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Exhibit 10.8(a)
CREDIT FACILITIES AGREEMENT
THIS CREDIT FACILITIES AGREEMENT, originally made as of DECEMBER 18,
1997, by and between IMPERIAL BANK ARIZONA, an Arizona banking corporation and
INTEGRATED INFORMATION SYSTEMS, INC., an Arizona corporation {"BORROWER"), (the
"LOAN AGREEMENT"), is hereby restated and amended as of April 30, 1999, by and
between Borrower and IMPERIAL BANK, a California banking corporation ("LENDER").
RECITALS
A. Pursuant to the Loan Agreement, as previously modified, Imperial
Bank Arizona made loans to Borrower as follows: (i) $750,000 term loan, (ii)
$750,000 revolving line of credit, and (iii) $250,000 short-term line of credit
(individually and collectively the "EXISTING LOAN").
B. All rights and interests under the Loan Agreement and the Existing
Loan were transferred to Lender, and Lender is now the owner and holder thereof.
C. Borrower has requested that Lender make available to it a $2,000,000
revolving line of credit (the "RESTATED LOAN"), a portion of the proceeds of
which will be used to pay off and refinance the Existing Loan. Lender is willing
to make the Restated Loan as requested and as herein described, but only if and
so long as there is strict compliance by Borrower with and satisfaction of the
terms and conditions of the Loan Agreement, as restated herein (the "RESTATED
LOAN AGREEMENT").
D. The Restated Loan will be evidenced by a promissory note. Borrower's
Obligations to Lender will continue to be secured by a Security interest in all
of Borrower's personal property as described in SECTION 1.14, to be evidenced by
one or more restated security agreements between Borrower and Lender.
AGREEMENT
NOW, THEREFORE, for due and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1 -- DEFINITIONS
The following terms when used in this Agreement, including its preamble
and recitals, shall, except where the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular and
plural forms thereof):
1.1 "ADJUSTED DEBT TO WORTH RATIO" means total Liabilities (excluding
therefrom Subordinated Debt) divided by Net Worth (including therein
Subordinated Debt).
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1.2 "ADVANCE" means the funding and disbursement of money to or on
behalf of Borrower pursuant to the terms of the Facility.
1.3 "AFFILIATE" of any Person means:
(a) any other Person that directly or indirectly owns,
controls, or holds with power to vote, twenty percent (20%) or more of
the outstanding voting securities of such Person, other than a Person
that holds such securities: (i) in a fiduciary or agency capacity
without sole discretionary power to vote such securities; or (ii)
solely to secure a debt, if such Person has not in fact exercised such
power to vote;
(b) a corporation twenty percent (20%) or more of whose
outstanding voting securities are directly or indirectly owned,
controlled, or held with power to vote, by such Person, or by an entity
that directly or indirectly owns, controls, or holds with power to
vote, twenty percent (20%) or more of the outstanding voting securities
of such Person, other than a Person that holds such securities: (i) in
a fiduciary or agency capacity without sole discretionary power to vote
such securities; or (ii) solely to secure a debt, if such Person has
not in fact exercised such power to vote;
(c) any other Person whose business is operated under a lease
or operating agreement by such Person, or a Person substantially all of
whose property is operated under an operating agreement with such
Person;
(d) any other Person that operates the business or
substantially all of the property of such Person under a lease or
operating agreement; or
(e) any other Person who is an officer or director of such
Person.
1.4 "ASSET DISPOSITION" means the Disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any of the
following: (a) any of the capital stock of Borrower, or (b) any or all of the
assets of Borrower or any of its Subsidiaries, other than sales of inventory
(including Software Property) in the ordinary course of business.
1.5 "AUTHORIZED SIGNATORS" means Xxxxx X. Xxxxxx, President and CEO,
and Xxxxx X. Xxxxxxxx, CFO, any other individual(s) authorized by Borrower to
make or execute any requests, directions and authorizations for, or with respect
to, any Advance from a Restated Loan or other financial accommodations in
accordance with the terms of this Agreement and the other writings described
herein.
1.6 "BANKRUPTCY CODE" means Title 11 of the United States Code, as
amended.
1.7 "BASIS POINT" means one hundredth of one percent (0.0001).
1.8 "BORROWING BASE" means, as of the time of determination, the lesser
of (i) the Gross Availability, and (ii) the Restated Commitment.
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1.9 "BORROWING BASE CERTIFICATE" means a document in the form attached
hereto as EXHIBIT B, executed by Borrower, which reflects the Net Availability
as of 5:00 P.M. Phoenix, Arizona time on the Business Day stated on such
certificate.
1.10 "BUSINESS DAYS" means those days (other than Saturdays and
Sundays) upon which Lender's home office in Phoenix, Arizona is open to the
public for the general conduct of its banking business.
1.11 "CAPITAL LEASE" means any lease of any property (whether real,
personal or mixed) that, in conformity with GAAP, should be accounted for as a
capital lease.
1.12 "CASH EQUIVALENTS" means: (a) marketable direct obligations issued
or unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard
& Poor's Rating Group or at least P-1 from Xxxxx'x Investors Service, Inc.; and
(c) certificates of deposit or bankers' acceptances maturing within six (6)
months from the date of issuance thereof issued by, or overnight reverse
repurchase agreements from, any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $250,000,000 and not subject to
setoff rights in favor of such bank.
1.13 "CHANGE OF CONTROL" OR "CHANGE OF MANAGEMENT" means: (i) any
Person or group of Persons who becomes the beneficial owner (within the meaning
of Rule 13d-3 under the Securities Act of 1934 and the rules, regulations and
interpretations of the Securities and Exchange Commission thereunder), directly
or indirectly, of securities of Borrower representing in excess of fifty percent
(50.0%) of the combined voting power entitled to be cast generally of such
Borrower's then outstanding voting securities; (ii) if individuals who
constitute the Board of Directors as of the Restated Closing Date cease for any
reason to constitute a majority thereof, except as set forth in Section 1 of
that certain Stockholder's Agreement, (entitled Board of Directors), dated April
12, 1999, but not including any modifications or amendments thereof; or (iii)
any change in the identity of the current chief executive officer of Borrower.
1.14 "CLOSING DATE" means the Business Day on which all the
requirements and conditions precedent were satisfied and the transaction
contemplated by the original Loan Agreement consummated.
1.15 "COLLATERAL" means all of the property described below in, to or
under which Borrower now has or hereafter acquires any right, title or interest,
whether present, future or contingent and in Borrower's expectancy to acquire
such property:
(a) All accounts, instruments, promissory notes, order paper,
chattel paper, electronic chattel paper, letter of credit rights,
payment intangibles, general intangibles, investment property,
health-care-insurance receivables, and commercial tort claims, arising
directly or indirectly from the sale, lease, license or rental of goods
or the sale or provision of services by Borrower or the business or
other operations of Borrower, together with all
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proceeds, Collections, guaranties and other security therefor, all
right, title and interest of Borrower in the goods that gave rise
thereto, including the right to stoppage in transit, all returned,
rejected, rerouted or repossessed goods, the sale or lease of which
shall have given rise to any account or any such instrument or chattel
paper, and all proceeds thereof;
(b) All inventory, goods, merchandise, materials, raw
materials, goods in process, finished goods, packaging and shipping
materials and other tangible personal property, whether now or
hereafter in existence, and held for sale or lease, or to be or
actually furnished under contracts for service or consumed in
Borrower's business, whether or not such inventory be in the
constructive or actual possession or custody of Borrower, whether or
not Borrower holds legal title thereto, and whether any such inventory
is represented by warehouse receipts or bills of lading or has been or
may be placed in transit or delivered to a public warehouse, together
with any and all proceeds resulting from the sale or other Disposition
thereof, and all books and records pertaining thereto;
(c) All equipment, accessories, appliances, apparatuses, spare
parts, supplies, materials, blueprints, specifications and maintenance
records related thereto, now or hereafter owned or acquired by
Borrower, wherever situated, together with all goods appertaining or
attached, or kept or used or intended for use in connection therewith,
and all property substituted or exchanged for any and all of the
foregoing, and all improvements to, replacements of, and additions to
any and all of the foregoing;
(d) All furniture and fixtures;
(e) All Intellectual Property now owned or hereafter created
or acquired by Borrower, including without limitation all licenses,
options, warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights,
indemnifications and model conversions of any of the foregoing;
(f) All of Borrower's deposits (whether or not evidenced by a
certificate with Lender) which shall include: (i) depository and other
accounts of Borrower, including all depository and other accounts
maintained with Lender; (ii) any successor and/or replacement
account(s), and any and all securities (including, without limitation,
treasury notes, treasury bills, stocks, bonds, options, futures, and
investment contracts of every kind and nature, whether similar or
dissimilar to the foregoing), money, instruments, documents, goods,
chattel paper, accounts, general intangibles, deposit accounts and
other property and rights of any nature now or hereafter held in or in
connection with or constituting part of such account(s); (iii) all
certificates and instruments issued with respect to any property of
Borrower referred to in subsection (ii); (iv) all replacements,
substitutions, interest, cash and stock dividends, warrants, options,
or other rights and amounts paid, accrued, received, receivable or
distributed with respect to any property of Borrower referred to in
subsection (ii) or (iii) from time to time; and (v) with respect to the
foregoing, all proceeds thereof, including without limitation insurance
proceeds and payments under the Securities Investor Protection Act of
1970, as amended, and all of Borrower's other personal property coming
into the hands of or under the control of Lender in any manner,
including securities held by, deposited with, assigned or pledged to
Lender, and all interest, dividends, stock rights,
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stock dividends, benefits and other property or rights to which
Borrower may become entitled by virtue of the ownership thereof;
(g) All rights under and interests in lease, license or rental
agreements pertaining to inventory, equipment or Intellectual Property
that are retained or reserved to Borrower, and all reversion or,
similar interests in property that is subject to lease, license or
rental agreement;
(h) All rights as unpaid seller or lienor that arise in
connection with any of the Collateral, including the rights of
replevin, reclamation and stoppage in transit, and the right to xxx or
file mechanics' or materialmen's liens in the name of Borrower or
otherwise for the unpaid balances due thereunder;
(i) All tax refund claims, all policies or certificates of
insurance covering any of the Collateral, all contracts, agreements or
rights of indemnification, guaranty or surety relating to any of the
Collateral, and all claims, awards, loss payments, proceeds and premium
refunds that may become payable with respect to any such policies,
certificates, contracts, agreements or rights;
(j) All ledger cards, invoices, delivery receipts, worksheets,
books of accounts, statements, correspondence, customer lists, files,
journals, ledgers and records in any form, written or otherwise,
related to any of the Collateral;
(k) All claims for loss or damage to or in connection with any
of the Collateral, all other claims in any form for the payment of
money, including tort claims, and all rights with respect to such
claims and all proceeds thereof;
(l) All accessions to any of the Collateral;
(m) All general intangibles arising by virtue of the
Collateral owned or held by or in the name of Borrower;
(n) All property substituted or exchanged for the Collateral;
and
(o) All proceeds of the foregoing, in any form, including all
proceeds received, due or to become due from any sale, exchange or
other Disposition of any of the Collateral, whether such proceeds are
Cash or Noncash in nature or are represented by checks, drafts, notes
or other instruments for the payment of money.
1.16 "COLLECTIONS" mean all collections, payments or receipts of any
kind or character, whether in the form of cash or other property, on or with
respect to any note, instrument, account or general intangible (including any of
the Collateral), whether or not in the ordinary course, pursuant to the terms
thereof, or otherwise, including by any act of discounting, compromise,
settlement or change of any term thereof.
1.17 "COMPLIANCE CERTIFICATE" shall mean a certificate of an
Authorized Signator in the form of EXHIBIT C hereto or otherwise as Lender may
from time to time require, setting forth as of the date required under Section
9.6 a calculation of the financial ratios and restrictions described in
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SECTION 9.7 hereof and a statement to the effect that: (a) the financial
statements, reports and other certificates submitted with the Compliance
Certificate are each true, complete and correct in all material respects,
subject to normal monthly and year-end accounting adjustments, and (b) no
Default or Potential Default has occurred and is continuing, and that if such
Default or Potential Default exists, the Compliance Certificate shall describe
such in reasonable detail and specify the actions taken and to be taken by
Borrower to remedy the same.
1.18 "COMPUTER HARDWARE AND SOFTWARE PROPERTY" shall mean, with respect
to any Person, the following:
(a) All computer and other electronic data processing
hardware, integrated computer systems, central processing units, memory
units, display terminals, printers, features, computer elements, card
readers, tape drives, hard and soft disk drives, cables, electrical
supply hardware, generators, power equalizers, accessories and all
peripheral devices and other related computer hardware;
(b) All software programs (including both source code, object
code and all related applications and data files), whether now owned,
licensed or leased or hereafter acquired by Borrower;
(c) All firmware associated with the property described in
clauses (a) and (b) of this definition;
(d) All documentation (including flow charts, logic diagrams,
manuals, guides and specifications) with respect to the hardware,
software and firmware described in the preceding clauses (a) through
(c) of this definition; and
(e) All rights with respect to all of the foregoing, including
without limitation, any and all Copyright Property, licenses, options,
warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights
and indemnifications and substitutions, replacements, additions or
model conversions of any of the foregoing.
1.19 "COPYRIGHT PROPERTY" shall mean, with respect to any Person, the
following:
(a) Now or hereafter in force throughout the world, including,
without limitation, all of such Person's right, title and interest in
and to all copyrights registered in the United States Copyright Office
or anywhere else in the world and also including, and all applications
for registration thereof, whether pending or in preparation, and all
copyrights arising from such applications;
(b) All extensions and renewals of any of the above;
(c) All copyright licenses and other agreements providing such
Person with the right to use any of the types of items referred to in
clauses (a) and (b) of this definition;
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(d) The right to xxx for past, present and future
infringements with respect to the Copyright Property described in
clauses (a) and (b) of this definition and, to the extent applicable,
clause (c) of this definition; and
(e) All proceeds of the foregoing, including, without
limitation, licenses, royalties, income, payments, claims by such
Person against third parties for past, present or future infringements
with respect to the Copyright Property described herein, to the extent
applicable, and all rights corresponding thereto throughout the world.
1.20 "CO-SALE AGREEMENT" means Agreement to be mutually agreed upon by
Borrower and Lender, and executed and delivered by the Borrower and its
principal shareholder(s) pursuant to the original Loan Agreement, as such
agreement may hereafter be amended, restated, supplemented or otherwise modified
from time to time.
1.21 "CURRENT ASSETS" means the book value, determined in accordance
with GAAP, of those assets which constitute cash or which are reasonably
expected to be realized in cash or consumed within one (1) year after the date
of determination.
1.22 "CURRENT LIABILITIES" means all Indebtedness which, by virtue of
its stated contractual terms or actual acceleration, is due within one year plus
the current portion of Capitalized Lease Liabilities and long-term Debt, all as
determined in accordance with GAAP.
1.23 "CURRENT RATIO" means total Current Assets divided by total
Current Liabilities.
1.24 "DEBT" means all unsubordinated liabilities according to GAAP.
1.25 "DEFAULT" means a condition or event described in SECTION 10
hereof that, after notice or lapse of time or both, is not cured, waived or
removed within any applicable grace or cure period.
1.26 "DEFAULT RATE" means the interest rate otherwise applicable to a
given Obligation, increased by five hundred (500) Basis Points per annum at any
time that: (a) an Event of Default has occurred and has been declared by Lender
in writing; and, (b) if and only if a Cure Period is provided, such Event of
Default has not been cured or waived within any relevant Cure Period provided by
SECTION 11.6 hereof.
1.27 "DISPOSITION" means any sale, transfer, dedication, granting of an
option or right of first refusal.
1.28 "DISTRIBUTIONS" mean any dividends, profits, income, surplus,
compensation, or return of capital.
1.29 "EBIT" for any period shall mean the Net Income for such period
before Interest Expense and income tax expense used in computing such Net
Income, all as determined in accordance with GAAP.
1.30 "ENVIRONMENTAL LAWS" means all Federal and all state and local
laws, ordinances and regulations applicable to Borrower or any of its
Subsidiaries (if any), relating to:
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(i) environmental protection; (ii) standards of conduct concerning any Hazardous
Substances; or (iii) standards of conduct involving exposure to Hazardous
Substances under occupational health and safety, public health and safety or
public nuisance or menace laws, including, without limitation, the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
(including the Superfund Amendments and Reauthorization Act), 42 U.S.C. Section
9600, et seq., ("CERCLA") the Toxic Substances Control Act, 15 U.S.C. Section
2601, et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., and the Clean
Water Act, 33 U.S.C. Section 1251 et seq., the Occupational Safety and Health
Act, 29 U.S.C. Section 651 et seq., and the Safe Drinking Water Act, 42 U.S.C.
Section 300f et seq.
1.31 "EQUITY" means Borrower's stockholders' equity, determined in
accordance with GAAP.
1.32 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time and any successor thereto. "ERISA AFFILIATE" means
any Person deemed to be under common control with Borrower or any of its
Subsidiaries (if any) as specified in Section 407(d)(7) of ERISA.
1.33 "ESOP" shall mean any Employee Stock Ownership Plan, as it may be
amended from time to time, adopted by Borrower.
1.34 "EVENT OF DEFAULT" see Default.
1.35 "FACILITY" means a revolving line of credit arrangement under
which one or more Advances may be made pursuant to Section 2.1, the aggregate
outstanding principal amount of which at any given time will not exceed the
Facility Commitment (viz. $2,000,000), and the repayment terms of which are set
forth in the Facility Note and this Agreement.
1.36 "FACILITY NOTE" means that certain promissory note, dated as of
April 30, 1999, in the original principal amount of $2,000,000.00, duly executed
and delivered by Borrower to Lender (in the form of EXHIBIT A hereto), and any
note or notes taken wholly or partially in renewal or extension thereof or
substitution or replacement therefor.
1.37 "FACILITY ORIGINATION FEE" means three-eighths of one percent
(.00375%) of the Facility Commitment (viz. $7,500).
1.38 "FACILITY RATE" means a fluctuating per annum rate of interest
equal to the sum of (i) the Prime Rate; plus (ii) 000 Xxxxx Xxxxxx, calculated
on the basis of the actual number of days elapsed over a year of 360 days.
1.39 "FISCAL QUARTER" means, as applicable, one of the following
three-month periods: (a) January, February and March; (b) April, May and June;
(c) July, August and September; or (d) October, November and December.
1.40 "FISCAL YEAR" means the twelve-month period ending on December 31
of any given year.
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1.41 "FIXED ASSETS" means all assets of Borrower which are items of
equipment having useful lives extending beyond the current Fiscal Year.
1.42 "FUNDING DATE" means a date upon which an Advance is disbursed.
1.43 "GAAP" means generally accepted accounting principles set forth in
the Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants, and in Statements of the Financial Accounting
Standards Board, or in such other statement by such other body as may be
approved by a significant segment of the public accounting profession, which are
applicable in the circumstances as of the relevant date. The requirement
contained in certain provisions of this Agreement that such principles be
applied on a consistent basis shall mean that the accounting principles observed
in a current period are comparable in all material respects to those applied in
the preceding period(s). Except and as to the extent otherwise expressly
provided in this Agreement, all accounting terms shall have the meanings
provided by GAAP.
1.44 "GOVERNMENTAL AUTHORITY" means the United States of America, any
state, county or municipality, and any political subdivision of any of the
foregoing, and any agency, department, commission, district, board, bureau or
instrumentality of any of the foregoing, which now or hereafter has jurisdiction
over Borrower or all or any portion of the Collateral.
