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Exhibit: 10.35FT
LOAN AGREEMENT
$1,000,000.00 Phoenix, Arizona
This LOAN AGREEMENT is made as of this 12th day of December, 1995, by
and between XXXXXXXX X. XXXXXX, XXXXX XXXXX and XXXXXXX X. XXXXX ("Lender")
and FUTECH EDUCATIONAL PRODUCTS, INC. ("Borrowers").
RECITALS:
A. Borrower has requested from Lender a loan ("Loan") in the amount of
up to $1,000,000.00 (One Million and 00/100 dollars) to provide, among other
things, working capital and equipment for Borrower's operations.
B. Subject to the terms and conditions of this Agreement, Lender has
agreed to make the Loan to Borrower.
IN CONSIDERATION OF THE FOREGOING, Borrower and Lender hereby agree as
follows:
ARTICLE I
1.1 AGREEMENT TO BORROW. Borrower agrees to borrow from Lender and,
subject to the terms of this Agreement, Lender agrees to loan to Borrower the
maximum principal amount of One Million Dollars ($1,000,000.00) ("Loan Amount").
Notwithstanding the foregoing, Lender is not obligated to advance the entire
Loan Amount to Borrower, but Borrower is obligated to borrow the entire Loan
Amount. Lender from time to time shall advise Borrower when funds are available
for borrowing. Upon receipt of that notice, Borrower is obligated to borrow the
funds up to the Loan Amount. Lender shall, however, advance no less than the
Loan Amount in full provided Borrower complies with its obligations hereunder.
1.2 THE NOTE. The loan shall be evidenced by a Master Promissory Note
("Note") in the form attached as Exhibit "A".
1.3 SECURITY FOR THE LOAN. The Loan shall be secured by a second
position security interest in all Borrower's equipment, furnishings, inventory,
work in process, intangibles and other collateral. All documents signed by
Borrower in connection with the Loan, collectively are referred to as the "Loan
Documents". All collateral described herein is referred to as the "Collateral".
1.4 USE OF LOAN. The Loan Amount shall be used only for Borrower's
operations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF BORROWER. To induce Lender to
execute this Agreement and make the Loan, Borrower hereby represents and
warrants to Lender as follows:
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(a) Borrower is a corporation duly incorporated and in good
standing in the laws of the State of Arizona, has the corporate authority to own
the Collateral and to transact Borrower's business, and is duly authorized to
execute and deliver this Agreement and to perform this Agreement and its
obligations under all Loan Documents.
(b) This Agreement is, and the Loan Documents when executed and
delivered will become, the valid and binding obligations of Borrower; subject,
however, to the limitations imposed by reorganization, bankruptcy and other
similar laws affecting the enforcement of creditor's rights generally.
(c) All financial statements delivered to Lender in connection
with this Loan have been prepared in conformity with generally accepted
accounting principles and are true, correct and complete in all material
respects.
(d) All consents, licenses and permits and all other
authorizations or approvals required of Borrower to allow Borrower to conduct
its business have been obtained or will be obtained before the Loan Amount is
disbursed.
(e) No litigation or proceedings are pending, or, to the best of
Borrower's knowledge, are threatened, against Borrower (i) which will affect
Borrower's ability to perform its obligations pursuant to and as contemplated by
the terms and provisions of this Agreement and the Loan Documents, or (ii) which
could reasonably be expected to have a material adverse affect on Borrower's
operations.
(f) To the best of Borrower's knowledge, all federal, state or
local laws, rules and regulations relating to the Borrower's business and the
Property have been complied with, including, but not limited to, all
environmental laws.
(g) The Collateral is free and clear of all liens and
encumbrances.
2.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties in this Agreement shall survive closing of the Loan and shall be true
and correct as of each Loan advance.
ARTICLE III
CONDITIONS TO CLOSING
3.1 CONDITIONS. As set forth above, Lender shall have no obligation to
fund the entire Loan Amount and, in any event, shall not fund any of the Loan
Amount until the requirements of this Loan Agreement have been satisfied and
each of the following conditions have been performed and have occurred in
Lender's sole discretion.
3.2 LOAN AGREEMENT. This Agreement has been executed and delivered to
the Lender, together with all Loan Documents required by Lender to effect the
Loan.
