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EXHIBIT 10.19
LOAN AND SECURITY AGREEMENT
DATED AS OF
JULY 31, 1997
BETWEEN
YOSYSTEMS, INC.,
an Ohio corporation,
AND
SMS GEOTRAC, INC.,
a Delaware corporation
AND
THE HUNTINGTON NATIONAL BANK,
a national banking association
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TABLE OF CONTENTS
SECTION HEADING PAGE NO.
------- ------- --------
1. DEFINITIONS............................................................... 1
1.1 Definitions of Terms....................................... 1
(a) "Accounts"........................................ 1
(b) "Account Debtor".................................. 1
(c) "Agreement"....................................... 1
(d) "Bank"............................................ 1
(e) "Cash Flow Coverage Ratio"........................ 1
(f) "Cash Outflow".................................... 1
(g) "Code"............................................ 1
(h) "Collateral"...................................... 1
(i) "Company"......................................... 1
(j) "Cross License Agreement"......................... 1
(k) "Deposits"........................................ 1
(l) "EBITDA".......................................... 2
(m) "Environmental Laws".............................. 2
(n) "Equipment"....................................... 2
(o) "ERISA"........................................... 2
(p) "Event of Default"................................ 2
(q) "Excess Cash Flow"................................ 2
(r) "Funded Indebtedness"............................. 2
(s) "Geotrac"......................................... 2
(t) "Georgia Residential Office"...................... 2
(u) "Hazardous Substances"............................ 2
(v) "Intellectual Property"........................... 3
(w) "Inventory"....................................... 3
(y) "Loan"............................................ 3
(z) "Net Worth"....................................... 3
(aa) "Obligations"..................................... 3
(bb) "Premises"........................................ 3
(cc) "Prime Commercial Rate"........................... 3
(dd) "YoSystems"....................................... 3
1.2 Uniform Commercial Code and Generally Accepted Accounting
Principles................................................. 3
2. TERM LOAN........................................................... 4
3. INTEREST, TERMS AND USES OF LOAN.................................... 4
3.1 Interest................................................... 4
(a) Interest Payments................................. 4
(b) Interest Rate Options............................. 5
(i) Prime Interest Rate...................... 5
(ii) LIBOR Interest Rate...................... 5
(iii) "As Quoted" Seven (7) Year Fixed
Interest Rate............................ 5
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SECTION HEADING PAGE NO.
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(c) Notice of Election................................ 7
(d) Interest Calculation and Interest Payment Date.... 7
(e) Limitations on Requests and Elections............. 8
(f) Illegality and Impossiblity....................... 8
(g) Indemnification................................... 8
3.2 Interest Rate After Default................................ 9
3.3 Prepayment................................................. 9
3.4 Fees; Expenses; Costs...................................... 10
3.5 Payments................................................... 10
3.6 Use of Proceeds............................................ 10
3.7 Maturity................................................... 11
3.8 Additional Costs........................................... 11
4. SECURITY AGREEMENT.................................................. 11
4.1 Grant of Security Interest................................. 11
4.2 Representations and Covenants Regarding the Collateral..... 12
4.3 Collateral Insurance....................................... 12
4.4 Books and Records; Account Verification.................... 13
4.5 Preservation and Disposition of Collateral................. 13
4.6 Extensions and Compromises................................. 14
4.7 Financing Statements....................................... 14
4.8 Bank's Appointment as Attorney-in-Fact..................... 14
4.9 Remedies on Default........................................ 15
5. WARRANTIES AND REPRESENTATIONS...................................... 16
5.1 Corporate Organization and Authority....................... 16
5.2 Borrowing is Legal and Authorized.......................... 16
5.3 Taxes...................................................... 17
5.4 Compliance with Law........................................ 17
5.5 Financial Statements; Full Disclosure...................... 17
5.6 No Insolvency.............................................. 17
5.7 Government Consent......................................... 17
5.8 Title to Properties........................................ 18
5.9 No Defaults................................................ 18
5.10 Environmental Protection................................... 18
5.11 Pending Litigation......................................... 18
5.12 Warranties and Representations............................. 18
6. COMPANY BUSINESS COVENANTS.......................................... 18
6.1 Payment of Taxes and Claims................................ 19
6.2 Maintenance of Properties and Corporate Existence.......... 19
6.3 Sale of Assets; Merger; Subsidiaries; Tradenames........... 19
6.4 Negative Pledge............................................ 20
6.5 Other Borrowings and Contingent Liabilities................ 20
6.6 Sale of Accounts; No Consignment........................... 20
6.7 Ownership and Management................................... 20
6.8 Acquisition of Capital Stock............................... 20
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SECTION HEADING PAGE NO.
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6.9 Trade Accounts Payable..................................... 20
6.10 Operating Lease Rentals.................................... 20
6.11 Cash Dividends and Other Distributions..................... 21
6.12 Investments................................................ 21
6.13 Net Worth.................................................. 21
6.14 Leverage Ratio............................................. 21
6.15 Cash Flow Coverage Ratio................................... 22
6.16 Capital Expenditures....................................... 22
6.17 Loans and Advances......................................... 22
6.18 Environmental Compliance in Indemnification................ 22
6.19 Evidence of Cash Equity in YoSystems, Inc.................. 22
7. FINANCIAL INFORMATION AND REPORTING................................. 23
8. DEFAULT............................................................. 23
8.1 Events of Default.......................................... 23
8.2 Default Remedies........................................... 24
9. MISCELLANEOUS....................................................... 24
9.1 Notices.................................................... 24
9.2 Reproduction of Documents.................................. 25
9.3 Survival; Successors and Assigns........................... 26
9.4 Amendment and Waiver; Duplicate Originals.................. 26
9.5 Enforceability and Governing Law........................... 26
9.6 Waiver of Right to Trial by Jury........................... 26
9.7 Advertising................................................ 27
9.8 Term of Agreement.......................................... 27
EXHIBITS
EXHIBIT A Note
EXHIBIT B Schedule of Permitted Liens
EXHIBIT C Schedule of Business Locations
EXHIBIT D Disclosure Schedule Relating to Representations and Warranties
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LOAN AND SECURITY AGREEMENT
This Agreement is entered into at Cleveland, Ohio, between the Bank
and the Company as of July __, 1997.
1. DEFINITIONS.
1.1 DEFINITIONS OF TERMS. As used in this Agreement, the following terms
shall have the following meanings.
(a) "Accounts" means accounts, accounts receivable, contract rights,
chattel paper, general intangibles, income tax refunds, instruments, negotiable
documents, notes, drafts, acceptances, and other forms of obligations, books,
records, ledger cards, computer programs, and other documents or property at
any time evidencing or relating to the Company's business, including, but not
limited to, those arising from or in connection with the sale, lease, or other
disposition of Inventory.
(b) "Account Debtor" means the party who is obligated on an Account.
(c) "Agreement" means this Loan and Security Agreement between the
Company and the Bank and includes any partial or total amendment, modification,
renewal, restatement, extension, or substitution of or for this Agreement.
(d) "Bank" means THE HUNTINGTON NATIONAL BANK, a national banking
association.
(e) "Cash Flow Coverage Ratio" means the consolidated ratio of EBITDA
to Cash Outflow, to be calculated quarterly based on a rolling four-quarter
cash flow.
(f) "Cash Outflow" means the consolidated aggregate of (i) scheduled
principal payments on long-term debt (including capital leases), (ii) interest
expense, (iii) taxes paid, and (iv) unfunded capital expenditures.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(h) "Collateral" means all of the assets of the Company, including,
without limitation, all Accounts, Deposits, Equipment, Intellectual Property,
and Inventory of the Company; excluding, however, the issued and outstanding
common stock of Geotrac.
(i) "Company" means collectively, YOSYSTEMS, INC., an Ohio
corporation, and SMS GEOTRAC, INC., a Delaware corporation.
(j) "Cross License Agreement" means that certain agreement between
YoSystems, Inc. and Bankers Hazard Determination Services, Inc. of even date
herewith.
(k) "Deposits" means any and all deposits or other sums at any time
credited by or due from the Bank to the Company, any and all policies,
certificates of insurance, securities,
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goods, choses in action, cash and property owned by the Company or in which the
Company has an interest, which now or hereafter are at any time in the
possession or control of the Bank or in transit by mail or carrier to or from
the Bank, or in the possession of any third party acting in the Bank's behalf,
without regard to whether the Bank received the same in pledge for safekeeping,
as agent for collection or transmission, or otherwise, or whether the Bank has
conditionally released the same.
(l) "EBITDA" means the consolidated aggregate of (i) net income, (ii)
interest expense, (iii) income tax expense, (iv) depreciation and amortization
expense, and (v) non-cash charges to income (net of non-cash credits).
(m) "Environmental Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. ss. 9601, et
seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, et seq., the Water
Quality Act of 1987, 33 U.S.C. ss. 1251, et seq., and the Clean Air Act, 42
U.S.C. ss. 7401, et seq., and any state or local statute, ordinance, law, code,
rule, regulation, or order regulating or imposing liability (including strict
liability) or standards of conduct regarding Hazardous Substances.
(n) "Equipment" means all of the Company's machinery, equipment,
tools, furniture, furnishings, and fixtures including, but not limited to, all
manufacturing, fabricating, processing, transporting, and packaging equipment,
power systems, heating, cooling, and ventilating systems, lighting and
communication systems, electric, gas, and water distribution systems, food
service systems, fire prevention, alarm, and security systems, laundry systems,
and computing and data processing systems.
(o) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
(p) "Event of Default" means any of the events specified in Section
8.1 of this Agreement.
(q) "Excess Cash Flow" means EBITDA less a 1.1x multiple of Cash
Outflow, to be calculated on an annual basis.
(r) "Funded Indebtedness" means the consolidated aggregate of (i) each
Company's obligations for borrowed money as evidenced by bonds, debentures,
notes or similar instruments, and (ii) each Company's obligations under capital
leases.
(s) "Geotrac" means SMS Geotrac, Inc., a Delaware corporation.
(t) "Georgia Residential Office" means the home office more fully
described in Section 1(bb) hereof.
(u) "Hazardous Substances" means all hazardous and toxic substances,
wastes, materials, compounds, pollutants, and contaminants, including, without
limitation, asbestos, polycholorinated biphenyls, and petroleum products, which
are included under or regulated by
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the Environmental Laws, but does not include such substances as are permanently
incorporated into a structure or any part thereof in such a way as to preclude
their subsequent release into the environment, or the permanent or temporary
storage or disposal of household hazardous substances by tenants, and which are
thereby exempt from or do not rise to any violation of the Environmental Laws.