1.45 "GROSS AVAILABILITY" means, as of the time of determination, an
amount equal to twenty percent (20%) of the product of (a) total revenues less
total product sales (all as determined according to GAAP) for the immediately
preceding four (4) Fiscal Quarters, and (b) 2; provided further that the
multiplier (viz. 2) may, in Lender's sole discretion, be adjusted to reflect
changes in market conditions and/or changes in generally accepted market
valuations for companies similar to Borrower.
1.46 "HAZARDOUS SUBSTANCES" mean any petroleum product and any
substance or material, including, without limitation, friable asbestos, defined
or designated as a hazardous or toxic or, "special" substance, material or waste
by CERCLA, the Hazardous Materials Transportation Act, 49 U.S.C. Section 1802,
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., or
in the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. Section 2601
et seq., or in any applicable state or local law or environmental statute,
regulation or ordinance presently in effect.
1.47 "INDEBTEDNESS" means as applied to any Person, without
duplication: (a) all indebtedness for borrowed money; (b) obligations under
leases which in accordance with GAAP constitute Capital Leases; (c) notes
payable and drafts accepted representing extensions of credit whether or not
representing obligations for borrowed money; (d) any obligation owed for all or
any part of the deferred purchase price of property or services if the purchase
price is due more than six months from the date the obligation is incurred or is
evidenced by a note or similar written instrument; and (e) all indebtedness
secured by any Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is nonrecourse to the credit of that Person.
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1.48 "INTELLECTUAL PROPERTY" means collectively, all Computer Hardware
and Software Property, Copyright Property, Patent Property and Trademark
Property of Borrower.
1.49 "INTEREST COVERAGE RATIO" means EBIT plus Net Contributed Capital
for the immediately preceding four (4) Fiscal Quarters, divided by aggregate
Interest Expense for the immediately preceding four (4) Fiscal Quarters.
1.50 "INTEREST EXPENSE" means, for any period, the total interest
expense of a Person (including, without limitation, interest expense
attributable to Capitalized Lease Liabilities and any interest expense that has
been capitalized for any purpose) for such period, determined in accordance with
GAAP, whether paid or accrued, on all Debt for such period, including, without
limitation without duplication, (a) interest expense in respect of debt
resulting from Advances under the Facility Note, (b) commissions, discounts and
fees and charges payable in connection with letters of credit and (c) any net
payment payable in connection with any Interest Rate Hedge Agreements, less the
sum of any net credits received in connection with any Interest Rate Hedge
Agreements. For the purposes of this definition, "INTEREST RATE HEDGE
AGREEMENTS" means interest rate swap, collar agreements, interest rate future or
option contracts, currency swap agreements, currency future or option contracts
and any other similar agreements.
1.51 "IRC" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, including the rules and regulations promulgated by the
Internal Revenue Service thereunder.
1.52 "LEGAL REQUIREMENT" means any valid and enforceable law,
ordinance, order, decree, rule, regulation or requirement of any Governmental
Authority and any requirement, term or condition contained in any leases or
other writings now or in the future affecting all or any portion of the
Collateral.
1.53 "LENDER'S EXPENSES" means all reasonable expenses of Lender
(including allocated costs for the services of Lender's in-house staff, such as
appraisal expenses), incurred in connection with or to be incurred in the future
and related to: (a) fees, costs and expenses (including attorneys' fees,
allocated costs of internal counsel and fees of environmental consultants,
accountants and other professionals retained by Lender) incurred with respect to
examinations, reviews, due diligence investigations, negotiations and document
preparation in connection with the documentation, execution and administration
of the Restated Loan Documents, the Restated Loan, and any amendments, waivers,
consents, forbearances and other modifications relating thereto, and/or any
subordination or intercreditor agreements pertaining to the financing
arrangements evidenced by the Restated Loan Documents, and all related
instruments, including, without limitation, all charges for recording, filing,
appraisal fees, and expenses of Lender's outside counsel and all expenses for
the Facility Commitment; (b) the protection of the rights of Lender in
connection with the transactions and documents described herein; (c) the
enforcement of payment of Borrower, obligations to Lender, whether by judicial
proceedings or otherwise; (d) the enforcement of payment of such obligations by
any action or participation in, or in connection with, a case or proceeding
under any chapter of the Bankruptcy Code, or any successor statute thereto,
including without limitation defense of any matter brought by a debtor therein,
making any attempt to enforce remedies therein, or proposing a plan or
participating in the plan process; (e) Lender's review of documentation and
other information delivered by Borrower pursuant to the
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Restated Loan Documents and this Agreement, from time to time; (f) all expenses
paid by Lender on Borrower's behalf; and (g) all reasonable legal fees of
Lender's outside counsel (as determined by the court or arbitrator and not by a
jury if any action or arbitration is commenced, including without limitation,
any allocated costs of in-house counsel), and disbursements related to any of
the above and/or the Obligations.
1.54 "LIABILITIES" mean, at any time, the aggregate amount of all
liabilities of a Person, at such time, determined in accordance with GAAP, plus
(without duplication) all liabilities of all joint ventures and partnerships in
which said Person is a joint venturer or general partner.
1.55 "LIEN" means any deed of trust, mortgage, pledge, security
interest, encumbrance, judgment or tax lien, or other lien or encumbrance or
charge of any kind (including, without limitation, any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of any agreement, financing
statement, mortgage, deed of trust, judgment, tax lien or other similar form of
public notice under the laws of any jurisdiction).
1.56 "LOAN" means the aggregate Advances made pursuant to the original
Loan Documents, and all amendments, modifications, increases, decreases,
renewals and/or extensions of any one or more of the foregoing.
1.57 "LOAN DOCUMENTS" means the original Loan Agreement, Notes,
Security Documents, UCC-1's and any other documents executed or certified in
connection with the original Loan.
1.58 "MATERIAL ADVERSE CHANGE" means any change in the financial
condition, results of operation, assets, business, or prospects of a Borrower,
that in the reasonable opinion of Lender (i) could impair the ability of
Borrower to repay the Restated Loan or to otherwise reliably perform in
accordance with the provisions of the Restated Loan Documents, (ii) could be
material and adverse to the financial condition or business operation of
Borrower and its Subsidiaries (if any), taken as a whole, or (iii) causes an
Event of Default or any Potential Default.
1.59 "MATERIAL ADVERSE EFFECT" means, with respect to a Person relative
to any condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration, or governmental investigation or
proceeding), a material adverse effect on: (i) the consolidated financial
condition, results of operations, or cash flow of such Person, taken as a whole;
or (ii) the current or prospective ability of such Person to perform any of its
payment or other material obligations under this Agreement or any other Restated
Loan Document to which it is a party; or (iii) any circumstance or event which
causes a Material Adverse Change.
1.60 "NET AVAILABILITY" means, as of the time of determination, Gross
Availability less the outstanding principal balance of the Restated Loan.
1.61 "NET CONTRIBUTED CAPITAL" means equity capital contributed to
Borrower, less all costs and expenses incurred by Borrower in seeking and/or
obtaining such capital.
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1.62 "NET INCOME" means, for any period, the sum of all amounts which
would be included as net earnings on the consolidated statements of earnings of
a Person for such period, determined in accordance with GAAP.
1.63 "NET PROCEEDS" with respect to any Disposition of, Collection on,
or the receipt of insurance, condemnation or similar proceeds with respect to,
any real or personal property, or with respect to any Distribution, means the
full amount of the proceeds of such event or transaction less: (i) reasonable
and customary direct costs, expenses and commissions actually incurred by
Borrower in connection with such event or transaction (other than any costs,
commissions or expenses paid or payable to Borrower, or any Affiliate of
Borrower), (ii) the amount actually paid to discharge any prior permitted Lien
upon such property or Indebtedness or liability not assumed by the buyer or
transferee, if any; and (iii) income taxes payable by Borrower as a result of
such event or transaction; provided, however, that the total amount by which Net
Proceeds are reduced in any tax year for income taxes payable by any Person
shall not exceed the total amount of income taxes payable by such Person for the
tax year in which such event or transaction occurred (with appropriate
adjustments made for installment sales taxable in more than one tax year). For
the purpose of the proviso contained in this definition, all Persons within the
same consolidated return group shall be considered one Person.
1.64 "NET WORTH" of a Person means, at any time, total Equity
(determined in accordance with GAAP).
1.65 "NOTE(S)" means the promissory notes made by Borrower pursuant to
the original Loan Agreement.
1.66 "OBLIGATIONS" means all of Borrower's debts, obligations and
liabilities arising under or by virtue of the Restated Loan Documents and/or the
(non)performance thereof, and all other present and future debts, obligations
and liabilities of any nature whatsoever of Borrower to Lender, and all
modifications, renewals, replacements, refundings and extensions thereof.
1.67 "PATENT PROPERTY" means, with respect to any Person:
(a) All of such Person's inventions (whether or not patentable
and whether or not reduced to practice) and all of such Person's
patents, patent applications (including, without limitation, all
patents and patent applications in preparation for filing) and patent
disclosures throughout the world;
(b) All reissues, divisions, continuations,
continuations-in-part, revisions, extensions, renewals and
reexaminations of any of the items described in clause (a) of this
definition;
(c) All patent licenses of such Person (whether as licensee or
licensor);
(d) The right to xxx third parties for past, present or future
infringements of any Patent Property described herein, to the extent
applicable, and
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(e) All proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits),
including any claim by such Person against third parties for past,
present or future infringements of any patent or (to the extent
applicable or permitted as a matter of law) patent covered by a patent
license and all rights corresponding thereto throughout the world.
1.68 "PERMITTED LIENS" shall mean those Liens to which the Collateral
is subject that are prior to the Liens of the Restated Security Documents, and
which consist of the following:
(a) Any Lien on furniture, fixtures, equipment or software to
secure the purchase price thereof;
(b) Any Capital Leases;
(c) Liens for taxes, assessments or governmental charges not
yet due and payable; and
(d) Liens to which Lender shall consent in writing, in its
sole and absolute discretion.
1.69 "PERSON" means an individual, partnership, corporation, including
a "business trust," limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
1.70 "POTENTIAL DEFAULT" means a condition or event which, but for the
lapse of time or the giving of notice, or both, would constitute a Default or
Event of Default.
1.71 "PRIMARY BUSINESS" means Borrower's business as conducted on the
Restated Closing Date.
1.72 "PRIME RATE" means a fluctuating interest rate per annum equal to
the rate of interest established, from time to time (whether or not charged in
each instance), by Lender, as Lender's "Prime Rate." Each change in the Prime
Rate (or any component thereof) shall become effective, without notice to
Borrower (which notice is hereby expressly waived by Borrower), on the effective
date of each such change. Should Lender, during the term of this Agreement,
abolish or abandon the practice of establishing a Prime Rate, then the Prime
Rate used during the remaining term of this Agreement shall be that interest
rate then in effect at Lender, which, from time to time, in the reasonable
judgment of the holder of a Note and this Agreement, most effectively
approximates the original definition of Lender's Prime Rate. Borrower
acknowledges that Lender may, from time to time, extend credit to other Persons
at rates of interest varying from, and having no relationship to, the Prime
Rate. A certificate signed by any Vice President of Lender shall be conclusive
evidence of the Prime Rate at any given time.
1.73 "PROCEEDS" means all Collections, Distributions and whatever is
received upon the sale, exchange, collection or other Disposition of real or
personal property or proceeds thereof (including proceeds of proceeds), and
shall include any and all: (i) rights, benefits, distributions, premiums,
profits, dividends, interest, cash, instruments, documents of title,
receivables, accounts,
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contract rights, inventory, equipment, general intangibles, deposit accounts,
chattel paper and other property from time to time received, receivable, or
otherwise distributed in respect of, or in exchange for, or as a replacement of
or a substitution for, any of such property; (ii) proceeds of any insurance,
indemnity, warranty, or guaranty (including guaranties of delivery) receivable
from time to time with respect to any of such property; (iii) payments (in any
form whatsoever) received or receivable from time to time, in connection with
any requisition, confiscation, condemnation or taking by eminent domain,
seizure, or forfeiture of all or any part of such property; (iv) distributions
from non-wholly owned joint ventures; and (v) any other amounts from time to
time received or receivable under or in connection with any of such property.
Money, checks, deposit accounts or other Cash Equivalents are "Cash Proceeds."
All other proceeds are "Non-Cash Proceeds."
1.74 "RELATED PERSON" means any insider or affiliate (or insider or
affiliate of any such insider or affiliate) of Borrower, determined by assuming
that Borrower or other affiliate or insider was a "debtor" as defined in Section
101 of the Bankruptcy Code at the time of determination of Related Person
status. For purposes of the preceding sentence only, the terms "affiliate" and
"insider" shall have the meanings provided for those terms by Section 101 of the
Bankruptcy Code, but does not include any officer of the Borrower that is not
also an owner of stock in Borrower.
1.75 "RESTATED CLOSING DATE" means the Business Day on which all the
requirements and conditions precedent set forth in SECTION 4 hereof shall have
been satisfied and the transaction contemplated by this Agreement shall
consummate, but not later than April 30, 1999.
1.76 "RESTATED COMMITMENT" means, as of the time of determination, and
subject to the limitations of the Borrowing Base then applicable and the
provisions of SECTION 2.1 hereof, $2,000,000.
1.77 "RESTATED INTELLECTUAL PROPERTY SECURITY AGREEMENT" means the
Security Agreement and Mortgage-Trademarks and Copyrights, as restated and
amended, to be executed and delivered by the Borrower in substantially the form
of EXHIBIT D, as such agreement may hereafter be amended, restated, supplemented
or otherwise modified from time to time, pursuant to which the Borrower shall
duly (re)pledge to Lender all Intellectual Property and certain other rights,
properties, and assets.
1.78 "RESTATED LOAN" means the aggregate Advances made pursuant to the
Facility, as the case may be, and all amendments, modifications, increases,
decreases, renewals and/or extensions of any one or more of the foregoing.
1.79 "RESTATED LOAN DOCUMENTS" means this Agreement, the Facility Note,
Restated Security Documents, UCC-1's and any other documents executed or
certified in connection with the Restated Loan.
1.80 "RESTATED LOAN PARTY" means, collectively, the Borrower and each
of its Subsidiaries (if any) which is or becomes a party to any Restated Loan
Document.
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1.81 "RESTATED LOAN PROCEEDS" means all funds from any Restated Loan
Advance to Borrower, or to a third party on behalf of Borrower.
1.82 "RESTATED MATURITY DATE" means April 30, 2000, unless such date is
extended by written agreement between the parties hereto.
1.83 "RESTATED SECURITY AGREEMENT" means the Security Agreement,
restated and amended, to be executed and delivered by the Borrower in
substantially the form of EXHIBIT E, as such agreement may hereafter be amended,
restated, supplemented or otherwise modified from time to time, pursuant to
which the Borrower shall duly pledge to Lender all of its rights, properties,
and assets.
1.84 "RESTATED SECURITY DOCUMENTS" means the Restated Security
Agreement and the Restated Intellectual Property Security Agreement, as the same
may hereafter be amended, modified and/or supplemented, and all other writings
now or hereafter executed to create, evidence and/or perfect any Lien(s) to
secure the Obligations or any portion(s) thereof.
1.85 "SECTION" means a numbered section of this Agreement, unless
another document is specifically referenced.
1.86 "SECURITY AGREEMENT" means the Security Agreement previously
executed and delivered by the Borrower pursuant to the original Loan Agreement,
pursuant to which the Borrower pledged to Imperial Bank Arizona all of its
rights, properties, and assets.
1.87 "SECURITY DOCUMENTS" means the Security Agreement and the
Intellectual Property Security Agreement previously executed pursuant to the
original Loan Agreement to create, evidence and/or perfect Lien(s) to secure the
Obligations.
1.88 "SHAREHOLDERS" means the Persons identified on EXHIBIT F hereto
who are the current holders of the issued and outstanding capital stock of
Borrower.
1.89 "SOFTWARE PROPERTY" shall mean the following:
(a) All software programs (including source code, object code
and all related applications and data files), whether now owned,
licensed or leased or hereafter acquired by Borrower;
(b) All firmware associated with the property described in
clause (a) of this definition;
(c) All documentation (including flow charts, logic diagrams,
manuals, guides and specifications) with respect to the software and
firmware described in the preceding clauses (a) and (b) of this
definition; and
(d) All rights held by Borrower with respect to all of the
foregoing, including without limitation, any and all copyrights,
licenses, options, warranties, service contracts, program services,
test rights, maintenance rights, support rights, improvement rights,
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renewal rights and indemnifications and substitutions, replacements,
additions or model conversions of any of the foregoing.
1.90 "SUBORDINATED DEBT" means Debt owed to a Related Person, an
Affiliate of Borrower or a Person who has contractually subordinated
Indebtedness owed by Borrower to that Person to Indebtedness owed by Borrower to
Lender.
1.91 "SUBSIDIARY" of any Person means a corporation, partnership,
association or other business entity of which such Person owns beneficially or
controls directly or indirectly through one or more intermediate Subsidiaries
sufficient voting stock or other equity interest which is entitled ordinarily to
vote for the election of directors or other governing body (however designated)
to be assured of being able to elect a majority of the directors or other
governing body or which is entitled to share more than fifty percent (50%) of
the profits and losses, however determined.
1.92 "TRADEMARK APPLICATIONS" shall mean (i) all applications for
Trademarks that have been filed in the U.S. Patent and Trademark Office as of
the effective date of this Restated Security Agreement, or in the future, that
have not yet issued as trademarks, all whether now or hereafter owned or
licensable by Borrower, including, but not limited to, those described on
Schedule A-2 of EXHIBIT D hereto and (ii) all reissues, continuations,
continuations-in-part, divisional or term restorations and all extensions
thereof and all licenses thereof.
1.93 "TRADEMARKS" mean (i) all trademarks, trade names, trade dress,
service marks, prints and labels on which said trademarks, trade names, trade
dress and service marks have appeared or appear, designs and general intangibles
of like nature, now existing or hereafter adopted or acquired, all right, title
and interest therein and thereto, and all registrations and recordings thereof,
including, without limitation, applications (excluding, however, intent-to-use
applications), registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof, or any other country or any political subdivision thereof, all
whether now or hereafter owned or licensable by Borrower, including, but not
limited to, those described in Schedule A-1 of EXHIBIT D annexed hereto and made
a part hereof, and (ii) all reissues, extensions or renewals thereof and all
licenses thereof (including, without limitation, all license agreements).
1.94 "TRADEMARK PROPERTY" shall mean, with respect to any Person, the
following:
(a) Now or hereafter in force throughout the world, including,
without limitation, all of such Person's right, title and interest in
and to all Trademarks, Trademark Applications, the goodwill of the
business symbolized by Trademarks, all customer lists and other records
relating to the distribution of products bearing the Trademarks;
(b) All extensions and renewals of any of the above;
(c) All Trademark licenses and other agreements providing such
Person with the right to use any of the types of items referred to in
clauses (a) and (b) of this definition;
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(d) The right to xxx for past, present and future
infringements with respect to the Trademark Property described in
clauses (a) and (b) of this definition and, to the extent applicable,
clause (c) of this definition; and
(e) All proceeds of the foregoing, including, without
limitation, licenses, royalties, income, payments, claims by such
Person against third parties for past, present or future infringements
with respect to the Trademark Property described herein, to the extent
applicable, and all rights corresponding thereto throughout the world.
