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EXHIBIT 10.14
LINE OF CREDIT AGREEMENT
This Line of Credit Agreement ("Agreement") is made and entered into this 20th
day of August, 1997 by and between SANWA BANK CALIFORNIA (the "Bank") and
NEOTHERAPEUTICS, INC.
(the "Borrower").
SECTION I
DEFINITIONS
1.01 CERTAIN DEFINED TERMS. Unless elsewhere defined in this Agreement the
following terms shall have the following meanings (such meanings to be generally
applicable to the singular and plural forms of the terms defined):
A. "ADVANCE" shall mean an advance to the Borrower under any line of
credit facility or similar facility provided for in Section II of this
Agreement which provides for draws by the Borrower against an established
credit line.
B. "BUSINESS DAY" shall mean a day, other than a Saturday or Sunday, on
which commercial banks are open for business in California.
C. "COLLATERAL" shall mean the property in which the Bank is granted a
security interest pursuant to provisions of the section herein entitled
"Collateral", together with any other personal or real property in which
the Bank may be granted a lien or security interest to secure payment of
the Obligations.
D. "COST OF FUNDS RATE" shall mean an interest rate determined by the
Bank, in its sole and absolute discretion, to be approximately equivalent
to the Bank's cost of acquiring funds in an amount approximately equal to
the relevant amount and for a period of time approximately equal to the
relevant period and adjusted for any and all assessments, surcharges and
reserve requirements pertaining to the borrowing or purchase of such funds
by the Bank.
E. "DEBT" shall mean all liabilities of the Borrower less Subordinated
Debt.
F. "EFFECTIVE TANGIBLE NET WORTH" shall mean the Borrower's stated net
worth plus Subordinated Debt but less all intangible assets of the
Borrower (i.e., goodwill, trademarks, patents, copyrights, organization
expense and similar intangible items).
G. "ENVIRONMENTAL CLAIMS" shall mean all claims, however asserted, by any
governmental authority or other person alleging potential liability or
responsibility for violation of any Environmental Law or for release or
injury to the environment or threat to public health, personal injury
(including sickness, disease or death), property damage, natural resources
damage, or otherwise alleging liability or responsibility for damages
(punitive or otherwise), cleanup, removal, remedial or response costs,
restitution, civil or criminal penalties, injunctive relief, or other type
of relief, resulting from or based upon (i) the presence, placement,
discharge, emission or release (including intentional and unintentional,
negligent and non-negligent, sudden or non-sudden, accidental or
non-accidental placement, spills, leaks, discharges, emissions or
releases) of any hazardous Materials at, in, or from property owned,
operated or controlled by the Borrower, or (ii) any other circumstances
forming the basis of any violation, or alleged violation, of any
Environmental Law.
H. "ENVIRONMENTAL LAWS" shall mean all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
governmental authorities, in each case relating to environmental, health,
safety and land use matters; including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the Clean Air
Act, the Federal Water Pollution Control Act of 1972, the Solid Waste
Disposal Act, the Federal Resource Conservation and Recovery Act, the
Toxic Substances Control Act, the Emergency Planning and Community
Right-to-Know Act, the California Hazardous Waste Control Law, the
California Solid Waste Management, Resource, Recovery and Recycling Act,
the California Water Code and the California Health and Safety Code.
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I. "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, including (unless the context otherwise
requires) any rules or regulations promulgated thereunder.
J. "EVENT OF DEFAULT" shall have the meaning set forth in the section
herein entitled "Events of Default".
K. "HAZARDOUS MATERIALS" shall mean all those substances which are
regulated by, or which may form the basis of liability under any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste, hazardous
constituent, special waste, hazardous substance, hazardous material, or
toxic substance, or petroleum or petroleum derived substance or waste.
L. "INDEBTEDNESS" shall mean, with respect to the Borrower, (i) all
indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which the Borrower is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in
respect of which the Borrower otherwise assures a creditor against loss
and (ii) obligations under leases which shall have been or should be, in
accordance with generally accepted accounting principles, reported as
capital leases in respect of which the Borrower is liable, contingently or
otherwise, or in respect of which the Borrower otherwise assures a
creditor against loss.