(v) "Intellectual Property" means all of the Company's trade names,
trademarks, trade secrets, service marks, data bases, software and software
systems, information systems, discs, tapes, goodwill, patents, patent
applications, copyrights, licenses, and franchises.
(w) "Inventory" means all of the Company's inventory including, but
not limited to, all goods, merchandise, and other personal property furnished
under any contract of service or intended for sale or lease, all parts,
supplies, raw materials, work in process, finished goods, materials used or
consumed in the Company's business, and repossessed and returned goods.
(x) "Leverage" means the ratio of Funded Indebtedness to EBITDA, to
be calculated quarterly based on a rolling four-quarter cash flow.
(y) "Loan" means the loans and advances made by the Bank to the
Company, subject to the terms and conditions of the Agreement, on a term basis
up to the principal sum of $8,750,000.00
(z) "Net Worth" means, on a consolidated basis, total shareholders'
equity plus subordinated debt, to be calculated on a quarterly basis.
(aa) "Obligations" is used in its most comprehensive sense and means
and includes, without limitation, all indebtedness, debts, and liabilities
(including principal, interest, late charges, collection costs, attorneys' fees,
and the like) of the Company to the Bank, whether now existing or hereafter
arising, either created by the Company alone or together with another or others,
primary or secondary, secured or unsecured, absolute or contingent, liquidated
or unliquidated, direct or indirect, whether evidenced by note, draft,
application for letter of credit, or otherwise, and any or all renewals of or
substitutes therefor, including all indebtedness owed by the Company to the Bank
in connection with the Loan.
(bb) "Premises" means all real property owned, leased, or used by the
Company, excluding the personal residence of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇., a sales
employee residing in the State of Georgia and working out of such personal
residence (the "Georgia Residential Office").
(cc) "Prime Commercial Rate" means the rate established from time to
time by the Bank as the Bank's Prime Rate, whether or not such rate is publicly
announced. The Prime Rate may not be the lowest interest rate charged by the
Bank for commercial or other extensions of credit.
(dd) "YoSystems" means YoSystems, Inc., an Ohio corporation.
1.2 Uniform Commercial Code and Generally Accepted Accounting Principles.
Unless the context otherwise requires, all terms used herein which are defined
in the Uniform
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Commercial Code as enacted in Ohio shall have the meaning stated therein, and
all accounting terms shall be determined in accordance with generally accepted
accounting principles, consistently applied.
2. TERM LOAN.
(a) The Bank will make a term loan (the "Term Loan") to the Company
in the principal amount of Eight Million Seven Hundred Fifty Thousand and No/100
Dollars ($8,750,000.00). The Term Loan will be evidenced by a promissory note of
even date herewith to be executed in the form of Exhibit A attached hereto (the
"Term Note"), or by one or more notes executed in substitution therefore.
Repayment of the Loan shall be made in accordance with the terms of the notes
then outstanding pursuant to the terms and conditions of this Agreement.
(b) The Company shall repay the aggregate amount of principal of the
Loan to the Bank in twenty-eight (28) consecutive and equal quarterly principal
installments of Three Hundred Twelve Thousand Five Hundred and No/100 Dollars
($312,500.00) each, plus accrued interest, commencing September 30, 1997, and
continuing on the last day of each calendar quarter thereafter. On June 30,
2004 (the "Maturity Date"), any and all remaining principal balance, plus
accrued interest, shall be due and payable in full.
(c) The Company shall be permitted to make optional prepayments of
principal ("Optional Prepayments"), subject to the terms and conditions of
Section 3.3 of this Agreement. Any Optional Prepayments shall be applied to the
outstanding principal balance of the Loan in the inverse order of installments
due hereunder and under the Term Note without relieving the Company from
continuing to make regular payments of principal and interest as required under
this Agreement.
(d) The addition to the quarterly principal payments required in
Section 2(b) above, the Company shall make mandatory annual prepayments of
principal ("Mandatory Prepayments"), in an amount equal to fifty percent (50%)
of Excess Cash Flow, for each fiscal commencing with fiscal year 1998. Such
payment shall be due on the earlier of thirty (30) days following delivery of
the Company's fiscal year end financial statements pursuant to Section 7 of this
Agreement, or October 31 of the fiscal year immediately following the fiscal
year end for which the Excess Cash Flow calculation is made. All Mandatory
Prepayments shall be applied to the outstanding principal balance of the Loan in
the inverse order of installments due hereunder and under the Term Note without
relieving the Company from continuing to make regular payments of principal and
interests as required under this Agreement.
3. INTEREST. TERMS AND USES OF LOAN.
3.1 Interest.
(a) Interest Payments. The Company agrees to pay the Bank interest on
the outstanding principal balance of the Loan on the earlier of a quarterly
basis on the last day of each calendar quarter, or the maturity date for a
contract for a LIBOR Rate Advance (as hereinafter defined); provided, however,
that if the Company elects a six(6) month LIBOR
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contract, interest shall be payable quarterly and upon the maturity date for
such contract. The first interest payment shall be due September 30, 1997.
(b) Interest Rate Options. Interest on the Loan shall be payable
pursuant to the Company's option as follows:
(i) Prime Interest Rate: Interest shall accrue on the Loan at
the Prime Commercial Rate of the Bank ("Prime Interest Rate")
at all times prior to the Maturity Date unless the Company
elects the LIBOR Interest Rate (as hereinafter defined)
pursuant to Section 3.1(b)(ii) of this Agreement, or a Fixed
Interest Rate (as hereinafter defined) pursuant to Section
3.1(b)(iii) of this Agreement. At all times when the Loan, or
any portion of the outstanding principal thereof, is subject
to the Prime Interest Rate, the Company agrees to pay to the
Bank quarterly interest as set forth in Section 3.1(a) hereof,
plus principal installments as set forth in the Term Note and
in Section 2 above, on the unpaid balance of the Loan and the
Prime Interest Rate from time to time in effect. Each change
in the Prime Interest Rate shall automatically and immediately
change the interest rate on the Loan without notice to the
Company. "Prime Commercial Rate" as used herein shall have the
same meaning as set forth in Section 1 of this Agreement. The
Prime Interest Rate shall be applicable at all times prior to
the Maturity Date of the Loan to all unpaid principal balance
of the Loan that is not subject to the alternative interest
rate options elected in the manner hereinafter provided.
"Prime Interest Rate Advance" shall mean any amount borrowed
as part of the Loan that bears interest at the Prime Interest
Rate.
(ii) LIBOR Interest Rate: During the term of the Loan, the
Company may from time to time prior to the Maturity Date elect
to have interest accrue on all or part of the outstanding
principal balance of the Loan at a rate of interest equal to
the LIBOR Rate (as defined below) plus the LIBOR Rate Margin
pursuant to the following incentive pricing matrix:
LIBOR Rate
Incentive Pricing Matrix
If the Company's Leverage then the LIBOR
(as defined in Rate Margin shall be:
Section 1 hereof) is:
< 1.5:1.0 175 basis points
-
< 2.0:1.0 200 basis points
-
< 2.5:1.0 225 basis points
-
> 2.5:1.0 250 basis points
The LIBOR Rate Margin shall be adjusted on a quarterly basis
with any such change effective on the first (1st) day of the
month following the month in which consolidating and
consolidated Company prepared financial statements of the
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Company are received for the immediately preceding fiscal
quarter. From the Closing Date until the first quarterly
adjustment (based on June 30, 1997 financial statements), the
initial LIBOR Rate Margin shall be 250 basis points. Provided,
further, that the amount of principal balance accruing
interest at the LIBOR Rate may not exceed the outstanding
principal balance remaining due under the Loan as of the
maturity date of the related LIBOR contract. In the event the
Company for any reason causes a LIBOR contract to be broken,
the Company shall pay any resulting penalty incurred by the
Bank thereof.
"LIBOR Rate" shall mean, with respect to any LIBOR Rate
Advance and the related Interest Period (as hereinafter
defined), the rate of interest the Bank may quote from time to
time and subject to change without notice, determined on the
basis of the offered per annum rate, estimated per annum rate,
or the arithmetic mean of the per annum rates determined by
the Bank in its reasonable discretion for deposits in U.S.
Dollars in an amount comparable to the partial advance of the
principal balance of the Loan for a period equal to the
applicable time period of said partial advance, which shall
appear on page 3750, captioned British Bankers Association
Interest Settlement Rates, of Telerate, a service of Telerate
Systems Incorporated (or such other page that may replace such
page on that service for the purpose of displaying LIBOR; or
if such service ceases to be available, such other reasonably
comparable money rate service as the Bank may select) or upon
information obtained from any other reasonable source
reporting "London Interbank Offered Rate" of major banks on
the date that is two (2) banking days of the Bank preceding
the day on which the Company makes a request for a LIBOR
Advance. Rates quoted by the Bank for LIBOR Rate Advances
shall mean the per annum rate that is equal to the sum of
LIBOR plus the rate representing the cost, if any, of
maintaining reserves against "Eurocurrency Liabilities" under
Regulation D of the Board of Governors of the Federal Reserve
System. This provision is for the benefit of the Bank and is
not intended to increase the expected yield to the Bank above
the rate of interest provided for herein. If a LIBOR rate
quoted by the Bank requires adjustment for a reserve
requirement the reserve adjusted rate is computed by dividing
the LIBOR by an amount equal to (1 - Reserve Requirement
expressed as a decimal).
"LIBOR Rate Advance" shall mean any amount borrowed as part of the Loan
that bears interest at a rate calculated with reference to the LIBOR
Rate. All LIBOR Rate Advances shall be for a minimum principal amount
$500,000 and even increments of $100,000 for all amounts above such
minimum. "LIBOR business day" shall mean, with respect to any LIBOR
Rate Advance, a day which is both a day on which the Bank is open for
business and a day on which dealings in U.S. dollar deposits are
carried out in the London interbank market.
(iii) "As Quoted" Seven (7) Year Fixed Interest Rate. The
Company may elect to fix the interest applicable to the Loan
for a period of seven (7) years (a "Fixed Interest Rate").
The Bank will quote the Company a Fixed Interest Rate upon
request not less than three (3) business days prior to the
Closing Date (as hereinafter defined). Such Fixed Interest
Rate shall be quoted to the Company
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based on money market, business, economic and competitive
factors, and shall be determined in the Bank's sole and
absolute discretion. "Fixed Interest Rate Advance" shall mean
any amount borrowed as part of the Loan that bears interest at
a Fixed Interest Rate. All Fixed Rate Advances shall be for a
minimum principal amount of $500,000.00 and even increments of
$100,000.00 for all amounts above such minimum.