1.95 "UCC" means the California Uniform Commercial Code, including the
Comments of the National Commissioners on Uniform State Laws published as a part
thereof.
1.96 "UCC DEFINITIONS" means the terms "inventory", "documents",
"equipment", "accounts", "account debtors", "instruments", "chattel paper",
"general intangibles", "deposit accounts", "proceeds", and "good faith", when
used in this Agreement or any writing executed in connection with or referred to
in this Agreement, that shall have the same meanings as are provided in the UCC
in effect on the date of this Agreement for such terms (notwithstanding any
other or different statutory definitions in any other state(s) in which any
inventory or lessor or lessee may be located); provided that the term "deposit
accounts" shall include certificates of deposit and any other credit balances of
any nature in or with any financial institution.
1.97 "UCC-1's" means those Uniform Commercial Code Financing
Statements, Forms UCC-1, executed by Borrower, and all extensions, amendments
and renewals thereof.
1.98 "WARRANT" means that certain warrant issued by Borrower to Lender,
and any warrant taken wholly or partially in substitution or exchange therefore
or in replacement thereof.
Certain additional terms used herein shall have the meanings provided in SECTION
12.9 of this Agreement.
SECTION 2 -- BASIC TERMS OF THE RESTATED LOAN
2.1 The Facility.
(a) Advances. Subject to the terms and conditions of this
Agreement, Lender agrees to advance money to or on behalf of Borrower,
as Borrower shall request from time to time, provided: (i) on the date
upon which the disbursement of an Advance is to be made, all applicable
conditions precedent have been satisfied, and Lender shall be in
possession of or be satisfied as to the terms or matters described in
section 4 of this Agreement (as well as satisfaction of other
conditions specified elsewhere herein or in the Restated Loan Documents
which are applicable to such Advance); (ii) each such request is made
prior to the Maturity Date; (iii) the purpose for which an advance is
requested is to pay in full the Existing Loan, for general corporate
purposes or for the short-term working capital needs of Borrower; and
(iv) (A) immediately upon disbursement of the Advance, the aggregate
unpaid principal balance of the Facility Note does not exceed the
Facility Commitment, (B) the amount of the Advance does not exceed the
then effective Net
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Availability, and (C) such Advance would not cause a violation of any
of the financial covenants set forth in SECTION 9.7.
(b) Reborrowings. Subject to the terms and conditions hereof,
Borrower may borrow, prepay and reborrow under SECTION 2.1(a) so long
as (a) the principal balance of the Facility Note at any time
outstanding does not exceed the Facility Commitment and (B) the amount
of an advance does not exceed the then effective Net Availability.
Lender, at its option, from time to time may make advances to or on
behalf of Borrower in excess of the above stated limitations without
impairing Lender's right to demand, at any time, repayment of such
excess upon ten (10) days' written demand from Lender. Borrower's
obligation to repay each advance made pursuant to this Section and to
pay interest thereon, shall be evidenced by the Facility Note and this
Agreement.
(c) Maturity. The Facility shall become fully due and payable
and no addition Advances shall be available on or after the Restated
Maturity Date.
(d) Principal and Interest Payments. Borrower shall pay to
Lender (in arrears) accrued but unpaid interest, computed at the
Facility Rate, on all sums outstanding under the Facility on the fifth
day of each calendar month following the Restated Closing Date and
thereafter until the Restated Maturity Date, at which time Borrower
shall pay to Lender the amount necessary to pay in full all remaining
principal and interest, together with any Lender's Expenses due Lender.
(e) Unused Commitment Fee. From and after the Restated Closing
Date, Borrower shall pay Lender an unused commitment fee for the
immediately preceding Fiscal Quarter, in an amount equal to one-half of
one percent (0.50%) per annum multiplied by an amount equal to the
difference between the Facility Commitment and the average daily
balance of the Facility during the immediately preceding Fiscal
Quarter. Such fee shall be calculated on the basis of a 360-day year
for the actual number of days elapsed and be payable in arrears,
beginning on the fifteenth (15th) day of the First Fiscal Quarter
following the Restated Closing Date, on the fifteenth (15th) day of
each Fiscal Quarter thereafter, and on the Restated Maturity Date;
provided that, if the Commitment is at any time terminated in its
entirety, all accrued commitment fees relating thereto shall be payable
at the applicable rate on the effective date of such termination.
SECTION 3 -- GENERAL ADVANCE AND REPAYMENT PROCEDURES
3.1 Advances Evidenced and Secured By Restated Loan Documents. All
Advances made by Lender pursuant to this Agreement and all other Obligations,
whether arising from Advances made by Lender under this Agreement, reasonable
costs incurred by Lender for purposes of preserving or protecting the Collateral
pursuant to any of the Restated Security Documents, reasonable costs incurred by
Lender in collecting any portion of the Obligations or in enforcing any of its
rights under any of the Restated Loan Documents or any other amounts that
Borrower are obligated to pay to Lender pursuant to the Restated Loan Documents,
shall be evidenced by the Facility Note, and secured by the Liens of the
Restated Security Documents.
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3.2 Requests for Advances. Subject to the provisions of SECTIONS 2 AND
4, Lender shall make Advances under the Facility upon receipt of appropriate
requests therefor signed by one of the Authorized Signators in a form reasonably
satisfactory to Lender, together with such information and writings as this
Agreement may require to obtain such Advances under the Restated Loan. Borrower
shall make its requests for Advances not later than 10:00 a.m. on the date an
Advance is required to be disbursed. All requests for Advances shall: (a)
contain the appropriate information required by SECTION 2 hereof; and (b)
clearly identify any amounts requested for payment of the Restated Loan.
3.3 Withholding from Advances. Upon the occurrence of an Event of
Default, Lender is expressly authorized to withhold from any Advance under this
Agreement, or portion thereof, as Lender in its discretion considers necessary
to protect Lender from loss on account of any obligation required by this
Agreement to have been performed by Borrower that has not been performed.
3.4 Protective Advances. Although Lender shall have no obligation to
make any Advance under this Agreement unless and until all of the relevant
conditions set forth herein have been fulfilled, Lender, in its sole discretion,
may make such Advance prior to that time without waiving or releasing any of the
requirements or conditions of this Agreement; but Borrower shall continue to be
strictly obligated and subject thereto, and all such conditions shall
nevertheless be strictly and punctually fulfilled; and, notwithstanding any such
disbursement, Lender, at its discretion, may discontinue any further Advances at
any time until all of the relevant conditions of this Agreement have been
strictly fulfilled. In the event of any dispute that, in the good faith opinion
of Lender, may endanger the fulfillment of any condition or covenant contained
herein, Lender may agree to make Advances for the account of Borrower without
prejudice to Borrower's rights, if any, to recover said funds from the party to
whom paid. All sums paid or agreed to be paid pursuant to such agreement shall
be for the account of Borrower, and shall constitute Advances pursuant to
SECTION 2.1. At any time that an uncured or non-waived Event of Default exists,
Lender may at its sole option make Advances from the Restated Loan in payment of
taxes, assessments, liens or encumbrances existing against any of the
Collateral, and any charges and expenses that are the obligation of Borrower
under any of the Restated Loan Documents. Notwithstanding what may otherwise be
provided herein, Lender shall not make Advances in payment of taxes,
assessments, liens or encumbrances if Borrower is then contesting such liability
and Borrower has provided a bond or other form of additional collateral security
acceptable to Lender (in its sole and absolute discretion) which when liquidated
would provide enough cash to satisfy all obligations of Borrower under such
liability including, without limitation, interest, penalties, costs and fees.
All Advances pursuant to this SECTION 3.4 shall be deemed made under and added
to the outstanding balance of Facility Note and bear interest as provided
thereunder.
3.5 Telephonic Notice of Advance Request. If Borrower elects to give
telephonic notice to Lender of its advance request, then Borrower shall promptly
mail written confirmation thereof to Lender, which confirmation shall be signed
by one of the Authorized Signators. In implementing this arrangement under this
SECTION 3.5, Lender is authorized to act upon and honor any such telephonic
notice which Lender believes, in its sole discretion, to emanate from an
Authorized Signator acting pursuant to this Agreement, whether in fact that be
the case or not, and
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Lender shall not be liable for acting in good faith on notices which emanate
from unauthorized individuals.
3.6 Disbursement of the Restated Loan. Lender, at its option, may waive
any condition to disbursement of any Advance or any disbursement procedure set
forth in SECTION 4 hereof, but no such waiver shall be deemed to constitute a
waiver of any other condition or procedure. Lender shall disburse the amounts
requested by direct deposit into Borrower's account with Lender or as otherwise
directed by Borrower.
3.7 Statements. Lender shall send to Borrower monthly interest
xxxxxxxx or statements by regular first class United States mail setting forth
the accrued and unpaid balances of principal and interest due on the Restated
Loan, and Borrower agrees to advise Lender with reasonable promptness if
Borrower is aware of any errors therein.
3.8 Time and Place of Payments. All payments of the Obligations
(including without limitation payments of interest thereon), shall be made not
later than 5:00 p.m. Phoenix, Arizona Time at the primary office of Lender in
Xxxxxxx, Xxxxxxx 00000. Funds received after such hour on any Business Day shall
be treated for all purposes of this Agreement as having been received on the
next succeeding Business Day. Whenever any payment to be made pursuant to the
Restated Loan Documents is due on a Saturday, Sunday or any other day which is
not a Business Day, such payment may be made on the next succeeding Business
Day, and such extension of time shall in such case be included in computing
interest in connection with such payments. Borrower authorizes Lender to
collect all interest, fees, costs, and/or expenses due under this Agreement by
charging Borrower's demand deposit account number 00000000 with Lender, or any
other demand deposit account maintained by Borrower with Lender, for the full
amount thereof. Should there be insufficient funds in any such demand deposit
account to pay all such sums when due, the full amount of such deficiency shall
be immediately due and payable by Borrower.
3.9 Prepayment. Borrower may at any time, and from time to time, repay
the Obligations in whole or in part without penalty, provided that all accrued
and unpaid interest on the Obligations to be prepaid is also paid. All such
prepayments shall be applied in the inverse order of maturity. All prepayments
made by Borrower to Lender, shall be in lawful money of the United States of
America in federal or other funds immediately available to Lender in Phoenix,
Arizona.
3.10 Insurance and Condemnation Proceeds. Any Net Proceeds payable
with respect to a loss under any property insurance policy of any kind, now
existing or after acquired, of any Collateral, any Net Proceeds from any award
or compensation from any proceeding for the condemnation or taking by eminent
domain of any Collateral, any Net Proceeds of other involuntary conversions of
Collateral, and any portions thereof shall be payable to Lender as loss payee,
and, except as otherwise provided in this SECTION 3.10, released to Borrower
subject to any provisions of this SECTION 3.10.
(a) Conditions for Release of Proceeds to Borrower. Provided
no Event of Default is then in effect and Borrower's Obligations have
not been accelerated, Lender shall release the Net Proceeds described
in SECTION 3.10 to Borrower, or, at the discretion of Lender, the
Person responsible for doing the repair or supplying the replacement of
the relevant Collateral upon receipt of a certificate from Borrower
accompanied by appropriate
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evidence of the matters asserted therein that the Collateral with
respect to which a property loss occurred has been repaired or
replaced, or will be so repaired or replaced using such Net Proceeds,
that the amount to be released does not exceed the cost of the repair
or replacement, and that the amount to be released will be expended for
such repair or replacement immediately after its release by Lender.
Notwithstanding the foregoing, Lender shall not be required to
authorize the release or payment of any such Net Proceeds resulting
from any one incident where the Net Proceeds with respect to said loss,
damage or destruction exceed $250,000.00 and where replacement or
repair of the relevant Collateral is not necessary (in the reasonable
judgment of Borrower) for the conduct of Borrower's on-going Primary
Business. In any such case Lender, in its discretion, may elect to
apply such Net Proceeds to the repayment of Borrower's Obligations (to
be applied as if Net Proceeds from a Disposition of the relevant
Collateral) or allow, as permitted herein, such Net Proceeds to be paid
or released in the manner provided herein to Borrower in such amounts
and on such terms as Lender may require.
(b) Proceeds Received After Acceleration of Obligations. Net
Proceeds payable as the result of property losses, condemnation awards,
and other involuntary conversions of Collateral and the allocation and
distribution thereof while a notice of acceleration of Obligation is in
effect, shall be paid to Lender. Any insurance Net Proceeds, or Net
Proceeds from a condemnation award, or Net Proceeds of other
involuntary conversions of assets, received by Borrower with respect to
Collateral when a notice of acceleration of Obligations is in effect
shall be held by Borrower in trust for Lender, shall be segregated from
other funds of Borrower and shall, forthwith upon receipt, be turned
over to Lender without any request from Lender, in the same form as
received by Borrower (duly endorsed to Lender, if required), for
application to the Borrower's Obligations.
SECTION 4 -- CLOSING AND CLOSING ADVANCES
4.1 Conditions Precedent to Lender's Obligations. This Agreement (other
than this SECTION 4), shall become effective as of the date hereof if, but only
if, and Lender shall not be obligated to disburse all or any portion of the
principal amount of the Restated Loan unless, on or before the Restated Closing
Date and at the time of each Funding Date each condition or event described in
SECTION 4.3 has occurred or been satisfied, Lender has received each item
described in SECTION 4.2, and each other condition specified elsewhere herein or
in the Restated Loan Documents which are applicable to the Advance have been
satisfied.
4.2 Documentary Conditions. Lender shall have received the following
(together with such other agreements, notes, certificates, orders,
authorizations, financing statements, mortgages and other documents which Lender
may at any time reasonably request), which, in the case of any instrument,
agreement or other document, shall be in form and substance satisfactory to and
approved by Lender, in recordable form where appropriate, and duly and validly
executed, endorsed and delivered by Borrower or such other Person as may be
appropriate:
(a) Authority. All of: (i) a copy of the articles of
incorporation of Borrower, and all amendments thereto (certified by the
Arizona Corporation Commission); (ii) a copy of Borrower's current
bylaws and all amendments thereto certified by the secretary of
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Borrower; (iii) a certificate of Good Standing of Borrower issued by
the Arizona Corporation Commission; (iv) copies of resolutions of the
board of directors of Borrower, authorizing the execution, delivery and
performance of the Restated Loan Documents by Borrower and all acts and
transactions required or contemplated thereunder or thereby,
(certified by the secretary of Borrower); (v) a certificate of
incumbency of Borrower's officers, certified by the secretary of
Borrower; (vi) any corporate documents or amendments thereto not
previously delivered to Lender; and (vii) any other organization
documents and/or verifications of authority, consents and existence as
Lender may require in its sole and exclusive discretion.
(b) Audited Financials. The most recent draft of the audited
consolidated financial statements of Borrower for the fiscal year
ending December 31, 1998, to be certified by independent public
accountants satisfactory to Lender, and in form and substance
satisfactory to Lender.
(c) Expenses. All of Lender's Expenses incurred through the
Restated Closing Date or as of any Funding Date, as the case may be.
(d) Fees. The Facility Origination Fee.
(e) Insurance Policies and Certificates. Copies of all
policies of insurance, endorsements thereto, and certificates required
under the Restated Loan Documents, accompanied by evidence of payment
of the premiums therefor.
(f) Restated Loan Documents. The Restated Loan Documents and
such other documents required by this Agreement or any of the Restated
Loan Documents as in Lender's opinion may be necessary and/or
appropriate to evidence or effectuate the intent of this Agreement or
any Restated Loan Document. Lender shall also have received all other
Security Documents, collateral assignments, financing statements for
filing and/or recording and any other Lien writings required by Lender
to evidence, create, perfect, and continue the Liens and security
interests of Lender. A carbon, photographic or other reproduced copy of
this Agreement and/or any financing statement relating hereto shall be
sufficient for filing and/or recording as a financing statement.
(g) Landlord Consents. To the extent that such can be obtained
with reasonable, good faith effort, a written agreement with each
landlord of a premises leased by Borrower, containing such consents and
waivers (in favor of Lender) as may be reasonably required by Lender.
(h) UCC Search. UCC, tax lien and judgment lien searches with
respect to the Collateral, in each case dated not earlier than March
31, 1999, and indicating no prior Liens.
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4.3 Non-Documentary Conditions. The following conditions shall have
occurred, exist or not exist, as applicable:
(a) Accuracy of Information. Lender must be satisfied that no
information, document, exhibit or report furnished to Lender by
Borrower in connection with the negotiation or execution of the
Restated Loan Documents, or in connection with Borrower's application
for the Restated Loan, and no report, statement or information required
to be furnished by Borrower to Lender under the Restated Loan
Documents, has contained or will contain, any material misstatement of
fact, or any omission of a material fact or any other fact necessary to
make any statement contained therein not misleading.
(b) Collateral. Lender must be satisfied that there have been
no Material Adverse Changes in the Collateral. Lender shall have
completed such examinations and/or audits of the Collateral as Lender
deems necessary in its sole and absolute discretion.
(c) Default. There shall exist no condition, event or act that
would constitute an event of Default or Potential Default under any of
the Restated Loan Documents and no condition, event or act which, as a
result of the giving of notice or the lapse of time, or both, as
specified in this Agreement, would constitute such an event of Default.
(d) Litigation. There shall not be pending or, to the
knowledge of Borrower, threatened, any action, charge, claim, demand,
suit, proceeding, petition, governmental investigation or arbitration
against or affecting any Restated Loan Party or any property of any
Restated Loan Party that could have a Material Adverse Affect and that
has not been disclosed by Borrower in writing, and there shall have
occurred no development in any such action, charge, claim, demand,
suit, proceeding, petition, governmental investigation or arbitration
that, in the opinion of Lender, would reasonably be expected to have a
Material Adverse Effect.
(e) Management. The chief executive officer of Borrower is
Xxxxx Xxxxxx.
(f) Margin Regulations. Lender must be satisfied that the
making of the Restated Loan requested on such Funding Date does not
violate Regulation G, Regulation T, Regulation U or Regulation X of the
Board of Governors of the Federal Reserve System.
(g) Material Adverse Change. No event shall have occurred
which has had or, in the opinion of Lender, could be reasonably
expected to have a Material Adverse Effect, and there has occurred no
Material Adverse Change, in the opinion of Lender, since the date of
the most recent audited financial statements of Borrower delivered to
Lender.
(h) Net Contributed Capital. Borrower shall have completed its
contemplated $5,000,000.00 equity offering with ABN AMRO Capital (USA),
Inc., 1 Eagle Trust, ABN AMRO Incorporated as manager and ABN AMRO
Incorporated, from which Borrower shall have received not less than
$2,999,998.
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(i) Security Interests. Lender shall have received
satisfactory evidence that all security interests and liens granted to
Lender pursuant to this Agreement or the other Restated Loan Documents
have been duly perfected and constitute first priority liens on the
Collateral.
(j) Performance of Agreements. Each Restated Loan Party shall
have performed in all material respects all agreements and satisfied
all conditions which any Restated Loan Document provides shall be
performed by it on or before that Funding Date.
(k) Permitted Liens. Lender shall have received satisfactory
evidence that none of the Collateral is subject to any Liens except
Permitted Liens.
(1) Prohibitions. Lender must be satisfied that no order,
judgment or decree of any court, arbitrator or governmental authority
shall purport to enjoin or restrain Lender from making any Restated
Loan.