3.3 ORGANIZATIONAL DOCUMENTS. Borrower has furnished Lender
Certificates of Good Standing (or the equivalent) for Borrower, copies of its
Articles of Incorporation and Bylaws, and such Borrower authorizations and
resolutions as may be required by Lender.
3.4 FINANCIAL INFORMATION. Borrower shall have furnished Lender with
such financial information as Lender requires and there has been no material
adverse change in Borrower's operations after the date of that information.
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(a) if any payment of principal or interest due under any Note is
not paid on its date, or if any other payment due under any Loan Document is not
made when due;
(b) if any of Borrower's representations warranties made herein
are false or if Borrower makes any material misrepresentation to Lender in
connection with the Loan;
(c) if Borrower fails to observe and perform any term, covenant,
promise or agreement on Borrower's part to be observed and performed under this
Agreement or any Loan Document;
(d) if Borrower shall not be able to pay its debts or if Borrower
admits its inability to pay its debts as those debts become due; makes an
assignment for the benefit of creditors or any petition is filed to appoint a
custodian, receiver, trustee for it or for a substantial part of its assets;
commences any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt dissolution of liquidation laws of any jurisdiction whether
now or hereinafter in effect; has any such petition or application filed or any
such proceeding commenced against it; or indicates, by any act or omission, its
consent to, approval of or participation in any application, proceeding or order
for relief or the appointment of a custodian, receiver or trustee for all or any
part of its assets, or suffers any such custodian, receivership or trustee to
continue undercharged for a period of sixty days (60) or more;
(e) the termination or suspension, whether voluntarily or
otherwise, of Borrower's usual business, except only by labor dispute or act of
God;
(f) a material adverse change in the financial condition or
operations of Borrower;
(g) a judgment is entered against Borrower which has become final
and is no longer appealable which judgment either has not been satisfied within
thirty days after the date of finality or which may have a material adverse
affect upon Borrower's financial condition or the Collateral;
(h) any action or proceeding is commenced to establish, assert,
perfect, foreclose or enforce any claim, encumbrance, deficiency, tax assessment
or tax lien on or with respect to any of the Collateral;
(i) if a levy is made or a receiver appointed for, all or any
part of the Collateral;
(j) if Borrower defaults in the payment of any sum due Lender or
fails to perform any obligation to Lender under any other loan from Lender to
Borrower and fails to cure the default within the applicable grace period, if
any;
(k) the material damage or destruction of any Collateral by any
casualty not covered by appropriate insurance, unless Borrower promptly deposits
with Lender sufficient funds to repair and replace the Collateral; or
(l) any sale or transfer of all or any portion of the Collateral
other than in the ordinary course of business.
5.2 REMEDIES. Upon the occurrence of any Event of Default, Lender, in
its sole discretion, may exercise any or all of the following rights and
remedies:
(a) declare immediately due and payable, without notice or
demand, all monies advanced under the Note and any other Loan Documents, or such
other notes and other loan documents Lender shall elect in its sole discretion,
which are then unpaid. accelerate payment thereof, and exercise all rights and
remedies available under the Note and Loan Documents, at law, in equity or
otherwise;
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(b) withhold any further advances;
(c) take and enter into possession of any or all of the
Collateral;
(d) foreclose its liens, security interests, assignments or
exercise any powers of sale contained therein or in the Loan Documents;
(e) obtain the appointment of receiver of the business and assets
of the Borrower;
(f) institute appropriate proceedings for injunctive relief
(including specific performance of the obligations of Borrower);
(g) terminate this Agreement by written notice to Borrower;
(h) exercise any other remedy or right provided or permitted
under this Agreement or the Loan Documents; or
(i) set off any indebtedness from Lender to Borrower whether or
not then due and set off any other properties of Borrower held by Lender and
apply that amount or such other property toward the Loan or any other
liabilities of Borrower to Lender. The rights and remedies provided in this
Agreement may be exercised by Lender without presentment, demand, protest or
notice to Borrower (to the extent permitted by law) and shall be in addition to
and not in substitution of the rights and remedies which would otherwise by
vested in Lender to recover damages or otherwise in the Event of Default.
ARTICLE VI
MISCELLANEOUS
6.1 AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by Lender and Borrower.
6.2 WAIVER. Lender's failure to exercise or delay in exercising any
remedy, right, power or privilege under this Agreement shall not operate as a
waiver thereof. No waiver by Lender shall be valid unless in written signed by
Lender and then only to the extent specifically set forth in that writing.