(c) Notice of Election. The Company may initially elect to
request an advance of any type (an "Advance"), continue an Advance of one type
as an Advance of the then existing type or convert an Advance of one type to an
Advance of another type, by giving notice thereof to the Bank in writing in the
form prescribed by the Bank not later than 10:00 a.m. New York time, two (2)
LIBOR business days prior to the date any such continuation of or conversion to
a LIBOR Rate Advance is to be effective, and not later than 10:00 a.m. New York
time on the date such continuation or conversion is to be effective in all
other cases, provided, that an outstanding Advance may only be converted on the
last day of the then current Interest Period (if applicable) with respect to
such Advance, and provided, further, that upon the continuation or conversion
of an Advance such notice shall also specify the Interest Period (if
applicable) to be applicable thereto upon such continuation or conversion. If
the Company shall fail to timely deliver such a notice with respect to any
outstanding Advance, the Company shall be deemed to have elected to convert
such Advance to a Prime Interest Rate Advance on the last day of the then
current Interest Period with respect to such Advance. The Company may elect to
have a combination of LIBOR Rate Advances and Prime Rate Advances outstanding
at any one time, subject to the limitations of Section 3.1(b)(ii) above and a
limit of no more than four (4) LIBOR Rate Advances outstanding at any one time.
(d) Interest Calculation and Interest Payment Date.
"Interest Period" shall mean:
(1) With respect to any LIBOR Rate Advance under the Loan, an
initial period commencing, as the case may be, on the day such an Advance shall
be made by the Bank, or on the day of conversion of any then outstanding
Advance to an Advance of such type, ending on the date one (1), two (2), three
(3) or six (6) months thereafter, all as the Company may elect pursuant to this
Agreement; provided, that (a) any Interest Period with respect to a LIBOR Rate
Advance that shall commence on the last LIBOR business day of the calendar
month (or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last LIBOR business day
of the appropriate subsequent calendar month; and (b) each Interest Period with
respect to a LIBOR Rate Advance that would otherwise end on a day which is not
a LIBOR business day shall end on the next succeeding LIBOR business day or, if
such next succeeding LIBOR business day falls in the next succeeding calendar
month, on the next preceding LIBOR business day.
(2) With respect to a Prime Interest Rate Advance under the Loan,
an initial period commencing, as the case may be, on the day such an Advance
shall be made by the Bank, or on the day of conversion of any then outstanding
Advance to an Advance of such type, and ending on the day of conversion to an
Advance of a different type or the Maturity Date.
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Notwithstanding the provisions of (1) and (2) above, no Interest Period
shall be permitted which would end after the Maturity Date of the Loan.
Interest shall be due and payable on each Interest Payment Date.
"Interest Payment Date" shall mean those times specified in Section 3.1(a)
above.
(e) Limitations on Requests and Elections. Notwithstanding any
other provision of this Agreement to the contrary, if, upon receiving a request
for an Advance or a request for a continuation of an Advance as an Advance of
the then existing type or conversion of an Advance to an Advance of another
type (i) in the case of any LIBOR Rate Advance, deposits in dollars for periods
comparable to the Interest Period elected by the Company are not available to
the Bank in the London interbank or secondary market, or (ii) by reason of
national or international financial, political or economic conditions or by
reason of any applicable law, treaty, rule or regulation (whether domestic or
foreign) now or hereafter in effect, or the interpretation or administration
thereof by any governmental authority charged with the interpretation or
administration thereof, or compliance by the Bank with any request or directive
of such authority (whether or not having the force of law), including without
limitation exchange controls, it is impracticable, unlawful or impossible for
the Bank (x) to make the relevant LIBOR Rate Advance or (y) to continue such
Advance as a LIBOR Rate Advance or (z) to convert an Advance to a LIBOR Rate
Advance, then the Company shall not be entitled, so long as such circumstances
continue, to request a LIBOR Rate Advance or a continuation of or conversion to
such Advances from the Bank. In the event that such circumstances no longer
exist, the Bank shall again accept elections for LIBOR Rate Advances of the
affected type and requests for continuations of and conversions to such
Advances of the affected type.
(f) Illegality and Impossibility. In the event that any
applicable law, treaty, rule or regulation (whether domestic or foreign) now or
hereafter in effect, or any interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by the Bank with any request or directive of such
authority (whether or not having the force of law), including without
limitation exchange controls, shall make it unlawful or impossible for the Bank
to maintain a LIBOR Advance under this Agreement, the Company shall upon
receipt of notice thereof from the Bank, repay in full the then outstanding
principal amount of all such LIBOR Advances made by the Bank together with all
accrued interest thereon to the date of payment and all amounts due to the Bank
this Section 1.3, (i) on the last day of the then current Interest Period, if
any, applicable to such LIBOR Advance, if the Bank may lawfully continue to
maintain such LIBOR Advance to such day, or (ii) immediately if the Bank may
not continue to maintain such LIBOR Advance to such day. This provision is for
the benefit of the Bank and is not intended to increase the yield to the Bank
above the rates of interest provided for in this Agreement. This section shall
apply only as long as such illegality exists. The Bank shall use reasonable,
lawful effects to avoid the impact of such law, treaty, rule or regulation.
(g) Indemnification. If the Company makes any payment of
principal with respect to any Advance on any other date than the last day of an
Interest Period applicable thereto or if the Company fails to borrow any
Advance after notice has been given to the Bank in accordance herewith, or
fails to make any payment of principal or interest in respect of an
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Advance when due or upon the Maturity Date of the Loan, the Company shall
reimburse the Bank on demand for any resulting loss or expense incurred by the
Bank, determined in the Bank's reasonable opinion, including without limitation
any loss incurred in obtaining, liquidating or employing deposits from third
parties. A detailed statement as to the amount of such loss or expense,
prepared in good faith and submitted by the Bank to the Company shall be
conclusive and binding for all purposes absent manifest error in computation.
The Bank shall promptly notify the Company of any event occurring after the date
of this Agreement that entitles the Bank to reimbursement pursuant to this
Paragraph. The provisions of this Paragraph (g) shall survive the termination
of this Agreement and the payment in full of all promissory notes outstanding
pursuant hereto. Notwithstanding anything to the contrary set forth in this
Agreement, the parties hereto agree that this Section 3.1(g), Section 3.3 and
3.8 shall not be interpreted so as to charge the Company more than once for any
loss or expense incurred by the Bank in connection with this Agreement and
reimbursable by the Company to the Bank pursuant to this Section 3.1(g), or
Sections 3.3 or 3.8.
3.2 Interest Rate After Default. Interest shall accrue on the outstanding
principal balance of all Advances made pursuant to this Agreement at a rate
equal to the Prime Interest Rate plus five percent (5%) per annum upon the
occurrence and during the continuance of any Event of Default and the expiration
of any applicable cure period, unless otherwise waived in writing.
3.3 Prepayment. The Company may, at any time, upon payment of all accrued
interest, fees and other amounts then due and payable to the Bank, and upon at
least five (5) business days written notice to the Bank if such prepayment
involves a LIBOR Rate Advance or a Fixed Interest Rate Advance, elect to prepay
all or part of the principal outstanding balance of the Loan, provided,
however, that if such prepayment occurs during an Interest Period subject to a
LIBOR Rate Advance or a Fixed Interest Rate Advance, any such prepayment shall
be in an amount equal to the sum of (i) the amount of the prepayment; (ii) all
accrued interest to the date of such prepayment; (iii) any late charges or
charge then due and owing; and (iv) an amount sufficient to compensate the Bank
for any costs, charges, penalties and other sums incurred or suffered by Bank
because of any match funding of all or any part of the principal amount of the
loan. The amount sufficient shall be determined in accordance with the
prepayment formula as follows:
Prepayment Premium = RD x Y x (AP - AD) x PVF where:
(1) RD is the Rate Differential and means (a) the Bank's cost of
funding for the original term of the obligation evidenced by
the Note through the last scheduled payment of the principal
sum of the Loan, expressed as a per annum rate of interest, as
determined by the Bank minus (b) the rate at which the Bank
re-employs or could re-employ the funds prepaid for the
remaining term of the obligation evidenced by the Note through
the last scheduled payment of the principal sum of the Loan,
expressed as a per annum rate of interest, as determined by
the Bank;
(2) Y is the Years and means the number of years an fractions of
years beginning on the date of the prepayment and ending on
the last day prior to the next
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adjustment date for a LIBOR Advance or the Maturity Date for
a Fixed Rate Advance;
(3) AP is the Amount Paid and means the actual amount of the
principal sum of the loan paid on the date of the prepayment;
(4) AD is the Amount Due and means the principal portion of the
installment payment due and payable on the date of the
prepayment in accordance with the payment schedule above, if
any; and
(5) PVF is the Present Value Factor and means the value of $1.00
for Y number of years discounted at the per annum rate of
interest at which the Bank re-employs or could re-employ the
funds prepaid for the remaining term of the obligation
evidenced by the Term Note through the last scheduled payment
of the principal sum of the Loan, expressed as a per annum
rate of interest, as determined by the Bank.
Provided, further, that if RD is a negative number, no prepayment premium shall
be incurred. Prepayment premiums shall be calculated against the principal
portion of the Loan that is (i) subject to a LIBOR Interest Rate or a Fixed
Interest Rate; and (ii) is actually prepaid by the Company.
3.4 Fees: Expenses: Costs. The Company agrees to pay to the Bank no later
than the execution date of this Agreement (the "Closing Date"), a facility fee
of Forty-Three Thousand Seven Hundred Fifty and No/100 Dollars ($43,750.00).
The Company shall also pay all costs and expenses incidental to the Loan or the
enforcement of the Bank's rights in connection therewith. Such costs shall
include, but not be limited to, fees and out-of-pocket expenses of the Bank's
counsel, audit fees, recording fees, inspection fees, revenue stamps, and note
and mortgage taxes, if any. The Bank acknowledges payment by the Company of
$5,000 as a deposit prior to the Closing Date, such deposit to be applied to
the fees, costs and expenses to be paid by the Company at Closing pursuant to
this Section 3.4.
3.5 Payments. All payments by the Company to the Bank hereunder shall be
made in lawful currency of the United States of America and in immediately
available funds before 2:00 p.m. Ohio time on the date when such payment is due
at the office of the Bank at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
Attention: Corporate Banking, or at such other location as the Bank shall
designate to the Company from time to time in writing. Any payment received and
accepted by the Bank after such time shall be considered for all purposes
(including the calculation of interest, to the extent permitted by law) as
having been made on the Bank's next following Business Day. If the date for any
payment hereunder falls on a day that is not a Business Day, then for all
purposes of this Agreement the same shall be deemed to have fallen on the next
following Business Day, and such extension of time shall in such case be
included in the computation of payments of interest.
