UNION BANK OF CALIFORNIA
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is made and
entered into as of September 3, 1998 by and between EDUCATIONAL INSIGHTS,
INC. a California corporation ("Borrower") and UNION BANK OF CALIFORNIA,
N.A., ("Bank"). This Agreement amends and restates in its entirety that
certain loan agreement dated May 27, 1997 between Bank and Borrower.
SECTION 1. THE LOAN
1.1.1 THE REVOLVING LOAN. Bank will loan to Borrower
an amount not to exceed Nine Million Dollars ($9,000,000) outstanding in the
aggregate at any one time (the "Revolving Loan"). Borrower may borrow, repay
and reborrow all or part of the Revolving Loan in amounts of not less than
One Hundred Thousand Dollars ($100,000) in accordance with the terms of the
Revolving Note. All borrowings of the Revolving Loan must be made before
June 15, 1999 at which time all unpaid principal and interest of the
Revolving Loan shall be due and payable. The Revolving Loan shall be
evidenced by a promissory note (the "Revolving Note") on the standard form
used by Bank for commercial loans. Bank shall enter each amount borrowed and
repaid in Bank's records and such entries shall be deemed to be the amount of
the Revolving Loan outstanding. Omission of Bank to make any such entries
shall not discharge Borrower of its obligation to repay in full with interest
all amounts borrowed.
1.1.1.1 THE COMMERCIAL LETTER OF CREDIT
SUBLIMIT. As a sublimit to the Revolving Loan, Bank shall issue, for the
account of Borrower, one or more irrevocable commercial letters of credit
(individually, an "L/C" and collectively, the "L/Cs") and calling for drafts
at sight or usance up to ninety (90) days covering the importation or
purchase of inventory of overseas suppliers. The aggregate amount available
to be drawn under all outstanding L/Cs and the aggregate amount of unpaid
reimbursement obligations under drawn L/Cs shall not exceed One Million Five
Hundred Thousand Dollars ($1,500,000) and shall reduce, dollar for dollar,
the maximum amount available under the Revolving Loan. All such commercial
L/Cs shall be drawn on such terms and conditions as are acceptable to Bank
and shall be governed by the terms of (and Borrower agrees to execute) Bank's
standard form for commercial L/C applications and reimbursement agreement and
shall not have an expiration date more than 360 days from its date of
issuance. No letter of credit shall expire after June 15, 2000.
1.1.2 TERM LOAN. Bank previously made a certain term
loan ("Term Loan") to Borrower, which matures on January 1, 2005. The current
outstanding principal amount of the Term Loan is One Million One Hundred Five
Thousand Four Hundred Sixteen Dollars and 03/100 Dollars ($1,105,416.03).
This Term Loan is evidenced by a promissory note ("Term Note") on the
standard form used by Bank for commercial loans. In the event of a
prepayment of principal and any resulting fees, any prepaid amounts shall be
applied to the scheduled principal payments in the reverse order of their
maturity.
1.2 TERMINOLOGY.
As used herein the word "Loan" shall mean, collectively,
all the credit facilities described above.
As used herein the word "Note" shall mean, collectively,
all the promissory notes described above.
As used herein, the words "Loan Documents" shall mean
all documents executed in connection with this Agreement.
1.3 BORROWING BASE. Notwithstanding any other provision of
this Agreement, Bank shall not be obligated to advance funds under the
Revolving Loan, if at any time the aggregate of Borrower's obligations to
Bank thereunder shall exceed the sum of eighty percent (80%) of Borrower's
Eligible Accounts plus, during the period beginning on September 3, 1998 and
ending on November 30, 1998, fifteen (15%) of Borrower's Eligible
Inventory. In no event, however, shall the aggregate amount of advances
based on Eligible Inventory exceed, at any one time, the sum of One Million
Seven Hundred Fifty
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Thousand Dollars ($1,750,000). If at any time Borrower's obligations to Bank
under the above facilities exceed the sum so permitted, Borrower shall
immediately repay to Bank such excess.