(m) Representations and Warranties. Lender must be satisfied
that the representations and warranties contained herein and in the
Restated Loan Documents shall be true, correct and complete in all
material respects on and as of that Funding Date to the same extent as
though made on and as of that date, except for any representation or
warranty limited by its terms to a specific date and taking into
account any amendments to the Schedules or Exhibits as a result of any
disclosures made by Borrower to Lender after the Restated Closing Date
and approved by Lender.
(n) Shareholders. Xxxxx Xxxxxx owns not less than 25% of the
common stock of Borrower.
(o) Solvency. Lender must be satisfied that on the Restated
Closing Date, Borrower owns and will own assets the fair valuation and
the fair salable value of which (each as determined in a manner and
based upon assumptions acceptable to Lender) are (i) materially greater
than the total amount of liabilities (including contingent liabilities)
of Borrower and (ii) materially greater than the amount that will be
required to pay the probable liabilities of Borrower, on a combined
basis as they mature.
(p) Third-Party Approvals. Lender must be satisfied that any
Person that is required pursuant to any instrument, contract,
commitment or other agreement of any kind, or pursuant to any law or
regulation to assent to or in any manner approve of any of the acts or
transactions contemplated by this Agreement (or any of the other
Restated Loan Documents), or the means of effecting any of the same,
shall have given such assent or approval, and shall have been duly
authorized so to do.
SECTION 5 - RESTATED SECURITY AGREEMENT AND COLLATERAL
5.1 Grant of Security Interest. It is the intention of the parties
hereto that the Obligations shall constitute one indebtedness, and shall
constitute one general obligation, including all whole or partial extensions,
renewals or replacements thereof, and including any obligation to perform or
forbear from any action as well as any obligation to pay money. To secure the
payment
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and performance of the Obligations, and to the extent not already created in
favor of and granted to Lender, Borrower hereby creates and grants to Lender a
security interest in the Collateral.
5.2 Borrower's Duties Regarding Collateral. Borrower agrees as follows:
(a) General Maintenance of Collateral. Borrower: (i) shall
maintain the Collateral in good condition and repair (ordinary wear and
tear and depreciation excepted) and shall not permit its value to be
materially impaired; (ii) shall keep the Collateral free from all
Liens (other than the Liens of ad valorem property taxes which are not
delinquent, any statutory landlords' liens which are covered by lien
waivers, and any Liens in favor of Lender); (iii) shall defend the
Collateral against all claims and legal proceedings by persons other
than Lender; (iv) shall pay and discharge when due all taxes, levies
and other charges upon the Collateral; (v) shall not sell, lease or
otherwise dispose of the Collateral or permit it to become a fixture or
an accession to other goods, except for sales or leases of equipment or
obsolete, damaged or replaced equipment in the ordinary course of
business and except as specifically authorized in this Agreement; and
(vi) shall not permit the Collateral to be used in violation of any
Legal Requirement or any policy of insurance. Notwithstanding the
foregoing, Borrower may, in its sole and absolute discretion, obtain
financing for its future acquisitions of vehicles or equipment from
third party lenders, and grant or convey to such third party lenders
such purchase money liens and security interests as may reasonably be
required by such third party lenders, provided only, that the vehicles
or equipment purchased or financed with all or part of the Proceeds of
one or more of the Restated Loan made hereunder, shall be and remain
free of any liens or security interests in favor of such third party
lenders. Upon Borrower's written request, and at Borrower's cost and
expense, Lender shall enter into intercreditor agreements or execute
lien waivers as may reasonably be required by such third party lenders
incident to their financing of Borrower's vehicles or equipment.
(b) Insurance. Borrower shall keep all Collateral and Lender's
interest in it insured under policies with such provisions, for such
amounts and by such insurers as shall be reasonably satisfactory to
Lender from time to time and shall furnish evidence of such insurance
satisfactory to Lender. Each policy shall be payable to the Borrower
and Lender as their interests appear. Borrower assigns and directs any
insurer to pay to Lender the Proceeds of all such insurance and any
premium refunds, and authorizes Lender to endorse in the name of
Borrower any instrument for such Proceeds or refunds, and to apply such
Proceeds or refunds as provided in SECTION 3.10 hereof. Lender is
authorized, in the name of Borrower or otherwise, to make, adjust or
settle claims under or cancel any insurance on the Collateral.
(c) Lien Waivers. Borrower shall (to the extent such can be
obtained with reasonable, good faith effort) obtain and provide to
Lender appropriate lien waivers from all present and future lessors of
real property upon which any of the Collateral consisting of goods or
any other Fixed Assets is at any time located.
(d) Perfection and Priority. Borrower shall pay all expenses
and, upon Lender's request, execute all writings and take all other
actions reasonably deemed advisable by
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Lender to preserve the Collateral or to establish, and determine
priority of, perfection, continued perfection or enforce Lender's
interest in the Collateral.
(e) Records. Lender may examine and conduct audits of the
Collateral and Borrower's records concerning it, wherever located, and
make copies of such records, at any time during normal business hours,
and Borrower shall assist Lender in so doing; provided, however,
Borrower shall be responsible for the cost and expense of any two
audits per calendar year. Borrower shall keep accurate, complete and
current records respecting the Collateral. In addition to the specific
requirements of SECTION 9, Borrower shall, within ten (10) days of any
request by Lender, furnish to Lender a detailed statement, certified as
being substantially accurate by an Authorized Signator, setting forth
the current status, value and location of all or any portion of the
Collateral.
5.3 Collateral Inspections. Lender shall have the right (but not the
obligation) to do physical on-site examinations of the Collateral, conducted in
a reasonable manner, upon one (1) day's prior written notice to Borrower.
5.4 Deposits. Effective on the Closing Date, Borrower hereby pledges to
Lender any and all deposits (including investment accounts) or other sums at any
time credited by or due from Lender to Borrower as security for Borrower's
Obligations, and at the direction of Lender, Lender may apply or setoff such
deposits or other sums against Borrower's Obligations at any time following a
Default as provided in SECTION 11.13, whether or not other Collateral is
adequate to pay Borrower's Obligations.
SECTION 6 -- REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender as follows:
6.1 Authority to Enter Transaction; Valid and Binding Obligation.
Borrower is fully authorized and permitted to enter into this Agreement and the
other Restated Loan Documents and the transactions contemplated herein upon the
terms set forth herein, none of which conflict with any Legal Requirement
applicable to Borrower or with the Articles or Bylaws of Borrower. This
Agreement and each of the other Restated Loan Documents constitute valid and
binding legal obligations of Borrower, enforceable in accordance with their
respective terms.
6.2 Capitalization. The authorized equity capitalization of Borrower
consists of: (i) 5,000,000 shares of preferred stock, 1,666,666 of which have
been designated as series A preferred, and all of which shares are issued and
outstanding, and 3,333,334 shares designated as series B preferred, none of
which is outstanding; (ii) 50,000,000 shares of common stock, 10,898,550 of
which are issued and outstanding, 5,000,000 of which are reserved for issuance
upon conversion of preferred stock and 1,494,500 of which are reserved for
issuance upon exercise of options and warrants.. Except as noted, all shares are
validly issued, fully paid and nonassessable. Shares outstanding are held of
record and beneficially owned by the Shareholders. To the best of Borrower's
knowledge, all issued and outstanding shares of capital stock of Borrower were
issued in compliance with all applicable state and federal laws concerning the
issuance of securities. The Warrant represents the right to purchase in the
aggregate, at an initial exercise price of $2.00 per share, the number of
shares of common stock of Borrower equal to one
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percent (1.0%) of the number of outstanding common shares of Borrower existent
as of December 18, 1997; said number of shares and exercise price to be subject
to adjustments as provided in the Warrant. The common shares issuable upon
exercise of the Warrant are duly and validly authorized and reserved for
issuance and when issued (upon exercise of the Warrant in accordance with the
terms thereof) will be validly issued, fully paid and nonassessable. Borrower's
Shareholders have no preemptive rights relating to the common shares of Borrower
issuable upon the exercise of the Warrant. Borrower has created no liens,
encumbrances, equities or restrictions on the shares to be issued pursuant to
the exercise of the Warrant. Except as set forth in EXHIBIT F and except with
respect to shares of preferred stock currently authorized by the Borrower, there
are no existent preemptive or other outstanding rights, options, warrants,
conversion rights subscriptions, convertible securities calls, or other
agreements, commitments or understandings for the purchase or acquisition from
Borrower of any shares of capital stock or other securities of Borrower, or
obligating Borrower to issue any additional shares of its capital stock or any
other securities, bonds or debentures of any class, or obligating Borrower to
redeem any shares of capital stock or other securities of Borrower.
6.3 Disclosure. To the best of Borrower's knowledge, no representation
or warranty of Borrower contained in this Agreement, the financial statements,
the other Restated Loan Documents, or any other document, certificate or written
statement furnished to Lender by or on behalf of any such Person for use in
connection with the Restated Loan Documents contains any untrue statement of a
material fact or omitted, omits or will omit to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances in which the same were made. The projections and pro
forma financial information contained in such materials are based upon good
faith estimates and assumptions believed by such Persons to be reasonable at the
time made, it being recognized by Lender that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results. There is no material fact known to Borrower that has had or will have a
Material Adverse Effect and that has not been disclosed herein or in such other
documents, certificates and statements furnished to Lender for use in connection
with the transactions contemplated hereby.
6.4 Financial Condition. All financial statements concerning Borrower
which have been furnished to Lender pursuant to SECTION 4.2(b) of this Agreement
have been prepared in accordance with GAAP consistently applied throughout the
periods involved (except as disclosed therein) and do present fairly the
financial condition of Borrower as at the dates thereof and the results of their
operations for the periods then ended. The projections delivered have been
prepared by Borrower in light of the past operations of the business of
Borrower, and such projections represent the good faith estimate of senior
management of Borrower concerning the most probable course of its business as of
the date such projections are prepared and delivered.
6.5 Intellectual Property.
(a) Borrower owns and possesses no right, title or interest in
and to any Intellectual Property, except as disclosed in EXHIBIT D;
(b) To the best of Borrower's knowledge, Borrower has not
infringed upon, misappropriated, or otherwise engaged in any conduct
that conflicts or may conflict with,
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any proprietary rights of any third parties in any Intellectual
Property, nor will any infringement, misappropriation or conflict occur
as a result of the continued operation of its business as it is
presently conducted; and
(c) Borrower has not granted to any third party any license,
right or other interest in any Intellectual Property other than in the
ordinary course of its business, and except as disclosed in EXHIBIT D.
6.6 Licenses, Permits and Approvals. Borrower has obtained and has
maintained in full force and effect all material licenses, permits, consents,
approvals and authorizations necessary or appropriate for the operation of its
Primary Business.
6.7 Names. Borrower conducts business and has not at any time during
the past five years conducted business under any name, trade name or fictitious
business name other than those names set forth in this Agreement.
6.8 No Actions, Suits or Proceedings. As of the Restated Closing Date
no actions, suits or proceedings are pending or threatened against Borrower that
Borrower should reasonably know might materially and adversely affect the
payment or performance of the Obligations, or Borrower's performance under the
Restated Loan Documents or Borrower's financial condition, business or
operations.
6.9 No Breach or Default Under Other Instruments or Agreements. The
execution, delivery and performance by Borrower of this Agreement, the other
Restated Loan Documents and all other writings relating to the Obligations does
not result, and will not have resulted, in any material breach of the terms or
conditions of, or constitute a material default under, any agreement or
instrument under which Borrower is a party or is obligated. Borrower is not in
material default in the performance or observance of any obligations, covenants
or conditions of any such agreement or instrument.
6.10 Ownership of Assets and Conduct of Business. Borrower has full
power and authority to own its property and assets and to carry on its business
as now being conducted. Except for vehicles, furniture, fixtures, equipment and
software purchased by loans or other financing from third party vendors as
permitted by SECTION 8.1, Borrower owns the Collateral free of all security
interests or other encumbrances except Permitted Liens and Security interests
and encumbrances specifically approved in this Agreement, and no financing
statement in favor of a person or entity other than Lender covering the
Collateral is filed or recorded in any public office, except Permitted Liens.
6.11 Prior Credit Agreements Acknowledgments. Borrower acknowledges
that all promissory notes, the Loan Agreement and Loan Documents, and
modifications thereto, which were previously made with Imperial Bank Arizona
and/or Lender, and all of Lender's and Imperial Bank Arizona's rights
thereunder, have been duly assigned to and are now owned and held by Lender.
Borrower acknowledges with respect to the amounts heretofore or currently owing
to Imperial Bank Arizona and/or Lender under the Loan Documents that Borrower
has no offset, defense or counterclaim with respect thereto, no claim or defense
in abatement or reduction thereof, nor any other claim against Lender or
Imperial Bank Arizona, or with respect to any
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document forming part of the transaction in respect of which the Loan Documents
were made. Borrower acknowledges that all interest imposed under the Loan
Documents through the date hereof, and all fees and other charges that have been
collected from or imposed upon Borrower with respect to the original Loans
evidenced by the Loan Documents were and are agreed to, and were properly
computed and collected.
6.12 Purpose of the Restated Loan. Borrower represents and warrants to
Lender that: (a) the entire Proceeds of all Advances under this Agreement will
be used solely and exclusively for business and commercial purposes; (b) no
portion of any Advance hereunder will be used for any personal, consumer,
family, household or similar purpose; and (c) no portion of any Advance
hereunder will be used for the immediate, incidental or ultimate purpose of
"purchasing" or "carrying" any "margin stock" as described in Regulation U (12
C.F.R., part 221) of the Board of Governors of the Federal Reserve System, or
for the purpose of reducing or retiring any indebtedness which was originally
incurred for such purpose.
6.13 Recitals. The recitals appearing in this Agreement are true and
correct in all material respects.
6.14 Representations and Warranties. All representations and warranties
made by Borrower under or in connection with the Loan Documents and the Restated
Loan Documents or in any other document delivered by Borrower to Lender shall be
conclusively deemed to have been relied upon by Lender in making the Restated
Loan in accordance with the terms and conditions of this Agreement, and shall
survive the execution, delivery and performance of the Restated Loan Documents,
notwithstanding any investigation made, by Lender or any of its respective
agents. All statements contained in any certificate or financial statement
hereafter delivered by Borrower to Lender shall constitute representations and
warranties made by Borrower hereunder. Each request by Borrower for an Advance
under this Agreement shall constitute an affirmation on the part of Borrower
that the representations and warranties contained in this SECTION 6 are true and
correct as of the time of such request and that the relevant conditions
precedent set forth in this Agreement have been fully satisfied.
6.15 Status of Borrower. Borrower is, and shall continue to be, a
corporation duly organized, validly existing and in good standing under the laws
of the State of Arizona and is qualified to do business in Arizona.
6.16 Subsidiaries. Borrower has no Subsidiaries.
6.17 Taxes. Borrower has filed all federal, state and local tax returns
and Borrower has paid all of its current obligations before they became
delinquent, including all federal, state and local taxes and all other payments
required under federal, state or local law.
6.18 Year 2000 Compliance. Borrower has reviewed the areas within its
operations and business which could be adversely affected by, and has developed
or is developing a program to address on a timely basis, the Year 2000 Problem
and has made related appropriate inquiry of material suppliers and vendors, and
based on such review and program, the Year 2000 Problem will not have a material
adverse effect upon its financial condition, operations or business as now
conducted. "YEAR 2000 PROBLEM" means the possibility that any computer
applications or
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equipment used by Borrower may be unable to recognize and properly perform date
sensitive functions involving certain dates prior to and any dates one or after
December 31, 1999.
SECTION 7 -- COVENANTS
So long as any of the Commitment remains in effect hereunder and until
all of the Obligations have been finally matured and fully paid and performed:
7.1 Access to Accountants. Borrower authorizes Lender, in Lender's
reasonable discretion, to discuss its financial condition and financial
statements with Borrower's independent public accountants upon reasonable notice
to the independent public accountants of its intention to do so, and authorizes
such accountants to respond to all of Lender's inquiries.
7.2 Account Covenants; Verification. Borrower shall, at its own
expense: (a) upon Lender's request, cause all invoices evidencing accounts and
all copies thereof to bear a notice that such invoices are payable to the lock
boxes established in accordance with SECTION 11.5 and (b) use its best efforts
to assure prompt payment of all amounts due or to become due under the accounts.
No discounts, credits or allowances will be issued, granted or allowed by
Borrower to customers and no returns will be accepted without Lender's prior
written consent; provided, that until Lender notifies Borrower to the contrary,
Borrower may presume consent. Borrower will immediately notify Lender in the
event that a customer alleges any dispute or claim with respect to an account
(which dispute or claim is reasonably likely to have a Material Adverse Effect
on Borrower) or of any other circumstances known to Borrower that may impair the
validity or collectibility of an account. Lender shall have the right, at any
time or times hereafter, to verify the validity, amount or any other matter
relating to an account, by mail, telephone or in person. After the occurrence of
a Default or an Event of Default, Borrower shall not, without the prior consent
of Lender, adjust, settle or compromise the amount or payment of any account, or
release wholly or partly any customer or obligor thereof, or allow any credit or
discount thereon.
7.3 After Acquired and Other Collateral. Borrower will promptly make
appropriate copyright registrations with respect to, and (to the extent not
already granted in the Loan documents or the Restated Loan Documents) will grant
to Lender a Lien on, Intellectual Property hereafter developed by Borrower,
either individually or jointly with others.
7.4 Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Borrower's agents or processors,
Borrower shall, upon the request of Lender, notify such warehouseman, bailee,
agent or processor of the security interests in favor of Lender created hereby
and shall instruct such Person to hold all such Collateral for Lender's account
subject to Lender's instructions.
7.5 Bank Accounts. Borrower shall maintain a majority (determined on
the basis of average monthly balances) of its depository or other similar
accounts with Lender. Borrower shall immediately deposit, upon receipt, all
Proceeds of Collateral into such accounts. Borrower will give Lender prompt
notice of any new bank accounts the Borrower (or any of its Subsidiaries (if
any)) intends to establish prior to opening of same.
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7.6 Collateral Locations. Borrower will keep the Collateral at its
current location. With respect to any new location (which in any event shall be
within the continental United States), the Borrower will execute such documents
and take such actions as Lender deems necessary to perfect and protect the
security interests of Lender in the Collateral prior to the transfer or removal
of any Collateral to such new location.
7.7 Collateral Records. Borrower shall keep full and accurate books and
records relating to the Collateral and shall xxxx such books and records to
indicate Lender's security interests in the Collateral.
7.8 Compliance with Laws. Borrower will comply with the requirements of
all applicable laws, rules, regulations and orders of any Governmental Authority
as now in effect and which may be imposed in the future in all jurisdictions in
which Borrower is now doing business or may hereafter be doing business, other
than those laws the noncompliance with which would not have a Material Adverse
Effect.
7.9 Corporate Existence. The Borrower will at all times preserve and
keep in full force and effect its corporate existence and all rights and
franchises material to its business. Borrower will promptly notify Lender of any
change in its ownership or corporate structure.
7.10 Events of Default and Material Adverse Changes. Promptly upon any
officer of Borrower obtaining knowledge of any of the following events or
conditions, Borrower shall deliver a certificate of its chief executive officer
specifying the nature and period of existence of such condition or event and
what action Borrower has taken, are taking and propose to take with respect
thereto: (1) any condition or event that constitutes an Event of Default or
Default; (2) any facts or circumstances (other than facts or circumstances
generally known within the business community that are not unique or relating
especially to Borrower) which have given (or are likely to give) rise to a
Material Adverse Effect; or (3) any notice of default that any Person has given
to Borrower or any other action taken with respect to a claimed default.
