Exhibit 10.7
LOAN AGREEMENT
THIS LOAN AGREEMENT is dated as of April 10, 2000, by and
between XXXXXX X. XXXXXXXX, INCORPORATED, a California corporation (hereinafter
referred to as "Borrower") and FIRSTAR BANK, N.A., a national banking
association (hereinafter referred to as the "Bank").
1. Borrower's Representations and Warranties. To induce
the Bank to enter into this Agreement to agree to make the loans described in
Section 4 of this Agreement (the "Loan"), Borrower makes the following
representations and warranties:
(a) Corporate existence. Borrower is duly organized, validly
existing and in good standing under the laws of the State of
California. Borrower is duly qualified as a foreign corporation and in
good standing under the laws of the jurisdictions listed in Exhibit
"1(a)" of this Agreement which are the only jurisdictions where the
failure to be so qualified by Borrower would have a material adverse
effect on its respective business prospects or financial condition.
(b) Corporate Authority. Borrower has full corporate power
and authority to own its properties and to conduct its business as such
business is now being conducted and to execute, deliver and perform
under this Agreement and each of the other documents contemplated or
required by or related to this Agreement (the "Loan Documents"),
including, but not by way of limitation, all those documents required
by Section 4 of this Agreement.
(c) Borrowing Authorization. The execution by Borrower and
the delivery and performance of this Agreement, the Note and other Loan
Documents in connection with the borrowings hereunder (i) have been
duly authorized by all requisite corporate action of Borrower and (ii)
will not violate (A) any provision of law, (B) any order of any court
or other agency of government, (C) the Articles of Incorporation or
Regulations of Borrower, (D) any provision of any indenture, agreement
or other instrument to which Borrower is a party, or by which it or any
of its properties or assets are bound, which would have a material
adverse effect on Borrower or its assets or business, and (iii) will
not be in conflict with, result in a breach of or constitute (with due
notice and/or lapse of time) a default under any such indenture,
agreement, or other instrument, which would have a material adverse
effect on Borrower or its assets or business, and (iv) will not result
in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the material properties or assets of
Borrower (other than in favor of the Bank hereunder).
(d) Financial Information and Reports. Exhibit "1(d)" to
this Agreement is a true and complete list of the financial statements
and projected financial statements previously furnished to the Bank in
connection with the borrowings to be made hereunder. The audited annual
financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied in accordance with
past practices, and all such statements accurately present the
financial condition of
Borrower and its operations as of the date (or with respect to the
period) noted in such financial statements. Other than any liability
incident to litigation described in Exhibit "1(f)" to this Agreement,
Borrower has no material contingent liabilities not provided for or
disclosed in such financial statements. Each such statement is true,
correct and complete. No such statement omits to state a material fact
necessary to make such report not misleading in light of the
circumstances under which it was made. There has been no material
adverse change in the business or financial condition of Borrower since
the date of the last financial statement noted in Exhibit "1(d)".
(e) Indebtedness. Except as reflected in the Financial
Statements listed in Exhibit "1(d)" attached hereto or as described in
Exhibit "1(e)" to this Agreement, Borrower has no indebtedness, other
than the obligations provided for in this Agreement, and has not
guaranteed the obligations of any other person (except by endorsement
of negotiable instruments payable on sight for deposit or collection or
similar banking transactions in the usual course of business).
(f) Actions Pending. There is no action or proceeding
pending or, to the knowledge of Borrower, threatened against or
affecting Borrower before any court or administrative agency except for
those described in Exhibit "1(f)" to this Agreement, none of which
might result in any material adverse change in the business or
condition of Borrower.
(g) Title to Collateral Security. Borrower has good,
indefeasible and merchantable title to and ownership of all of its real
and personal property including, without limitation, the Collateral
Security (as defined in Section 4(e) of this Agreement) and other
security for any of the obligations provided for in this Agreement,
free and clear of all liens, claims, security interests and
encumbrances except those liens: (i) in favor of the Bank pursuant to
Sections 4(e) and 4(f) below or pursuant to prior loans from the Bank;
(ii) as allowed by Section 2(h) below; and (iii) permitted liens in
favor of third-parties specified in Exhibit "1(c)" to this Agreement or
specified in the financial statements noted in Exhibit "1(d)" (the
"Permitted Liens"). Borrower has and will continue to have full rights
and powers to give the Bank a security interest in the Collateral
Security.
(h) Employee Benefit Plans. No "reportable event" or
"prohibited transaction," as defined by the Employee Retirement Income
Security Act of 1974 ("ERISA") has occurred or is continuing, as to any
plan of Borrower which poses a threat of taxes or penalties against or
termination of such plans (or trusts related thereto). Borrower has not
violated in any material respect the requirements of any "qualified
pension benefit plan," as defined in ERISA and the Internal Revenue
Code of 1986 or done anything to create any material liability under
the Multi-Employee Pension Plan Amendment Act. Borrower has not
incurred any material liability to the Pension Benefit Guarantee
Corporation ("PBGC") in connection with such plans, including, but not
limited to any funding deficiency (as defined by ERISA).
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(i) Purpose of Loan. The purpose of the Loan is described in
Exhibit "1(i)" to this Agreement. The Loan is not secured, directly or
indirectly, by any stock for the purpose of purchasing or carrying any
margin stock or for any purpose which would violate either Regulation
U, 12 C.F.R. Part 221, or Regulation X, 12 C.F.R. Part 224, promulgated
by the Board of Governors of the Federal Reserve System.
(j) Compliance. Borrower is in compliance in all material
respects with all laws, statutes, ordinances, rules, regulations and
orders of any governmental entity applicable to it (including, but not
by way of limitation, any such laws, statutes, ordinances, rules,
regulations and orders related to ecology, human health and the
environment), the violation of which would have a material adverse
effect on Borrower or its assets or operations.