M. "LIBOR RATE" shall mean an interest rate determined by the Bank's
Treasury Desk as being the arithmetic mean (rounded upwards, if necessary,
to the nearest whole multiple of one-sixteenth of one percent (1/16%)) of
the U.S. dollar London Interbank Offered Rates for the relevant period
appearing on page3750 (or such other page as may replace 3750) of the
Telerate screen at or about 11:00 a.m. (London time) on the second
Business Day prior to the first day of the relevant interest period
(adjusted for any and all assessments, surcharges and reserve
requirements).
N. "OBLIGATIONS" shall mean all amounts owing by the Borrower to the Bank
pursuant to this Agreement including, but not limited to, the unpaid
principal amount of Advances.
O. "PERMITTED LIENS" shall mean": (i) liens and security interests
securing indebtedness owed by the Borrower to the Bank; (ii) liens for
taxes, assessments or similar charges either not yet due or being
contested in good faith, provided proper reserves are maintained therefor
in accordance with generally accepted accounting procedure; (iii) liens of
materialmen, mechanics, warehousemen, or carriers or other like liens
arising in the ordinary course of business and securing obligations which
are not yet delinquent; (iv) purchase money liens or purchase money
security interests upon or in any property acquired or held by the
Borrower in the ordinary course of business to secure Indebtedness
outstanding on the date hereof or permitted to be incurred pursuant to
this Agreement; (v) liens and security interests which, as of the date
hereof, have been disclosed to and approved by the Bank in writing; and
(vi) those liens and security interests which in the aggregate constitute
an immaterial and insignificant monetary amount with respect to the net
value of the Borrower's assets.
P. "POSSESSORY COLLATERAL" shall mean that portion of the Collateral which
consists of securities, certificates of deposit, savings or checking
accounts, notes and instruments and any other similar collateral in which
the security interest is normally perfected through possession by the Bank
or its agent.
Q. "REFERENCE RATE" shall mean an index for a variable interest rate which
is quoted, published or announced from time to time by the Bank as its
reference rate and as to which loans may be made by the Bank at, below or
above such reference rate.
R. "SUBORDINATED DEBT" shall mean such liabilities of the Borrower which
have been subordinated to those owed to the Bank in a manner acceptable to
the Bank.
1.02 ACCOUNTING TERMS. All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
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1.03 OTHER TERMS. Other terms not otherwise defined shall have the meanings
attributed to such terms in the California Uniform Commercial Code.
SECTION II
CREDIT FACILITIES
2.01 COMMITMENT TO LEND. Subject to the terms and conditions of this Agreement
and so long as no Event of Default occurs, the Bank agrees to extend to the
Borrower the credit accommodations that follow:
2.02 LINE OF CREDIT FACILITY. The Bank agrees to make loans and Advances to the
Borrower, upon the Borrower's request therefor made prior to the Expiration Date
(as defined below in this Section 2.02), up to a total principal amount from
time to time outstanding of not more than $1,600,000.00. Within the foregoing
limits, the Borrower may borrow, partially or wholly prepay, and reborrow under
this Line of Credit facility.
A. PURPOSE. Advances made under this Line of Credit shall be used for
asset expansion.
B. INTEREST RATE. Interest shall accrue on the outstanding principal
balance of Advances under this Line of Credit at a variable rate equal to
the Bank's Reference Rate, per annum, as it may change from time to time.
(Such rate is referred to in this Section 2.02 as the "Variable Rate".)
The Variable Rate shall be adjusted concurrently with any change in the
Reference Rate. Interest shall be calculated on the basis of 360 days per
year but charged on the actual number of days elapsed.
C. PAYMENT OF INTEREST. The Borrower hereby promises and agrees to pay
interest monthly on the last day of each month, commencing on September
30, 1997.