3.6 Use of Proceeds. The net proceeds of the Loan will be used for the
purpose of financing YoSystems, Inc.'s purchase of one hundred percent (100%)
of the issued and outstanding common and preferred stock of SMS Geotrac, Inc.
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3.7 Maturity. The Loan shall be available until the Maturity Date, unless
extended in the sole and absolute discretion of the Bank. In addition, the
Loan, at the option of the Bank, shall become immediately due and payable
without notice or demand upon the occurrence of any Event of Default under this
Agreement.
3.8 Additional Costs. In the event that any applicable law, treaty, rule or
regulation, whether domestic or foreign, now or hereafter in effect, or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by the Bank
with any request or directive of any such authority, whether or not having the
force of law, shall (a) affect the basis of taxation of payments to the Bank of
any amounts payable by the Company for LIBOR Rate Advances under this Agreement
(other than taxes imposed on the overall net income of the Bank by jurisdiction
or by any political subdivision or taxing authority of any such jurisdiction, in
which the Bank has its principal office), (b) impose, modify, or deem applicable
any reserve, special deposit, or similar requirement against assets of, deposits
with or for the account of, or credit extended by the Bank, or (c) impose any
other condition, requirement, or charge with respect to this Agreement or the
Loan, including without limitation any capital adequacy requirement, any
requirement which affects the manner in which the Bank allocates capital
resources to its commitments, or any similar requirement, and the result of any
of the foregoing is to increase the cost to the Bank of making or maintaining
the Loan or any advance under it, to reduce the amount of any sum receivable by
the Bank thereon, or to reduce the rate of return on the Bank's capital, then
the Company shall pay to the Bank from time to time, upon request of the Bank,
an additional amount sufficient to compensate the Bank for such increased cost,
reduced sum receivable, or reduced rate of return to the extent the Bank is not
compensated therefor in the computation of the interest rates applicable to the
Loan. A detailed statement as to the amount of such increased cost, reduced sum
receivable, or reduced rate of return, prepared in good faith and submitted by
the Bank to the Company, shall be conclusive and binding for all purposes
relative to the Bank, absent manifest error in computation. The Bank shall
promptly notify the Company of any event occurring after the date of this
Agreement which entitles the Bank to additional compensation pursuant to this
Section 3.8.
4. SECURITY AGREEMENT.
4.1 Grant of Security Interest. The Company hereby grants, pledges, and
assigns to the Bank a security interest in the Collateral, whether the Company's
interest therein is as owner, co-owner, lessee, consignee, secured party, or
otherwise, be now owned or existing or hereafter arising or acquired, and
wherever located, together with all substitutions, replacements, additions, and
accessions therefor or thereto, all documents, negotiable documents, documents
of title, warehouse receipts, storage receipts, dock warrants, express bills,
freight bills, airbills, bills of lading, and other documents relating thereto,
all products thereof and all cash and noncash proceeds thereof including, but
not limited to, notes, drafts, checks, instruments, instruments, insurance
proceeds, indemnity proceeds.
The security interest hereby granted is to secure the prompt and full
payment and complete performance of all Obligations of the Company to the Bank.
It is the Company's express intention that the continuing security interest
granted hereby shall extend to all present and future Obligations of the
Company to the Bank, whether or not such Obligations are
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reduced or extinquished and thereafter increased or reincurred, whether or not
such Obligations are related to the indebtedness identified above by class,
type, or kind, and whether or not such Obligations are specifically
contemplated as of the date hereof. The absence of any reference to this
Agreement in any documents, instruments, or agreements evidencing or relating
to any Obligation secured hereby shall not limit or be construed to limit the
scope or applicability of this Agreement.
4.2 Representations and Covenants Regarding the Collateral. The Company
represents, warrants, and covenants as follows: (a) Except for (i) the security
interest granted hereby, (ii) any liens set forth in Exhibit B (the "Permitted
Liens"), the Company is, or as to Collateral arising or to be acquired after the
date hereof, shall be, the sole and exclusive owner of the Collateral, and the
Collateral is and shall remain free from any and all liens, security interests,
encumbrances, claims, and interests, (other than pursuant to the Cross License
Agreement) and no security agreement, financing statement, equivalent security
or lien instrument or continuation statement covering any of the Collateral is
on file or of record in any public office; (b) the Company shall not create,
permit, or suffer to exist, and shall take such action as is necessary to
remove, any claim to or interest in or lien or encumbrance upon the Collateral
except the Permitted Liens, and shall defend the right, title, and interest of
the Bank in and to the Collateral against all claims and demands of all persons
and entities at any time claiming the same or any interest therein; (c) the
Company's principal place of business and chief executive office is located at
the address set forth in paragraph 9.1 of this Agreement; the Collateral and the
records concerning the Collateral shall be kept at that address unless the Bank
shall give its prior written consent otherwise; and the Company has no other
places of business except as shown in Exhibit C attached hereto; (d) at lease
thirty (30) days prior to the occurrence of any of the following events, the
Company shall deliver to the loan office who is handling the Company's
Obligations on behalf of the Bank written notice of such impending events: (i) a
change in the Company's principal place of business or chief executive office;
(ii) the opening or closing of any Premises; or (iii) a change in the Company's
name, identity, or corporate structure; (e) each of the Accounts is based on an
actual and bona fide sale and delivery of goods or service in the ordinary
course of the Company's business, and the Company's Account Debtors have
accepted the goods or services, and owe and are obligated to pay the full
amounts reflected in the invoices according to the terms thereof; and (f) any
and all taxes and fees relating to the Company's business shall be the Company's
sole responsibility, the Company will pay the same when due, and none of said
taxes and fees represent a lien on or claim against the Accounts.
4.3 Collateral Insurance. The Company shall have and maintain insurance at
all times with respect to all Inventory and Equipment (a) insuring against risks
of fire (including so-called extended coverage), explosion, theft, sprinkler
leakage, and such other casualties as the Bank may reasonably designate, and (b)
insuring against liability for personal injury and property damage, containing
such terms, in such form, for such periods and written by such companies as may
be reasonably satisfactory to the Bank, such insurance to be payable to the Bank
and the Company as loss payee as their interests may appear. All policies of
insurance, other than as described below with respect to errors and omissions
insurance, shall provide for twenty (20) days' written minimum cancellation
notice to the Bank and, at request of the Bank, shall be delivered to and held
by it. During the continuance of an Event of Default, the Bank may act as
attorney for the Company in obtaining, adjusting, settling, and cancelling such
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insurance and indorsing any drafts. In the event of failure to provide insurance
as herein provided, the Bank may, at its option, provide such insurance, and the
Company shall pay to the Bank, upon demand, the cost thereof. Should the Company
fail to pay said sum to the Bank upon demand, interest shall accrue thereon from
the date of demand until paid in full at the highest rate set forth in any
document or instrument evidencing any of the Obligations. The Company shall
obtain satisfactory errors and omissions insurance coverage within ninety (90)
days of the Closing Date, and shall upon request, deliver such policy to the
Bank. Upon issuance, such policy shall also include twenty (20) days' minimum
written cancellation notice to the Bank.
4.4 Books and Records: Account Verification. The Company shall at all times
keep accurate and complete records of the Collateral, and at all times and from
time to time, shall allow the Bank, by or through any of its officers, agents,
attorneys, or accountants, to examine, inspect, and make extracts from the
Company's books and records, and to arrange for verification of the Collateral
directly with Account Debtors or by other methods and to examine and inspect the
Collateral wherever located. In addition, upon request of the Bank, the Company
shall provide the Bank with copies of agreements with, purchase orders from, and
invoices to, the Company's customers, and copies of all shipping documents,
delivery receipts, and such other documentation and information relating to the
Collateral as the Bank may require.
4.5 Preservation and Disposition of Collateral. (a) Other than as specified
in the sentence immediately following this sentence, prior to the placement of
any Collateral in or upon any real property which the Company has leased or
mortgaged, the Company shall have obtained a waiver from the lessor and/or the
mortgagee, as the case may be, with respect to the rights (whether present or
future) of the lessor or mortgagee with respect to that Collateral. The Bank
agrees that the Company shall use its best efforts to obtain a waiver from
Southwest Business Center, Ltd., as lessor, with respect to the Premises located
at ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇, within twenty (20) days of the Closing
Date. The Company shall advise the Bank promptly, in writing and in reasonable
detail, (i) of any material encumbrance or claim asserted against any of the
Collateral; (ii) of any material change in the composition of the Collateral;
and (iii) of the occurrence of any other event that would have a material
adverse effect upon the aggregate value of the Collateral or upon the security
interest of the Bank; (b) the Company shall not sell or otherwise dispose of the
Collateral, except that the Company may sell or otherwise dispose of Inventory
in the ordinary course of its business, other non-Inventory assets reasonably
determined by the Company not to be useful to the Company's business because of
obsolescence, and pursuant to the Cross License Agreement; (c) the Company shall
keep the Collateral in good condition and shall not misuse, abuse, secrete,
waste, or destroy any of the same; (d) the Company shall not use the Collateral
in violation of any statute, ordinance, regulation, rule, decree, or order; (e)
the Company shall pay promptly when due all taxes, assessments, charges, or
levies upon the Collateral or in respect to the income or profits therefrom
(except those taxes contested by the Company in good faith in appropriate
proceedings); (f) the Company will not accept any drafts or trade acceptances
against the Collateral; and (g) at its option, the Bank may discharge taxes,
liens, security interests, or other encumbrances at any time levied or placed on
the Collateral and may pay for the maintenance and preservation of the
Collateral. The Company agrees to reimburse the Bank upon demand for any payment
made or any expense incurred (including reasonable
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attorneys' fees) by the bank pursuant to the foregoing authorization. Should the
Company fail to pay said sum to the Bank upon demand, interest shall accrue
thereon, from the date of demand until paid in full, at the highest rate set
forth in any document or instrument evidencing any of the Obligations.
4.6 Extensions and Compromises. With respect to any Collateral, the Company
assents to all extensions or postponements of the time of payment thereof or any
other indulgence in connection therewith, to each substitution, exchange, or
release of Collateral, to the addition or release of any party primarily or
secondarily liable, to the acceptance of partial payments thereon and to the
settlement, compromise, or adjustment thereof, all in such manner and at such
time or times as the Bank may deem advisable. The Bank shall have no duty as to
the collection or protection of Collateral or any income therefrom, nor as to
the preservation of rights against prior parties, nor as to the preservation of
any right pertaining thereto, beyond the safe custody of Collateral in the
possession of the Bank.