(k) No Default. No default (or event which, with notice or
lapse of time, or both, would constitute a default) exists under any
agreement or instrument for borrowed money to which Borrower is a party
or pursuant to which any property of Borrower is encumbered. Borrower
warrants that it is current on all material money and trade obligations
(other than the subject of a bona fide dispute), and that all dividend
payments and or declarations owed to shareholders are current.
(l) Offering of Note. Neither Borrower nor any agent acting
for it has offered the Note or any similar obligation of Borrower for
sale to or solicited any offers to buy the Note or any similar
obligation of Borrower from any person other than Bank and neither
Borrower nor any agent acting for it will take any action which would
subject the sale of the Note to the registration provisions of Section
5 of the Federal Securities Act of 1933, as amended.
(m) Ability to Conduct Business. Borrower possesses adequate
management, employees, assets, governmental approvals, and, to the
extent applicable, licenses, patents, patent applications, copyrights,
trademarks, trademark applications and trade names, to continue to
conduct its business as heretofore conducted by it.
(n) Adverse Contracts and Conditions. Borrower is not a
party to any contract or agreement, or subject to any charge, corporate
restrictions, judgment, decree or order, materially and adversely
affecting its business, property, assets, operations or condition,
financial or otherwise. Borrower is not a party to any labor disputes
which could result in a general work stoppage or which could have a
material adverse effect on Borrower's business operations. There are no
strikes or walk-outs relating to any labor contracts entered into by
Borrower.
(o) Taxes. Except as described in Exhibit "1(o)" to this
Agreement, Borrower has filed all federal, state and local tax returns
and other reports which it is required by law to file, has paid all
taxes, assessments and other similar charges that are due and payable,
and Borrower has withheld all employee and similar taxes which it is
required by law to withhold.
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(p) Broker's Fees. No brokerage, finder's or similar fee or
commission is due to any party by reason of Borrower entering into this
Agreement or by reason of any of the transactions contemplated hereby,
and Borrower shall and hereby does indemnify and hold Bank harmless
from all such fees and commissions.
2. Borrower's Covenants. In consideration of the Bank's
promise to make the Loan, Borrower agrees that, from the date of this Agreement
and until the Loan are paid in full and Borrower's obligations under this
Agreement are fully performed, it shall:
(a) Books and Records. Keep and maintain complete books of
accounts, records and files with respect to its business in accordance
with generally accepted accounting principles consistently applied in
accordance with past practices and shall accurately and completely
record all transactions therein.
(b) Financial Statements: Periodic Reports: Verification.
Furnish to the Bank: (i) within ninety (90) days after the last day of
each fiscal year of Borrower, a copy of the annual audited financial
statements of Borrower signed by independent certified accountants
satisfactory to the Bank and prepared in accordance with generally
accepted accounting principles applied on a basis consistent with that
of the preceding fiscal year, with detail consistent with past
financial statements (unless Bank requests additional detail, in which
case Bank shall allow Borrower a reasonable opportunity to provide
same), including, at a minimum, a balance sheet, profit and loss
statement with proper footnotes, and statements of retained earnings
and sources and application of funds; (ii) within ten (10) days after
the last day of each quarter [or, upon written notice from Bank,
thereafter, within ten (10) days after the last day of each calendar
month] a copy of Borrower's unaudited financial statements, with detail
consistent with past financial statements (unless Bank requests
additional detail, in which case Bank shall allow Borrower a reasonable
opportunity to provide the same), and such other statements and/or
reports as Bank shall reasonably request all in sufficient detail to
fully and accurately present the financial condition and results of
operations of Borrower; (iii) at the request of Bank, any annual
auditor's management letter; (iv) within ninety (90) days after the end
of each fiscal year, an annual projection of income statements and cash
forecasts for such year; and (v) within ten (10) days after the last
day of each calendar month a monthly compliance certificate certifying
that Borrower is in compliance with the financial covenants set forth
in Exhibit 2(f) hereof and including a monthly income statement, with
detail consistent with past financial statements; (vi) such other
reports and information as the Bank may reasonably request. Borrower
shall permit the Bank, or its agents or representatives, at all times
to perform audits, inspect Borrower's property and to verify accounts,
inspect, check, make copies of or extracts from the books, records and
files of Borrower, and Borrower will make the same available to the
Bank or its agents and representatives at any reasonable time (within
usual business hours), and upon reasonable notice for such purposes.
Borrower shall provide Bank or its agents or representatives with
reasonable clerical assistance in order to permit Bank or its agents or
representatives to complete any of its work as contemplated by this
Agreement.
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(c) Casualty Insurance. Maintain and/or cause to be
maintained insurance policies on all real and personal property of
Borrower (including, but not by way of limitation, the Collateral
Security and other security for the obligations provided for herein)
with responsible carriers acceptable to the Bank to such extent and
against such hazards and liabilities as is commonly maintained by
companies similarly situated, such policies to carry endorsements that
require thirty (30) days advance notice to the Bank of any cancellation
of same, and at least annually (and more frequently if requested by the
Bank) provide the Bank with certificates of insurance or other
satisfactory evidence thereof.
(d) Liability Insurance. Maintain in full force and effect
such liability and business interruption insurance with respect to the
activities of Borrower and other insurance as is commonly maintained by
similar companies and as may be reasonably required by Bank, all such
insurance to be provided by responsible carriers acceptable to Bank.
(e) Taxes. File all federal, state and local tax returns and
other reports Borrower is required by law to file and pay when due all
taxes, assessments, and other liabilities, except that Borrower shall
not be obligated to pay any taxes or assessments which Borrower is
contesting in good faith provided that adequate reserves therefor are
established on Borrower's books and that such taxes and assessments are
promptly paid when the dispute is finally determined.
(f) Financial Covenants. Comply with all of the financial
covenants contained in Exhibit "2(f)" to this Agreement.