D. REPAYMENT OF PRINCIPAL. Unless sooner due in accordance with the terms
of this Agreement, on August 31, 1998 the Borrower hereby promises and
agrees to pay the Bank in full the aggregate unpaid principal balance of
all Advances then outstanding, together with all accrued and unpaid
interest thereon.
Any payment received by the Bank shall, at the Bank's option, first be
applied to pay any late fees or other fees then due and unpaid, and then
to interest then due and unpaid and the remainder thereof (if any) shall
be applied to reduce principal.
E. FIXED RATE ALTERNATIVE PRICING. In addition to Advances based upon the
Variable Rate ("Variable Borrower under this Line of Credit at a fixed
rate ("Fixed Rate") which shall be, at the Borrower's option, either
equivalent to 1.5% per annum in excess of the Cost of Funds Rate or 1.5%
per annum in excess of the LIBOR Rate. Such Advances shall be in the
minimum amount of $100,000.00 and in $100,000.00 increments thereafter and
for such period of time (each an "Interest Period") as the Bank may quote
and offer, provided that the Interest Period shall be for a Rate
Advances"), at the Borrower's election, the Bank hereby agrees to make
Advances to the minimum of at least 7 days and not exceed a maximum of 365
days and provided further that any interest Period shall not extend beyond
the Expiration Date (as defined below) of this facility. Advances based
upon the Fixed Rate are hereinafter referred to as "Fixed Rate Advances".
Interest on any Fixed Rate Advance shall be computed on the basis of 360
days per year but charged on the actual number of days elapsed.
The Borrower hereby promises and agrees to pay the Bank interest on any
Fixed Rate Advance with an Interest Period of 90 days or less on the last
day of the relevant Interest Period. The Borrower further promises and
agrees to pay the Bank interest on any Fixed Rate Advance with an Interest
Period in excess of 90 days on a quarterly basis (i.e., on the last day of
each 90-day period occurring in such Interest Period) and on the last day
of the relevant Interest Period. If interest is not paid as and when it is
due, the amount of such unpaid interest shall bear interest, until paid in
full, at a rate of interest equal to the Variable Rate.
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(i) REPAYMENT OF FIXED RATE ADVANCES. Unless sooner due in accordance
with other terms of this Agreement, or unless adjusted at the end of
the relevant Interest Period as described below, the Borrower hereby
promises and agrees to pay the Bank the principal amount of each
Fixed Rate Advance, together with accrued and unpaid interest
thereon, on the last day of the Interest Period pertaining to such
Fixed Rate Advance.
(ii) NOTICE OF ELECTION TO ADJUST INTEREST RATE. Upon telephonic
notice which shall be received by the Bank at or before 2:00 p.m.
(California time) on a Business Day, the Borrower may elect:
(a) That interest on a Variable Rate Advance shall be adjusted
to accrue at the Fixed Rate; provided, however, that such notice
shall be received by the Bank no later than two business days
prior to the day (which shall be a business day) on which the
Borrower requests that interest be adjusted to accrue at the
Fixed Rate.
(b) That interest on a Fixed Rate Advance shall continue to
accrue at a newly quoted Fixed Rate or shall be adjusted to
commence to accrue at the Variable Rate; provided however, that
such notice shall be received by the Bank no later than two
business day prior to the last day of the Interest Period
pertaining to such Fixed Rate Advance. If the Bank shall not
have received notice as prescribed herein of the Borrower's
election that interest on any Fixed Rate Advance shall continue
to accrue at the Fixed Rate, the Borrower shall be deemed to
have elected that interest thereon shall be adjusted to accrue
at the Variable Rate upon the expiration of the Interest Period
pertaining to such Advance.