7.11 Government Notices. Borrower will deliver to Lender promptly after
receipt copies of all notices, requests, subpoenas, inquiries or other writings
received from any Governmental Authority concerning any Employee Benefit Plan,
the violation or alleged violation of any Environmental Laws, the storage, use
or disposal of any Hazardous Material, the violation or alleged violation of the
Fair Labor Standards Act or Borrower's payment or non-payment of any taxes
including any tax audit.
7.12 Inspection. Borrower shall permit Lender and any authorized
representatives designated by Lender to visit and inspect any of the properties
of the Borrower and its Subsidiaries (if any), including their financial and
accounting records, and to make copies and take extracts therefrom, and to
discuss their affairs, finances and business with its and their officers at such
reasonable times during normal business hours and as often as may be reasonably
requested upon one (1) day's prior written notice to Borrower. Borrower
acknowledges that Lender intends to make such inspections on a quarterly basis,
and Borrower agrees to pay reasonable Lender's Expenses in connection therewith.
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7.13 Insurance. Borrower will maintain or cause to be maintained, at
its expense, with financially sound and reputable insurers, adequate fire,
public liability and other hazard and liability insurance and property damage
insurance with respect to its business and properties against loss or damage of
the kinds customarily carried or maintained by corporations of established
reputation engaged in similar businesses and in amounts acceptable to Lender.
Borrower shall cause a lender's loss payable endorsement in favor of Lender to
be added to all insurance policies relating to any Collateral and cause Lender
to be named as additional insured under all liability policies, in each case
pursuant to appropriate endorsements in form and substance satisfactory to
Lender and will, within thirty (30) days of any request of Lender, deliver to
Lender copies of the policies concerned or a detailed schedule of insurance in
force.
7.14 Lender's Expenses. In addition to any requirements under the
Restated Loan Documents and the documents relating to this Agreement, Borrower
shall immediately reimburse Lender for all reasonable Lender's Expenses upon
Lender's request therefor.
7.15 Licenses. Borrower shall use best efforts to obtain promptly and
keep in full force and effect all licenses, permits, authorizations, rights and
franchises necessary to its on-going business and shall not engage in any action
or do anything which would impair any such license, permit, authorization, right
or franchise. Borrower shall promptly advise Lender of any order, application,
suit, hearing or proceeding which might affect materially and adversely its
rights in any respect in any license, permit, authorization, right or franchise.
Borrower shall use its best efforts to defend against such order, application,
suit, hearing or proceedings.
7.16 Litigation. Borrower will give Lender prompt notice of:
(a) The institution of any action, suit, proceeding,
governmental investigation or arbitration against or affecting Borrower
or any property of Borrower, not previously disclosed to Lender, that
could have a Material Adverse Effect;
(b) Any material development in any action, suit, proceeding,
governmental investigation or arbitration at any time pending against
or affecting Borrower or any property of Borrower which is reasonably
likely to have a Material Adverse Effect, and provide such other
information as may be reasonably available to enable Lender and its
counsel to evaluate such matter;
(c) Any litigation or claims that may or could materially and
adversely affect the repayment of any Obligation(s), the performance by
Borrower under the Restated Loan Documents or the financial condition
or operations of Borrower; and
(d) All complaints and charges filed by or with any
Governmental Authority or any other person or entity (i) that could
materially and adversely affect the Collateral or any portion thereof
or any of the Restated Loan Documents, or (ii) that lead to the
exercise of supervision or control of Borrower, or its business or
assets, that could impair the security of Lender or adversely affect
any of its rights under any of the Restated Loan Documents.
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7.17 Locations. Borrower will give Lender at least thirty (30) days
advance written notice of any change in the principal place of business of
Borrower or any change in the location of its books and records or of any new
location for its books and records.
7.18 Maintenance of Properties. Borrower will maintain or cause to be
maintained in good repair, working order and condition all material properties
used in the business of the Borrower and will make or cause to be made all
appropriate repairs, renewals and replacements thereof.
7.19 Other Information Documents or Acts. Borrower, at its expense,
shall execute and deliver, or cause to be executed and delivered, to Lender such
other writings, including current and updated certified copies of corporate
borrowing resolutions, and shall do or cause to be done such other acts as
Lender may reasonably require in connection with the Restated Loan. Borrower
shall from time to time, execute such guaranties, financing or continuation
statements, documents, security agreements, reports and other documents or
deliver to Lender such instruments, certificates of title or other documents as
Lender at any time may reasonably request to evidence, perfect or otherwise
implement the security for repayment of the Obligations provided for in the
Restated Loan Documents. At Lender's request, Borrower shall cause any
Subsidiaries (if any) of Borrower promptly to guaranty the Obligations and to
grant to Lender security interests in the real, personal and mixed property of
such Subsidiary to secure the Obligations.
7.20 Perfection Changes. Borrower shall notify Lender, within thirty
(30) days after the occurrence of any other event known to any of it which
requires action be taken to maintain the perfection and priority of the Liens
granted or to be granted to Lender.
7.21 Release. Borrower, effective on and from the Restated Closing
Date, does hereby unconditionally, absolutely and irrevocably release Lender and
Imperial Bank Arizona, and their respective employees, agents and officers from
any and all Claims (as the term is defined in this Section) and defenses against
them or any of them, and agrees that Lender and Imperial Bank Arizona, and their
respective employees, agents and officers shall have no liability to Borrower by
reason of anything occurring prior to the Restated Closing Date. Accordingly,
this Agreement is made to compromise, resolve, settle, and terminate all actual
and potential Claims by reason of anything occurring prior to the Restated
Closing Date. The term "CLAIMS" as used in this Section means all claims,
complaints, demands, causes of action, damages, costs, expenses, fees, and all
other debts, liabilities or obligations of every sort and description, direct
and indirect, fixed or contingent, known or unknown, and whether or not
liquidated, arising out of, caused by, or otherwise related in any way to events
or transactions occurring prior to the Restated Closing Date, between or among
or affecting any of the parties hereto and Imperial Bank Arizona. Borrower
agrees that this general release extends to Claims which Borrower may not know
of or suspect to exist in its favor at the time of executing this release, and
Borrower specifically the provision of any law providing that a general release
does not extend to claims that the releasing party does not know of at the time
of executing the release. In that regard, Borrower expressly waive the
provisions of California Civil Code Section 1542, which provides that: "A
general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor." To
the extent permitted by law, regulation, guide or code, Borrower expressly
waives and assumes the risk of any and all Claims arising out of any matter
described or referred to in this
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Section that exist as of the date hereof, but which they do not know or suspect
to exist in their favor, whether through ignorance, oversight, error,
negligence or otherwise, and which, if known, would materially affect its
decision to enter into this Restated Loan Agreement. Borrower understands that
its release will prevent it from making any further claim against Lender or
Imperial Bank Arizona, even for damages not now known to exist, and even if the
extent of damage may actually be greater than it now understands it to be. This
Agreement has been negotiated and entered into with knowledge that such risks
exist and are assumed by Borrower.
7.22 Subordinated Debt and Other Indebtedness Notices. Borrower shall
promptly deliver copies of all notices given or received by a Restated Loan
Party with respect to noncompliance with any term or condition related to any
Subordinated Debt and other Indebtedness, and shall promptly notify Lender of
any potential or actual event of default with respect to any Subordinated Debt
or other Indebtedness.
7.23 Taxes and Other Liabilities. Borrower shall pay and discharge,
before the same become delinquent and before penalties or interest accrue
thereon, all taxes, assessments, and governmental charges of, upon, or against
Borrower or any of its property, and all other debts, obligations and
liabilities existing at any time, including, without limitation, all
withholdings, premiums, deposits, remittances and payments due under any
applicable federal or state law related to employment, payroll, workers'
compensation and unemployment compensation, except to the extent and so long as:
(i) the same are being contested in good faith and by appropriate proceedings in
a manner that will not have any material adverse effect upon the financial
condition of Borrower or the loss of any right of redemption from any sale
thereunder; and (ii) the Borrower shall have set aside on its books reserves
(segregated to the extent required by regulation or sound accounting practice)
deemed by Borrower and its certified public accountants to be adequate with
respect thereto.
7.24 Trade Names. Borrower will give Lender at least thirty (30) days
advance written notice of any change of name or of any new trade name or
fictitious business name. Borrower's use of any trade name or fictitious
business name will be in compliance with all laws regarding the use of such
names.
7.25 Use of Advances; Costs and Expenses Relating to Collateral.
Borrower shall use all Advances from the solely for permitted purposes for the
particular Advances described in this Agreement, consistent with all applicable
laws, statutes, rules and regulations. No portion of the Proceeds of any
Restated Loan shall be used by Borrower in any manner that might cause the
borrowing or the application of such Proceeds to violate or require a filing by
Lender or Borrower under Regulation G, Regulation U, Regulation T or Regulation
X or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Exchange Act. Borrower shall promptly pay all costs and
expenses relating to the Collateral, but may contest in good faith the validity
or amount thereof provided that Borrower shall have furnished Lender a cash
deposit or other appropriate security in an amount and form satisfactory to
Lender to protect Lender against the creation of any lien on, or any sale or
forfeiture of, any Collateral. Upon the final determination of Borrower, such
contest, Borrower shall promptly pay any sums determined to be due, whereupon
any deposit or security provided by Borrower shall be returned to Borrower.
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SECTION 8 -- NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any of the Commitments
remain in effect and until payment in full of all Obligations, unless Borrower
has received the prior written consent of Lender, Borrower shall not:
8.1 Additional Debt. Except for de minimis Debt, Capital Leases and
purchase money Security interest Debt allowed by this SECTION 8.1, incur any
senior indebtedness (as defined under GAAP). Notwithstanding the foregoing,
Borrower may, in it sole and absolute discretion, enter into one or more loans,
leases or other financing arrangements for the acquisition of vehicles,
furniture, fixtures, equipment and software to be used in the Primary Business
of Borrower without the prior written consent of Lender and give, grant or
convey liens or security interests in such vehicles, furniture, fixtures,
equipment and software financed to such third party lender or lessor as security
for such loans, leases or financing. As stated above, Lender will, at the
written request and expense of Borrower, enter into intercreditor agreements or
execute lien waivers as reasonably required to assure any such third party
lender that Lender's Liens and security interests in and to Borrower's vehicles
and equipment generally is subordinate to such third party's liens and security
interests in the vehicles or equipment acquired or purchased with the financing
from such third party lender.
8.2 Amendments to Organizational Documents. Amend its organizational
documents if the result thereof could result in the occurrence directly or
indirectly of a Material Adverse Effect. Borrower's Articles or Bylaws shall not
be modified or amended in any respect without Lender's prior written consent,
(which shall not be unreasonably withheld). In the event of any modification or
amendment of any such Articles or Bylaws, Lender may impose such documentary,
opinion of counsel and/or recording and filing conditions and requirements as
Lender may determine on a conservative basis are required or prudent to assure
that Lender's rights under the Restated Loan Documents will be maintained in
full force and effect and will not be impaired.
8.3 Change of Control, Structure or Management. (i) Cause or permit a
Change of Control to occur, exist, or continue (ii) enter into any transaction
of merger or consolidation; (iii) liquidate, wind-up or dissolve itself (or
suffer any liquidation or dissolution); (iv) convey, sell, lease, sublease,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business or assets, whether now
owned or hereafter acquired; (v) acquire by purchase or otherwise all or any
substantial part of the business or assets of, or stock or other evidence of
beneficial ownership of, any Person; or (vi) turn over the management or
operation of its property, assets or business to any other person or entity. In
the event of a merger approved by Lender, the surviving company or the resulting
new entity must be in compliance with all material terms, covenants and
provisions hereof as if it were deemed to be a "Borrower" for all purposes
hereunder.
8.4 Conduct of Business. Engage in any business other than businesses
of the type engaged in by Borrower on the Restated Closing Date, or cease to
conduct its operations or its business for any reason.
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8.5 Compliance with ERISA. Establish any new Employee Benefit Plan or
amend any existing Employee Benefit Plan if the liability or increased liability
resulting from such establishment or amendment is material. Borrower shall not
fail to establish, maintain and operate each Employee Benefit Plan in compliance
in all material respects with the provisions of ERISA, the IRC and all other
applicable laws and the regulations and interpretations thereof.
8.6 Dividends. Except as provided for in the Articles of Restatement of
Articles of Incorporation of Borrower, dated April 9, 1999, and filed April 9,
1999, but not including any amendments or modifications thereof:
(a) Declare, pay or make any Except as provided for in the
Articles of Restatement of Articles of Incorporation of Borrower, dated
April 9, 1999, and filed April 9, 1999, but not including any
amendments or modifications thereof, dividend or Distributions (in
cash, property or obligations) on any shares of any class of capital
stock (including preferred stock), now or hereafter outstanding, of
Borrower or on any warrants, options or other rights with respect to
any shares of any class of capital stock (including preferred stock),
now or hereafter outstanding, of Borrower (other than dividends or
distributions payable in its capital stock or warrants, options or
other rights to purchase its capital stock or split-ups or
reclassifications of its stock into additional or other shares of its
capital stock); or
(b) Apply any of its funds, property or assets to the
purchase, redemption, sinking fund or other retirement of, or agree to
purchase or redeem, any shares of any class of capital stock (including
preferred stock), now or hereafter outstanding, of Borrower, or
warrants, options or other rights with respect to any shares of any
class of capital stock (including preferred stock), now or hereafter
outstanding, of Borrower; or
(c) Pay or make any Distributions of royalties or license fees
to any shareholder; provided that the foregoing shall not prohibit
Distributions to enable Borrower's shareholders to pay income taxes for
which they become liable as a result of Borrower's income (provided
such Distributions are limited in amount to the estimated tax liability
of said shareholders, calculated on the assumption that each
shareholder's income is taxed at the highest marginal rate provided by
the IRC).
8.7 Environmental Liabilities. (a) Violate any applicable Environmental
Law; (b) dispose of any Hazardous Substances (except in accordance with
applicable law) into or onto or from, any real property owned, leased or
operated by any Restated Loan Party; or (c) permit any Lien imposed pursuant to
any Environmental Law to be imposed or to remain on any real property owned,
leased or operated by any Restated Loan Party.
8.8 Fiscal Year. Change its Fiscal Year.
8.9 Guaranties. Except for endorsements of instruments or items of
payment for collection in the ordinary course of business, guaranty, endorse, or
otherwise in any way become or be responsible for any obligations of any other
Person, whether directly or indirectly by agreement to purchase the Indebtedness
of any other Person or through the purchase of goods, supplies or services, or
maintenance of working capital or other balance sheet covenants or conditions,
or by
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way of the issue of "comfort letters" or "put options" with respect to any
obligations, or by way of stock purchase, capital contribution, advance or
Restated Loan for the purpose of paying or discharging any Indebtedness or
obligation of such other Person or otherwise.
8.10 Indebtedness and Liabilities. Directly or indirectly create,
incur, assume, guaranty, or otherwise become or remain directly or indirectly
liable, on a fixed or contingent basis, with respect to any Indebtedness except:
(a) the Obligations; (b) Indebtedness represented by trade payables incurred in
the ordinary course of business; and/or (c) Indebtedness existing on the
Restated Closing Date, and additional Indebtedness as permitted herein. Except
for Indebtedness described permitted in the preceding sentence, the Borrower
will not incur any Liabilities except for trade payables and normal accruals in
the ordinary course of business not yet due and payable or with respect to which
the Borrower is contesting in good faith the amount or validity thereof by
appropriate proceedings and then only to the extent that the Borrower has
established adequate reserves therefor, if appropriate under GAAP.
8.11 Investments and Loan. Make or permit to exist investments in or
loans to any other Person, except: (a) Cash Equivalents; and (b) loans and
advances to employees for moving, entertainment, travel and other similar
expenses in the ordinary course of business in an aggregate outstanding amount
not in excess of $25,000.00 at any time for the Borrower and its Subsidiaries
(if any) on an aggregate basis.
8.12 Issuance of Stock of a Subsidiary. Form, issue or sell any capital
stock of or other equity interest in a Subsidiary. In the event that Lender
shall consent to the formation or acquisition by Borrower of any new subsidiary
corporation, or participation in any partnership or joint venture, whether or
not wholly owned, Borrower shall promptly and diligently take all actions
necessary to cause such corporation, partnership, or venture to become a
"CO-BORROWER" for all purposes of this Agreement and a "DEBTOR" under any other
Restated Security Documents reasonably required by Lender. The term
"CO-BORROWER" shall mean that such corporation, partnership, or venture shall be
jointly liable, and each severally and unconditionally liable, for the full
payment and satisfaction of the Restated Loan and all Obligations of Borrower
under this Agreement. The term "DEBTOR" shall have the meaning set forth in the
Restated Security Agreement.
8.13 Liens. Directly or indirectly create, incur, assume or permit to
exist any Lien on or with respect to any of the Collateral or any Proceeds,
income or profits therefrom.
8.14 Management Fees and Compensation. Pay any management fees,
directors' fees, guaranty fees, consulting fees or similar fees to any director
or officer or any Restated Loan Party except for salaries and bonuses paid to
full-time employees of the Borrower in accordance with past practice and in the
ordinary course of business and customary directors' and consulting fees paid to
independent directors of the Borrower.
8.15 No Negative Pledges. Enter into or assume any agreement (other
than the Restated Loan Documents) prohibiting the creation or assumption of any
Lien upon its properties or assets, whether now owned or hereafter acquired.
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8.16 Permitted Acquisitions. Borrower shall not, without having
received the prior written consent of Lender (which consent shall not be
unreasonably withheld), acquire another company or operating entity having
assets of more than $100,000.00, either by acquisition of its stock or a
controlling interest therein, or by acquisition of all or substantially all of
the assets of such other entity.
8.17 Press Release; Public Offering Materials. Except as required by
law, disclose the name of Lender in any press release or in any prospectus,
proxy statement or other materials filed with any governmental entity relating
to a public offering of the capital stock of any Restated Loan Party.
8.18 Subordinated Debt Changes. Change or amend the terms of the
Subordinated Debt if the effect of such amendment is to: (a) increase the
interest rate on such Indebtedness or the principal amount thereof; (b) change
the dates upon which payments of principal or interest are due on such
Indebtedness; (c) change any event of default or add any covenant with respect
to such Indebtedness; (d) change the payment provisions of such Indebtedness;
(e) change the subordination provisions thereof, or (f) change or amend any
other term if such change or amendment would materially increase the obligations
of the obligor or confer additional material rights on the holder of such
Indebtedness in a manner adverse to the Borrower or Lender.
8.19 Source Code Escrow. Enter into any escrow affecting or concerning
any software program, its source code, object code or any related applications
and data files.
8.20 Subsidiaries. Establish, create or acquire any new Subsidiaries.
8.21 Tax Consolidations. File or consent to the filing of any
consolidated income tax return with any Person.
8.22 Transactions with Affiliates. Directly or indirectly, enter into
or permit to exist any transaction (including the purchase, sale or exchange of
property or the rendering of any service) with any Affiliate or with any
officer, director or employee of Borrower, except for transactions in the
ordinary course of and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms which are fully disclosed to Lender
and which are no less favorable to Borrower than it would obtain in a comparable
arm's length transaction with an unaffiliated Person.