(g) Indebtedness. Not incur or permit to exist any
indebtedness by Borrower except (i) the borrowings under this
Agreement; (ii) indebtedness incurred in connection with the liens
permitted by Section 2(h) herein; (iii) indebtedness existing as of the
date of this Agreement and reflected in the financial statements
described in Exhibit "1(d)" to this Agreement; (iv) other indebtedness
existing as of the date of this Agreement and described in Exhibit
"1(g)" to this Agreement; (v) short term unsecured trade credit or
accounts incurred in the ordinary course of business; (vi) operating
leases aggregating a maximum of $2,500.00 per month for normal business
purposes; and (vii) indebtedness related to purchase money security
interests arising in the ordinary course of Borrower's business and
limited as noted in Section 2(h) below. "Indebtedness" shall mean for
all purposes of this Agreement any indebtedness for borrowed money or
indebtedness representing the deferred purchase price of property being
acquired pursuant to installment or conditional sale agreements or
capitalized lease obligations.
(h) Liens. Not create or permit to exist any mortgage,
pledge, security interest, title retention right, lien or other
encumbrance (collectively "liens") with respect to any assets now owned
or hereafter acquired by Borrower except those liens: (i) created in
favor of the Bank hereunder; (ii) related to current taxes not yet
delinquent or as security for taxes being contested in good faith, or
in connection with workers' compensation insurance, unemployment
insurance or old age pensions, or of mechanics
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and materialmen for sums not due or sums being contested in good faith
and for which adequate reserves are set aside on Borrower's books to
pay same when finally determined to be due; (iii) those granted in the
normal course of business to procure bid, performance or surety bonds;
(iv) liens which do not materially impair the value of Borrower's
assets or Bank's security interest granted herein (so long as any of
such liens noted in subsections (ii), (iii) and (iv) herein, separately
or in the aggregate, do not materially affect the property or
operations of Borrower or materially diminish the Collateral Security
or the Bank's interest therein); and (v) the Permitted Liens.
(i) Corporate Existence and Status. Except with the prior
written consent of the Bank, maintain the corporate existence of
Borrower in good standing under the laws of each jurisdictions
described in Section 1(a) of this Agreement and not amend, without
prior written notice to Bank, the Articles of Incorporation or
Regulations, or fiscal year for tax and accounting purposes of
Borrower.
(j) Contracts. Not enter into any agreement, contract or
arrangement which would materially impair or adversely affect the right
and/or ability of Borrower to carry on its business as now conducted or
materially impair or adversely affect the Collateral Security or other
security for the obligations provided for hereunder.
(k) Merger and Transfer of Assets. Except with the prior
written consent of the Bank, not (i) be a party to any merger,
consolidation, or reorganization (including any acquisition of all or
substantially all of the equity, assets or debt of any other
enterprise) or enter into or form any partnership or joint venture;
(ii) sell, transfer, convey, or lease, or grant an option to sell,
transfer, convey or lease all or any part of Borrower's property,
tangible or intangible, except in the normal course of business or as
authorized herein, or sales of damaged, obsolete, or discontinued
assets; (iii) not materially change the nature of or discontinue
Borrower's current business activities; (iv) not sell, discount,
encumber or assign, with or without recourse, any accounts receivable
except in the ordinary course of business in connection with the
collection of accounts which are at least ninety (90) days past due.
(l) Maintenance of Property . To the extent consistent with
good business practices, maintain all tangible and intangible property
of Borrower in good condition and repair and not in any way impair the
value of said property or the Bank's Collateral Security hereunder.
(m) Guarantees. Not endorse, co-obligate, guaranty or in any
way commit to the repayment of any credit obligations of any person,
firm, corporation or other entity except with respect to
indemnifications and/or guaranties involving Borrower's own directors,
officers and employees in connection with actions taken on behalf of
Borrower, or involving the endorsement of negotiable instruments for
deposit or collection, or as to normal indemnities given bonding
companies.
(n) Compliance with Law. Comply at all times, with all
material laws, statutes, ordinances, rules, regulations and orders of
any governmental entity (including,
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but not by way of limitation, such laws, statutes, ordinances, rules,
regulations and orders relating to ecology, human health and the
environment) having jurisdiction over Borrower or any part of its
assets, where such failure to comply would have a material adverse
effect on Borrower or its assets. Borrower shall obtain and maintain
all permits, licenses, approvals and other similar documents required
by any such laws, statutes, ordinances, rules, regulations or orders.
(o) Restricted Payments. Not (i) declare or pay any dividend
(cash or stock) to any of Borrower's shareholders; (ii) make any
distributions of Borrower's assets or loans or advances to officers,
directors or employees, other than salaries paid by Borrower in the
normal course of business; or (iii) purchase, redeem, retire or
otherwise acquire any shares of Borrower's stock from Borrower's
shareholders.
(p) Notice of Litigation. Notify Bank in writing, promptly
upon any Borrower learning thereof, of any litigation, suit or
administrative proceeding which may materially affect the operations,
financial condition or business of Borrower or Bank's security interest
in the Collateral Security or other security for the obligations
provided for herein, whether or not the claim is considered by Borrower
to be covered by insurance.
(q) ERISA Notice. Notify Bank in writing (i) promptly upon
the occurrence of any material event described in Section 4043 of
ERISA, other than a termination, partial termination or merger of a
"Plan" (as defined in ERISA) or a transfer of a Plan's assets and (ii)
prior to any termination, partial termination or merger of a Plan or a
transfer of a Plan's assets.
(r) Ability to Conduct Business. Maintain adequate
management, employees, assets, governmental approvals, permits and
licenses and/or, if applicable, patents, patent applications,
copyrights, trademarks, trademark applications and trade names, to
conduct its businesses as now or hereafter conducted by it, including
after the purchase of the X'Xxxxxxxxxxx Mutual Funds.
(s) Notice of Labor Dispute . Notify Bank, promptly upon
Borrower's learning thereof, of any labor dispute to which Borrower may
become a party which could result in a general work stoppage or which
could have a material adverse effect on Borrower's business operations,
any strikes or walkouts relating to any of its operations or facilities
which could have a material adverse effect on Borrower or its assets or
operations, and/or the expiration of any labor contract to which
Borrower is a party or by which Borrower is bound.