1.3.1 ELIGIBLE ACCOUNTS. The term "Accounts" means all
presently existing and hereafter arising accounts receivable, contract
rights, chattel paper, and all other forms of obligations owing to Borrower,
payable in United States Dollars, arising out of the sale or lease of goods,
or the rendition of services by Borrower, whether or not earned by
performance, and any and all credit insurance, guaranties and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower and
Borrower's books and records relating to any of the foregoing.
The term "Eligible Accounts" means those Accounts, net of finance
charges, which are due and payable within sixty (60) days, or less, from due
date, have been validly assigned to Bank and strictly comply with all of
Borrower's warranties and representations to Bank, but Eligible Accounts
shall not include the following:
(a) Any Account with respect to which the account
debtor is an officer, shareholder, director, employee or agent of Borrower;
(b) Any Account with respect to which the account
debtor is a subsidiary of, related to, or affiliated or has common officers
or directors with Borrower;
(c) Any Account relating to goods placed on
consignment, guaranteed sale or other terms by reason of which the payment by
the account debtor may be conditional;
(d) Any Account with respect to which the account
debtor is the United States or any department, agency or instrumentality of
the United States;
(e) Any Account with respect to which Borrower is or
may become liable to the account debtor for goods sold or services rendered
by the account debtor to Borrower;
(f) Any Account with respect to which there is
asserted a defense, counterclaim, discount or setoff, whether well-founded or
otherwise, except for those discounts, allowances and returns arising in the
ordinary course of Borrower's business;
(g) Any Account with respect to which the account
debtor becomes insolvent, fails to pay its debts as they mature or goes out
of business or is owed by an account debtor which has become the subject of a
proceeding under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including, but not
limited to, assignments for the benefit of creditors, formal or informal
moratoriums, compositions or extensions with all or substantially all of its
creditors;
(h) Any Account owed by any account debtor with
respect to which twenty-five percent (25%) or more of the aggregate dollar
amount of its Accounts are not paid within sixty (60) days from the due date
of the invoice except as provided in attached Schedule A;
(i) Any Account that is not paid by the account
debtor within sixty (60) days of its due date;
(j) That portion of the Accounts owed by any single
account debtor which exceeds fifteen percent (15%) of all of the Accounts;
and
(k) Any Account which Bank reasonably deems not to be
an Eligible Account.
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1.3.2 ELIGIBLE INVENTORY. The term "Eligible
Inventory" means that portion of Borrower's inventory of finished goods which
is (a) owned by Borrower, free and clear of all liens or encumbrances except
those in favor of Bank, (b) held for sale or lease by Borrower and normally
and currently saleable in the ordinary course of Borrower's business, (c) of
good and merchantable quality, free from defects, (d) located only at
locations of which Bank is notified in writing, and (e) as to which Bank has
been able to perfect and maintain perfected a first priority security
interest. Eligible Inventory does not include obsolete or unmerchantable
items, or inventory which Bank otherwise reasonably deems not be Eligible
Inventory.
The term Inventory means and includes all present and future inventory
in which Borrower had any interest, including but not limited to, goods,
machinery, equipment held by Borrower for sale or lease, or to be furnished
under a contract, of service and all of Borrower's present and future raw
materials, work in process, finished goods and packing and shipping
materials, wherever located, and any documents of title representing any of
the above.
1.4 PURPOSE OF LOAN. The proceeds of the Revolving Loan
shall be used for general working capital purposes.
1.5 INTEREST. The unpaid principal balance of the Revolving
Loan shall bear interest at the rate or rates provided in the Revolving Note
and selected by Borrower. The Revolving Loan may be prepaid in full or in
part only in accordance with the terms of the Revolving Note and any such
prepayment shall be subject to the prepayment fee provided for therein.
1.6 BALANCES. Borrower shall maintain its major depository
accounts with Bank until the Note and all sums payable pursuant to this
Agreement have been paid in full.
1.7 DISBURSEMENT. Upon execution hereof, Bank shall
disburse the proceeds of the Loan as provided in Bank's standard form
Authorization executed by Borrower.
1.8 SECURITY. Prior to any disbursement of the Revolving
Loan, Borrower shall have executed a security agreement, on Bank's standard
form, and a financing statement, suitable for filing in the office of the
Secretary of State of the State of California and any other state designated
by Bank, granting to Bank a first priority security interest in such of
Borrower's property as is described in said security agreement. Exceptions
to Bank's first priority, if any, are permitted only as otherwise provided in
this Agreement. At Bank's request, Borrower will also obtain executed
landlord's and mortgagee's waivers on Bank's form covering all of Borrower's
property located on leased or encumbered real property.