8.23 Transfers, Liens and Related Matters. Sell, assign (by operation
of law or otherwise) or otherwise dispose of, or grant any option with respect
to any of the Collateral or the assets of such Person, except that the Borrower
may:
(a) Sell inventory (including Software Property) in the
ordinary course of business;
(b) Make Asset Dispositions if all of the following conditions
are met: (1) the market value of assets sold or otherwise disposed of
in any single transaction or series of related transactions does not
exceed $50,000.00 and the aggregate market value of assets sold or
otherwise disposed of in any Fiscal Year does not exceed $100,000.00;
(2) the
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consideration received is at least equal to the fair market value of such
assets; (3) the sole consideration received is cash; (4) after giving effect to
the sale or other Disposition of the assets included within the Asset
Disposition and the repayment of the Obligations with the Proceeds thereof, the
Borrower is in compliance on a pro forma basis with the covenants set forth in
SECTION 9 recomputed for the most recently ended month for which information is
available and is in compliance with all other terms and conditions contained in
this Agreement; and (5) no Default or Event of Default shall result from such
sale or other Disposition; and
(c) Sell assets that have become obsolete, outdated or have
been consumed or worn out in their ordinary usage.
8.24 Warrant Covenants. For so long as the Warrant is to any extent
outstanding, unexpired and unexercised, regardless of whether the Restated Loan
and the other Obligations shall have been repaid:
(a) Authorize or issue, or commit to authorize or issue, any
class of its capital shares other than the class of common shares and
preferred shares currently authorized by Borrower's Articles of
Incorporation, nor amend Borrower's Articles of Incorporation to any
manner alter or modify the rights and privileges of the holders of the
common shares.
(b) Fail to perform and observe all covenants, agreements and
obligations imposed upon it under the terms of the Warrant.
(c) Except for Series B preferred stock which Borrower may be
obligated to issue, issue or sell, or become obligated to issue or sell
any of its shares or securities to any Person unless (i) such sale is
at arm's length, and Borrower receives, in the good faith judgment of
its board of directors, the fair market value of its shares or
securities sold in cash, and (ii) the purchaser is not an Affiliate.
8.25 Year 2000 Compliance. Borrower shall perform all acts reasonably
necessary to ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors whose
compliance is likely to be material to Borrower's business, become "YEAR 2000
COMPLIANT" in a timely manner. Such acts shall include, without limitation,
performing a comprehensive review and assessment of all Borrower's systems and
adopting a detailed plan, with itemized budget, for the remediation, monitoring
and testing of such systems. As used in this Section, "YEAR 2000 COMPLIANT"
shall mean, in regard to any entity, that all software, hardware, firmware,
equipment, goods or systems utilized by or material to the business operations
or financial condition of such entity, will properly perform date sensitive
functions before, during and after the year 2000. Borrower shall, immediately
upon request, provide to Lender such certifications or other evidence of
Borrower's compliance with the terms of this Section as Lender may from time to
time require.
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SECTION 9 -- FINANCIAL AND OTHER REPORTING
9.1 [Intentionally Blank].
9.2 Accountants' Reports. Promptly upon receipt thereof, Borrower will
deliver copies of all significant reports submitted to Borrower by independent
public accountants in connection with each annual, interim or special audit of
the financial statements of Borrower made by such accountants, including the
comment letter submitted by such accountants to management in connection with
their annual audit.
9.3 Accounting System. Borrower will maintain a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP.
9.4 Borrowing Base Certificates. Within twenty (20) days after the end
of each Fiscal Quarter, Borrower shall furnish Lender a Borrowing Base
Certificate, reflecting the amount and calculation thereof, of Gross
Availability and Net Availability as of 5:00 P.M. on the last Business Day of
the immediately preceding Fiscal Quarter.
9.5 Change in Fiscal Year or Accounting Methods. Borrower shall not
without having received the prior written consent of Lender (which consent shall
not be unreasonably withheld), change its Fiscal Year or other accounting
periods, or change its method of accounting other than to conform to GAAP
applied on a consistent basis.
9.6 Compliance Certificates. Borrower will deliver to Lender, within
twenty (20) days after each Fiscal Quarter, and no later than April 30 of each
Fiscal Year, a Compliance Certificate, together with copies of the calculations
and work-up employed to determine the Borrower's compliance or noncompliance
with the financial covenants set forth in SECTION 9.7 and the calculation (and
non-compliance with, if applicable) said covenants.
9.7 Financial Covenants. Until payment in full of the Obligations,
Borrower agrees that as of the last day of each Fiscal Quarter, its:
(a) Current Ratio shall not be less than 2.00 to 1.00,
measured on a quarterly basis.
(b) Adjusted Debt to Worth Ratio shall not be greater than
2.00 to 1.00, measured on a quarterly basis.
(c) Interest Coverage Ratio shall not be less than 2.00 to
1.00.
9.8 Financial Statements. Borrower shall cause to be prepared and shall
deliver or cause to be delivered to Lender:
(a) Borrower will furnish to Lender, as soon as available and
in any event (in the case of (i), (ii) and (iii) of this Subsection) no
later than April 30 of each Fiscal Year of Borrower: (i) consolidated
and consolidating balance sheets of Borrower as of the end of
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such Fiscal Year; (ii) consolidated and consolidating statements of
income and retained earnings of Borrower for such Fiscal Year; (iii) a
statement of cash flow of Borrower for such Fiscal Year; (iv) copies of
Borrower's most recent tax returns; and (v) any reports submitted by
any independent certified public accountants in connection with the
preparation of, or concerning, tax returns of Borrower. Financial
statements shall be in reasonable detail and state (in such comparative
form as shall be requested by and be reasonably acceptable to Lender)
the respective consolidated and consolidating figures for the
corresponding date and period in the prior Fiscal Year, and be prepared
in accordance with GAAP, and (in the case of the annual consolidated
financial statements) shall be audited by an independent certified
public "Big Five" accounting firm selected by Borrower and reasonably
satisfactory to Lender.
(b) Borrower will furnish to Lender, as soon as available and
in any event within twenty (20) days after the end of each calendar
month, consolidated and consolidating balance sheets for Borrower as at
the end of such month, consolidated and consolidating statements of
income and retained earnings of Borrower for the period commencing at
the beginning of the current fiscal year and ending with the end of
such month, and a statement of cash flow of Borrower for the portion of
the fiscal year ended with the last day of such month all in reasonable
detail and stating (in such comparative form as shall be requested by
and be reasonably acceptable to Lender) the respective figures for the
corresponding date and period in the previous fiscal year and all
prepared in accordance with GAAP (although footnotes shall not be
required and variances in format from that required by GAAP shall be
permitted), and certified by the chief financial officer of Borrower
as being substantially accurate (subject to normal year-end audit
adjustments) by the chief financial officer of Borrower.
(c) Borrower will furnish to Lender, as soon as available and
in any event within twenty (20) days after the end of each Fiscal
Quarter, a pro-forma financial plan for the next four (4) Fiscal
Quarters.
9.9 Other Information. Except as would violate mandatorily applicable
law, Borrower shall: (a) furnish to Lender, with reasonable promptness, such
data and information, financial or otherwise, concerning Borrower as Lender may
from time to time reasonably request; (b) promptly notify Lender of any
condition or event which constitutes an Event of Default or a material adverse
change in the financial condition of Borrower; and (c) permit any authorized
representative of Lender to inspect the books of account of Borrower to make
extracts or copies therefrom and to discuss with Borrower its affairs, finances
and accounts at reasonable times upon reasonable notice.
9.10 Proxy Statements and Securities Reports. Borrower will furnish
Lender promptly after the sending or filing thereof, copies of all proxy
statements, financial statements, and reports which Borrower sends to its
stockholders, and copies of all regular, periodic, and special reports, and all
registration statements which Borrower files with the Securities and Exchange
Commission or any governmental authority which may be substituted therefor, or
with any national securities exchange, including all reports on Form 10-K and
10-Q.
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9.11 Reports to Other Persons. Borrower will furnish promptly after the
furnishing thereof, copies of all financial statements, financial reports and
management reports, including accountants' reports with respect to financial
statements, relating to Borrower furnished to any other Person and not otherwise
required to be furnished to Lender pursuant to any other clause of this
Agreement; provided (i) the content of the statement or report concerns the
business, assets, revenues, financial condition, results of operations, cash
flow, or the prospects of Borrower, or the ability of Borrower to perform any of
its payment or other material obligations under the Restated Loan Documents;
(ii) the information contained therein is not subject to an attorney-client
privilege, and (iii) disclosure of the same would not, in the reasonable
judgment of Borrower, after consultation with counsel, give rise to a
significant risk of violating applicable securities laws or other applicable
laws.
SECTION 10 -- EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. A Default occurs upon the occurrence of any one
or more of the conditions or events (whether or not within the control of
Borrower) described in SUBSECTIONS 10.1 (a) THROUGH (m), but only after Lender
gives Borrower a Notice of Default, and after the lapse of any applicable Cure
Period; provided, however, there shall be no Default if Lender approves, or
waives the effect, of the condition or event that would otherwise give rise to a
Default.
(a) Insolvency Matters. Borrower: (i) becomes insolvent or
generally fails to pay, or admits in writing its inability or
unwillingness to pay, debts as they become due; (ii) applies for the
appointment of a trustee, receiver, sequestrator or other custodian for
Borrower or any substantial portion of its property, or makes a general
assignment for the benefit of creditors; (iii) in the absence of such
application, consents or acquiesces, permits or suffers to exist the
appointment of a trustee, receiver, sequestrator or other custodian for
Borrower, or for a substantial part of its property, and such trustee,
receiver, sequestrator or other custodian shall not be discharged
within sixty (60) days, provided that Borrower hereby expressly
authorizes Lender to appear in any court conducting any relevant
proceeding during such 60-day period to preserve, protect and defend
the rights of Lender under the Restated Loan Documents; (iv) affects or
participates in, or permits or suffers to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of Borrower or
proceeding is not commenced by Borrower, such case or proceeding shall
be consented to or acquiesced in by Borrower or shall result in the
entry of an order for relief or shall remain for sixty (60) days
undismissed, provided that Borrower, hereby expressly authorizes Lender
to appear in any court conducting any such case or proceeding during
such 60-day period to preserve, protect and defend the rights of Lender
under the Restated Loan Documents; or (v) takes any action authorizing,
or in furtherance of, any of the foregoing.
(b) Breach of Warranty. If any warranty, representation or
financial or other statement or certificate contained in any Loan
Document or other Restated Loan Document, or made or furnished to
Lender by or on behalf of Borrower, shall be false, inaccurate or
misleading (or there shall be any material omission) in any material
respect as of the relevant date(s) reflected thereby.
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(c) Change of Control or Change of Management. The occurrence
of a Change of Control or Change of Management.
(d) Default in Other Agreements. The holder of any Debt or
Indebtedness of Borrower having an individual principal amount in
excess of $25,000 is then entitled to cause such Debt or Indebtedness
to become or be declared due prior to its stated maturity.
(e) Failure of Security. Lender does not have or ceases to
have a valid and perfected first priority security interest in the
Collateral, in each case, for any reason other than the failure of
Lender to take any action within its control.
(f) Injury to Collateral. Any material injury to, or
destruction or loss of the Equipment Collateral that is not adequately
insured against, consisting of more than $150,000.00.
(g) Invalidity of Restated Loan Documents. Any of the Restated
Loan Documents for any reason, other than a partial or full release in
accordance with the terms thereof, ceases to be in full force and
effect or is declared to be null and void, or Borrower denies that it
has any further liability under any Restated Loan Documents to which it
is party, or gives notice to such effect.
(h) Levy and Execution. The issuance of a levy or execution
involving a claim of more than $25,000.00 against any of the property
or effects of Borrower.
(i) Liens. If any mechanics, or materialmen's lien, tax lien
or levy, attachment, garnishment, replevin, execution, or other
statutory or judicial lien is filed, levied or claimed against all or
any portion of or any interest in the Collateral or any undisbursed
deposits or committed Restated Loan Proceeds under this Agreement, and
such claim or lien is not discharged, satisfied or bonded over to
Lender's satisfaction before the earlier of: (i) forty-five (45)
Business Days thereafter; and (ii) not less than five (5) Business Days
prior to any sale of any portion of or interest in the Collateral
pursuant thereto.
(j) Non-Monetary Default Under Restated Loan Documents. Any
material failure or neglect of the Borrower to perform or observe any
of the terms, provisions, conditions or covenants of any Restated Loan
Document or any other writing executed or delivered in accordance with
the provisions of any Restated Loan Document, other than for the
payment of monies to Lender.
(k) Non-Payment. Failure to pay any sum owing hereunder or
under any other indebtedness of the undersigned to Lender as agreed.
(l) Transfer of Collateral. The sale, assignment, pledge,
transfer, hypothecation, encumbrance or other Disposition of the
Collateral or of any more than de minimis portion thereof (or any
interest therein) by Borrower, except in the ordinary course of
business (which shall include the Disposition of obsolete or retired
property not used or useful in its business), without the written
consent of Lender or except as may be authorized herein.
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(m) Termination of Borrower. If Borrower is dissolved,
liquidated or terminated, without an immediate reconstitution, or
otherwise ceases to exist.
SECTION 11 -- REMEDIES
11.1 Acceleration. At any time when a Default shall have occurred (and
not be cured as provided in this Agreement or waived in writing by Lender) or
shall exist, without notice to, demand, presentment, protest or other
formalities of any kind, all of which are hereby expressly waived by Borrower,
Lender shall have the right to accelerate the Maturity Date of the applicable
Note and require immediate payment of the entire principal sum owing, together
with all accrued and unpaid interest, Advances, and Lender Expenses, and all
other amounts payable by Borrower hereunder; provided, however, upon the
occurrence of a Default under SECTION 10.1 (c), (g) and (i) the entire amount of
Borrower's Obligations shall be deemed fully due and payable without notice to,
demand, presentment, protest or other formalities of any kind, all of which are
expressly waived by Borrower.
11.2 Advances to Protect Lender's Interests. Regardless whether a
Default or Potential Default shall have occurred or exist, with notice to be
given Borrower as promptly as is practicable (and, in advance, if practicable),
Lender shall have the right but not the obligation, at any time to advance to
any Person any sum which Lender in its judgment deems necessary to protect or
preserve the Collateral or Lender's security interests in or liens on the
Collateral (or the priority thereof), or to cure any Default which shall then
exist. Each such Advance shall constitute a part of Borrower's Obligations and
shall be secured by the Collateral and, at Lender's election, shall either be
reimbursed to it by Borrower immediately upon demand or added to Borrower's
Obligations balance and bear interest at the Default Rate under the Facility
Note. It is understood and agreed that nothing herein contained shall obligate
Lender to make any such advance, nor shall the making of one or more such
advances constitute an agreement by Lender to make any further advance or be
deemed a waiver of any Default by Borrower under the terms hereof or of any
other Restated Loan Document. Lender shall seasonably inform Borrower of any
such advance, but failure to so inform or delay therein shall not limit or
otherwise affect Borrower's obligation under this SECTION 11.2 to reimburse such
advance or to pay interest thereon.
11.3 Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, the Proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied: first, to
all Lender Expenses incurred by Lender; second, to accrued and unpaid interest
on the Obligations; third, to the principal amounts of the Obligations
outstanding; and fourth, to any other indebtedness or obligations of Borrower
owing to Lender.
11.4 Cessation of Funding. Lender shall have the right to cease making
any disbursements hereunder or pursuant to any of the other Restated Loan
Documents.
11.5 Collection of Accounts and Payments. Upon the occurrence of an
Event of Default and at any time while an uncured or non-waived Event of Default
exists, if requested by Lender, Borrower shall establish such lock boxes and
depository accounts ("BLOCKED ACCOUNTS") in Borrower's name with such banks as
are acceptable to Lender (subject to Bank Agency Agreements and to irrevocable
instructions acceptable to Lender as hereinafter set forth) to which all account
debtors shall directly remit all payments on accounts and in which Borrower will
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immediately deposit all cash payments made for inventory or other cash payments
constituting Proceeds of Collateral in the identical form in which such payment
was made, whether by cash or check. Borrower hereby agrees that all immediately
available funds received in the Blocked Accounts shall on the Business Day of
receipt be forwarded to Lender. All payments received by Lender, whether by
cash, check, wire transfer or any other instrument, made to such Blocked
Accounts or otherwise received by Lender and whether on the accounts or as
Proceeds of other Collateral or otherwise will be the sole and exclusive
property of Lender. Lender may settle, compromise, extend or renew the
indebtedness of such account debtors. Borrower hereby constitutes and appoints
Lender and all Persons designated by Lender for that purpose as the Borrower's
true and lawful attorney-in-fact, with power to endorse Borrower's name to any
of the items of payment or Proceeds described in this SECTION 11.5, and all
Proceeds of Collateral that come into Lender's possession or under Lender's
control. Both the appointment of Lender as Borrower's attorney and Lender's
rights and powers are coupled with an interest and are irrevocable until payment
in full and complete performance of all of the Obligations. Borrower, and any of
its Affiliates, employees, agents or other Persons acting for or in concert with
Borrower, shall, acting as trustee for Lender, receive, as the sole and
exclusive property of Lender, any monies, checks, notes, drafts or any other
payments relating to and/or Proceeds of accounts or other Collateral which come
into the possession or under the control of Borrower or any of Borrower's
Affiliates, employees, agents or other Persons acting for or in concert with
Borrower, and immediately upon receipt thereof, Borrower or such Persons shall
remit the same or cause the same to be remitted, in kind, to the Blocked
Accounts or to Lender at its address set forth in SECTION 12.14 below.
11.6 Cure Period. Upon the occurrence of an Event of Default under
SECTION 10.1(k), Lender shall not be entitled to declare the Obligations
immediately due and payable prior to the Restated Maturity Date of any relevant
Obligation(s) unless Borrower fails to cure the Event of Default within five (5)
days after Lender gives written notice to Borrower as provided by SECTION 12.25
hereof, reasonably specifying the nature of the Events of Default. Upon the
occurrence of an Event of Default under SECTIONS 10.1 (d), (h), (i), or (j),
Lender shall not be entitled to declare the Obligations immediately due and
payable prior to the final maturity date of any relevant Obligation(s) unless
Borrower fails to cure the relevant Event(s) of Default within thirty (30) days
after Lender gives written notice to Borrower as provided by SECTION 12.25
hereof, reasonably specifying the nature of the Event(s) of Default. The thirty
(30) day period described in the foregoing sentence shall be extended for an
additional sixty (60) days (for a total of ninety (90) days) if: (a) the
relevant Event(s) of Default are reasonably capable of being cured, but not
within thirty (30) days and not by the payment of monies; and (b) Borrower
immediately commences to take and diligently pursues all reasonable steps to
cure such Event(s) of Default, except as provided in SECTION 10.1 hereof.
Notwithstanding any conflicting provision of this SECTION 11.6, no notice shall
be required or cure period provided with respect to any other Event(s) of
Default.
11.7 Default Interest. During any period that there exists a Default in
payment due under any of the Restated Loan Documents, unless the same is waived
in writing by Lender, and during any period when a notice of acceleration of
Obligation is in effect, interest on the unpaid balance of the Notes shall
accrue at the Default Rate.
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11.8 Duty of Lender with Respect to Collateral. Beyond the safe
custody thereof, Lender shall have no duty with respect to any Collateral in
its possession or control (or in the possession or control of any agent or
bailee) or with respect to any income thereon or the preservation of rights
against prior parties or any other rights pertaining thereto. Lender shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which Lender accords its own property, provided,
however, Lender shall have no duty or obligation to protect, insure, collect or
realize upon the Collateral or preserve rights in it against prior parties.