(t) Notice of Default of Indebtedness. Notify Bank, promptly
upon the occurrence thereof, of any default by Borrower under any note,
indenture, loan agreement, mortgage, lease, deed of other similar
agreement to which Borrower is a party or by which any of Borrower is
bound.
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(u) Sufficient Capital. At all times prior to, during and
after any disbursement of the Loan, have capital sufficient to carry on
its business and transactions as now conducted and all businesses and
transactions in which it is about to engage and will be solvent and
able to pay its debts as they mature, and Borrower will own property
having a value, both at fair valuation and at present fair saleable
value, greater than the amount required to pay its debts.
(v) Ownership and Operations: Compensation. Cause Xxxx X.
Xxxxxxxx or his family (or any trust benefiting him and/or his family)
to maintain direct or indirect ownership of at least one hundred
percent (100%) of all the shares of Borrower, agree not to pledge his
shares or grant any interest therein to anyone but a family member, and
remain active in the day-to-day management of Borrower.
(w) Trust Relationship. Appoint and maintain Firstar Trust
as the Transfer Agent, Fund Accountant, Custodian and Administrator for
all of the mutual funds managed by Borrower, including, without
limitation, the X'Xxxxxxxxxxx Mutual Funds being purchased with the
proceeds hereof.
(x) Waiver. Any variance from the covenants of Borrower
pursuant to this Section 2 shall be permitted only with the prior
written consent and/or waiver of the Bank. Any such variance by consent
and/or waiver shall relate solely to the variance addressed in such
consent and/or waiver, and shall not operate as the Bank's consent
and/or waiver to any other variance of the same covenant or other
covenants, nor shall it preclude the exercise by the Bank of any power
or right under this Agreement.
3. Closing Conditions. The obligation of the Bank to make
the Loan, or any portion thereof, is subject to the satisfaction of each of the
following conditions precedent:
(a) Default. Before and after giving effect to any Loan or
any portion thereof, no Event of Default, as defined in Section 5 of
this Agreement, or any event which, with the passage of time or notice
or both, would mature into an Event of Default shall have occurred or
be continuing;
(b) Warranties. Before and after giving effect to any Loan
or any portion thereof, the representations and warranties in Section 1
hereof shall be true and correct as though made on the date of such
Loan or portion thereof;
(c) Certification . Borrower shall have delivered to the
Bank certificates as of the date of this Agreement and any future date
as Bank may request, in a form satisfactory to the Bank, of the
President or chief financial officer of Borrower (i) as to the matters
set out in Sections 3(a) and 3(b) of this Agreement, (ii) that the
resolutions described in Section 3(d) of this Agreement have not been
amended or rescinded, and (iii) as to incumbency of all officers of
Borrower (with specimen signatures of such incumbent officers and
whenever such officers have been changed); and.
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(d) Resolutions . Borrower shall have delivered to the Bank
a copy, duly certified as of the date of this Agreement by the
secretary or assistant secretary of Borrower of (a) the resolutions of
Borrower's Board of Directors authorizing all borrowings hereunder and
the execution and delivery of this Agreement and the Note and other
Loan Documents hereunder, (b) all documents evidencing other necessary
corporate action by Borrower, and (c) all approvals or consents, if
any, with respect to this Agreement, the Note and other Loan Documents.
(e) Note. Borrower shall have delivered its promissory note
evidencing the Term Loan to the Bank substantially in the form of
Exhibit "4(a)" to this Agreement, but with all blanks appropriately
completed and properly executed by an authorized officer or officers of
Borrower (collectively, with any renewal or replacement note, the
"Note").
(f) Delivery of Collateral Security. The Collateral Security
(and amendments thereof and additions thereto) specified in Section
4(e) has been provided to the satisfaction of the Bank.
(g) Opinion. Borrower shall have delivered to the Bank an
opinion of present counsel to the Borrower (or other counsel acceptable
to the Bank), dated the date of the Loan (or such other date acceptable
to the Bank) to the effect that (i) Borrower is duly incorporated,
validly existing and in good standing under the laws of the State of
California; (ii) Borrower has full power to execute and deliver this
Agreement, the Note and other Loan Documents and to perform its
obligations under same; (iii) such actions have been duly authorized by
all necessary corporate action, and are not in conflict with any
provision of law or of the Articles of Incorporation and Regulations of
Borrower nor, to the best knowledge of such counsel after due
investigation, in conflict with any agreement, order or decree binding
upon Borrower; and (iv) this Agreement and the Note and other Loan
Documents are the legal and binding obligations of Borrower, and all
other parties thereto, enforceable in accordance with their terms,
except as the same may be affected by bankruptcy, insolvency,
moratorium or similar laws now or hereafter in effect, or by legal and
equitable principles relating to or limiting creditors' rights
generally, or other rules of law or equity limiting the availability of
attorney's fees or of specific performance, injunctive relief or other
equitable remedies may limit, restrict, modify or otherwise impair the
enforceability of the Agreement, the Note and other Loan Documents.
(h) Insurance. Evidence of insurance as required by Sections
2(c) and 2(d) of this Agreement reasonably satisfactory to Bank.
(i) Other Items. Borrower shall have delivered to Bank the
other items specified in Exhibit "3(i)" to this Agreement.
(j) Other Documents; Inspection. Borrower shall have
delivered to the Bank such other documents, certificates and
instruments as the Bank, in its sole discretion, may reasonably
request, and such post-loan closing documents as may be reasonably
requested by the Bank to evidence, protect or perfect the Loan and any
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collateral security therefore. The Bank or its designated
representative shall have the continuing right to inspect and review,
at reasonable times and upon reasonable notice, all Borrower's records,
documents and assets, directly or indirectly related to the Loan or
Borrower's obligations provided for in this Agreement.