4.7 Financing Statements. At the request of the Bank, the Company shall
join with the Bank in executing, delivering, and filing one or more financing
statements in a form satisfactory to the Bank and shall pay the cost of filing
the same in all public offices wherever filing is deemed by the Bank to be
necessary or desirable. A carbon, photographic, or other reproduction of this
Agreement or of a financing statement shall be sufficient as a financing
statement.
4.8 Bank's Appointment as Attorney-in-fact. Effective upon and during the
continuance of an Event of Default, the Company hereby irrevocably constitutes
and appoints the Bank and any officer or agent thereof, with full power of
substitution, as the Company's true and lawful attorney-in-fact with full
irrevocable power and authority in its place and stead and in its name or in the
Bank's own name, from time to time in the Bank's discretion, for the purpose of
carrying out the terms of this Agreement and, without limiting the generality of
the foregoing, hereby grants to the Bank the power and right, on behalf of the
Company, without notice to or assent: (a) to execute, file, and record all such
financing statements, certificates of title, and other certificates of
registration and operation, and similar documents and instruments as the Bank
may deem necessary or desirable to protect, perfect, and validate the Bank's
security interest in the Collateral; (b) to receive, collect, take, indorse,
sign, compromise, assign, and deliver in the Company's or the Bank's name, any
and all checks, notes, drafts, or other documents or instruments relating to the
Collateral; and (c) upon the occurrence of an Event of Default, (i) to notify
postal authorities to change the address for delivery of the Company's mail to
an address designated by the Bank, (ii) to open such mail delivered to the
designated address, (iii) to sign and indorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, and notices in connection with accounts and other
documents relating to the Collateral; (iv) to commence and prosecute any suits,
actions, or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any
other right in respect of any Collateral; (v) to defend any suit, action, or
proceeding brought with respect to any Collateral; (vi) to negotiate, settle,
compromise, or adjust any account, suit, action, or proceeding described above
and, in connection therewith, to give such discharges or releases as the Bank
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may deem appropriate; and (vii) generally, to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Bank were the absolute owner thereof for all
purposes, and to do, at the Bank's option and the Company's expense, at any
time or from time to time, all acts and things which the Bank deems necessary
to protect, preserve, or realize upon the Collateral and the Bank's security
interest therein, in order to effect the intent of this Agreement.
The Company hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable. The powers conferred upon the Bank
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon the Bank to exercise any such powers. The Bank shall be
accountable only for amounts that the Bank actually receives as a result of the
exercise of such powers and neither the Bank nor any of its officers,
directors, employees, or agents shall be responsible to the Company for any act
or failure to act, except for the Bank's own gross negligence or willful
misconduct.
4.9 Remedies on Default. Upon the occurrence and continuance of an Event of
Default, the Bank shall have the rights and remedies of a secured party under
this Agreement, under any other instrument or agreement securing, evidencing, or
relating to the Obligations, and under the law of the State of Ohio or any other
applicable state law. Without limiting the generality of the foregoing, upon
the occurrence and continuance of an Event of Default, the Bank shall have the
right to take possession of the Collateral and all books and records relating to
the Collateral and for that purpose the Bank may enter upon any premises on
which the Collateral or books and records relating to the Collateral or any part
thereof may be situated and remove the same therefrom. the Company expressly
agrees that the Bank, upon the occurrence and continuance of an Event of
Default, without demand of performance or other demand, advertisement, or notice
of any kind (except the notices specified below of time and place of public sale
or disposition or time after which a private sale or disposition is to occur) to
or upon the Company or any other person or entity (all and each of which
demands, advertisements, and/or notices are hereby expressly waived), may
forthwith collect, receive, appropriate, and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase or sell, or otherwise dispose of and deliver the Collateral (or
contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any of the Bank's offices or elsewhere at such prices
as the Bank may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Bank shall have the right upon any such
public sales or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption. The Company further agrees,
upon the occurrence and continuance of an Event of Default and at the Bank's
request, to assemble the Collateral and to make it available to the Bank at such
places as the Bank may reasonably select. The Company further agrees upon the
occurrence and continuance of an Event of Default to allow the Bank to use or
occupy the Company's premises, subject to the terms and conditions of those
certain Landlord Estoppel Certificate, Waiver and Consent Agreements executed by
the lessors of the Company's business locations in favor of the Bank of even
date herewith, for the purpose of effecting the Bank's remedies in respect of
the Collateral. the Bank shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization, or sale, after deducting all
reasonable costs and expenses of every kind incurred
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in connection therewith or incidental to the care or safekeeping of any or all
of the Collateral or in any way relating to the rights of the Bank hereunder,
including reasonable attorneys' fees and legal expenses, to the payment in
whole or in part of the Obligations, in such order as the Bank may elect, and
only after so paying over such net proceeds and after the payment by the Bank
of any other amount required by any provision of law, need the Bank account for
the surplus, if any. To the extent permitted by applicable law, the Company
waives all claims, damages, and demands against the Bank arising out of the
repossession, retention, sale, or disposition of the Collateral. The Company
agrees that the Bank need not give more than seven days' notice (which
notification shall be deemed given when mailed, postage prepaid, addressed to
the Company at its address set forth in this Agreement, or when telecopied or
telegraphed to that address or when telephoned or otherwise communicated orally
to the Company or any of its agents at that address) of the time and place of
any public sale or of the time after which a private sale may take place and
that such notice is reasonable notification of such matters. The Company shall
remain liable for any deficiency if the proceeds of any sale or disposition of
the Collateral are insufficient to pay all amounts to which the Bank is
entitled. The Company shall also be liable for the costs of collecting any of
the Obligations or otherwise enforcing the terms thereof or of this Agreement,
including reasonable attorneys' fees.
5. WARRANTIES AND REPRESENTATIONS. Each Company warrants and represents to
the Bank as follows:
5.1 Corporate Organization and Authority. (a) YoSystems is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio; (b) Geotrac is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware; (c) each Company has all
requisite corporate power and authority and all necessary licenses and permits
to own and operate their properties and to carry on their business as now
conducted and as presently proposed to be conducted; (d) other than the State
of Georgia in connection with the Georgia Residential Office, neither Company
is doing business or conducting any activity in any jurisdiction in which it
has not duly qualified and become authorized to do business; and (e) other than
Geotrac being a subsidiary of YoSystems, neither Company has subsidiaries and
neither Company will create or acquire any subsidiaries without the prior
written consent of the Bank.
5.2 Borrowing is Legal and Authorized. (a) The Board of Directors of each
Company has duly authorized the execution and delivery of this Agreement and of
the notes, and documents contemplated herein; this Agreement, the notes and
other documents executed in connection with this Agreement will constitute
valid and binding obligations of each Company enforceable in accordance with
their respective terms; (b) the execution of this Agreement and related notes
and documents and the compliance by each Company with all the provisions of
this Agreement (i) are within the corporate powers of each Company, and (ii)
are legal and will not conflict with, result in any breach in any of the
provisions of, constitute a default under, or result in the creation of any
lien or encumbrance upon any property of either Company under the provisions
of, any agreement, charter instrument, bylaw, or other instrument to which
either Company is a party or by which either Company may be bound; (c) there
are no limitations in any indenture, contract, agreement, mortgage, deed of
trust, or other agreement or instrument to which either Company is now a party
or by which either Company may be
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bound with respect to the payment of principal or interest on any indebtedness,
or either Company's ability to incur indebtedness including the notes to be
executed in connection with this Agreement.
5.3 Taxes. All tax returns required to be filed by each Company in any
jurisdiction have in fact been filed, and all taxes, assessments, fees, and
other governmental charges upon either Company, or upon any of either Company's
properties, which are due and payable have been paid. Neither Company knows of
any proposed additional tax assessment against it. The provisions for taxes on
the books of each Company for its current fiscal period are adequate.
5.4 Compliance with Law. Each Company (a) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, including
without limitation any laws, rulings or regulations relating to ERISA or
Section 4975 of the Code; (b) has not failed to obtain any licenses, permits,
franchises, or other governmental or environmental authorizations necessary to
the ownership of its properties or to the conduct of its business, which
violation or failure might materially and adversely affect the business,
prospects, profits, properties, or condition (financial or otherwise) of either
Company; and (c) has not acquired, incurred or assumed directly or indirectly,
any material contingent liability in connection with the release of any toxic
or hazardous waste or substance into the environment.
5.5 Financial Statements: Full Disclosure. The historical financial
statements for the fiscal year ending June 30, 1996, and the historical
financial statements for any periods between that date and the date of this
Agreement, which have been supplied by each Company to the Bank have been
prepared in accordance with generally accepted accounting principles
consistently applied and fairly represent each Company's financial condition as
of such date. No material adverse change in either Company's financial
condition has occurred since that date. The historical financial statements
referred to in this paragraph do not, nor does this Agreement or any written
statement furnished by either Company to the Bank in connection with obtaining
the Loan, contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein or herein not
misleading. Each Company has disclosed to the Bank in writing all facts which
materially affect the properties, business, prospects, profits, or condition
(financial or otherwise) of each Company or the ability of each Company to
perform this Agreement.
5.6 No Insolvency. On the date of each Company's entering into the Loan and
after giving effect to all indebtedness of each Company (including the Loan),
(a) each Company will be able to pay its obligations as they become due and
payable; (b) the present fair saleable value of each Company's assets exceeds
the amount that will be required to pay its probable liability on its
obligations as the same become absolute and matured; (c) the sum of each
Company's property at a fair valuation exceeds each Company's indebtedness; and
(d) each Company will have sufficient capital to engage in its business. Each
Company's grant of collateral for the Loan constitutes fair consideration and
reasonably equivalent value because of the receipt of the proceeds of the Loan.
5.7 Government Consent. Neither the nature of each Company or of its business
or properties, nor any relationship between either Company and any other entity
or person, nor any circumstances in connection with the execution of this
Agreement, is such as to require a
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consent, approval or authorization of, or filing, registration, or
qualification with, any governmental authority on the part of either Company as
a condition to the execution and delivery of this Agreement and the notes and
documents contemplated herein.
5.8 Title to Properties. Each Company has good and marketable title to all
the property in which it has a property interest, free from any liens and
encumbrances, except for the Permitted Liens and except as provided in the
Cross License Agreement. Neither Company has agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any of
its property whether now owned or hereafter acquired to be subject to a lien or
encumbrance except as provided in this paragraph.
5.9 No Defaults. No event has occurred and no condition exists which would
constitute an Event of Default pursuant to this Agreement. Neither Company is
in violation in any material respect of any term of any agreement, charter
instrument, bylaw, or other instrument to which it is a party or by which it
may be bound.