Lender shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by Lender in good faith. Borrower releases Lender from,
and shall indemnify Lender against, any liability for any act or omission
relating to the Collateral, except for any liability directly resulting from
Lender's gross negligence or willful misconduct.
11.9 General Remedies. At any time when a Default shall have occurred
or exists, or if any Obligation matures by its terms and is not then fully paid,
without any further notice (except as may be required by specific applicable
laws such as those requiring notices of intended Dispositions of certain
Collateral), and in addition to all rights and remedies provided for under the
Restated Loan Documents, Lender shall have all rights and remedies provided to
it by law, and, without limiting the generality of the foregoing, Lender may do
any one or more acts described in this SECTION 11.9, this Agreement or in the
other Restated Loan Documents and in any order they deem appropriate. Lender
shall exercise all rights, powers and remedies afforded it under the Restated
Loan Documents in good faith, unless the exercise of such rights, powers and
remedies is stated to be in Lender's sole and absolute discretion. To the extent
that the Collateral consists of personal property rights and interests, Lender
may exercise any or all of the remedies of a secured party under the UCC (and/or
any other relevant state(s)' Uniform Commercial Code) with respect to such
personal property. If Lender should proceed to dispose of or otherwise realize
upon any such personal property in accordance with the provisions of the UCC,
unless the Collateral is perishable or threatens to decline speedily in value,
ten (10) days notice by Lender to Borrower or any other "debtor" entitled to
notice under the UCC shall be deemed to be commercially reasonable notice under
any provision of the UCC requiring notice.
11.10 License of Intellectual Property. Borrower hereby assigns,
transfers and conveys to Lender, effective upon the occurrence of any Event of
Default hereunder, the non-exclusive right and license to use all Intellectual
Property owned or used by it together with any goodwill associated therewith,
all to the extent necessary to enable Lender to realize on the Collateral and
any successor or assign to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of all successors, assigns and transferees of
Lender and its successors, assigns and transferees, whether by voluntary
conveyance, operation of law, assignment, transfer, foreclosure, transfer in
lieu of foreclosure or otherwise. Such right and license is granted free of
charge, without requirement that any monetary payment whatsoever be made to
Borrower by Lender.
11.11 Other Remedies. Lender shall have the right to exercise any other
right, privilege or remedy available to Lender under any of the Restated Loan
Documents, under any other agreement or instrument or as may be provided by
applicable law or in equity. Lender shall have the
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right to enforce any one or more of the remedies provided hereunder or by law or
in equity either successively or concurrently, and any such action by Lender
shall not be deemed an election of remedies or otherwise prevent Lender from
pursuing any further remedy it may have hereunder or at law or in equity, except
as otherwise required by applicable law.
11.12 Power of Attorney. All assignments and grants of liens to Lender
made or contemplated by SECTION 5 include, inter alia, all powers, rights and
privileges that are now or hereafter possessed by Borrower in and to the
Collateral. Borrower hereby makes, constitutes and appoints Lender the true and
lawful attorney-in-fact of Borrower, in the name, place and stead of Borrower,
or otherwise, upon the occurrence of any Event of Default which remains uncured
or not waived following the receipt of a notice pursuant to SECTION 12.25:
(a) To take all actions and to execute, acknowledge, obtain
and deliver any and all writings necessary or deemed advisable by
Lender in order to exercise any rights of Borrower with respect to the
Collateral or to receive and enforce any payment or performance due to
Borrower with respect to the Collateral;
(b) To give any notices, instructions or other communications
to any Person or entity in connection with the Collateral;
(c) To demand and receive all performances due under or with
respect to the Collateral and to take all lawful steps to enforce such
performances and to compromise and settle any claim or cause of action
of Borrower arising from or related to the Collateral and give
acquittances and other discharges relating thereto; and
(d) To file any claim or proceeding or to take any other
action, in the name of Lender, Borrower or otherwise, to enforce
performances due under or related to the Collateral or to protect and
preserve the right, title and interest of Lender thereunder.
The foregoing power of attorney is a power coupled with an interest and shall be
irrevocable and unaffected by the disability of the principal so long as any
portion of the Obligations remains contingent, unmatured, unliquidated, unpaid
or unperformed. Lender shall have no obligation to exercise any of the foregoing
rights and powers in any event.
11.13 Set Off Rights. Lender is hereby granted a continuing security
interest in, and shall have the right, without notice to Borrower to set off and
apply against Borrower's Obligations, any deposits (general or special, time or
demand, provisional or final) or funds held by it for the account of Borrower,
for so long as a Default shall exist and remain uncured, to the full extent of
the indebtedness owed with respect to Borrower's Obligations, and the aforesaid
security interest and right of set off may be exercised against Borrower or
against any trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, custodian, sequestrator, receiver, or execution, judgment
or attachment creditor of Borrower, or against anyone else claiming through or
against Borrower or such trustee in bankruptcy, debtor in possession, assignee
for the benefit of creditors, custodian, sequestrator, receiver, or execution,
judgment or attachment creditor, notwithstanding the fact that such right of set
off shall not have been exercised by Lender prior to the making, filing or
issuance, or service upon Lender of, or of notice of, any petition seeking any
such relief or remedy, any assignment for the benefit of creditors, an
appointment or application
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for the appointment of a custodian, sequestrator or receiver, or the issuance of
execution, subpoena, order or warrant. Lender agrees promptly to notify Borrower
after any such set off and application made by it, provided that neither failure
to give such notice nor delay therein shall affect the validity of such set off
and application. It is understood that the cumulative right of set off granted
hereby shall not exceed in the aggregate the full indebtedness owing with
respect to Borrower's Obligations. Borrower hereby agrees, to the fullest extent
permitted by law, that any Lender or holder or participant may exercise its
right of setoff with respect to amounts in excess of its pro rata share of the
Obligations (or, in the case of a Lender or participant, in excess of its pro
rata participation interest in the Obligations) and that such Lender or holder
or participant, as the case may be, shall be deemed to have purchased for cash
in the amount of such excess, participations in each other Lender or holder's
share of the Obligations.
11.14 Specific Performance. Lender shall have the right to institute
appropriate proceedings to specifically enforce performance of the terms and
conditions of all or any of the Restated Loan Documents.
11.15 Waivers, Non-Exclusive Remedies. No failure on the part of Lender
to exercise, and no delay in exercising and no course of dealing with respect
to, any right under this Agreement or the other Restated Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise by Lender
of any right under this Agreement or any other Restated Loan Document preclude
any other or further exercise thereof or the exercise of any other right. The
rights in this Agreement and the other Restated Loan Documents are cumulative
and are not exclusive of any other remedies provided by law.
SECTION 12 -- MISCELLANEOUS
12.1 Advice of Counsel. Borrower acknowledges that it has received a
copy of this Agreement as executed and that it has had the opportunity to seek,
and has in fact sought, the advice and benefit of legal counsel prior to
executing this Agreement.
12.2 Assignability by Borrower. Borrower shall not sell, assign,
transfer or otherwise convey any of its rights or delegate any of its
obligations or duties under this Agreement or any of the other Restated Loan
Documents. Any attempted sale, assignment, transfer, conveyance or delegation in
violation of this SECTION 12.2 shall be void and a Default under SECTION 10.1.
12.3 Assignments and Participations by Lender. Lender may assign its
rights and delegate its obligations under this Agreement and further may assign,
or sell participations in, all or any part of the Restated Loan, the Commitments
or any other interest herein to an Affiliate or to another Person; provided,
Lender retains an interest in the Restated Loan and Commitments and continues as
the servicing agent for such assignees and participants. In the case of an
assignment authorized under this SECTION 12.3, the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as it would
if it were a Lender hereunder. Lender shall be relieved of its obligations
hereunder with respect to the Commitments or assigned portion thereof. Borrower
hereby acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the assignee and that the assignee shall be considered
to be a "Lender." Lender may furnish any information concerning Borrower in its
possession from time to time to assignees and participants (including
prospective assignees and participants).
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12.4 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and, subject to SECTION 12.2, their respective
successors and assigns.
12.5 Brokers. Borrower and Lender each warrant and represent to the
other that they have dealt with no mortgage broker or finder with respect to the
Restated Loan. Each party indemnities and holds the other harmless from any and
all claims for broker's or finder's fees relating to the Restated Loan alleged
to be due as a result of the acts of the indemnifying party.
12.6 Claims Resolution.
(a) Other than matters involving the appointment of a
receiver, or the exercise of other provisional remedies (any and all of
which may be initiated pursuant to applicable law), each controversy,
dispute or claim between or among the parties hereto arising out of or
relating to this Agreement (individually and collectively, a "CLAIM")
which is not settled in writing within thirty (30) days after the date
on which a party subject to this Agreement gives written notice to all
other parties that a Claim exists (the "CLAIM DATE"), will be settled
by a "REFERENCE PROCEEDING."
(b) "REFERENCE PROCEEDING" means a proceeding in California in
accordance with the provisions of Section 638 et seq. of the California
Code of Civil Procedure, or their successor section ("CCP"), which
shall constitute the exclusive remedy for the settlement of any Claim
concerning this Agreement, including whether such controversy, dispute
or claim is subject to the reference proceeding. Except as set forth
above, the parties waive their rights to initiate any legal proceedings
against each other in any court or jurisdiction other than Los Angeles
County (the "COURT").
(c) The referee shall be a retired Judge of the Court selected
by mutual Agreement of the parties, and if they cannot so agree within
forty-five (45) days after the Claim Date, the Presiding Judge of the
Court (or his representative) shall promptly select the referee. The
referee shall be appointed to sit as a temporary judge, with all of the
powers for a temporary judge, as authorized by law, and upon selection
should take and subscribe to the oath of office as provided for in Rule
244 of the California Rules of Court (or any subsequently enacted
Rule). Each party shall have one peremptory challenge pursuant to CCP
Section 170.6.
(d) The referee shall (i) be requested to set the matter for
hearing within sixty (60) days after the Claim Date and (ii) try any
and all issues of law or fact and report a statement of decision upon
them, if possible, within ninety (90) days of the Claim Date. Any
decision rendered by the referee will be final, binding and conclusive
and judgment shall be entered pursuant to CCP Section 644 in any court
in the State of California having jurisdiction.
(e) Any party may apply for a reference proceeding at any time
after thirty (30) days following notice to any other party of the
nature of the controversy, dispute or claim, by filing a petition for a
hearing and/or trial.
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(f) All discovery permitted by this Agreement shall be
completed no later than fifteen (15) days before the first hearing
date established by the referee. The referee may extend such period in
the event of a party's refusal to provide requested discovery for any
reason whatsoever, including, without limitation, legal objections
raised to such discovery or unavailability of a witness due to absence
or illness. No party shall be entitled to "priority" in conducting
discovery. Either party upon seven (7) days written notice may take
depositions, and request for production or inspection of documents
shall be responded to within ten (10) days after service. All disputes
relating to discovery which cannot be resolved by the parties shall be
submitted to the referee whose decision shall be final and binding upon
the parties. Pending appointment of the referee as provided herein, the
Superior Court is empowered to issue temporary and/or provisional
remedies, as appropriate.
(g) Except as expressly set forth in this Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with
respect to the course of the reference proceeding. All proceedings and
hearings conducted before the referee, except for trial, shall be
conducted without a court reporter, except that when any party so
requests, a court reporter will be used at any hearing conducted before
the referee. The party making such a request shall have the obligation
to arrange for and pay for the court reporter. The costs of the court
reporter at the trial shall be borne equally by the parties.
(h) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State
of California. The rules of evidence applicable to proceedings at law
in the State of California will be applicable to the reference
proceeding. The referee shall be empowered to enter equitable as well
as legal relief, to provide all temporary and/or provisional remedies
and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding that shall dispose of all of the claims of the parties that
are the subject of the reference.
(i) The parties hereto expressly reserve the right to contest
or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve
the right to findings of fact, conclusions of law, a written statement
of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference
proceeding under this provision.
(j) In the event that the enabling legislation which provides
for appointment of a referee is repealed (and no successor statute is
enacted), any dispute between the parties that would otherwise be
determined by the reference procedure herein described will be resolved
and determined by arbitration. The arbitration will be conducted by a
retired judge of the Court, in accordance with the California
Arbitration Act, Section 1280 through Section 1294.2 of the CCP as
amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
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12.7 Confidentiality. Prior to the Restated Closing Date, neither
Lender nor Borrower shall disclose or in any way publish any information or
make publicity releases regarding the proposed transaction except to their
respective counsel, accountants and such other parties as would need to know for
them to proceed with appropriate due diligence. Upon the execution and delivery
of this Agreement, either of the parties may disclose and make public the fact
of this financing provided that such disclosure shall not include disclosure of
rates, particular terms or covenants without the prior written consent of
Lender, which consent Lender may withhold in its sole and absolute discretion.
12.8 Consent and Approval by Lender. In any instance under the Restated
Loan Documents where Lender's approval or consent is required or the exercise of
Lender's judgment is required, the granting or denial of such approval or
consent and the exercise of such judgment shall be subject to the obligation of
Lender to act in good faith, unless the matter is expressly provided to be
within the sole discretion of Lender, in which event, as to such matters, Lender
shall not, for any reason or to any extent, be required to grant such approval
or consent or exercise such judgment in any particular manner.
12.9 Construction of Agreement. This Agreement shall apply to the
parties hereto according to the context hereof, without regard to the number or
gender of words or expressions used herein. The headings or captions of parts
and Sections in this Agreement are for convenience and reference only, and in no
way define, limit or describe the scope or intent of this Agreement or the
provisions of such Parts or Sections. This Agreement shall be construed as a
whole, in accordance with the fair meaning of its language, and, as each party
has been represented by legal counsel of its choice in the negotiation of this
Agreement, neither this Agreement nor any provision thereof shall be construed
for or against either party by reason of the identity of the party drafting
this Agreement. As used in this Agreement, the term(s): (a) "INCLUDING" shall
mean without limitation by reason of enumeration; (b) "HEREIN", "HEREUNDER",
"HEREOF", "HEREINAFTER" or similar terms refer to this Agreement as a whole
rather than to any particular Section or Section; and (c) "MONTH" means a
calendar month unless otherwise provided. Unless otherwise expressly provided in
this Agreement or another Restated Loan Document, the provisions of this
Agreement shall prevail in the event that an irreconcilable conflict or
discrepancy exists between the provisions of this Agreement and the provisions
of any other Restated Loan Document, and specific provisions of the Restated
Loan Documents that irreconcilably conflict with general provisions of the same
or another Restated Loan Document that is not otherwise entitled to priority in
construction shall prevail over the general provisions. Technical words and
phrases and those that have acquired particular meanings in the banking, real
estate and construction industries shall be construed according to those
particular meanings when the context in which they are used in this Agreement
reasonably indicates that the technical meaning is intended.
12.10 Counterparts. This Agreement and any other Restated Loan Document
may be executed in any number of counterparts, each of which, when executed and
delivered, shall be an original, but all of which shall together constitute one
and the same agreement.
12.11 Expenses and Attorneys' Fees. Whether or not the transactions
contemplated hereby shall be consummated (provided, any failure to consummate is
not Lender's fault) Borrower agrees to promptly pay all of Lender's Expenses in
connection with any matters contemplated by or arising out of this Agreement or
the other Restated Loan Documents.
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12.12 Further Documents and Acts. Borrower, upon the request of Lender,
shall execute and deliver such further writings, and take such further actions
as may be reasonably necessary to carry out the intent of this Agreement and to
perfect and preserve the rights, interests and priority of Lender hereunder.
12.13 General Immunity. Lender shall have no liability to Borrower, or
any other Person for: (i) any loss, costs or expenses incurred by Borrower in
connection with any drafts, documents or instruments delivered by Borrower to
Lender in connection herewith; (ii) any negligence, misfeasance, suspension,
misconduct, insolvency, or bankruptcy of any correspondent or agent of Lender to
whom any such drafts, documents or instruments may be entrusted, unless caused
by such correspondent's or agent's gross negligence or willful misconduct; (iii)
any loss or delay, in transmission or otherwise, of any such drafts, documents
or instruments or the Proceeds thereof; or, (iv) any delay, interruption,
omission or error in transmission or delivery of any message; provided, however,
that nothing herein contained shall be deemed to release Lender from liability
on account of any gross negligence or willful misconduct by Lender, nor to
release any obligation under any of the Restated Loan Documents of Lender.
12.14 Governing Law. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE
IN THE STATE OF CALIFORNIA AND THE VALIDITY OF THIS AGREEMENT AND THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE
PARTIES HERETO SHALL SPECIFICALLY, EXCEPT AS OTHERWISE PROVIDED HEREIN, BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
12.15 Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, Lender shall not be obligated to do anything in
violation of any limitation or prohibition provided by any applicable statute or
regulation.
12.16 Headings. All sections and descriptive headings of subsections
in this Agreement are inserted for convenience only, and shall not affect the
construction or interpretation hereof.
12.17 Incorporation of Recitals and Exhibits. The recitals hereto
together with all Exhibits attached hereto are hereby incorporated herein and
made a part hereof for all purposes, and references in this Agreement to such
recitals and Exhibits shall be deemed to include this reference and
incorporation.
12.18 Indemnification.
12.18.1. Scope of Indemnity. Borrower hereby indemnifies
Lender, and its past and current officers, directors, employees,
attorneys and agents, and their respective successors and assigns
(collectively, the "INDEMNITEES), from and against any and all
out-of-pocket loss, expenses, charges, fees (and including reasonable
attorneys' fees of independent and in-house counsel) and liability, and
agrees to hold Indemnitees harmless from any and all out-of-pocket
damages, costs, expenses, claims, demands, and liabilities which may be
asserted or alleged against any of them in connection with or arising
out of (i) the Borrower's Obligations; and (ii) the administration or
enforcement of or the exercise
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of any right under the original Loan Documents or the Restated Loan
Documents (including, without limitation, in connection with or as a
result of any sale, use, operation, lease, Disposition or consumption
of any of the Collateral as long as such is done in a commercially
reasonable manner); whenever asserted, and for all reasonable
out-of-pocket expenses (and including reasonable attorneys' fees of
independent and in-house counsel) and all out-of-pocket costs of
compromise or settlement which may be incurred by Indemnitees on
account of or arising out of or in connection with any such claim,
demand or obligation. In each case, such losses or expenses shall
include, but not be limited to, any such loss or expense arising from
interest or fees payable by an Indemnitee to lenders of funds obtained
by it in order to maintain Advances hereunder and the cost of
liquidating any time deposit prior to the maturity thereof. A
certificate as to any additional amounts payable pursuant to this
Section submitted by Lender to Borrower shall be conclusive, absent
manifest error.
12.18.2. Survival of Indemnity Obligation. This covenant shall
survive termination of the original Loan Agreement, this Agreement and
the payment of the original Notes and the Facility Note. The foregoing
indemnity shall extend to claims, demands or obligations, and
out-of-pocket expenses relating thereto and out-of-pocket costs of
compromise or settlement thereof, but not to those resulting from the
gross negligence of or willful misconduct by any Indemnitee.
12.18.3. Tender of Defense. In the event that any action or
proceeding is brought against an Indemnitee arising out of Borrower's
Obligations, the administration or enforcement of the Restated Loan
Documents or the exercise of any right under the Restated Loan
Documents, Borrower shall, upon notice from the Indemnitee, resist and
defend such action or proceeding on behalf of the Indemnitee; provided
that failure of such party to give such notice shall not relieve
Borrower from any of its obligations under this Section unless such
failure prejudices defense of such action or proceeding by Borrower. At
its own expense, an Indemnitee may employ separate counsel and
participate in the defense.