4. Loan.
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(a) Term Loan. Subject to the terms and conditions set forth
herein, the Bank agrees to lend to the Borrower up to a maximum
principal amount of Two Million Five Hundred Thousand Dollars (US
$2,500,000); provided, however, that such amount shall not exceed the
amount of the Available Facility. "Available Facility" shall mean the
lesser of (i) $2,500,000, or (ii) $100,000 plus 50% of the License Fee
(as set forth, and defined in, the License Agreement which License Fee
shall be calculated as 2.25% of the total fund assets of the
X'Xxxxxxxxxxx Mutual Funds calculated on the business day immediately
preceding the Closing Date as defined in the License Agreement). Such
loan shall be referred to herein as the "Term Loan."
The proceeds of the Term Loan shall be disbursed by Bank to
Borrower as follows: (i) $100,000 less the Facility Fee less $10,000
for the Bank's legal fees in connection herewith, shall be payable to
the Borrower on the date hereof which amount shall be used by the
Borrower to pay the proxy fees and expenses associated with Borrower's
purchase of the X'Xxxxxxxxxxx Mutual Funds pursuant to the License
Agreement, (ii) $484,129.79 (which amount is equal to 10% of the
estimated purchase price of the X'Xxxxxxxxxxx Mutual Funds calculated
based on 2.25% of the total funds assets of the X'Xxxxxxxxxxx Mutual
Funds on the close of business on April 7, 2000) shall be payable to
the Borrower on the date hereof, which amount shall be placed by
Borrower into an escrow account with the Bank pursuant to that certain
Escrow Agreement of even date herewith among Borrower, Bank and
Licensor, and (iii) at the closing of the License Agreement, Bank shall
pay to the Borrower, the remaining proceeds of the Term Loan.
The Term Loan shall be evidenced by a term note given by the
Borrower to the Bank, in the form of Exhibit "4(a)" attached hereto and
made a part hereof (the "Term Note"). The Bank is hereby authorized by
the Borrower to enter from time to time on the reverse of the Term Note
the principal balance of the Term Loan and all prepayments thereon, and
the aggregate unpaid amount of the Term Loan set forth on the Term Note
shall be contained in a monthly statement sent to Borrower and, if not
objected to by Borrower within a reasonable time thereafter, shall be
presumptive evidence of the principal amount owing to the Bank and
unpaid thereon. No prepayment of the Term Loan by Borrower shall create
any obligation on the part of the Bank to relend such repaid or prepaid
amounts to Borrower. The Term Loan shall bear interest through its
maturity date at the Prime Rate, such rate to be adjusted on the
effective date of any change in the Prime Rate by the Bank, computed on
the basis of a year consisting of 360 days but applied to the actual
number elapsed. The "Prime Rate" shall mean the rate announced as such
by the Bank from time-to-time and determined solely by the Bank
pursuant to market factors and its own operating needs. Interest shall
be payable to the
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Bank monthly, in arrears, commencing May 10, 2000 and monthly there-
after on the tenth day of each month and when the Term Note is due.
After an Event of Default or other maturity, whether by acceleration or
otherwise, the Term Loan shall bear interest (computed and adjusted in
the same manner, and with the same effect, as interest on the Term Loan
prior to maturity) payable on demand at a rate per annum equal to the
Prime Rate plus three percent (3.0%) (the "Default Rate"), in all cases
until paid and whether before or after entry of any judgment thereon.
Borrower shall also pay any late payment fees specified in the Term
Note. The Term Loan shall mature on May 10, 2005 and be repayable to
the Bank in fifty-four (54) equal consecutive uninterrupted monthly
installments of principal and interest, each due on the tenth day of
the month, commencing November 10, 2000, with a final installment of
the remaining balance and any accrued interest and fees due on April
10, 2005.
(b) Facility Fee. Borrower shall pay Bank a facility fee of
$10,000 as of the date of this Agreement (the "Facility Fee").
(c) Mandatory Prepayments: Optional Prepayments. The
Borrower shall make mandatory annual prepayments of the Term Loan
principal balance outstanding as of September 30 of each year,
commencing September 30, 2001, equal to fifty percent (50%) of Excess
Cash Flow, but only if such Excess Cash Flow for the period in question
exceeds $100,000 (in which case the 50% calculation shall be made on
the entire Excess Cash Flow, without such $100,000 exclusion). "Excess
Cash Flow" shall mean Borrower's net income after taxes plus
depreciation and amortization.
The Borrower may also, from time to time, after the date of
this Loan Agreement and from time to time thereafter, at its option,
repay or prepay part or all of any Term Loan principal balance
outstanding. There shall be no prepayment premium for any such
prepayments by Borrower. All prepayments of the Term Loan shall be
applied to unpaid principal installments of the Term Loan in the
inverse order of the maturity dates of such installments, and each such
repayment or prepayment shall include accrued interest to the date of
prepayment on the principal amount being prepaid. No amounts repaid or
prepaid on the Term Loan shall be reloaned to Borrower by the Bank.
(d) Place of Payment. All payments of principal and interest
hereunder shall be made in immediately available funds to the Bank at
000 Xxxxxx Xxxxxx, X.X. XX-XX-00XX, Xxxxxxxxxx, Xxxx 00000, or at such
other places as may be designated by the Bank to the Borrower in
writing. Borrower directs the Bank to charge any account or charge or
increase any loan balance of Borrower at the Bank for the amount of any
interest or principal payments or fees due to the Bank hereunder.
Further, the Bank shall have the power to charge and offset management
fees as specified in Section 4(f) below.