ARTICLE VII
GENERAL PROVISIONS
7.1 CAPTIONS. The captions and headings of various Articles and
Sections of this Agreement and Exhibits are for convenience only.
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7.2 NOTICES. Any notice, demand, request or other communication given
hereunder shall be in writing and shall be deemed to have been given properly if
hand delivered or if mailed (effective upon mailing) by United States registered
or certified mail, postage prepaid, return requested, addressed as follows:
If to Borrower: Futech Educational Products, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
If to Lender: Xxxxxxx X. Xxxxx
0000 Xxxxx 00xx Xxxxxx
Xxxxxxxx Xxxxxx, Xxxxxxx 00000-0000
or to such other address as the party to be served with notice may have
furnished in writing to the other party
7.3 GOVERNING LAW. This Agreement shall be construed, interpreted and
governed by Arizona law.
7.4 DISCLAIMER BY LENDER. This Agreement is made for the sole benefit
of Borrower and Lender (and Lender's successors and assigns), and no other
person or persons shall have any benefits, rights or remedies under or by reason
of this Agreement. Lender shall not be liable to any customers, contractors,
employees, supplier, laborer, distributor or other party for any debts or claims
accruing in favor of any such parties against Borrower or others. Borrower is
not and shall not be an agent of the Lender for any purpose. Lender, by making
the Loan or any action taken pursuant to any of the Loan Documents, shall not be
deemed a partner or a joint venturer with Borrower.
7.5 RIGHT OF LENDER TO MAKE ADVANCES TO CURE BORROWER'S DEFAULTS. If
Borrower fails to perform in a timely fashion any of Borrower's covenants,
agreements or obligations contained in this Agreement or the Loan Documents,
Lender may (but is not required to) perform any of such covenants, agreements
and obligations. Loan proceeds advanced by Lender in the exercise of its
reasonable judgment that the advance is needed to discharge those obligations of
the Borrower shall be deemed obligatory advances hereunder and any amounts
expended (whether by disbursement of undisbursed Loan proceeds or otherwise) by
Lender in so doing, shall constitute additional indebtedness evidenced and
secured by the note and the other Loan Documents.
7.6 TIME IS OF THE ESSENCE. Time is of the essence of this Agreement
and of every part hereof.
7.7 SUCCESSORS AND ASSIGN. This Agreement shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors and
assigns.
7.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
THE UNDERSIGNED BORROWER HEREBY ACKNOWLEDGES THAT XXXXXXX X. XXXXX,
BORROWER'S CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD, IS THE DULY
ACKNOWLEDGED AND APPOINTED LENDER REPRESENTATIVE.
Borrower and Lender have executed this Agreement as of the day and year
first set forth above.
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"Borrower"
/s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx, CEO and Chairman
Futech Educational Products, Inc.
0000 X 00 Xxxxxx
Xxxxxxx, XX 00000-0000
Attested by: Xxxxxxx X. Xxxxx 4/29/96
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Date
Its: Chief Financial Officer
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"Lender"
/s/ Xxxxxxx X. Xxxxx [OFFICIAL SEAL
--------------------------------------- XXXXXX XXXXXXX
Xxxxxxx X. Xxxxx, Lender Representative Notary Public
0000 X. 00xx Xxxxxx Xxxxx of Arizona]
Paradise Valley, AZ. 85253-4076
State of Arizona
County of Maricopa
The foregoing instrument was acknowledged before me this 12 day of
December 1995, by Xxxxxxx Xxxxx the CEO of FUTECH EDUCATIONAL PRODUCTS, INC., on
behalf of the corporation.
In witness whereof, I hereunto set my hand and official seal
/s/ Xxxxxx Xxxxxxx
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Notary Public
My commission expires:
4/24/99
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The foregoing instrument was acknowledged before me this 12 day of Dec. 1995,
by Xxxxxxx Xxxxx the of LENDER, on behalf of the LENDER
In witness whereof, I hereunto set my hand and official seal.
/s/ Xxxxxx Xxxxxxx
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Notary Public
My commission expires:
4/24/99
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[OFFICIAL SEAL
XXXXXX XXXXXXX
Notary Public
State of Arizona]
