EXHIBIT 10.1
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is entered into as of
September 1, 2005, by and between EMRISE CORPORATION, a Delaware corporation
("Borrower"), and XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
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Borrower has requested that Bank extend or continue credit to Borrower
as described below, and Bank has agreed to provide such credit to Borrower on
the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
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CREDIT TERMS
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SECTION 1.1 LINE OF CREDIT.
(a) LINE OF CREDIT. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including September 1, 2006, not to exceed at any time the aggregate
principal amount of Nine Million Dollars ($9,000,000.00) ("Line of Credit"), the
proceeds of which shall be used to finance Borrower's working capital
requirements. Borrower's obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note dated as of September 1, 2005 ("Line of
Credit Note"), all terms of which are incorporated herein by this reference.
(b) INITIAL LIMITATION ON BORROWINGS; CONVERSION TO FORMULA LINE OF
CREDIT. Notwithstanding anything herein to the contrary, until such time as Bank
has completed a collateral examination of Borrower's accounts receivable and
inventory in form and substance satisfactory to Bank in its discretion,
borrowings hereunder shall not exceed an aggregate of Two Million Dollars
($2,000,000.00) outstanding at any time. Thereafter, if at any time aggregate
outstanding borrowings under the Line of Credit exceed Two Million Dollars
($2,000,000.00) (a "Conversion Event"), the Line of Credit shall be immediately
converted to a formula-based Line of Credit as set forth herein. Immediately
upon the occurrence of a Conversion Event and continuing up to and including
such time as a Reconversion Event (as such term is defined in Section 1.1 (c)
below), if any, occurs hereunder, outstanding borrowings under the Line of
Credit, to a maximum of the principal amount set forth above, shall not at any
time exceed an aggregate of eighty percent (80%) of Borrower's eligible accounts
receivable plus thirty percent (30%) of the value of finished goods inventory
(exclusive of work in process and inventory which is obsolete, unsaleable,
damaged, consigned or offsite items), with value defined as the lower of cost or
market value. All of the foregoing shall be determined by Bank upon receipt and
review of all collateral reports required hereunder and such other documents and
collateral information as Bank may from time to time require. Borrower
acknowledges that said borrowing base was established by Bank with the
understanding that, among other items, the aggregate of all returns, rebates,
discounts, credits and allowances for the immediately preceding three (3) months
at all times shall be less than five percent (5%) of Borrower's gross sales for
said period. If such dilution of Borrower's accounts for the immediately
preceding three (3) months at any time exceeds five percent (5%) of Borrower's
gross sales for said period, or if there at any time exists any other matters,
events, conditions or contingencies which Bank reasonably believes may affect
payment of any portion of Borrower's accounts, Bank, in its sole discretion, may
reduce the foregoing advance rate against eligible accounts receivable to a
percentage appropriate to reflect such additional dilution and/or establish
additional reserves against Borrowers eligible accounts receivable.
As used herein, "eligible accounts receivable" shall consist solely of
trade accounts created in the ordinary course of Borrower's business, upon which
Borrowers right to receive payment is absolute and not contingent upon the
fulfillment of any condition whatsoever, and in which Bank has a perfected
security interest of first priority, and shall not include:
(i) any account which is more than sixty-one (61) days past
due;
(ii) that portion of any account for which there exists any
right of setoff, defense or discount (except regular discounts allowed
in the ordinary course of business to promote prompt payment) or for
which any defense or counterclaim has been asserted;
(iii) any account which represents an obligation of any state
or municipal government or of the United States government or any
political subdivision thereof (except accounts which represent
obligations of the United States government and for which the
assignment provisions of the Federal Assignment of Claims Act, as
amended or recodified from time to time, have been complied with to
Bank's satisfaction);
(iv) any account which represents an obligation of an account
debtor located in a foreign country;
(v) any account which arises from the sale or lease to or
performance of services for, or represents an obligation of, an
employee, affiliate, partner, member, parent or subsidiary of Borrower;
(vi) that portion of any account, which represents interim or
progress xxxxxxxx or retention rights on the part of the account
debtor;
(vii) any account which represents an obligation of any
account debtor when twenty percent (20%) or more of Borrower's accounts
from such account debtor are not eligible pursuant to (i) above;
(viii) that portion of any account from an account debtor
which represents the amount by which Borrower's total accounts from
said account debtor exceeds twenty-five percent (25%) of Borrower's
total accounts;
(ix) any account deemed ineligible by Bank when Bank, in its
sole discretion, deems the creditworthiness or financial condition of
the account debtor, or the industry in which the account debtor is
engaged, to be unsatisfactory.