5.10 Environmental Protection. Each Company (a) has no knowledge of the
permanent placement, burial, or disposal of any Hazardous Substances on any of
the Premises, of any spills, releases, discharges, leaks, or disposal of
Hazardous Substances that have occurred or are presently occurring, under, or
onto the Premises, or of any spills, releases, discharges, leaks or disposal of
Hazardous Substances that have occurred or are occurring off the Premises as a
result of the Company's improvement, operation, or use of the Premises which
would result in noncompliance with any of the Environmental Laws; (b) is and
has been in compliance with all applicable Environmental Laws; (c) knows of no
pending or threatened environmental civil, criminal, or administrative
proceedings against either Company relating to Hazardous Substances; (d) knows
of no facts or circumstances that would give rise to any future civil,
criminal, or administrative proceeding against either Company relating to
Hazardous Substances; and (e) will not permit any of its employees, agents,
contractors, subcontractors, or any other person occupying or present on its
business premises to generate, manufacture, store, dispose, or release on,
about, or under the Premises any Hazardous Substances which would result in
the Premises not complying with the Environmental Laws.
5.11 Pending Litigation. Except as set forth on Exhibit D attached hereto and
incorporated herein by reference, there are no proceedings pending, or to the
knowledge of either Company threatened, against or affecting the properties,
business prospects, profits or condition (financial or otherwise) of either
Company or the ability of either Company to perform under this Agreement.
5.12 Warranties and Representations. On the date of each advance pursuant to
the Loan, the warranties and representations set forth in Section 5 hereof
shall be true and correct on and as of such date with the same effect as though
such warranties and representations had been made on and as of such date,
except to the extent that such warranties and representations expressly relate
to an earlier date.
6. COMPANY BUSINESS COVENANTS. Each Company covenants that on and after the
date of this Agreement until terminated pursuant to the terms of this
Agreement, or so long as any of the indebtedness provided for herein remains
unpaid:
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6.1 Payment of Taxes and Claims. Each Company will pay before they become
delinquent (except as contested in good faith by the Company in appropriate
proceedings) (a) all taxes, assessments, and governmental charges or levies
imposed upon it or its property; and (b) all claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords, bailees, and other like persons
which, if unpaid, might result in the creation of a lien or encumbrance upon
its property.
6.2 Maintenance or Properties and Corporate Existence. Each Company shall
(a) maintain its property in good condition and make all renewals,
replacements, additions, betterments, and improvements thereto which are deemed
necessary by the Company; (b) maintain, with financially sound and reputable
insurers, insurance with respect to its properties and business against such
casualties and contingencies, or such types (including but not limited to fire
and casualty, public liability, products liability, larceny, embezzlement, or
other criminal misappropriation insurance) in such amounts as is customary in
the case of corporations of established reputations engaged in the same or a
similar business and similarly situated; (c) keep true books of records and
accounts in which full and correct entries will be made of all its business
transactions, and reflect in its financial statements adequate accruals and
appropriations to reserves; (d) subject to the terms of the Merger (as defined
in Section 6.3), do or cause to be done all things necessary (i) to preserve and
keep in full force and effect its existence, rights and franchises, and (ii) to
maintain its status as a corporation duly organized and existing and in good
standing under the laws of the state of its incorporation; and (e) not be in
violation of any laws, ordinances, or governmental rules and regulations or fail
to obtain any licenses, permits, franchises, or other governmental
authorizations necessary to the ownership of its properties or to the conduct of
its business, which violation or failure to obtain might materially and
adversely affect the business, prospects, profits, properties, or condition
(financial or otherwise) of either company.
6.3 Sale of Assets: Merger; Subsidiaries: Tradenames. Neither Company
will, except in the ordinary course of business, sell, lease, transfer, or
otherwise dispose of, any of its assets. Neither Company will without the prior
written consent of the Bank consolidate with or merger into any other entity,
or permit any other entity to consolidate or merge into it. Neither Company
shall acquire all or substantially all of the assets or business of any other
company, person, or entity without the prior written consent of the Bank. Other
than Geotrac being a subsidiary of YoSystems, each Company has no subsidiaries
and conducts business only under the names of each Company identified in
Section 1. The Company will not create or acquire any subsidiaries or conduct
business under any other tradenames without the prior written consent of the
Bank. Notwithstanding anything to the contrary set forth in this Section 6.3,
the Bank consents to the merger of YoSystems and Geotrac (the "Merger")
following the Closing Date provided the Company delivers to the Bank
satisfactory evidence of the following: (a) Certificate of Merger filed with
the Secretary of Ohio and the Secretary of State of Delaware; (b)
identification of the name and domicile State of the surviving entity; and (c)
any and all documents relating to such corporate merger and any supporting
information reasonably requested by the Bank in connection therewith. In
addition, each Company will execute such other documents and instruments as
reasonably requested by the Bank in connection with the foregoing merger in
order to protect the Bank's interests as a secured lender pursuant to this
Agreement.
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6.4 Negative Pledge. Neither Company will cause or permit or agree or
consent to cause or permit in the future (upon the happening of a contingency
or otherwise), any of its property, whether now owned or hereafter acquired, to
become subject to a lien or encumbrance, except: (i) liens in connection with
deposits required by workers' compensation, unemployment insurance, social
security, and other like laws; (ii) taxes, assessments, reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases, and other similar title exceptions or encumbrances
affecting real property, provided they do not in the aggregate materially
detract from the value of said property or materially interfere with its use in
the ordinary conduct of either Company's business; (iii) inchoate liens arising
under ERISA to secure the contingent liability of either Company's business;
(iii) inchoate liens arising under ERISA to secure the contingent liability of
either Company; and (iv) the Permitted Liens. Neither Company shall grant or
agree in favor of any other creditor or third-party to provide it with a
"negative pledge" or provision similar to this Section 6.4.
6.5 Other Borrowings and Contingent Liabilities. Except for the Loan,
neither Company will (a) create or incur any indebtedness for borrowed money
or advances, or (b) guarantee, indorse, or otherwise become surety for or upon
the obligations or others, except by indorsement of negotiable instruments for
deposit or collection in the ordinary course of business. The limitations set
forth in this Section 6.5 shall not included indebtedness for borrowed money or
advances incurred through the execution of capitalized lease agreements
("Capitalized Leases"). Capitalized Leases entered into by the Company shall be
subject to the limitations set forth in Section 6.16 of this Agreement.
6.6 Sale of Accounts: No Consignment. Neither Company shall sell, assign,
or encumber, except to the Bank, any of its Accounts or notes receivable, with
or without recourse. Neither Company shall permit any of its Inventory to be
sold or transferred on consignment or acquire or possess any of its Inventory
on consignment.
6.7 Ownership and Management. Neither Company shall permit any change in
its ownership or any change among its principal executive officers or its
principal members of management, other than in connection with the granting of
options for the common stock of either Company, not to exceed ten percent (10%)
of the issued and outstanding shares of either Company, to certain key
employees pursuant to a stock option plan or agreement which shall include
related rights to repurchase such shares. The Company, and each of them, shall
upon request provide the Bank with copies of all documents and agreements
relating to the granting of such stock options.
6.8 Acquisition of Capital Stock. Neither Company shall redeem or acquire
any of its own capital stock except through the use of the net proceeds from
the simultaneous sale of an equivalent amount of its capital stock, except in
connection with the stock options referred to in Section 6.7 above.
6.9 Trade Accounts Payable. The Company shall not permit more than fifteen
percent (15%) of its trade accounts payable to be past due for more than thirty
(30) days.
6.10 Operating Lease Rentals. Exclusive of real property leases of each
Company's business locations, neither Company will, without prior written
approval of the Bank, enter into
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operating leases providing for in the aggregate consolidated annual rentals in
excess of $50,000.
6.11 Cash Dividends and Other Distributions. Neither Company shall (i)
declare or pay any cash dividends or distributions which total in excess of a
consolidated aggregate fifty percent (50%) of Excess Cash Flow in any one fiscal
year; (ii) or make any other distributions of any kind to its shareholders,
other than prior to the merger of Geotrac and YoSystems, dividends made by
Geotrac to YoSystems in an amount not to exceed regular payments of principal
and interest due under this Agreement. Dividends paid to shareholders other than
YoSystems pursuant to Section 6.11(ii)(b) shall be subject to the limitations of
Section 6.11(i). Provided, further, that no dividends shall be paid if an Event
of Default has occurred and is continuing under this Agreement. Notwithstanding
anything to the contrary set forth in this Section 6.11, the Bank consents to a
one time cash distribution to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to occur on the Closing Date
provided (i) such distribution does not exceed $1,700,000; and (ii) the payment
of such distribution does not result in the Company, on a consolidated basis,
having less than $1,000,000 in cash on its consolidated balance sheet
immediately following the Closing Date.
6.12 Investments. Neither Company shall purchase for investment securities
of any kind except for bonds or other obligations of the United States,
certificates of deposit issued by commercial banks, commercial paper rated at
least A-1 or P-1 and having a maturity of no more than one (1) year, and
automated funds investment accounts (AIF Accounts).
6.13 Net Worth. The Company shall maintain a consolidated Net Worth as
follows:
(a) from the date hereof through and including June 29, 1998, a
consolidated Net Worth of not less than $6,250,000;
(b) from June 30, 1998 and thereafter, a consolidated Net Worth
of not less than $6,250,000 plus fifty percent (50%) of
consolidated net income for each successive fiscal year
commencing with fiscal year 1998 (twelve months ending June
30, 1998).
6.14 Leverage Ratio. The Company shall maintain a Leverage Ratio as follows:
(a) from September 30, 1997 through and including June 29, 1998, a
Leverage Ratio of not greater than 3.0 to 1.0;
(b) from June 30, 1998 through and including June 29, 1999, a
Leverage Ratio of not greater than 2.5 to 1.0; and
(c) from June 30, 1999 and thereafter, a Leverage Ratio of not
greater than 2.0 to 1.0.
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6.15 Cash Flow Coverage Ratio. The Company shall maintain a Cash Flow
Coverage Ratio as follows:
(a) from September 30, 1997 through and including June 29, 1998, a
Cash Flow Coverage Ratio of not less than 1.10 to 1.0;
(b) from June 30, 1998 through and including June 29, 1999, a Cash
Flow Coverage Ratio of not less than 1.15 to 1.0; and
(c) from June 30, 1999 and thereafter, a Cash Flow Coverage Ratio
not less than 1.20 to 1.0.