(iii) PROHIBITION AGAINST PREPAYMENT OF FIXED RATE ADVANCES.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE AGREEMENT, NO
PREPAYMENT SHALL BE MADE ON ANY FIXED RATE ADVANCE EXCEPT ON A DAY
WHICH IS THE LAST DAY OF THE INTEREST PERIOD PERTAINING THERETO. IF
THE WHOLE OR ANY PART OF ANY FIXED RATE ADVANCE IS PREPAID BY REASON
OF ACCELERATION OR OTHERWISE, THE BORROWER SHALL, UPON THE BANK'S
REQUEST, PROMPTLY PAY TO AND INDEMNIFY THE BANK FOR ALL COSTS AND ANY
LOSS (INCLUDING INTEREST) ACTUALLY INCURRED BY THE BANK AND ANY LOSS
(INCLUDING LOSS OF PROFIT RESULTING FROM THE RE-EMPLOYMENT OF FUNDS)
SUSTAINED BY THE BANK AS A CONSEQUENCE OF SUCH PREPAYMENT.
(iv) INDEMNIFICATION FOR FIXED RATE COSTS. During any period of time
in which interest on any Advance is accruing on the basis of a Fixed
Rate, the Borrower shall, upon the Bank's request, promptly pay to
and reimburse the Bank for all costs incurred and payments made by
the Bank by reason of any future assessment, reserve, deposit or
similar requirements or any surcharge, tax or fee imposed upon the
Bank or as a result of the Bank's compliance with any directive or
requirement of any regulatory authority pertaining or relating to
funds used by the Bank in quoting and determining the Fixed Rate.
(v) INVOLUNTARY CONVERSION FROM FIXED RATE TO VARIABLE RATE. In the
event that the Bank shall at any time determine that the accrual of
interest on the basis of the Fixed Rate (a) is infeasible because the
Bank is unable to determine the Fixed Rate due to the unavailability
of U.S. dollar deposits, contracts or certificates of deposit in an
amount approximately equal to the amount of the relevant Advance and
for a period of time approximately equal to the relevant Interest
Period; or (b) is or has become unlawful or infeasible by reason of
the Bank's compliance with any new law, rule, regulation, guideline
or order, or any new interpretation of any present law, rule,
regulation, guideline or order, then the Bank shall give telephonic
notice thereof (confirmed in writing) to the Borrower, in which event
any Fixed Rate Advance shall be deemed to be a Variable Rate Advance
and interest shall thereupon immediately accrue at the Variable Rate.
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F. LATE FEE. If any regularly scheduled payment of principal and/or
interest (exclusive of the final payment upon maturity), or any portion
thereof, under this Line of Credit is not paid within ten (10) calendar
days after it is due, a late payment charge equal to five percent (5%) of
such past due payment may be assessed and shall be immediately payable.
G. MAKING LINE ADVANCES/NOTICE OF BORROWING. Each Advance made hereunder
shall be conclusively deemed to have been made at the request of and for
the benefit of the Borrower (i) when credited to any deposit account of
the Borrower maintained with the Bank or (ii) when paid in accordance with
the Borrower's written instructions. Subject to any other requirements set
forth in this Agreement, Advances shall be made by the Bank upon
telephonic or written notice received from the Borrower in form acceptable
to the Bank, which notice shall be received by the Bank at or before 2:00
p.m. (California time) on a Business Day. The Borrower may borrow under
the Line of Credit by requesting either:
(i) A VARIABLE RATE ADVANCE. A Variable Rate Advance may be made on
the Business Day notice is received by the Bank; provided however,
that if the Bank shall not have received notice at or before 2:00
p.m. (California time) on the day such Advance is requested to be
made, such Variable Rate Advance may be made, at the Bank's option,
on the next Business Day.
(ii) A FIXED RATE ADVANCE. The Borrower may elect that an Advance be
made as a Fixed Rate advance by requesting the Bank to provide a
quote as to the rate which would apply for a designated Interest
Period and concurrently with receiving such quote, giving the Bank
irrevocable notice of the Borrower's acceptance of the rate quoted,
provided such notice shall be given to the Bank not later than 10:00
a.m. (California time) on a date (which shall be a Business Day) at
least two days prior to the first day of the requested Interest
Period. Any telephonic or oral quote or offer by the Bank of a Fixed
Rate for a given Interest Period may be confirmed in writing by the
Bank upon the election (as provided herein) of the Borrower to accept
such terms and such confirmation shall be deemed conclusive as to the
terms quoted and offered.