1.9 CONTROLLING DOCUMENT. In the event of any inconsistency
between the terms of this Agreement and any Note or any of the other Loan
Documents, the terms of such Note or other Loan Documents will prevail over
the terms of this Agreement.
SECTION 2. CONDITIONS PRECEDENT
Bank shall not be obligated to disburse all or any portion of the
proceeds of the Loan unless at or prior to the time for the making of such
disbursement, the following conditions have been fulfilled to Bank's
satisfaction:
2.1 COMPLIANCE. Borrower shall have performed and complied
with all terms and conditions required by this Agreement to be performed or
complied with by it prior to or at the date of the making of such
disbursement and shall have executed and delivered to Bank the Note and other
documents deemed necessary by Bank.
2.2 BORROWING RESOLUTION. Borrower shall have provided Bank
with certified copies of resolutions duly adopted by the Board of Directors
of Borrower, authorizing this Agreement and the Loan Documents. Such
resolutions
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shall also designate the persons who are authorized to act on Borrower's
behalf in connection with this Agreement and to do the things required of
Borrower pursuant to this Agreement.
2.3 TERMINATION STATEMENTS. Borrower shall have provided
Bank with UCC-2 termination statements executed by such secured creditors as
may be required by Bank suitable for filing with the Secretary of State in
each state designated by Bank.
2.4 CONTINUING COMPLIANCE. At the time any disbursement is
to be made, there shall not exist any event, condition or act which
constitutes an event of default under Section 6 hereof or any event,
condition or act which with notice, lapse of time or both would constitute
such event of default; nor shall there be any such event, condition, or act
immediately after the disbursement were it to be made.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 BUSINESS ACTIVITY. The principal business of Borrower
is developer and distributor of supplemental educational material.
3.2 AFFILIATES AND SUBSIDIARIES. Borrower's affiliates and
subsidiaries (those entities in which Borrower has either a controlling
interest or at least a 25% ownership interest) and their addresses, and the
names of Borrower's principal shareholders, are as provided on a schedule
delivered to Bank on or before the date of this Agreement.
3.3 AUTHORITY TO BORROW. The execution, delivery and
performance of this Agreement, the Note and all other agreements and
instruments required by Bank in connection with the Loan are not in
contravention of any of the terms of any indenture, agreement or undertaking
to which Borrower is a party or by which it or any of its property is bound
or affected.
3.4 FINANCIAL STATEMENTS. The financial statements of
Borrower, including both a balance sheet at June 30, 1998 together with
supporting schedules, and an income statement for the six (6) months ended
June 30, 1998, have heretofore been furnished to Bank, and are true and
complete and fairly represent the financial condition of Borrower during the
period covered thereby. Since June 30, 1998, there has been no material
adverse change in the financial condition or operations of Borrower.
3.5 TITLE. Except for assets which may have been disposed
of in the ordinary course of business, Borrower has good and marketable title
to all of the property reflected in its financial statements delivered to
Bank and to all property acquired by Borrower since the date of said
financial statements, free and clear of all liens, encumbrances, security
interests and adverse claims except those specifically referred to in said
financial statements.
3.6 LITIGATION. There is no litigation or proceeding
pending or threatened against Borrower or any of its property which is
reasonably likely to affect the financial condition, property or business of
Borrower in a materially adverse manner or result in liability in excess of
Borrower's insurance coverage.
3.7 DEFAULT. Borrower is not now in default in the payment
of any of its material obligations, and there exists no event, condition or
act which constitutes an event of default under Section 6 hereof and no
condition, event or act which with notice or lapse of time, or both, would
constitute an event of default.
3.8 ORGANIZATION. Borrower is duly organized and existing
under the laws of the state of its organization, and has the power and
authority to carry on the business in which it is engaged and/or proposes to
engage.
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3.9 POWER. Borrower has the power and authority to enter
into this Agreement and to execute and deliver the Note and all of the other
Loan Documents.