(e) Collateral Security. All the obligations of the Borrower
to the Bank under this Agreement and the Note shall be secured by the
following (together called the "Collateral Security"):
11
(i) a security interest in and to all of the tangible and
all of the intangible personal property of the Borrower, including, but
not by way of limitation, machinery, equipment, furniture, fixtures,
inventory, accounts (meaning accounts receivable, accounts,
instruments, chattel paper, documents, contracts, contract rights
(including, without limitation, the management agreements with the
Xxxxxxxx Mutual Funds and the X'Xxxxxxxxxxx Mutual Funds), choses of
action and any form of obligation now or hereafter owing to Borrower),
general intangibles (including, without limitation, any patents,
copyrights, trademarks and trade names relating to managed mutual funds
or otherwise), goodwill of Borrower, now owned or existing or hereafter
acquired or arising, and their proceeds and products, cash or non-cash,
as evidenced by the Bank's Security Agreement and Schedule, all
attached hereto as Exhibit "4(e)(i)" and made a part hereof
(hereinafter called the "Security Agreement");
(ii) a payment guaranty by Xxxx X. Xxxxxxxx ("Guarantor") in
the initial amount of $500,000 in the form of the Business Guaranty
attached hereto as Exhibit "4(e)(ii)" and made a part hereof
(hereinafter called the "Guaranty"), which Guaranty the Bank agrees (i)
to reduce to $300,000 at the Closing Date as defined in the License
Agreement or (ii) to cancel and eliminate the Guaranty at such time
after the Closing Date (as defined in the License Agreement) as
Guarantor has satisfactorily assigned to the Bank a replacement
Certificate of Deposit in the amount of $300,000;
(iii) a security interest in favor of the Bank as specified in
Section 4(f) herein;
(iv) a subordination to the Bank of all amounts owed by the
Borrower to Netfolio, Inc. under the License Agreement or otherwise
pursuant to the Bank's Subordination Agreement in the form of Exhibit
"4(e)(iv)" attached hereto and made a part hereof (the "Subordination
Agreement");
(v) an assignment of partnership interest to the Bank of all
of Borrower's right, title and interest in Xxxxxxxx Management Company,
L.P. and Xxxxxxxx Management Company II, L.P. in the form of Exhibit
"4(e)(v)" attached hereto and made a part hereof; and
(vi) as may otherwise be specified in the Term Note, Security
Agreement, Guaranty and/or Subordination Agreement, as same may be
amended or restated from time to time.
The Collateral Security shall be in form satisfactory to the
Bank and its counsel, and the Borrower agrees to execute or cause to be
executed any and all documents and deliver to the possession of the
Bank such documents or other assets of Borrower as are determined
reasonably necessary by the Bank or its counsel to evidence or assure
the protection, perfection and/or enforcement of such Collateral
Security including, but not limited to additional confirmation security
agreements as to newly acquired assets, and UCC financing statements).
The provisions of the Term Note, Security Agreement, Guaranty,
Subordination Agreement and other related documents provided or related
to the Collateral Security for the Bank shall supplement and be in
addition to those of this Agreement and any inconsistent provisions
therein
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shall be interpreted in all respects to be in favor of the Bank,
provided, however, that whenever possible, such provisions shall be
interpreted and limited consistent with the provisions and limitations
of this Agreement.
(f) Lien; Right of Set-Off. Borrower hereby grants to Bank a
continuing lien and a security interest for all obligations of Borrower
to Bank in and to any and all moneys, securities and other properties
of Borrower and the proceeds thereof now or hereafter held or received
by or in transit to the Bank from or for the account of Borrower,
whether for safekeeping, pledge, transmission, collection or otherwise,
and also upon any and all deposits (general and special), account
balances and credits of Borrower with Bank at any time existing. In
addition to all statutory rights of Bank, Bank is hereby authorized at
any time and from time to time after any Event of Default hereunder,
without prior notice to Borrower to set-off, appropriate, apply and
enforce said lien and security interest in any and all items
hereinbefore specified in this subsection referred to against all
obligations of Borrower to the Bank arising under this Agreement and
the Note, and Borrower shall continue to be liable to the Bank for any
deficiency with interest at the rates set forth herein and in the Note.
Specifically, but without limitation, the Bank, as the Administrator of
the Xxxxxxxx and X'Xxxxxxxxxxx Mutual Funds, shall have the authority
to set-off the amounts due from Borrower from the management fees due
Borrower pursuant to such Fund agreements. The Bank, as such
Administrator of the Funds, shall release to Borrower all amount in
excess thereof.
5. Events of Default; Collateral Realization; Remedies.
---------------------------------------------------
(A) Events of Default. If any of the following events (any
such event shall be referred to as an "Event of Default") shall occur, then Bank
may, without further notice or demand, accelerate the Loan and declare it to be,
and thereupon the Loan (and the Note) and other obligations due hereunder shall
become immediately due and payable, and to the extent the maximum Available
Facility or any amounts still available under the Term Loan have not yet been
used or fully drawn on by Borrower, terminate the balance of same, and the Bank
shall have all rights provided herein or in any of the other Loan Documents or
otherwise provided by law to realize on the Collateral Security;
(a) Borrower does not pay or, repay to Bank any principal of
or any interest on any Loan the Note or any fee or obligation when due
whether by reason of demand, acceleration or otherwise, within ten (10)
days of the due date, or any payment default or demand or acceleration
based on non-payment to Bank shall occur under any Loan Document (and
same shall not be cured within any available period);
(b) Borrower does not pay principal or interest on any other
borrowed money obligation when due or the holder of such other
obligation declares, or may declare, such obligation due prior to its
stated maturity because of Borrower's default thereunder (unless such
obligation is the subject of an unexpired cure period or a bona fide
dispute by Borrower) except any money obligation due to Licensor
pursuant to the License Agreement; or
13
(c) Borrower does not perform its obligations under any
agreement material to its business and the other party to such
agreement declares, or may declare, such agreement in default (unless
such agreement is the subject of an unexpired cure period or a bona
fide dispute by Borrower); or
(d) Any representation or warranty made by Borrower herein
or in any other Loan Document or writing furnished in connection with
this Agreement shall be false in any material respect when made; or
(e) Borrower violates in any material respect any covenant,
agreement or condition contained herein or in any other Loan Document
or writing (other than to make payment of principal, interest, fees or
obligations) and does not cure such violation to the reasonable
satisfaction of the Bank within ten (10) days of such occurrence;
provided, however, that it shall be an immediate Event of Default (with
no cure period) if Borrower makes any payment to Licensor on the
Subordinated Debt (whether such payment is a payment of principal and
interest or interest only) and such payment causes Borrower to be in
breach of the Financial Covenant set forth in Exhibit "2(f)" or
(f) Borrower is unable to pay its business debts as due or
Borrower's financial statement indicates insolvency or a deficit net
worth; or
(g) With respect to the plans referred to in Section 1(i),
or any other similar plan, a "reportable event" or "prohibited
transaction" pursuant to ERISA has occurred which results in the
imposition of material taxes or penalties against Borrower or the
termination of such plans (or trusts related thereto), or Borrower
incurs any material liability to PBGC in connection with such plans,
and does not cure same to the satisfaction of the Bank within ten (10)
days of such occurrence; or
(h) Borrower makes an assignment for the benefit of
creditors; or
(i) Borrower applies for the appointment of a trustee or
receiver of any part of the assets of Borrower or commences any
proceedings relating to Borrower under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or other
liquidation law of any jurisdiction; or any such application if filed,
or any such proceedings are commenced, against Borrower and Borrower
indicates approval, consent on acquiescence; or an order is entered
appointing such trustee or receiver, or adjudicating Borrower bankrupt
or insolvent, or approving the petition in any such proceedings, and
such order remains in effect for thirty (30) days; or
(j) Any order is entered in any proceedings against Borrower
decreeing the dissolution or division of Borrower or its assets, and
such order remains in effect for thirty (30) days; or
(k) A part of Borrower's operations shall cease (which, if
continued, would have a material adverse effect on Borrower's
operations or financial condition); or
14
(l) Any final judgment in excess of confirmed insurance
coverage satisfactory to Bank which, together with other outstanding
judgments against Borrower which have not been discharged or execution
thereon stayed, causes the aggregate of such judgments to exceed Fifty
Thousand Dollars ($50,000), shall be rendered against Borrower and
within sixty (60) days such judgment shall not have been discharged or
execution stayed pending appeal or within sixty (60) days after the
expiration of any such stay such judgment shall not have been
discharged.