H. AUTOMATIC PAYMENTS - AUTHORIZATION TO CHARGE ACCOUNT. The Borrower
hereby authorizes and instructs the Bank to charge regularly scheduled
payments of interest under this Line of Credit facility against the
undersigned's checking account number 1064-11518 on a monthly basis
commending on September 30, 1997, and to credit such amounts towards
payments due under this Line of Credit facility. In the event there are
not sufficient funds in such account on the day of the charge, the Bank is
hereby authorized, at any time thereafter, to deduct, in addition to the
amount indicated above, a late charge in accordance with the terms of this
Line of Credit facility. This authorization shall remain in full force and
effect until revoked by the undersigned in writing, or until all amounts
due the Bank under this Line of Credit facility are paid in full; provided
however that the Bank reserves the right, at any time, to discontinue or
suspend the taking of automatic payments hereunder.
I. EXPIRATION OF THE LINE OF CREDIT FACILITY. Unless earlier terminated in
accordance with the terms of this Agreement, the Bank's commitment to make
Advances to the Borrower hereunder shall automatically expire on August
30, 1998 (the "Expiration Date"), and the Bank shall be under no further
obligation to advance any monies thereafter.
J. LINE ACCOUNT. The Bank shall maintain on its books a record of account
in which the Bank shall make entries for each Advance and such other
debits and credits as shall be appropriate in connection with the Line of
Credit facility (the "Line Account"). The Bank shall provide the Borrower
with a monthly statement of the Borrower's Line Account, which statement
shall be considered to be correct and conclusively binding on the Borrower
unless the Bank is notified by the Borrower to the contrary within thirty
(30) days after the Borrower's receipt of any such statement which is
deemed to be incorrect.
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K. AMOUNTS PAYABLE ON DEMAND. If the Borrower fails to pay on demand any
amount so payable under this Agreement, the Bank may, at its option and
without any obligation to do so and without waiving any default occasioned
by the Borrower's failure to pay such amount, create an Advance in an
amount equal to the amount so payable, which Advance shall thereafter bear
interest as provided under this Line of Credit facility.
In addition, the Borrower hereby authorizes the Bank, if and to the extent
payment owed to the Bank under this Line of Credit facility is not made
when due, to charge, from time to time, against any or all of the deposit
accounts maintained by the Borrower with the Bank any amount so due.
L. CONVERSION TO TERM LOAN. It is hereby agreed that the Borrower may, by
giving written notice to the Bank at least thirty (30) days prior to July
7, 1998, convert the principal balance outstanding under the Line of
Credit as of August 7, 1998 to be payable on a term loan basis. The term
loan (the "Converted Term Loan") shall be in the amount of such
outstanding principal balance and shall be evidenced by a promissory
notice or credit agreement (the "Term Agreement") containing the following
payment terms: At the Borrower's election made prior to the conversion,
interest shall accrue on the outstanding balance under the converted term
note at one of the following rates: (i) A variable rate equal to the
Bank's Reference Rate, per annum, as it may change from time to time; or
(ii) a fixed rate to be quoted and offered by the Bank which shall be
approximately equal to 1.5% per annum in excess of the Cost of Funds rate,
or, at the Borrower's option, 1.5% per annum in excess of the LIBOR Rate.
If the variable rate is selected, the interest rate shall be adjusted
concurrently with any change in the Reference Rate. The Borrower may elect
the fixed rate option only for a Converted Term Loan in the minimum amount
of $100,000.00. Repayment under the Converted Term Loan shall be made in
72 monthly installments of principal plus interest if a variable rate is
elected or principal and interest if the fixed rate option is elected with
the exact amount and dates for such payments to be determined upon the
issuance of the Term Agreement. Accrued and unpaid interest under the Line
of Credit shall be paid to the Bank concurrently with the Borrower's
execution of the Term Agreement. Interest shall accrue and principal and
interest shall be paid in accordance with the terms and provisions of the
Term Agreement.