6.16 Capital Expenditures. The Company will not make any expenditure for
fixed or capital assets, including by way of the incurrence of obligations under
Capital Leases, expenditures for maintenance and repairs which should be
capitalized in accordance with generally accepted accounting principles or
otherwise in excess of (i) $750,000.00 for fiscal years ending 1998 and 1999;
(ii) $875,000.00 for fiscal years ending 2000 and 2001; and (iii) $1,000,000.00
for fiscal years ending 2002 and thereafter.
6.17 Loans and Advances. The Company will not make any loans or advances to
any person, corporation or entity if such loans will exceed an aggregate total
outstanding at any one time of $25,000.00.
6.18 Environmental Compliance and Indemnification. The Company hereby
indemnifies the Bank and holds the Bank harmless from and against any loss,
damage, cost, expense or liability (including strict liability) directly or
indirectly arising from or attributable to the generation, storage, release,
threatened release, discharge, disposal, or presence (whether prior to or during
the term of the Loan) of Hazardous Substances on, under, or about the Premises
(whether by the Company or any employees, agents, contractor, or subcontractors
of the Company or any predecessor in title or any third persons occupying or
present on the Premises), or the breach of any of the representations and
warranties regarding the Premises, including, without limitation: (a) those
damages or expenses arising under the Environmental Laws; (b) the costs of any
repair, cleanup, or detoxification of the Premises, including the soil and
ground water thereof, and the preparation and implementation of any closure,
remedial, or other required plans; (c) damage to any natural resources; and (d)
all reasonable costs and expenses incurred by the Bank in connection with
clauses (a), (b) and (c) including, but not limited to reasonable attorneys'
fees.
The indemnification provided for herein shall not apply to any losses,
liabilities, damages, injuries, expenses, or costs which: (i) arise from the
gross negligence or willful misconduct of the Bank, or (ii) relate to Hazardous
Substances placed or disposed of on the Premises after the Bank acquires title
to the Premises through foreclosure or otherwise.
6.19 Evidence of Cash Equity in YoSystems, Inc. On or before the Closing
Date, the Company, and each of them, shall provide the Bank satisfactory
evidence that YoSystems has or shall contemporaneously with Closing receive a
cash payment of not less than $6,750,000.00 in consideration of the sale of not
more than forty-nine percent (49%) of its common stock to
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Bankers Hazard Determination Services, Inc. ("Bankers"), a subsidiary of
Bankers Insurance Group, Inc. Such sale of the stock of YoSystems shall be
consummated pursuant to the terms and conditions of that certain Stock Purchase
Agreement of even date herewith among YoSystems, Inc., ▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇
▇▇▇▇▇, and Bankers.
7. FINANCIAL INFORMATION AND REPORTING. The Company shall deliver the
following on a consolidating and consolidated basis to the Bank: (a) within
thirty (30) days after the end of each fiscal quarter, financial statements,
including a balance sheet and statements of income and surplus, and statements
of cash flows and reconciliation of capital accounts certified by the president
or chief financial officer of the Company as fairly representing the Company's
financial condition as of as of the end of such period; (b) within thirty (30)
days after the end of each fiscal quarter, statements signed by the president
or chief financial officer of the Company calculating each of the financial
covenants as set forth in Sections 6.9 through 6.17 of the Agreement (the
"Financial Covenants") as of the end of such fiscal quarter and otherwise
certifying the compliance of the Company with the terms of this Agreement, such
statements to be provided every fiscal quarter, including fiscal year end; (c)
within ninety (90) days of the end of each fiscal year consolidating and
consolidated audited financial statements prepared in accordance with generally
accepted accounting principles consistently applied and certified by
independent public accountants satisfactory to the Bank, containing a balance
sheet, statements of income and surplus, statements of cash flows and
reconciliation of capital accounts, along with any management letters written
by such accountants; (d) within ninety (90) days of the end of each fiscal
year, a statement signed by the Company's independent public accountants
certifying that the Company was in compliance with the Financial Covenants as
of the end of such fiscal year; (e) immediately upon becoming aware of the
existence on any set of facts or circumstances which, by themselves, upon the
giving of notice, the lapse of time, or any one or more of the foregoing, would
constitute a breach of any of the terms or conditions of this Agreement or an
Event of Default under this Agreement, a written notice specifying the nature
and period of existence thereof and what action the Company is taking or
proposes to take with respect thereto; and (f) at the request of the Bank, such
other information as the Bank may from time to time reasonably require.
8. DEFAULT.
8.1 Events of Default. An Event of Default shall exist if any of the
following occurs and is continuing: (a) the Company, and either of them, fails
to make any payment of principal or interest on any note executed in connection
with this Agreement on or before the date such payment is due and such failure
remains uncured for more than five (5) days; (b) the Company, and either of
them, fails to perform or observe any covenant contained in Sections 3, 4, 6,
or 7 of this Agreement, except those Sections specifically identified in
subparagraph 8.1(c) which shall be subject to a cure period; (c) the Company,
and either of them, fails to comply with any covenant contained in Sections
4.2, 4.3, 4.5(a), (c), (d) and (e), 6.1, 6.2 and 6.4 of this Agreement, or any
other provision of this Agreement, and such failure continues for more than 30
days after such failure shall first become known to any officer of either
Company; (d) any warranty, representation, or other statement by or on behalf
of either Company contained in this Agreement or in any instrument furnished in
compliance with or in reference to this Agreement is false or misleading in any
material respect, or either Company fails to perform or observe any covenant
contained in any mortgage, security agreement, or other agreement
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in favor of the Bank; (e) either Company becomes insolvent or makes an
assignment for the benefit of creditors, or consents to the appointment of a
trustee, receiver, or liquidator; (f) bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceedings are instituted against either Company
and such proceedings are not dismissed within sixty (60) days of the
commencement thereof; (g) bankruptcy, reorganization, arrangement, insolvency,
or liquidation proceedings are instituted by either Company; (h) a final
judgment or judgements for the payment of money aggregating in excess of
$100,000 is or are outstanding against the Company, or either of them, and any
such judgement or judgements have not been promptly discharged in full or
stayed; (i) the occurrence of any event which allows the acceleration of the
maturity of any indebtedness of either Company to the Bank, any of the Bank's
affiliates, or any other person, corporation, or entity under any indenture,
agreement, or undertaking; or (j) the default by or death of any guarantor,
insurer, or other surety for either Company with respect to any obligation or
liability to the Bank; (k) any uninsured loss, damages, theft, destruction,
levy, seizure, or attachment to, of, or upon any Collateral, including any
attempt to accomplish the foregoing, which exceeds $100,000; or (l) default
shall have occurred and be continuing under any agreement or other instrument
under which any indebtedness of either Company may be issued or under any
mortgage or other document, which default permits the acceleration of the
indebtedness of either Company outstanding thereunder.
8.2 Default Remedies. If an Event of Default exists, the Bank may immediately
exercise any right, power, or remedy permitted to the Bank by law or any
provision of this Agreement, and shall have, in particular, without limiting
the generality of the foregoing, the right to declare the entire principal and
all interest accrued on all notes then outstanding pursuant to this Agreement
to be forthwith due and payable, without any presentment, demand, protest, or
other notice of any kind, all of which are hereby expressly waived by the
Company. No course of dealing on the part of the Bank to exercise any right
shall operate as a waiver of such right or otherwise prejudice the Bank's
rights, powers and remedies. When the notes outstanding pursuant to this
Agreement become due and payable, whether by acceleration or otherwise, the
Bank shall have the remedies of a secured party under the laws of the State of
Ohio with respect to all property securing the Obligations evidenced hereunder,
and the Bank may, at its option, demand, ▇▇▇ for, collect, or make any
compromise or settlement it deems desirable with reference to the Collateral
held as security herefor. The Bank shall not be bound to take any steps
necessary to preserve any rights in the Collateral against prior parties which
the Company hereby assumes to do. The provisions of this Agreement shall apply
and be controlling as to all property which may from time to time be Collateral
securing the Obligations.
9. MISCELLANEOUS.
9.1 Notices. (a) All Communications under this Agreement or under the notes
executed pursuant hereto shall be in writing and shall be mailed by first class
mail, postage prepaid, (1)
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if to the Bank, at the following address, or at such other address as may have
been furnished in writing to the Company by the Bank:
The Huntington National Bank
Corporate Banking Group
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
with copy to:
McDonald, Hopkins, ▇▇▇▇▇ & ▇▇▇▇▇ Co., L.P.A.
2100 Bank One Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ 441142653
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(2) if to the Company, at the following address, or at such other address as
may have been furnished in writing to the Bank by the Company:
YoSystems, Inc./SMS Geotrac, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with copy to:
Benesch, Friedlander, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(b) any notice so addressed and mailed by registered or certified mail shall be
deemed to be given when so mailed.
9.2 Reproduction of Documents. This Agreement and all documents relating
hereto, including, without limitation, (a) consents, waivers, and modifications
which may hereafter be executed, (b) documents received by the Bank at the
closing or otherwise, and (c) financial statements, certificates, and other
information previously or hereafter furnished to the Bank, may be reproduced by
the Bank by any photographic, photostatic, microfilm, micro-card, miniature
photographic, or other similar process and the Bank may destroy any original
document so reproduced. The Company agrees and stipulates that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Bank in the
regular course of business) and that any enlargement, facsimile, or further
reproduction of such reproduction shall likewise be admissible in evidence.
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9.3 Survival: Successors and Assigns. All warranties, representations,
and covenants made by each Company herein or on any certificate or other
instrument delivered by it or on its behalf under this Agreement shall be
considered to have been relied upon by the Bank and shall survive the closing
of the Loan regardless of any investigation made by the Bank on its behalf. All
statements in any such certificate or other instrument shall constitute
warranties and representations by each Company. This Agreement shall inure to
the benefit of and be binding upon the heirs, successors, and assigns of each
of the parties. The Bank hereby agrees to allow Citizens Bank, Norwalk, Ohio
to participate in the Loan in the principal amount of up to $1,000,000,
provided, however, that such participation shall be made upon terms and
conditions acceptable to the Bank in the exercise of its sole and absolute
discretion.
9.4 Amendment and Waiver: Duplicate Originals. This Agreement may be
amended, and the observance of any term of this Agreement may be waived, with
(and only with) the written consent of the Company and the Bank; provided
however that nothing herein shall change the Bank's sole discretion (as set
forth elsewhere in this Agreement) to make advances, determinations, decisions
or to take or refrain from taking other actions. No delay or failure or other
course of conduct by the Bank in the exercise of any power or right shall
operate as a waiver thereof; nor shall any single or partial exercise of the
same preclude any other or further exercise thereof, or the exercise of any
other power or right. Two or more duplicate originals of this Agreement may be
signed by the parties, each of which shall be an original but all which
together shall constitute one and the same instrument.