(m) If, in the reasonable opinion of Bank, there has been a
material adverse change in the financial affairs or operating condition
of Borrower, or in the value of the Collateral Security which, in the
reasonable judgment of the Bank, imperils Borrower's ability to repay
its obligations under this Agreement.
The above recitation of Events of Default: (i) shall
supplement and be in addition to any defaults specified within the Term Note,
Security Agreement, Subordination Agreement and any other Loan Document, which
shall be interpreted in all respects in favor of the Bank but whenever possible
shall be interpreted and limited consistent with the default provisions of this
Agreement; and (ii) shall not in any way defer or in any way limit the Bank from
exercising its rights in connection with other notes issued to the Borrower. To
the extent any cure-of-default period is provided above, the Bank may
nevertheless, at its option pending completion of such cure, suspend its
obligations to consider further Loans hereunder.
(B) Remedies Upon Event of Default. At any time as of which
an Event of Default shall have occurred, Bank, at its option, may, but shall not
be obligated to, exercise any one or more of the following remedies without
notice or demand, which notice and demand Borrower hereby expressly waives:
(i) Bank may declare the indebtedness evidenced by the Note
and all other indebtedness and obligations of Borrower to Bank
hereunder and under the Loan Documents to be forthwith due and payable,
and thereupon the Note, interest accrued thereon and all such other
indebtedness and obligations shall become and be immediately due and
payable without presentment, demand, protest or further notice of any
kind, all of which are expressly waived by Borrower;
(ii) Bank may take such actions, make such payments and, in
doing so, incur such costs and expenses as Bank, in its sole
discretion, may deem to be appropriate to correct or eliminate or
attempt to correct or eliminate the condition or circumstance
constituting such Event of Default, whereupon Borrower shall
immediately reimburse Bank for the amount of all such payments made and
costs and expenses incurred, together with interest thereon at the
Default Rate, provided that no action or payment by Bank pursuant to
this subsection shall constitute a waiver by Bank of, or be deemed to
have cured, such Event of Default;
(iii) Bank may enforce, or otherwise avail itself of, any and
all remedies provided in any of the Loan Documents; and/or
15
(iv) Bank may enforce, or avail itself of, any other remedies
available to it at under this Agreement, any other Loan Document, at
law or in equity.
(C) Remedies Cumulative. All powers and remedies given by
this Section shall be cumulative and not exclusive of one another or of any
other right or remedy or of any other powers and remedies available to Bank
under the Loan Documents and/or applicable law to enforce the performance or
observance of the covenants and agreements of Borrower contained in this
Agreement. No delay or omission of Bank to exercise any right or power accruing
upon the occurrence of any Event of Default shall constitute a waiver of any
subsequent Event of Default or impair any rights or remedies consequent thereto.
Every power and remedy given to Bank may be exercised from time to time and as
often as may be deemed necessary by Bank, and such powers and remedies may be
exercised by Bank simultaneously or in such order as Bank may determine in its
sole discretion.
6. General.
-------
(a) Reasonable Actions. Bank agrees that in taking any
action which it is permitted or empowered to take under this Loan
Agreement, it will act reasonably under what it believes are the facts
and circumstances existing at such time.
(b) Delay. No delay, omission or forbearance on the part of
the Bank or the holder of any Note, in the exercise of any power or
right shall operate as a waiver thereof, nor shall any single or
partial delay, omission or forbearance in the exercise of any other
power or right. The rights and/or remedies of the Bank herein provided
are cumulative, shall be interpreted in all respects in favor of the
Bank, and are not exclusive of any other rights and/or remedies
provided by law.
(c) Notice. Any notice hereunder to Borrower or Bank shall
be in writing and, if mailed, shall be deemed to be given by Borrower
to Bank when received by the Bank at its address set forth below, and
by Bank to Borrower when sent by mail, postage prepaid, and addressed
to the Borrower at its address set forth below:
Bank: Firstar Bank, N.A.
000 Xxxxxx Xxxxxx
Xxxxxxxx XX-XX-00XX
Xxxxxxxxxx, Xxxx 00000
Attention: XxXxxxx Xxxxxx
Vice President, Trust
Lending & Credit Officer
With a copy to: Xxxx, Stettinius & Hollister
1800 Firstar Tower
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
16
Borrower: Xxxxxx X. Xxxxxxxx, Incorporated
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx
President
With a copy to: Xxxxx & Lardner
Firstar Center
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
The Borrower or the Bank may, by written notice to the other, designate another
address for purposes hereunder.