SECTION III
COLLATERAL
3.01 GRANT OF SECURITY INTEREST. To secure payment and performance of all of the
Borrower's Obligations under this Agreement and the performance of all the
terms, covenants and agreements contained in this Agreement (and any and all
modifications, extensions and renewals of the Agreement) and in any other
document, instrument or agreement evidencing or related to the Obligations or
the Collateral, and also to secure all other liabilities, loans, guarantees,
covenants and duties owed by the Borrower to the Bank, whether or not evidenced
by this or by any other agreement, absolute or contingent, due or to become due,
now existing or hereafter and howsoever created, the Borrower hereby grants to
the Bank a security interest in and to all of the following property:
A. SECURITIES. Those share of stock, bonds, and other negotiable and
non-negotiable securities listed on the "Collateral Securities Schedule"
attached to this Agreement and on any additional and supplemental
schedules or exhibits now or hereafter attached hereto, together with all
warrants, options, stock rights, rights to subscribe, liquidating
dividends, payments, dividends paid in stock, new securities or other
property derived therefrom or to which the Borrower may become entitled to
receive on account thereof.
B. MONIES AND OTHER PROPERTY IN POSSESSION. In addition to the above, all
monies, and property of the Borrower now or hereafter in the possession of
the Bank or the Bank's agents, or any one of them, including, but not
limited to, all deposit accounts, certificates of deposit, stocks, bonds,
indentures, warrants, options and other negotiable and non-negotiable
securities and instruments, together with all stock rights, rights to
subscribe, liquidating dividends, cash dividends, payments dividends paid
in stock, new securities or other property to which the Borrower may
become entitled to receive on account of such property.
3.02 CONTINUING LIEN & PROCEEDS. The Bank's security interest in the Collateral
shall be a continuing lien and shall include all proceeds and products of the
Collateral including, but not limited to, the proceeds of any insurance thereof.
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3.02 EXCLUSION OF CONSUMER DEBT. The Obligations and performance secured hereby
shall not include any indebtedness of the Borrower incurred for personal, family
or household purposes except to the extent any disclosure required under any
consumer protection law (including but not limited to the Truth in Lending Act)
or any regulation thereto, as now existing or hereafter amended, is or has been
given.
SECTION IV
CONDITIONS PRECEDENT
4.01 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT AND/OR FIRST
ADVANCE. The obligation of the Bank to make the initial extension of credit
and/or the first Advance hereunder is subject to the conditions precedent that
the Bank shall have received before the date of such extension of credit and/or
the first Advance all of the following, in form and substance satisfactory to
the Bank:
A. AUTHORITY TO BORROW. Evidence relating to the duly given approval and
authorization of the execution, delivery and performance of this
Agreement, all other documents, instruments and agreements required under
this Agreement and all other actions to be taken by the Borrower hereunder
or thereunder.
B. LOAN FEES. Evidence that any required loan fees and expenses as set
forth above with respect to each credit facility have been paid or
provided for by the Borrower.
C. AUDIT. The opportunity to conduct an audit of the Borrower's books,
records and operations and the Bank shall be satisfied as to the condition
thereof.
D. MISCELLANEOUS DOCUMENTS. Such other documents, instruments, agreements
and opinions as are necessary, or as the Bank may reasonably require, to
consummate the transactions contemplated under the Agreement, all fully
executed.
4.02 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT AND/OR ADVANCES. The
obligation of the Bank to make any extensions of credit and/or each Advance to
or on account of the Borrower (including the initial extension of credit and/or
the first Advance) shall be subject to the further conditions precedent that, as
of the date of each extension of credit or Advance and after the making of such
extension of credit or Advance:
A. REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in the Section entitled "Representations and Warranties" herein and
in any other document, instrument, agreement or certificate delivered to
the Bank hereunder are true and correct.