(c) RECONVERSION TO NON-FORMULA LINE OF CREDIT. If, following a
Conversion Event, aggregate outstanding borrowings under the Line of Credit at
any time are equal to or less than Two Million Dollars ($2,000,000.00) (a
"Reconversion Event"), the Line of Credit shall be reconverted immediately to a
non-formula based Line of Credit until such time as a Conversion Event, if any,
shall occur hereunder.
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(d) BORROWING AND REPAYMENT. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; PROVIDED, HOWEVER,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.
SECTION 1.2 INTEREST/FEES.
(a) INTEREST. The outstanding principal balance of the Line of Credit
shall bear interest at the rate of interest set forth in the Line of Credit
Note.
(b) COMPUTATION AND PAYMENT. Interest shall be computed on the basis of
a 360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument or document required
hereby.
(c) UNUSED COMMITMENT FEE. Borrower shall pay to Bank a fee equal to
one-quarter percent (0.25%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Line of Credit,
which fee shall be calculated on a quarterly basis by Bank and shall be due and
payable by Borrower in arrears on the first day of each calendar quarter.
SECTION 1.3 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all interest and fees due under each credit subject hereto by charging
Borrower's deposit account number 4950-002477 with Bank, or any other deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such deposit account to pay all such sums
when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
SECTION 1.4 COLLATERAL.
As security for all indebtedness of Borrower to Bank subject hereto,
Borrower hereby grants to Bank security interests of first priority in all
Borrower's accounts receivable and other rights to payment, general intangibles,
inventory and equipment.
All of the foregoing shall be evidenced by and subject to the terms of
such security agreements, financing statements, deeds or mortgages, and other
documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for
all costs and expenses incurred by Bank in connection with any of the foregoing
security, including, without limitation, filing and recording fees and costs of
appraisals, audits and title insurance. Without in any way limiting the
generality of the foregoing, Borrower shall reimburse Bank for all costs and
expenses incurred by Bank in connection with any audits of new collateral
acquired by Borrower through Permitted Acquisitions (as defined in Section 5.3
hereof) within sixty (60) days following completion of each such new collateral
audit.
SECTION 1.5 GUARANTIES. All indebtedness of Borrower to Bank shall be
guaranteed jointly and severally by CXR Telcom Corporation and Emrise
Electronics Corporation in the principal amount of Nine Million Dollars
($9,000,000.00) each, as evidenced by and subject to the terms of guaranties in
form and substance satisfactory to Bank.
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ARTICLE II
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REPRESENTATIONS AND WARRANTIES
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Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1 LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of Delaware, and is qualified or
licensed to do business (and is in good standing as a foreign corporation, if
applicable) in all jurisdictions in which such qualification or licensing is
required or in which the failure to so qualify or to be so licensed could have a
material adverse effect on Borrower.
SECTION 2.2 AUTHORIZATION AND VALIDITY. This Agreement and each
promissory note, contract, instrument and other document required hereby or at
any time hereafter delivered to Bank in connection herewith (collectively, the
"Loan Documents") have been duly authorized, and upon their execution and
delivery in accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Borrower or the party which executes
the same, enforceable in accordance with their respective terms.