(d) Expenses: Indemnity. Borrower agrees to pay all
out-of-pocket expenses of the Bank and its employees (including
attorney's fees and legal expenses, but excluding the salaries of the
Bank's own employees) incurred by the Bank in entering into and closing
this Agreement and preparing the documentation in connection herewith
and in connection with any of the Loan Documents, and the Borrower
agrees to pay the Bank upon demand for the same. Borrower agrees to pay
all filing fees to protect the Bank's security interest under this
Agreement, and if the Bank pays for same, Borrower shall reimburse the
Bank upon demand. The Borrower agrees to pay the Bank upon demand for
enforcing the obligations of the Borrower hereunder or under any Note
or documents relative to the Collateral Security or under any of the
Loan Documents (including reasonable attorney's fees and legal
expenses), and to defend, indemnify and hold the Bank harmless from all
liability, obligation, cost, damage or expense (including attorney's
fees and legal expenses) for taxes (except income or franchise taxes),
fees or third party claims which may arise or be related to the
execution, delivery or performance of this Agreement or any of the Loan
Documents or the issuance of the Note. Such obligations of the Borrower
shall survive any termination of this Agreement.
(e) Survival. All covenants of Borrower made herein or
otherwise in writing in connection with the transactions contemplated
hereby shall survive the execution and delivery of this Loan Agreement,
the Note and the Loan Documents, and shall remain in effect so long as
any obligations of Borrower are outstanding hereunder or under any of
the Loan Documents.
(f) Severability . Any provision of this Agreement (or any
Exhibit hereto) which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition of enforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(g) Law. IMPORTANT: The Loan shall be deemed made in Ohio
and the Term Note, and all other Loan Documents evidencing same, and
all the rights and
17
obligations of Borrower and the Bank hereunder, shall in all respects
be governed by and construed in accordance with the laws of the State
of Ohio, including all matters of construction, validity and
performance. Without limitation on the ability of the Bank to exercise
all its rights as to the Collateral Security for the Loan or to
initiate and prosecute any action or proceeding in any applicable
jurisdiction related to loan repayment, Borrower and the Bank agree
that any action or proceeding commenced by or on behalf of the parties
arising out of or relating to the Loan and/or the Note and/or other
documents evidencing same and/or the Loan Documents shall be commenced
and maintained exclusively in the District Court of the United States
for the applicable District of Ohio, or any other court of applicable
jurisdiction located in Cincinnati, Ohio. The Borrower and the Bank
also agree that a summons and complaint commencing an action or
proceeding in any such Ohio courts by or on behalf of such parties
shall be properly served and shall confer personal jurisdiction on a
party to which said party consents, if (a) served personally or by
certified mail to the other party at any of its addresses noted herein,
or (b) as otherwise provided under the laws of the State of Ohio. The
interest rate and all other terms of the Loan negotiated with Borrower
are, in part, related to the aforesaid provisions on jurisdiction,
which the Bank deems a vital part of this loan arrangement.
(h) Confession of Judgment. Borrower hereby irrevocably
authorizes and empowers any attorney-at-law to appear for Borrower in
any action upon or in connection with this Agreement at any time after
the Term Loan and/or other obligations of Borrower hereunder become
due, as herein provided, in any court in or of the State of Ohio or
elsewhere, and waive the issuance and service of process with respect
thereto, and irrevocably authorizes and empowers any such
attorney-at-law to confess judgment in favor of Bank against Borrower
in the amount due thereon or hereon, plus interest as herein provided,
and all costs of collection, and waive and release all errors in any
said proceedings and judgments and all rights of appeal from the
judgment rendered. The Borrower agrees and consents that the attorney
confessing judgment on behalf of the Borrower hereunder may also be
counsel to the Bank and/or the Bank's affiliates, and the Borrower
hereby further waives any conflict of interest which might otherwise
arise and consents to the Bank paying such confessing attorney a legal
fee or allowing such attorneys' fees to be paid from proceeds of
collection of this Agreement and/or any and all collateral and security
for the Terms Loan and obligations.
(i) Successors. This Agreement shall be binding upon
Borrower and Bank and their respective successors and assigns, and
shall inure to the benefit of Borrower and Bank and the successors and
assigns of Bank. Borrower shall not assign its rights or duties
hereunder without the prior written consent of Bank.
(j) Amendment. This Agreement may not be modified or amended
except in writing signed by authorized officers of Bank and Borrower.
(k) Exhibits. For all purposes hereof, the Exhibits attached
hereto shall be considered a part of this Agreement.
18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed at Cincinnati, Ohio by their respective officers thereunto duly
authorized as of the date first above written.
BANK:
FIRSTAR BANK, N.A.
By: /s/ XxXxxxx Xxxxxx
------------------------------
XxXxxxx Xxxxxx
Vice President, Trust
Lending & Credit Officer
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND
-------------------------------------------------------------------
COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN
--------------------------------------------------------------------
AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN
----------------------------------------------------------------------
BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE
-----------------------------------------------------------------
AGAINST THE BANK.
----------------
BORROWER:
XXXXXX X. XXXXXXXX, INCORPORATED
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------
Xxxx X. Xxxxxxxx
President
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LIST OF EXHIBITS
----------------
1(a) - Jurisdictions
1(d) - Financial Information and Reports
1(e) - Description of Financial Statements
1(f) - Actions Pending
1(g) - Permitted Liens
1(i) - Purpose of Loan
1(o) - Tax Matters
2(f) - Financial Covenants
3(i) - Other Items Due At Closing
4(a) - Term Note
4(e)(i) - Security Agreement and Schedules
4(e)(ii) - Business Guaranty
4(e)(iv) - Subordination Agreement
4(e)(v) - Assignment of Partnership Interest