B. COLLATERAL. The security interest in the Collateral has been duly
authorized, created and perfected with first priority and is in full force
and effect and the Bank has been provided with satisfactory evidence of
all filings necessary to establish such perfection and priority.
C. EVENT OF DEFAULT. No event has occurred and is continuing which
constitutes, or, with the lapse of time or giving of notice or both, would
constitute an Event of Default.
D. SUBSEQUENT APPROVALS, ETC. The Bank shall have received such
supplemental approvals, opinions or documents as the Bank may reasonably
request.
4.03 REAFFIRMATION OF STATEMENTS. For the purposes hereof, the Borrower's
acceptance of the proceeds of any extension of credit and the Borrower's
execution of any document or instrument evidencing or creating any Obligation
hereunder shall each be deemed to constitute the Borrower's representation and
warranty that the statements set forth above in this Section are true and
correct.
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SECTION V
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:
5.01 STATUS. The Borrower is a corporation duly organized and validly existing
under the laws of the State of Colorado and is properly licensed, qualified to
do business and in good standing in, and, where necessary to maintain the
Borrower's rights and privileges, has complied with the fictitious name statute
of every jurisdiction in which the Borrower is doing business.
5.02 AUTHORITY. The execution, delivery and performance by the Borrower of this
Agreement and any instrument, document or agreement required hereunder have been
duly authorized and do not and will not: (i) violate any provision of any law,
rule, regulation, writ, judgment or injunction presently in effect affecting the
Borrower; (ii) require any consent or approval of the stockholders of the
Borrower of violate any provision of the articles of incorporation or by-laws of
the Borrower; or (iii) result in a breach of or constitute a default under any
material agreement to which the Borrower is a party or by which it or its
properties may be bound or affected.
5.03 LEGAL EFFECT. This Agreement constitutes, and any document, instrument or
agreement required hereunder when delivered will constitute, legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.
5.04 FICTITIOUS TRADE STYLES. The Borrower currently uses no fictitious trade
styles in connection with its business operations. The Borrower shall notify the
Bank within thirty (30) days of the use of any fictitious trade style at any
future date, indicating the trade style and state(s) of its use.
5.05 FINANCIAL STATEMENTS. All financial statements, information and other data
which may have been and which may hereafter be submitted by the Borrower to the
Bank are true, accurate and correct and have been and will be prepared in
accordance with generally accepted accounting principles consistently applied
and accurately represent the Borrower's financial condition and, as applicable,
the other information disclosed therein. Since the most recent submission of any
such financial statement, information or other data to the Bank, the Borrower
represents and warrants that no material adverse change in the Borrower's
financial condition or operations has occurred which has not been fully
disclosed to the Bank in writing.
5.06 LITIGATION. Except as have been disclosed to the Bank in writing, there are
no actions, suits or proceedings pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or the Borrower's properties before
any court or administrative agency which, if determined adversely to the
Borrower, would have a material adverse effect on the Borrower's financial
condition, operations or the Collateral.
5.07 TITLE TO ASSETS. The Borrower has good and marketable title to all of its
assets (including, but not limited to, the Collateral) and the same are not
subject to any security interest, encumbrance, lien or claim of any third person
except for Permitted Liens.
5.08 ERISA. If the Borrower has a pension, profit sharing or retirement plan
subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.
5.09 TAXES. The Borrower has filed all tax returns required to be filed and paid
all taxes shown thereon to be due, including interest and penalties, other than
taxes which are currently payable without penalty or interest or those which are
being duly contested in good faith.
