incorrect or incomplete, or in the event of default pursuant to any of the
Agreements or any other obligation of any of the undersigned or any Obligor in
favor of the Lenders, or in the event the Lenders demand that the undersigned
secure or provide additional security for its obligations under this Note and
security deemed adequate and sufficient by the Lenders is not given when
demanded, or in the event one or more of the undersigned or any Obligor shall
die, terminate its existence, allow the appointment of a receiver for any part
of its property, make an assignment for the benefit of creditors, or where a
proceeding under bankruptcy or insolvency laws is initiated by or against any of
the undersigned or any Obligor, or in the event the Lenders should otherwise
deem themselves, their security interest, or any collateral unsafe or insecure;
or should the Lenders in good faith believe that the prospect of payment or
other performance is impaired, or if there is an attachment, execution, or other
judicial seizure of all or any portion of the Borrowers' or any Obligor's
assets, and such seizure is not discharged within 20 days, or if final judgment
for the payment of money shall be rendered against the Borrowers or any Obligor
which is not covered by insurance and shall remain undischarged for a period of
30 days unless such judgment or execution thereon is effectively stayed, or the
termination of any guaranty agreement given in connection with this Note, then
any one of the same shall be a material default hereunder and this Note and
other debts due to the Lenders by any one or more of undersigned shall
immediately become due and payable without notice, at the option of the Lenders.
From and after any event of default hereunder, interest shall accrue on the sum
of the principal balance and accrued interest then outstanding at the variable
rate equal to the Bank's Prime Rate plus 5% per annum ("Default Rate"), provided
that such rate shall not exceed at any time the highest rate of interest
permitted by the laws of the State of North Carolina; and further provided that
such rate also shall apply after judgment, if applicable. In the event of any
default, the then remaining unpaid principal amount and accrued but unpaid
interest then outstanding shall bear interest at the Default Rate called for
hereunder until such principal and interest have been paid in full. In addition,
upon default, the Lenders may pursue their full legal remedies at law or equity,
and the balance due hereunder may be charged against any obligation of the
Lenders to any party including any Obligor. Lenders shall not be obligated to
accept any check, money order, or other payment instrument marked "payment in
full" on any disputed amount due hereunder, and Lenders expressly reserve the
right to reject all such payment instruments. Borrowers agree that tender of its
check or other payment instrument so marked will not satisfy or discharge its
obligation under this Note, disputed or otherwise, even if such check or payment
instrument is inadvertently deposited by Lenders unless in fact such payment is
in fact sufficient to pay the amount due hereunder.
The term "Prime Rate," if used herein, means the rate of interest per annum
announced by the Bank from time to time and adopted as its Prime Rate. Bank
lends at rates above and below the Prime Rate, and the Prime Rate is one of
several rate indexes employed by the Bank when extending credit. Any change in
the interest rate resulting from a change in the Bank's Prime Rate shall become
effective as of the opening of business on the effective date of the change. If
this Note is placed with an
attorney for collection, the undersigned agrees to pay, in addition to
principal and interest, all costs of collection and reasonable attorneys' fees.
All obligations of the undersigned and of any Obligor shall bind his heirs,
executors, administrators, successors, and/or assigns. Use of the masculine
pronoun herein shall include the feminine and the neuter, and also the plural.