SECTION 2.3 NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
SECTION 2.4 LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5 CORRECTNESS OF FINANCIAL STATEMENT. The financial statement
of Borrower dated May 31, 2005, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower, (b) discloses all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.
SECTION 2.6 INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to any
year.
SECTION 2.7 NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
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SECTION 2.8 PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.
SECTION 2.9 ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10 OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11 ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
ARTICLE III
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CONDITIONS
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SECTION 3.1 CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:
(a) APPROVAL OF BANK COUNSEL. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank's counsel.
(b) DOCUMENTATION. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and each promissory note or other
instrument or document required hereby.
(ii) Certificates of incumbency.
(iii) Corporate Resolution: Borrowing.
(iv) Corporate Resolutions: Continuing Guaranty.
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(v) Continuing Guaranties.
(vi) Continuing Security Agreement: Rights to Payment and
Inventory.
(vii) Disbursement Order.
(viii) Security Agreement: Equipment.
(ix) Such other documents as Bank may require under any
other Section of this Agreement.
(c) FINANCIAL CONDITION. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower or any guarantor hereunder, nor any material decline, as determined by
Bank, in the market value of any collateral required hereunder or a substantial
or material portion of the assets of Borrower or any such guarantor.
(d) INSURANCE. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank.
SECTION 3.2 CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) COMPLIANCE. The representations and warranties contained herein and
in each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) DOCUMENTATION. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
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AFFIRMATIVE COVENANTS
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Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in
writing:
SECTION 4.1 PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein, and immediately upon demand by Bank,
the amount by which the outstanding principal balance of any credit subject
hereto at any time exceeds any limitation on borrowings applicable thereto.
SECTION 4.2 ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.
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SECTION 4.3 FINANCIAL STATEMENTS. Provide to Bank all of the following,
in form and detail satisfactory to Bank:
(a) not later than 120 days after and as of the end of each fiscal
year, a consolidated and consolidating audited copy of Borrower's 10K report
filed with the Securities Exchange Commission and financial statements of
Borrower, CXR Telcom Corporation and Emrise Electronics Corporation, prepared by
a certified public accountant acceptable to Bank, to include a balance sheet,
statements of income, retained earnings and cash flow, together with all
supporting schedules and footnotes;
(b) not later than 30 days after and as of the end of each month, a
financial statement of Borrower, prepared by Borrower, to include a balance
sheet, an income statement and all supporting schedules and footnotes;
(c) not later than 30 days after and as of the end of each fiscal year,
projections of the consolidated financial statements of Borrower for the
immediately following fiscal year;
(d) commencing immediately upon the occurrence of a Conversion Event,
if any, and continuing up to and including such time as a Reconversion Event, if
any, occurs: (i) not later than 10 days after and as of the end of each month, a
borrowing base certificate, an inventory collateral report, an aged listing of
accounts receivable and accounts payable. and a reconciliation of accounts; and
(ii) not later than 10 clays after and as of each June 30 and December 31, a
list of the names and addresses of all Borrower's account debtors;
(e) from time to time such other information as Bank may reasonably
request.
SECTION 4.4 COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.5 INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
SECTION 4.6 FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7 TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including, without limitation federal and state income taxes and state and local
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property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.
SECTION 4.8 LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower.
SECTION 4.9 FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles consistently
applied and used consistently with prior practices (except to the extent
modified by the definitions herein):
(a) Current Ratio not less than 1.50 to 1.0 as of each fiscal quarter
end, with "Current Ratio" defined as total current assets divided by total
current liabilities.
(b) Tangible Net Worth not less than $14,250,000.00 as of each fiscal
quarter end, with "Tangible Net Worth" defined as the aggregate of total
stockholders' equity plus subordinated debt less any intangible assets.
(c) Total Liabilities divided by Tangible Net Worth not greater than
1.25 to 1.0 as of each fiscal quarter end, with "Total Liabilities" defined as
the aggregate of current liabilities and non-current liabilities less
subordinated debt, and with "Tangible Net Worth" as defined above.