3.10 AUTHORIZATION. This Agreement and all things required by
this Agreement have been duly authorized by all requisite action of Borrower.
3.11 QUALIFICATION. Borrower is duly qualified and in good
standing in any jurisdiction where such qualification is required.
3.12 COMPLIANCE WITH LAWS. Borrower is not in violation with
respect to any applicable laws, rules, ordinances or regulations which
materially affect the operations or financial condition of Borrower.
3.13 ERISA. Any defined benefit pension plans as defined in
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of
Section 302 of ERISA, and no Reportable Event or Prohibited Transaction as
defined in ERISA has occurred with respect to any such plan.
3.14 REGULATION U. No action has been taken or is currently
planned by Borrower, or any agent acting on its behalf, which would cause
this Agreement or the Note to violate Regulation U or any other regulation of
the Board of Governors of the Federal Reserve System or to violate the
Securities and Exchange Act of 1934, in each case as in effect now or as the
same may hereafter be in effect. Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock as
one of its important activities and none of the proceeds of the Loan will be
used directly or indirectly for such purpose.
3.15 CONTINUING REPRESENTATIONS. These representations shall
be considered to have been made again at and as of the date of each
disbursement of the Loan and shall be true and correct as of such date or
dates.
SECTION 4. AFFIRMATIVE COVENANTS
Until the Note and all sums payable pursuant to this Agreement or any
other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, Borrower agrees that:
4.1 USE OF PROCEEDS. Borrower will use the proceeds of the
Loan only as provided in subsection 1.4 above.
4.2 PAYMENT OF OBLIGATIONS. Borrower will pay and discharge
promptly all taxes, assessments and other governmental charges and claims
levied or imposed upon it or its property, or any part thereof, provided,
however, that Borrower shall have the right in good faith to contest any such
taxes, assessments, charges or claims and, pending the outcome of such
contest, to delay or refuse payment thereof provided that adequately funded
reserves are established by it to pay and discharge any such taxes,
assessments, charges and claims.
4.3 MAINTENANCE OF EXISTENCE. Borrower will maintain and
preserve its existence and assets and all rights, franchises, licenses and
other authority necessary for the conduct of its business and will maintain
and preserve its property, equipment and facilities in good order, condition
and repair. Bank may, at reasonable times, visit and inspect any of the
properties of Borrower.
4.4 RECORDS. Borrower will keep and maintain full and
accurate accounts and records of its operations according to generally
accepted accounting principles and will permit Bank to have access thereto,
to make examination and photocopies thereof, and to make audits during
regular business hours. Costs for such audits shall be paid by Borrower.
4.5 INFORMATION FURNISHED. Borrower will furnish to Bank:
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(a) Within forty-five (45) days after the close of
each fiscal quarter, except for the final quarter of each fiscal year, its
unaudited balance sheet as of the close of such fiscal quarter, its unaudited
income and expense statement with supportive schedules and statement of
retained earnings for that fiscal quarter, prepared in accordance with
generally accepted accounting principles;
(b) Within ninety (90) days after the close of each
fiscal year, a copy of its statement of financial condition including at
least its balance sheet as of the close of such fiscal year, its income and
expense statement and retained earnings statement for such fiscal year,
examined and prepared on an audited basis by independent certified public
accountants selected by Borrower and reasonably satisfactory to Bank, in
accordance with generally accepted accounting principles applied on a basis
consistent with that of the previous year;
(c) Within ninety days (90) days after the end of
each fiscal year, a copy of the financial statement of Educational Insights
U.K. for such fiscal year.
(d) Such other financial statements and information
as Bank may reasonably request from time to time;
(e) In connection with each financial statement
provided hereunder, a statement executed by the president, chief financial
officer or controller of Borrower, certifying that no default has occurred
and no event exists which with notice or the lapse of time, or both, would
result in a default hereunder;
(f) Prompt written notice to Bank of all events of
default under any of the terms or provisions of this Agreement or of any
other agreement, contract, document or instrument entered, or to be entered
into with Bank; and of any litigation which, if decided adversely to
Borrower, would have a material adverse effect on Borrower's financial
condition; and of any other matter which has resulted in, or is likely to
result in, a material adverse change in its financial condition or operations;
(g) Prompt written notice to Bank of any changes in
Borrower's officers; Borrower's name; and location of Borrower's principal
assets, principal place of business or chief executive office; and
(h) Within twenty-five (25) days after each
calendar month end, a copy of Borrower's monthly accounts receivable aging
and a certification of compliance with the Borrowing Base described above,
executed by Borrower's chief financial officer or other duly authorized
officer of Borrower, in form agreed to by Bank, which certificate shall
accurately report Borrower's accounts receivable, Eligible Accounts,
inventory and Eligible Inventory. Borrower will permit Bank to audit, at
Borrower's expense, Bank's collateral upon reasonable notice and during
regular business hours prior to May 31, 1999.