9.5 Enforceability and Governing Law. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction, as to such
jurisdiction, shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. No delay or
omission on the part of the Bank in exercising any right shall operate as a
waiver of such right or any other right. All of the Bank's rights and
remedies, whether evidenced hereby or by any other agreement or instrument,
shall be cumulative and may be exercised singularly or concurrently. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Ohio. The Company agrees that any legal suit, action, or proceeding
arising out of or relating to this Agreement may be instituted in a state or
federal court of appropriate subject matter jurisdiction in the State of Ohio;
waives any objection which it may have now or hereafter to the venue of any
suit, action or proceeding; and irrevocably submits to the jurisdiction of any
such court in any such suit, action, or proceeding.
9.6 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR
CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING,
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AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
9.7 Advertising. The Company agrees that the Bank may advertise or
otherwise disclose for marketing purposes the extent and nature of the credit
extended or to be extended and other services provided to the Company by the
Bank in connection with or relating in any way to the Loan.
9.8 Term of Agreement. The term of this Agreement shall commence with the
date hereof and end on the date when, after written notice from either party to
the other that no further loans are to be made hereunder, the Company pays in
full the Loan and all other obligations of Company to Bank which are secured
hereby, and the Bank has no further obligations of any type to the Company.
THE PARTIES have caused this Agreement to be signed by their duly
authorized representatives as of the date first written above.
YOSYSTEMS, INC., an Ohio corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
SMS GEOTRAC, INC., a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
THE HUNTINGTON NATIONAL BANK, a
national banking association
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Vice President
32
EXHIBIT A
THE HUNTINGTON NATIONAL BANK
TERM NOTE
$8,750,000.00 Dated as of July 31, 1997
Cleveland, Ohio
FOR VALUE RECEIVED, the undersigned, jointly and severally if more than
one, promise to pay to the order of THE HUNTINGTON NATIONAL BANK (hereinafter
called the "Bank", which term shall include any holder hereof), at such place
as the Bank may designate or, in the absence of such designation, at any of the
Bank's offices, the sum of Eight Million Seven Hundred Fifty Thousand and No/100
Dollars ($8,750,000.00) (hereinafter called the "Principal Sum"), together with
interest as hereinafter provided. The undersigned promise to pay the Principal
Sum and the interest thereon at the time(s) and in the manner(s) hereinafter
provided in this note (this "Note").
This Note is executed and the advances contemplated hereunder are to be
made pursuant to a Loan and Security Agreement by and between the undersigned
and the Bank (hereinafter call the "Loan Agreement") dated as of July 31, 1997,
and all the covenants, representations, agreements, terms and conditions
contained therein, including but not limited to additional conditions of
default, are incorporated herein as if fully rewritten.
INTEREST
Interest will accrue on the unpaid balance of the Principal Sum at the
applicable interest rate set forth in the Loan Agreement. Interest shall be
payable quarterly and at such other times as specified in the Loan Agreement.
Upon the occurrence and during the continuance of an "Event of Default"
pursuant to the Loan Agreement, interest will accrue on the unpaid balance of
the Principal Sum and unpaid interest, if any, until paid, at a variable rate of
interest per annum, which shall change in the manner set forth below, equal to
five percentage points (5%) in excess of the Prime Commercial Rate.
All interest shall be calculated on the basis of a 360 day year for the
actual number of days the Principal Sum or any part thereof remains unpaid.
As used herein, Prime Commercial Rate shall mean the rate established by
the Bank from time to time based on its consideration of economic, money market,
business and competitive factors, and it is not necessarily the Bank's most
favored rate. Subject to any maximum or minimum interest rate limitation
specified herein or by applicable law, any variable rate of interest on the
obligation evidenced hereby shall change automatically without notice to the
undersigned immediately with each change in the Prime Commercial Rate.
33
MANNER OF PAYMENT
The Principal Sum shall be due and payable in twenty-eight (28)
consecutive quarterly installments, beginning on September 30, 1997, and
continuing on the last day of each calendar quarter thereafter, and at maturity
whether by demand, acceleration, or otherwise. Each installment of the Principal
Sum shall be in the amount of Three Hundred Twelve Thousand Five Hundred and
No/100 Dollars ($312,500.00), plus a final installment of the remaining
Principal Sum which shall be due and payable on June 30, 2004. The undersigned
shall also pay annual Mandatory Prepayments pursuant to Section 2 of the Loan
Agreement. Regular payments made by the undersigned with respect to the
indebtedness evidenced hereby shall be applied first to accrued interest then
due and then to the Principal Sum. Optional and Mandatory Prepayments made by
the undersigned with respect to the indebtedness evidenced hereby shall be
applied first to accrued interest then due and then to the Principal Sum in the
inverse order of installments due hereunder without relieving the undersigned
from continuing to make regular payments as set forth herein and in the Loan
Agreement.
PREPAYMENT
Prepayment of all or any portion of the Principal Sum may be subject to a
prepayment premium as set forth in the Loan Agreement.
LATE CHARGE
Any installment or other payment not made within 10 days of the date such
payment or installment is due shall be subject to a late charge equal to the
lesser of 5% of the amount of the installment or payment, or $250.00.
SECURITY
This Note is secured by the security interest in the Collateral (as
defined in the Loan Agreement) granted by the undersigned pursuant to the terms
and conditions of the Loan Agreement. The rights of the Bank under this Note
shall be cumulative and in addition to any and all rights of the Bank under the
Loan Agreement or otherwise.
DEFAULT
Upon the occurrence and continuance of an "Event of Default" under the
Loan Agreement, the Bank may, at its option, without notice or demand,
accelerate the maturity of the obligations evidenced hereby, which obligations
shall become immediately due and payable. In the event the Bank shall institute
any action for the enforcement or collection of the obligations evidenced
hereby, the undersigned agree to pay all costs and expenses of such action,
including reasonable attorneys' fees, to the extent permitted by law.
34
GENERAL PROVISIONS
All of the parties hereto, including the undersigned, and any endorser,
surety, or guarantor, hereby severally waive presentment, notice of dishonor,
protest, notice of protest, and diligence in bringing suit against any party
hereto, and consent that, without discharging any of them, the time of payment
may be extended an unlimited number of times before or after maturity without
notice. The Bank shall not be required to pursue any party hereto, including any
guarantor, or to exercise any rights against any collateral herefor before
exercising any other such rights.
The obligations evidenced hereby may from time to time be evidenced by
another Note or Notes given in substitution, renewal or extension hereof. Any
security interest or mortgage which secures the obligations evidenced hereby
shall remain in full force and effect notwithstanding any such substitution,
renewal, or extension.
The captions used herein are for reference only and shall not be deemed a
part of this Note. If any of the terms or provisions of this Note shall be
deemed unenforceable, the enforceability of the remaining terms and provisions
shall not be affected. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
WAIVER OF RIGHT TO TRIAL BY JURY
THE UNDERSIGNED ACKNOWLEDGE THAT, AS TO ANY AND ALL DISPUTES THAT MAY ARISE
BETWEEN THE UNDERSIGNED AND THE BANK, THE COMMERCIAL NATURE OF THE TRANSACTION
OUT OF WHICH THIS NOTE ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL
BY JURY. ACCORDINGLY, THE UNDERSIGNED HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY AS
TO ANY AND ALL DISPUTES THAT MAY ARISE RELATING TO THIS NOTE OR TO ANY OF THE
OTHER INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
WARRANT OF ATTORNEY
Each of the undersigned authorize any attorney at law to appear in any
Court of Record in the State of Ohio or in any other state or territory of the
United States after the above indebtedness becomes due, whether by acceleration
or otherwise, to waive the issuing and service of process, and to confess
judgment against any one or more of the undersigned in favor of the Bank for the
amount then appearing due together with costs of suit, and thereupon to waive
all errors and all rights of appeal and stays of execution. No such judgment or
judgments against less than all of the undersigned shall be a bar to a
subsequent judgment or
35
judgments against any one or more of the undersigned against whom judgment has
not been obtained hereon; this being a joint and several warrant of attorney to
confess judgment.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
YOSYSTEMS, INC., an Ohio
corporation
By:
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
SMS GEOTRAC, INC., a Delaware
corporation
By:
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
36
EXHIBIT B
PERMITTED LIENS
Permitted Liens shall mean:
(i) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business and which are not yet due and payable
(or which are being contested in good faith by appropriate and
lawful proceedings diligently conducted);
(ii) Pledges or deposits made in the ordinary course of business to
secure payment of workmen's compensation, or to participate in any
fund in connection with workmen's compensation, unemployment
insurance, old-age pensions or other social security programs;
(iii) Liens of mechanics, materialmen, warehousemen, carriers, or other
like liens, securing obligations incurred in the ordinary course of
business that are not yet due and payable (or which are being
contested in good faith by appropriate and lawful proceedings
diligently conducted or otherwise released by surety bond within 90
days of attachment) and liens of landlords securing obligations to
pay lease payments that are not yet due and payable or in default
(or which are being contested in good faith by appropriate and
lawful proceedings diligently conducted);
(iv) Good-faith pledges or deposits made in the ordinary course of
business to secure performance of bids, tenders, contracts (other
than for the repayment of borrowed money) or leases, not in excess
of the aggregate amount due thereunder, or to secure statutory
obligations, or surety, appeal, indemnity, performance or other
similar bonds required in the ordinary course of business;
(v) Encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially
impairs the use of such property;
(vi) Liens on property leased by Borrower or other interest or title of
the lessor under leases not otherwise prohibited by the Loan
Agreement securing obligations of Borrower to the lessor under such
leases;
(vii) Purchase money security interests to the extent that (X) such
purchase money security interests attach to inventory purchased in
the ordinary course of business pursuant to customary payment terms;
(viii) Liens resulting from the Cross License Agreement; and
(ix) Liens relating to any sublease of real property leased by Borrower,
which sublease does not materially impair Borrower's use of such
property.
37
EXHIBIT C
BUSINESS LOCATIONS
1. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
2. ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
3. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (private residence of one salesman)
38
EXHIBIT D
DISCLOSURE SCHEDULE RELATING TO REPRESENTATIONS AND WARRANTIES
Geotrac has been named as a defendant in an action (▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ v. SMS Geotrac, Inc., SMS,
Inc., DSV Partners, Welsh, Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ and Does 1
through ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of
Orange-Central District, Case No. 780061) brought by four individuals seeking
compensation for certain "stay in place bonuses" allegedly promised to them by
an affiliate of Strategic Holdings USA, Inc., a Delaware corporation
("Seller"). Seller has agreed to indemnify and hold Geotrac harmless from any
liability arising in connection with this claim.