(d) Net profit after taxes greater than $500,000.00, determined as of
each fiscal quarter end on a rolling four-quarter basis; PROVIDED, HOWEVER, that
for purposes of such calculation of net profit after taxes, Borrower may not
sustain net loss after tax in any two consecutive fiscal quarters.
(e) Debt Service Coverage Ratio greater than 1.25 to 1.0, determined as
of each fiscal quarter end on a rolling four-quarter basis, with "Debt Service
Coverage Ratio" defined as the sum of (i) net profit after taxes, PLUS (ii)
depreciation, PLUS (iii) amortization, (iv) PLUS OR MINUS net distributions
DIVIDED BY, the sum of (v) the current portion of long term debt PLUS (vi)
capitalized lease payments.
SECTION 4.10 NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property.
ARTICLE V
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NEGATIVE COVENANTS
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Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
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SECTION 5.1 USE OF FUNDS. Use any of the proceeds of any credit
extended hereunder except for the purposes stated in Article I hereof.
SECTION 5.2 DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower's stock now or hereafter outstanding.
SECTION 5.3 ACQUISITIONS. Acquire all or substantially all of the
assets, business, stock, partnership interests or membership interests of any
person or entity, or acquire any corporation, partnership, limited liability
company or other entity through a merger or consolidation in which the surviving
entity is Borrower, except for Permitted Acquisitions. As used herein, a
"Permitted Acquisition" means any such acquisition, merger or consolidation
which satisfies all of the following conditions, as determined by Bank in its
sole discretion:
(a) the purpose of such acquisition, merger or consolidation shall be
to acquire a business in a similar or related line of business to that of
Borrower;
(b) Bank shall have received from Borrower such information regarding
the terms and conditions of such acquisition, merger or consolidation as it
shall reasonably require;
(c) at the time of such acquisition, merger or consolidation, the
entity whose stock, assets or business shall be acquired by, merged into or
with, or consolidated with Borrower shall be profitable and accretive to
Borrower's earnings;
(d) Borrower shall provide to Bank a certification from one of
Borrower's senior financial officers, in form and substance satisfactory to
Bank, certifying that after giving effect to such acquisition, merger or
consolidation, no covenant of this Agreement shall be violated; and
(e) such acquisition, merger or consolidation shall comply with all
applicable laws.
ARTICLE VI
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EVENTS OF DEFAULT
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SECTION 6.1 The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a) and (b) above), and
with respect to any such default which by its nature can be cured, such default
shall continue for a period of twenty (20) days from its occurrence.
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(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower, any guarantor
hereunder or any general partner or joint venturer in any Borrower which is a
partnership or joint venture (with each such guarantor, general partner and/or
joint venturer referred to herein as a "Third Party Obligor") has incurred any
debt or other liability to any person or entity, including Bank.
(e) The filing of a notice of judgment lien against Borrower or any
Third Party Obligor; or the recording of any abstract of judgment against
Borrower or any Third Party Obligor in any county in which Borrower or such
Third Party Obligor has an interest in real property; or the service of a notice
of levy and/or of a writ of attachment or execution, or other like process,
against the assets of Borrower or any Third Party Obligor; or the entry of a
judgment against Borrower or any Third Party Obligor.
(f) Borrower or any Third Party Obligor shall become insolvent, or
shall suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any Third Party Obligor shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time ("Bankruptcy Code"), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower or any Third Party
Obligor, or Borrower or any Third Party Obligor shall file an answer admitting
the jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any Third Party Obligor shall be adjudicated a
bankrupt, or an order for relief shall be entered against Borrower or any Third
Party Obligor by any court of competent jurisdiction under the Bankruptcy Code
or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors.
(g) There shall exist or occur any event or condition which Bank in
good faith believes impairs, or is substantially likely to impair, the prospect
of payment or performance by Borrower of its obligations under any of the Loan
Documents.