4.6 TANGIBLE NET WORTH. Borrower will at all times
maintain Tangible Net Worth of not less than Eighteen Million Dollars
($18,000,000). "Tangible Net Worth" shall mean net worth increased by
indebtedness of Borrower subordinated to Bank and decreased by patents,
licenses, trademarks, trade names, goodwill and other similar intangible
assets, organizational expenses, and monies due from affiliates (including
officers, shareholders and directors), royalties, and barter credits.
4.7 DEBT TO TANGIBLE NET WORTH. Borrower will at all times
maintain a ratio of total liabilities to Tangible Net Worth of not greater
than 1.0:1.0.
4.8 PROFITABILITY. Borrower will maintain its net profit,
after provision for income taxes, at not less than Three Hundred Thousand
Dollars ($300,000) for any fiscal year.
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4.9 QUICK RATIO. Borrower shall maintain at all times a
ratio of cash, accounts receivable and marketable securities to current
liabilities of not less than 1.0 :1.0, as such terms are defined by generally
accepted accounting principles.
4.10 EBITDA TO DEBT SERVICE RATIO. Borrower will maintain a
ratio of EBITDA, less dividends, to Debt Service of not less than 1.0:1.0.
"EBITDA" shall mean earnings before interest, taxes, depreciation, and
amortization. "Debt Service" shall mean the sum of the current portion of
term obligations coming due during the twelve (12) months following the date
of calculation plus interest, taxes, non-financed capital expenditures and
value of acquired or retired shares of its capital stock during the twelve
(12) months preceding the date of calculation. Compliance with this
subsection shall be measured as of the end of each fiscal quarter on a
rolling four-quarter basis.
4.11 INSURANCE. Borrower will keep all of its insurable
property, real, personal or mixed, insured by companies and in amounts agreed
to by Bank against fire and such other risks, and in such amounts, as is
customarily obtained by companies conducting similar business with respect to
like properties. Borrower will furnish to Bank statements of its insurance
coverage, will promptly furnish other or additional insurance deemed
necessary by and upon request of Bank to the extent that such insurance may
be available and hereby assigns to Bank, as security for Borrower's
obligations to Bank, the proceeds of any such insurance. Prior to any
disbursement of the Loan, Bank will be named loss payee on all policies
insuring collateral and such policies shall require at least ten (10) days'
written notice to Bank before any policy may be altered or canceled.
Borrower will maintain adequate worker's compensation insurance and adequate
insurance against liability for damage to persons or property.
4.12 ADDITIONAL REQUIREMENTS. Borrower will promptly, upon
demand by Bank, take such further action and execute all such additional
documents and instruments in connection with this Agreement as Bank in its
reasonable discretion deems necessary, and promptly supply Bank with such
other information concerning its affairs as Bank may request from time to
time.
4.13 LITIGATION AND ATTORNEYS' FEES. Borrower will pay
promptly to Bank upon demand, reasonable attorneys' fees (including but not
limited to the reasonable estimate of the allocated costs and expenses of
in-house legal counsel and legal staff) and all costs and other expenses paid
or incurred by Bank in collecting, modifying or compromising the Loan or in
enforcing or exercising its rights or remedies created by, connected with or
provided for in this Agreement or any of the Loan Documents, whether or not
an arbitration, judicial action or other proceeding is commenced. If such
proceeding is commenced, only the prevailing party shall be entitled to
attorneys' fees and court costs.