If more than one party shall execute this Note, the term "undersigned" as used
herein shall mean all the parties signing this Note and each of them, and all
such parties shall be jointly and severally obligated hereunder. Wherever
possible, each provision of this Note shall be interpreted in such a manner to
be effective and valid under applicable law, but if any provision of this Note
shall be prohibited by or invalid under such law, such provision shall be
ineffective but only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Note. All of the undersigned hereby waive all exemptions and homestead
laws. The proceeds of the loan evidenced by this Note may be paid to any one or
more of the undersigned. From time to time the maturity date of this Note may
be extended, or this Note may be renewed in whole or in part, or a new note of
different form may be substituted for this Note, or the rate of interest may be
modified, or changes may be made in consideration of loan extensions, and the
holder hereof, from time to time may waive or surrender, either in whole or in
part any rights, guaranties, secured interest, or liens, given for the benefit
of the holder in connection with the payment and the securing the payment of
this Note; but no such occurrence shall in any manner affect, limit, modify, or
otherwise impair any rights, guaranties or security of the holder not
specifically waived, released, or surrendered in writing nor shall the
undersigned makers, or any guarantor, endorser, or any person who is or might
be liable hereon, either primarily or contingently, be released from such
event. The holder hereof, from time to time, shall have the unlimited right to
release any person who might be liable hereon, and such release shall not
affect or discharge the liability of any other person who is or might be liable
hereon. No waivers and modifications shall be valid unless in writing and
signed by the Lenders. The Lenders may, at their option, charge any fees for
the modification, renewal, additional advance, extension, or amendment of any
of the terms of the Note permitted by applicable law. In case of a conflict
between the terms of this Note and the Loan Agreement or Commitment Letter
issued in connection herewith, the priority of controlling terms shall be first
this Note, then the Loan Agreement, and then the Commitment Letter. This Note
shall be governed by and construed in accordance with the laws of North
Carolina, and the Borrowers hereby submit to the jurisdiction of North Carolina
in connection with any foreclosure or enforcement proceeding undertaken in
connection with the Borrowers' property situated in North Carolina.
Borrowers agree that the only interest charge is the interest actually stated in
this Note, and that any loan or origination fee shall be deemed charges rather
than interest, which charges are fully earned and non-refundable. It is further
agreed that any late charges are not a charge for the use of money but are
imposed to compensate Lenders for some of the costs and losses associated with
any delinquency or default under this Note, and said charges shall be fully
earned and non-refundable when accrued. All other charges imposed by Lenders
upon Borrowers in connection with this Note and the loan including, without
limitation, any commitment fees, loan fees, facility fees, origination fees,
discount points, default and late charges, prepayment fees, statutory attorneys'
fees and reimbursements for costs and expenses paid by Lenders to third parties
or for damages incurred by Lenders are and shall be deemed to be charges made to
compensate Lenders for costs or losses incurred and to be incurred by Lenders in
connection with this Note and the loan and shall under no circumstances be
deemed to be charges for the use of money. All such charges shall be fully
earned and non-refundable when due.
It is the intention of Lenders and Borrowers to conform strictly to the usury
laws now or hereafter in effect, and any interest payable hereunder shall be
subject to reduction to the amount not in excess of the maximum non-usurious
amount allowed under applicable usury laws now or hereafter construed by courts
having jurisdiction over such matters. If the maturity of this Note is
accelerated by reason of any provision of this Note or by reason of voluntary
prepayment by the undersigned, or otherwise, then earned interest may never
include more than the maximum amount permitted by law, computed from the date of
each advance of loan proceeds hereunder until payment and any interest in excess
of the maximum amount permitted by law shall be cancelled automatically and, if
paid, shall at the option of Lenders if allowed by applicable law, either be
rebated to Borrowers or credited on the principal amount of this Note, or if all
principal has heretofore been repaid, then the excess shall be rebated to
Borrowers.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the undersigned, on the day and year first written
above, has caused this Note to be executed under seal.
REEDS JEWELERS, INC.
By: /s/ Alan M. Zimmer
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Title: Alan M. Zimmer, President
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REEDS FINANCIAL SERVICES, INC.
By: /s/ Alan M. Zimmer
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Title: Alan M. Zimmer, President
----------------------------
REEDS JEWELERS OF NORTH
CAROLINA, INC.
By: /s/ Alan M. Zimmer
------------------------------
Title: Alan M. Zimmer, President
----------------------------
REEDS CORPORATE SERVICES INC.
By: /s/ Alan M. Zimmer
------------------------------
Title: Alan M. Zimmer, President
----------------------------
REEDS INSURANCE SERVICES, LTD.
By: /s/ Alan M. Zimmer
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Title: Alan M. Zimmer, President
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Doc. No. 340974.1