(h) The death or incapacity of any individual Borrower or Third Party
Obligor. The dissolution or liquidation of any Borrower or Third Party Obligor
which is a corporation, partnership, joint venture or other type of entity; or
Borrower or any such Third Party Obligor, or any of its directors, stockholders
or members, shall take action seeking to effect the dissolution or liquidation
of such Borrower or Third Party Obligor.
(i) Any change in ownership of an aggregate of twenty-five percent
(25%) or more of the common stock of Borrower.
SECTION 6.2 REMEDIES. Upon the occurrence of any Event of Default: (a)
all indebtedness of Borrower under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Bank's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by each Borrower;
(b) the obligation, if any, of Bank to extend any further credit under any of
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the Loan Documents shall immediately cease and terminate; and (c) Bank shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including, without limitation, the right to resort to any or
all security for any credit subject hereto and to exercise any or all of the
rights of a beneficiary or secured party pursuant to applicable law. All rights,
powers and remedies of Bank may be exercised at any time by Bank and from time
to time after the occurrence of an Event of Default, are cumulative and net
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.
ARTICLE VII
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MISCELLANEOUS
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SECTION 7.1 NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2 NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: EMRISE CORPORATION
0000 Xxxxx Xxx., Xxxxx 000
Xxxxxx Xxxxxxxxx, XX 00000
BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
Inland Empire Regional Commercial Banking Xxxxxx
0000 Xxxxxx Xxxxxx Xxxx., Xxxxx #000
Xxxxxxx, XX 00000
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3 COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with the negotiation and preparation of this
Agreement and the other Loan Documents, Bank's continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including, without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including, without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
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SECTION 7.4 SUCCESSORS, ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; PROVIDED, HOWEVER, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or its business, any
guarantor hereunder or the business of such guarantor, or any collateral
required hereunder.
SECTION 7.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.
SECTION 7.6 NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7 TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
SECTION 7.8 SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.
SECTION 7.10 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
SECTION 7.11 ARBITRATION.
(a) ARBITRATION. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way (i) the loan and related Loan Documents which are the subject of
this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.
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(b) GOVERNING RULES. Any arbitration proceeding will (i) proceed in a
location in California selected by the American Arbitration Association ("AAA");
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. ss.91 or any
similar applicable state law.
(c) NO WAIVER OF PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) ARBITRATOR QUALIFICATIONS AND POWERS. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; PROVIDED, HOWEVER, that all three arbitrators must
actively participate in all hearings and deliberations. The arbitrator will be a
neutral attorney licensed in the State of California or a neutral retired judge
of the state or federal judiciary of California, in either case with a minimum
of ten years experience in the substantive law applicable to the subject matter
of the dispute to be arbitrated. The arbitrator will determine whether or not an
issue is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of California and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the California Rules of CMI Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
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(e) DISCOVERY. In any arbitration proceeding discovery will be
permitted in accordance with the Rules. All discovery shall be expressly limited
to matters directly relevant to the dispute being arbitrated and must be
completed no later than 20 days before the hearing date and within 180 days of
the filing of the dispute with the AAA. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party's presentation and that no alternative means for
obtaining information is available.
(f) CLASS PROCEEDINGS AND CONSOLIDATIONS. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.
(g) PAYMENT OF ARBITRATION COSTS AND FEES. The arbitrator shall award
all costs and expenses of the arbitration proceeding.
(h) REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE. Notwithstanding
anything herein to the contrary, no dispute shall be submitted to arbitration if
the dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
(i) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
XXXXX FARGO BANK,
EMRISE CORPORATION NATIONAL ASSOCIATION
By: /S/ Xxxxxxxx X. Xxxxx By: /S/ Xxxxxx Xxxxxx
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Xxxxxxxx X. Xxxxx Xxxxxx Xxxxxx
Vice President Vice President
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