4.14 BANK EXPENSES. Borrower will pay or reimburse Bank for
all costs, expenses and fees incurred by Bank in preparing and documenting
this Agreement and the Loan, and all amendments and modifications thereof,
including but not limited to all filing and recording fees, costs of
appraisals, insurance and outside attorneys' fees.
4.15 REPORTS UNDER PENSION PLAN. Borrower will furnish to
Bank, as soon as possible and in any event within 15 days after Borrower
knows or has reason to know that any event or condition with respect to any
defined benefit pension plans of Borrower described in Section 3 above has
occurred, a statement of an authorized officer of Borrower describing such
event or condition and the action, if any, which Borrower proposes to take
with respect thereto.
SECTION 5. NEGATIVE COVENANTS
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Until the Note and all other sums payable pursuant to this
Agreement or any other of the Loan Documents have been paid in full, unless
Bank waives compliance in writing, Borrower agrees that:
5.1 ENCUMBRANCES AND LIENS. Borrower will not create,
assume or suffer to exist any mortgage, pledge, security interest,
encumbrance, or lien (other than for taxes not delinquent and for taxes and
other items being contested in good faith) on property of any kind, whether
real, personal or mixed, now owned or hereafter acquired, or upon the income
or profits thereof, except to Bank and except for minor encumbrances and
easements on real property which do not affect its market value, and except
for existing liens on Borrower's personal property and future purchase money
security interests encumbering only the personal property purchased. All of
such permitted personal property liens shall not exceed, in the aggregate,
Two Hundred Fifty Thousand Dollars ($250,000) at any time.
5.2 BORROWINGS. Borrower will not sell, discount or
otherwise transfer any account receivable or any note, draft or other
evidence of indebtedness, except to Bank or except to a financial institution
at face value for deposit or collection purposes only and without any fee
other than fees normally charged by the financial institution for deposit or
collection services. Borrower will not borrow any money, become contingently
liable to borrow money, nor enter any agreement to directly or indirectly
obtain borrowed money, except pursuant to agreements made with Bank in excess
of $500,000.
5.3 SALE OF ASSETS, LIQUIDATION OR MERGER. Borrower will
neither liquidate nor dissolve nor enter into any consolidation, merger,
partnership or other combination, nor convey, nor sell, nor lease all or the
greater part of its assets or business, nor purchase or lease all or the
greater part of the assets or business of another in excess of One Million
Dollars ($1,000,000) per year.
5.4 LOANS, ADVANCES AND GUARANTIES. Borrower will not,
except in the ordinary course of business as currently conducted, make any
loans or advances, become a guarantor or surety, pledge its credit or
properties in any manner or extend credit.
5.5 INVESTMENTS. Borrower will not purchase the debt or
equity of another person or entity in an amount greater than $500,000 except
for savings accounts and certificates of deposit of Bank, direct U.S.
Government obligations and commercial paper issued by corporations with the
top ratings of Xxxxx'x or Standard & Poor's, provided all such permitted
investments shall mature within one year of purchase.
5.6 PAYMENT OF DIVIDENDS. Borrower will not declare or pay
any dividends, other than a dividend payable in its own common stock, or
authorize or make any other distribution with respect to any of its stock now
or hereafter outstanding.
5.7 RETIREMENT OF STOCK. Borrower may not acquire or retire
any share of its capital stock for value: a) if such transaction would cause
the ratio of EBITDA, less dividends, to Debt Service (as defined in
Subsection 4.10) to be less than or equal to 1.25:1.0, as measured as of the
end of each fiscal quarter on a rolling four-quarter basis; b) if an Event
of Default has occured and is continuing at the time of the proposed
transaction; or c) if such transaction would cause any Event of Default.
5.8 PARENT AND SUBIDIARY PROPERTY. Borrower will not
transfer any property at less than cost to any affiliate.
5.9 CAPITAL EXPENDITURES. Borrower will not make capital
expenditures in excess of Two Million Dollars ($2,000,000) in any fiscal
year; and shall only make such expenditures as are necessary for Borrower in
the conduct of its ordinary course of business. Each said expenditure shall
be needed by Borrower in the ordinary course of its business. Expenditures
as used in this subsection shall include the current expense portion of all
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leases whether or not capitalized and shall also include the current portion
of any debt used to finance capital expenditures.