12.18.4. Conflicts of Interest. If employment of separate
counsel is required because of a conflict of interest between Borrower
and the indemnified party or among the indemnified parties, or the
failure of Borrower, after receipt of notice, to assume the defense,
then the indemnified party may employ separate counsel at Borrower's
expense.
12.18.5. Compromise and Settlement. Borrower shall not be
liable for any compromise or settlement without its consent unless
Borrower shall have failed to perform any of its obligations under this
SECTION 12.18.
12.18.6. Unenforceability of Indemnity Undertaking. If and to
the extent that the undertaking described in this SECTION 12.18 may be
unenforceable for any reason, Borrower hereby agrees to make the
maximum contribution to the payment and satisfaction of indemnified
liabilities which is permissible under applicable law.
12.19 Interest Limit. All Restated Loan Documents and all other
agreements between Borrower and Lender are hereby expressly limited so that, in
no event whatsoever, whether by
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reason of deferment in accordance with any Restated Loan Document(s) or any
other present or future agreement, or advancement of the Proceeds of any
Restated Loan acceleration or maturity of any Obligation, or otherwise, shall
the total amount paid or agreed to be paid to Lender for the loan, use,
forbearance, detention, funding or issuance of any financial accommodations
described herein, including, without limitation, all interest, any commitment,
loan, consent or extension fees, all late charges, all values of deposit
accounts, and all reimbursable charges, expenses and costs which may be treated
as interest, exceed the total maximum permissible amount(s), if any, under
applicable law. If, from any circumstance whatsoever, fulfillment of any
provision of any Restated Loan Document or any such other agreement would
require Borrower to pay amounts in excess of the maximum amounts, if any,
lawfully collectible under applicable law, then, ipso facto, the obligation of
Borrower to be fulfilled shall be reduced to the require the payment of only
the maximum amounts lawfully collectible. To the extent that Borrower have the
power to do so, Borrower agrees that the only laws relevant to maximum
permissible interest shall be the substantive internal laws of the State of
Arizona in effect on the date of this Agreement. All interest and other charges,
fees, things of value and reimbursable costs and expenses which Borrower is or
may become obligated to pay or reimburse in connection with the financial
accommodations described herein and which constitute "interest" shall constitute
items of interest in addition to the rate(s) of interest specified in the
Restated Loan Documents, which Borrower hereby contracts in writing to pay, and
shall constitute additional "rates of interest" for purposes of determining
compliance with such statutes. Notwithstanding anything herein or in any of the
other Restated Loan Documents to the contrary, if any charge or fee for which
Borrower is or becomes obligated in connection with the Restated Loan Documents
constitutes interest and is not otherwise stated as a rate, such charge or fee
shall be deemed an additional rate of interest to which Borrower agrees,
computed by dividing the amount of such charge or fee by the principal amount of
the Notes. This provision shall control every agreement between Borrower and
Lender pertaining to Borrower's Obligations. In the event any amount determined
to be excessive interest is applied against the unpaid principal balance of
Borrower's Obligations, and thereafter the rate of interest accruing on
Borrower's Obligations is less than the rate permitted by law, Borrower's
Obligations shall thereafter accrue interest at such highest lawful rate until
such time as the amount accrued at the interest rate differential equals the
amount of excessive interest previously applied against principal.
12.20 Lender's Agents. All attorneys, accountants, appraisers, and
other professional Persons and consultants retained by Lender shall have the
right to act exclusively in the interest of Lender and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to Borrower or any of Borrower's shareholders or any
other Person.
12.21 Marshaling; Payments Set Aside. Lender shall not be under any
obligation to marshal any assets in favor of any Restated Loan Party or any
other party or against or in payment of any or all of the Obligations. To the
extent that any Restated Loan Party makes a payment or payments to Lender or
Lender enforces its Security interests or exercise its rights of setoff, and
such payment or payments or the Proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the Obligations or part
thereof
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originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
12.22 Modification and Waiver. No provision of this Agreement shall be
amended, or modified except by an instrument in writing signed by Borrower and
Lender. No provision of this Agreement shall be waived except by an instrument
in writing signed by Borrower and Lender. Unless and until Lender has received
written notice from Borrower that such authorization has been revoked with
respect to that Borrower, any Authorized Signator shall be authorized to execute
any amendment on behalf of Borrower. Any and all prior oral and/or written
commitments from Lender to Borrower, any Related Person or any predecessor in
interest of Borrower, any Related Person or any principals or agents thereof
with respect to all or any portion of the financing described in this Agreement
have been merged in the Restated Loan Documents and shall, except as expressly
provided in the Restated Loan Documents, be of no further force or effect.
Lender shall not be deemed to have waived any rights with respect to the
obligations secured or the Collateral unless such waiver be in writing and
signed by Lender. No delay or omission on the part of Lender in exercising any
right shall operate as a waiver of such right or any other right. A waiver on
any one occasion shall not be construed as a bar to the exercise of any right on
any future occasion. All rights and remedies of Lender as to Borrower's
Obligations or the Collateral, whether evidenced hereby or by any other
instrument or papers shall be cumulative and may be exercised singularly or
concurrently. The waiver by Lender of any breach or Default by Borrower under
any of the terms of any of the Restated Loan Documents shall not be deemed to be
a waiver of any subsequent breach or Default on the part of Borrower under the
same or any other of the Restated Loan Documents.
12.23 No Agency, Fiduciary or Partnership Relationship. Borrower
acknowledges and agrees that no agency, fiduciary, representative or partnership
relationship exists between Lender, on the one hand, and Borrower, on the other
hand.
12.24 No Other Parties to Benefit. The Restated Loan Documents are made
for the sole benefit of Borrower and Lender, and, subject to SECTIONS 12.2 AND
12.3, their respective successors and assigns, and no other Person is intended
to or shall have any rights or benefits hereunder, whether as third-party
beneficiary or otherwise, except as otherwise expressly provided therein.
12.25 Notices. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telecopy or other
facsimile communication) and mailed, telegraphed, telexed, cabled, telecopied
(or communicated by other means of facsimile transmission) or delivered (by hand
or by courier service), to the parties at their respective addresses set forth
below or at such other address as shall be designated by such party in a written
notice to the other parties in like manner:
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If to Lender IMPERIAL BANK
One Arizona Center
000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: R. Xxxx Xxxxxxxx, Vice President
With copies to: XXXXX & XXXX, P.A.
0000 Xxxxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxxx Xxxxxxxx, Esq.
If to Borrower: INTEGRATED INFORMATION SYSTEMS, INC.
Fountainhead Corporate Park
0000 Xxxx Xxxxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, President and CEO
Xxxxx X. Xxxxxxxx, CFO
With copies to: XXXXX & XXXXXX L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxx Xxxxxxx
All notices and communications shall, when mailed by mail, telegraphed, telexed,
cabled or telecopied, be effective upon the earlier to occur of actual receipt
or two (2) Business Days after deposit in the mail (postage prepaid), or upon
delivery to the telegraph company, or upon confirmation by telex answerback, or
upon delivery to the cable company or upon confirmation at the established
confirmation number, respectively. Lender's giving of notice to Borrower under
the Restated Loan Documents shall not be required in any instance in which the
giving of such notice is prohibited by the provision of 11 U.S.C. Section 362.
12.26 Other Actions and Documents. At any time and from time to time,
Borrower agrees to take, without further consideration, such actions and to
execute and deliver such documents as Lender deems necessary to effectuate the
purposes of this Agreement.
12.27 Ratification of Loan Documents; Integration. Borrower and Lender
hereby ratify all Loan Documents and the terms, conditions and provisions
thereof except as specifically amended hereby. This Agreement and the Restated
Loan Documents constitute a complete integration of the agreement of Lender and
Borrower respecting the Restated Loan.
12.28 Reinstatement of Liabilities. In the event that any time after
the Restated Closing Date Lender is for any reason compelled to surrender to any
Person all or any portion of the Collateral or any payments received by them as
contemplated by the original Loan Agreement, this Agreement, the Notes, the
Facility Note, the original Loan Documents, or the Restated Loan Documents,
because the same (or any portion thereof) is determined to be void or voidable
as a fraudulent transfer or conveyance or a preference, or a diversion of trust
funds or for any other reason, then, to the extent such Collateral or such
payments, note or any other payments are
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compelled to be surrendered, any Debt deemed to have been satisfied and
discharged, and (as applicable) the Restated Loan Documents and any promissory
notes which have been cancelled, as the case may be, will be reinstated with the
same force and effect as though they had continued in full force and effect
notwithstanding the receipt of such Collateral or such payments, and any action
taken by Lender in reliance upon or by reason of the receipt of such Collateral
or such payment or payments shall be without prejudice to Lender's rights under
the original Loan Documents or the Restated Loan Documents, and any promissory
notes, as the case may be, and such action shall be deemed to have been
conditioned upon the receipt of such Collateral or such payment or payments to
Lender having become final and irrevocable.
12.29 Rights Unimpaired. ABSENT FULL AND TIMELY PERFORMANCE OF THE
RESTATED LOAN DOCUMENTS BY BORROWER, NOTHING CONTAINED HEREIN SHALL BE DEEMED A
WAIVER OF ANY CAUSE OF ACTION, CLAIM, RIGHT OR REMEDY WHICH LENDER HAS AGAINST
BORROWER AND ITS OFFICERS, DIRECTORS AND EMPLOYEES, BY REASON OF THE
CIRCUMSTANCES AND EVENTS GIVING RISE TO BORROWER'S OBLIGATIONS.
12.30 Right to Appear in Litigation. Lender shall have the right to
commence, appear in or defend any action or proceeding which Lender, in good
faith, believes may affect the rights or duties of any of the parties hereunder
or in connection herewith or in and to the Collateral. If no Default shall
exist hereunder, Lender shall give notice to Borrower of its intent to exercise
its rights hereunder, and, if Borrower fails, within five (5) Business Days, to
diligently commence, appear in or defend any action or proceeding which Lender
sets forth in its notice to Borrower, then Lender may commence such action or
appear in or defend any action or proceeding then pending. In the event Lender
exercises its rights hereunder, then Borrower agrees to pay all necessary and
reasonable out-of-pocket expenses incurred by Lender in connection therewith
(including, but not limited to, reasonable attorneys' fees of independent and
in-house counsel).
12.31 Severability; Integration; Form and Substance of Documents;
Time of the Essence. Inapplicability or unenforceability of any provision of the
Restated Loan Documents shall not limit or impair the operation or validity of
any other provision of the Restated Loan Documents. The Restated Loan Documents
constitute the entire agreement between the parties with respect to the subject
matter hereof. Restated Loan Documents is intended to represent the mutual
intent of the parties thereto and no rule of strict construction shall be
applied against any party. TIME IS OF THE ESSENCE OF THIS AGREEMENT AND OF THE
RESTATED LOAN DOCUMENTS.
12.32 Taxes and Expenses. Any taxes (excluding income taxes) payable,
ruled payable or assessed by any Governmental Authority in respect of Borrower's
Obligations or the making thereof, or the Restated Loan Documents, shall be paid
by Borrower, together with interest and penalties, if any. If any taxes or fees
which Borrower is obligated to pay are imposed or assessed against Lender,
Borrower shall pay, or reimburse and indemnify Lender. Any liability of Borrower
hereunder for reimbursement of interest or penalties shall not extend to
liability on account of amounts arising from the gross negligence or willful
misconduct by Lender.
12.33 Term of Agreement. The term of this Agreement shall commence
immediately upon its execution and delivery and the covenants, agreements,
representations and warranties contained in this Agreement shall survive the
making of the Restated Loan and, except where
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provision is made for a longer effective period, shall continue so long as any
part of the Obligations, or any extension, modification or renewal thereof,
remains unmatured, unpaid or unperformed.
12.34 Time Periods. Time periods referred to herein shall be determined
by excluding the day of the event when the period commences or from which it
runs and shall expire at 5:00 P.M. (Phoenix, Arizona time) on the last day
included in such period unless it is not a Business Day, in which case it shall
expire at 5:00 P.M. (Phoenix, Arizona time) on the next Business Day.
12.35 Venue. BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S SOLE
DISCRETION, ALL ACTIONS AND PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING
OUT OF, FROM OR RELATED TO THIS AGREEMENT, THE RESTATED LOAN DOCUMENTS OR THE
COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE STATE OF
CALIFORNIA, AND BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER
ACCEPTS THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. For purposes of
litigation relating to the Restated Loan Documents or the Collateral, Borrower
hereby consents and submits to the jurisdiction of any local, state or federal
court located within said state. Borrower hereby waives any right it may have to
transfer or change the venue of any litigation brought against Borrower in
accordance with this SECTION 12.35. Nothing in this paragraph shall affect the
right of Lender to serve legal process in any manner permitted by law or affect
the right of Lender to bring any action or proceeding against any of Borrower's
property in the courts of any other jurisdictions.
12.36 Voluntary and Fair Agreement. BORROWER UNDERSTANDS AND EXPRESSLY
AGREES THAT THE RESTATED LOAN DOCUMENTS HAVE BEEN FREELY AND VOLUNTARILY ENTERED
INTO, AND THAT NO ORAL OR WRITTEN REPRESENTATIONS OR PROMISES OF ANY KIND,
UNLESS SPECIFICALLY CONTAINED IN THE RESTATED LOAN DOCUMENTS, HAVE BEEN MADE BY
LENDER TO INDUCE OR OTHERWISE INFLUENCE BORROWER TO ENTER INTO THIS AGREEMENT.
The parties understand and expressly agree that this Agreement is not executed
pursuant to any duress, and is executed in mutual good faith between the
parties and is not given or intended to hinder, delay or defraud any creditor,
or to contravene any of the bankruptcy laws of the United States pertaining to
fraudulent conveyances or any other applicable laws.
12.37 Waiver of Jury Trial. BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY, WAIVES ANY RIGHTS IT MAY HAVE TO REQUIRE A TRIAL BY JURY IN ANY
COURT ACTION INVOLVING LENDER AND PERTAINING TO BORROWER'S OBLIGATIONS OR THE
RESTATED LOAN DOCUMENTS OR THE COLLATERAL, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A REFEREE IN ARBITRATION AND NOT BEFORE A JURY.
12.38 Waivers by Borrower. Borrower waives presentment, demand, protest
and notices of protest, nonpayment, partial payment and all other notices and
formalities except as expressly required by any Restated Loan Document(s) and
any applicable law(s) which may not be legally waived. Borrower further consents
to, and waives notice of: (a) the granting of indulgences or extensions of time
of payment; (b) the taking or releasing of security; and (c) the addition or
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release of persons who may be or become primarily or secondarily liable for the
Obligations or any part thereof, all in such a manner and at such time as Lender
may elect in its sole discretion.
DATED as of the day first above written.
IMPERIAL BANK, a California INTEGRATED INFORMATION
banking corporation SYSTEMS, INC., an Arizona corporation
By /s/ R. Xxxx Xxxxxxxx By /s/ Xxx Xxxxxx
----------------------------- ----------------------------
Its Vice President Its President
-------------------------- ----------------------------
"Lender" "Borrower"
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INTEGRATED INFORMATION SYSTEMS, INC.
BORROWING BASE CERTIFICATE
Dated as of March 31, 1999
Revenues For Preceding Four Fiscal Quarters: $ 1,998,793 Q2 98
$ 2,165,095 Q3 98
$ 2,302,857 Q4 98
$ 3,253,236 Q1 99
A. Total Revenues $ 9,719,981
Less Product Sales for Preceding Four Quarters: $ 31,567 Q2 98
$ 75,827 Q3 98
$ 104,336 Q4 98
$ 73,780 Q1 99
B. Total Product Sales $ 285,510
C. Net Revenues $ 9,434,471
D. Net Revenues Multiplied by 2: $18,868,942
GROSS AVAILABILITY
(Item D Multiplied by 20%) $ 3,773,788
Less: Outstanding Principal Balance $ NA
NET AVAILABILITY $ NA
BORROWING BASE
(Lesser of $2,000,000 and Gross Availability) $ 2,000,000
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INTEGRATED INFORMATION SYSTEMS, INC. hereby certifies that: (a) the
foregoing represents a true and accurate calculation of the Borrowing Base
calculated, as of the last day of March, 1999, in accordance with the Restated
Credit Facilities Agreement, dated April 30, 1999, between INTEGRATED
INFORMATION SYSTEMS, INC., and IMPERIAL BANK, a California banking corporation;
and (b) all items not entitled to be included in the calculation of the
Borrowing Base have not been included.
/s/ Xxxxx Xxxxxxxx 5/18/99
---------------------------------------
INTEGRATED INFORMATION SYSTEMS, INC
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COMPLIANCE CERTIFICATE
FOR FISCAL PERIOD ENDING
April 30, 1999
---------------
("Reporting Period")
Imperial Bank
000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: R. Xxxx Xxxxxxxx
Telecopier: (000) 000-0000 Date: 5/18/99
-------
Dear Ladies and Gentlemen:
This Financial Maintenance Certificate refers to the Restated Credit
Facilities Agreement originally made by Integrated Information Systems, Inc.,
("Integrated Information Systems") with Imperial Bank Arizona, an Arizona
banking corporation, dated as of December 18, 1997, and thereafter assigned to
Imperial Bank, a California banking corporation ("Imperial Bank"), and restated
as of April 30, 1999, (as it may hereafter be amended, modified, extended or
restated from time to time (the "Restated Loan Agreement"). Capitalized terms
used and not otherwise defined herein shall have the meanings assigned to such
terms in the Restated Loan Agreement.
Pursuant to Section 9.6 of the Restated Loan Agreement, the undersigned,
hereby certifies that:
1. To the best of the undersigned's knowledge, Integrated Information
Systems has observed, performed and fulfilled each and every obligation and
covenant contained in the Restated Loan Agreement and no Potential Default or
Default thereunder exists [or if so, specifying the nature and extent thereof
and any corrective actions taken or to be taken].
2. All financial statements of Integrated Information Systems delivered
to Imperial Bank during this Reporting Period, to the undersigned's knowledge,
fairly present in all material respects the financial position of Integrated
Information Systems and the results of its operations at the dates and for the
periods indicated.
3. As of the last day of the Reporting Period, the computations below,
made pursuant to the Restated Loan Agreement, were true and correct.
4. As of the last day of each Fiscal Quarter, Integrated Information
Systems' computations were:
A. Current Assets [$5,278,000] divided by Current Liabilities date of
[$745,000] = 7.08.
Covenant Requirement: Current Ratio cannot be less than 2.00 to 1.00,
measured on a quarterly basis.
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B. Liabilities (excluding therefrom Subordinated Debt) [$2,375,00]
divided by Total Net Worth (including therein Subordinated Debt) [$3,989,000] =
0.60.
Covenant Requirement: Adjusted Debt to Worth Ratio shall not be greater
than 2.00 to 1.00, measured on a quarterly basis:
C. EBIT plus Net Contributed Capital for the most recent four Fiscal
Quarters (A) [$4,052,000] divided by aggregate interest payments for the most
recent four (4) quarters [$233,000]. = 17.39
Covenant Requirement: Interest Coverage Ratio cannot be less than 2.00 to
1.00.
INTEGRATED INFORMATION SYSTEMS, INC.,
an Arizona corporation
By:/s/ Xxxxx Xxxxxxxx
------------------
Its: CFO
-----------------
EBIT 65,679
Common Stock 1,106,134
Preferred Stock 2,879,999
---------
4,051,812 (A)
=========
2