5.10 LEASE OBLIGATIONS. Borrower will not incur new lease
obligations as lessee which would result in aggregate lease payments for any
fiscal year exceeding One Hundred Thousand Dollars ($100,000). Each said
lease shall be of equipment or real property needed by Borrower in the
ordinary course of its business.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default")
shall terminate any obligation on the part of Bank to make or continue the
Loan and automatically, unless otherwise provided under the Note, shall make
all sums of interest and principal and any other amounts owing under the Loan
immediately due and payable, without notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor, or any other
notices or demands:
6.1 Borrower shall default in the due and punctual payment
of the principal of or the interest on the Note or any of the other Loan
Documents; or
6.2 Any default shall occur under the Note; or
6.3 Borrower shall default in the due performance or
observance of any covenant or condition of the Loan Documents; or
6.4 There is a change in ownership whereas Xxxxxx Xxxxxx,
Xxx Xxxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxxx Xxxxxx, Xxxxx Xxxxxx Xxxxx and Xxxxx
Xxxxxx Xxxxxxx, and children thereof collectively own or control less than
51% of the issued and outstanding stock of Borrower.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 ADDITIONAL REMEDIES. The rights, powers and remedies
given to Bank hereunder shall be cumulative and not alternative and shall be
in addition to all rights, powers and remedies given to Bank by law against
Borrower or any other person, including but not limited to Bank's rights of
setoff or banker's lien.
7.2 NONWAIVER. Any forbearance or failure or delay by Bank
in exercising any right, power or remedy hereunder shall not be deemed a
waiver thereof and any single or partial exercise of any right, power or
remedy shall not preclude the further exercise thereof. No waiver shall be
effective unless it is in writing and signed by an officer of Bank.
7.3 INUREMENT. The benefits of this Agreement shall inure
to the successors and assigns of Bank and the permitted successors and
assignees of Borrower, and any assignment by Borrower without Bank's consent
shall be null and void.
7.4 APPLICABLE LAW. This Agreement and all other agreements
and instruments required by Bank in connection therewith shall be governed by
and construed according to the laws of the State of California.
7.5 SEVERABILITY. Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective. In the event of any conflict between the
provisions of this Agreement and the provisions of any note or reimbursement
agreement evidencing any indebtedness hereunder, the provisions of such note
or reimbursement agreement shall prevail.
7.6 INTEGRATION CLAUSE. Except for documents and
instruments specifically referenced herein, this Agreement constitutes the
entire agreement between Bank and Borrower regarding the Loan and all prior
communications verbal or written between Borrower and Bank shall be of no
further effect or evidentiary value.
7.7 CONSTRUCTION. The section and subsection headings herein
are
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for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
7.8 AMENDMENTS. This Agreement may be amended only in
writing signed by all parties hereto.
7.9 COUNTERPARTS. Borrower and Bank may execute one or more
counterparts to this Agreement, each of which shall be deemed an original,
but when together shall be one and the same instrument.
SECTION 8. SERVICE OF NOTICES
8.1 Any notices or other communications provided for or
allowed hereunder shall be effective only when given by one of the following
methods and addressed to the respective party at its address given with the
signatures at the end of this Agreement and shall be considered to have been
validly given: (a) upon delivery, if delivered personally; (b) upon receipt,
if mailed, first class postage prepaid, with the United States Postal
Service; on the next business day, if sent by overnight courier service of
recognized standing; and (d) upon telephoned confirmation of receipt, if
telecopied.
8.2 The addresses to which notices or demands are to be
given may be changed from time to time by notice delivered as provided above.
THIS AGREEMENT is executed on behalf of the parties by duly
authorized officers as of the date first above written.
UNION BANK OF CALIFORNIA, N.A. EDUCATIONAL INSIGHTS, INC.
By: /s/ Xxxxxx X. Xxxx By: /s/ X. X. Xxxxxxx
Xxxxxx Xxxx
Title: Vice President Title: CFO
Address: 000 Xxxx 000xx Xxxxxx Address: 00000 Xxxxxx Xxx.
Xxxxxxxx, Xxxxxxxxxx 00000 Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxx Attention: X. X. Xxxxxxx
Telecopier: (000) 000-0000 Telecopier: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
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