5.10 ENVIRONMENTAL COMPLIANCE. The operations of the Borrower comply, and during
the term of this Agreement will at all times comply, in all respects with all
Environmental Laws; the Borrower has obtained licenses, permits, authorizations
and registrations required under any Environmental Law ("Environmental Permits")
and necessary for its ordinary operations, all such Environmental Permits are in
good standing, and the Borrower is in
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compliance with all material terms and conditions of such Environmental Permits;
neither the Borrower nor any of its present properties or operations are subject
to any outstanding written order from or agreement with any governmental
authority nor subject to any judicial or docketed administrative proceeding,
respecting any Environmental Law, Environmental Claim or Hazardous Material;
there are no Hazardous Materials or other conditions or circumstances existing,
or arising from operations prior to the date of this Agreement, with respect to
any property of the Borrower that would reasonably be expected to give rise to
Environmental Claims; provided however, that with respect to property leased
from an unrelated third party, the foregoing representation is made to the best
knowledge of the Borrower. In addition, (i) the Borrower does not have or
maintain any underground storage tanks which are not properly registered or
permitted under applicable Environmental Laws or which are leaking or disposing
of Hazardous Materials off-site, and (ii) the Borrower has notified all of its
employees of the existence, if any, of any health hazard arising from the
conditions of their employment and have met all notification requirements under
Title III of CERCLA and all other Environmental Laws.
SECTION VI
COVENANTS
The Borrower covenants and agrees that, during the term of this Agreement, and
so long thereafter as the Borrower is indebted to the Bank under this Agreement,
the Borrower shall, unless the Bank otherwise consents in writing:
6.01 PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS. Maintain and
preserve its existence and all rights and privileges now enjoyed; not liquidate
or dissolve, merge or consolidate with or into, or acquire any other business
organization; and conduct its business in accordance with all applicable laws,
rules and regulations.
6.02 MAINTENANCE OF INSURANCE. Maintain insurance in such amounts and covering
such risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower
operates and maintain such other insurance and coverages as may be required by
the Bank. All such insurance shall be in form and amount and with companies
satisfactory to the Bank. With respect to insurance covering properties in which
the Bank maintains a security interest or lien, such insurance shall be in an
amount not less than the full replacement value thereof, at the Bank's request,
shall name the Bank as loss payee pursuant to a loss payable endorsement
satisfactory to the Bank and shall not be altered or canceled except upon ten
(10) days' prior written notice to the Bank. Upon the Bank's request, the
Borrower shall furnish the Bank with the original policy or binder of all such
insurance.
6.03 MAINTENANCE OF COLLATERAL AND OTHER PROPERTIES. With respect to Possessory
Collateral: (i) such Collateral at all times be of a character and value
acceptable to the Bank, as determined by the Bank in its sole and absolute
judgment; (ii) the Borrower shall not withdraw or seek to withdraw any of such
Collateral now or hereafter in the possession of the Bank or the Bank's agents
or any one of them; and (iii) the Borrower shall make timely payments of all
taxes, charges, liens and assessments against the Collateral. With respect to
all Collateral, except for Permitted Liens, the Borrower shall keep and maintain
the Collateral free and clear of all levies, liens, encumbrances and security
interests (including but not limited to, any lien of attachment, judgment or
execution) and defend the Collateral against any such levy, lien, encumbrance or
security interest, comply with all laws, statutes and regulations pertaining to
the Collateral and its use and operation; execute, file and record such
statements, notices and agreements, take such actions and obtain such
certificates and other documents as necessary to perfect, evidence and continue
the Bank's security interest in the Collateral and the priority thereof;
maintain accurate and complete records of the Collateral which show all sales,
claims and allowances; and properly care for, house, store and maintain the
Collateral in good condition, free of misuse, abuse and deterioration, other
than normal wear and tear. The Borrower shall also maintain and preserve all its
properties in good working order and condition in accordance with the general
practice of other businesses of similar character and size, ordinary wear and
tear excepted.
6.04 PAYMENT OF OBLIGATIONS AND TAXES. Make timely payment of all assessments
and taxes and all of its liabilities and obligations including, but not limited
to, trade payables, unless the same are being contested in good faith by
appropriate proceedings with the appropriate court or regulatory agency. For
purposes hereof, the Borrower's issuance of a check, draft or similar instrument
without delivery to the intended payee shall not constitute payment.
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6.05 POSSESSORY COLLATERAL LOAN-TO-VALUE RATIO. The Borrower covenants and
agrees that so long as all or any part of the Obligations shall remain
outstanding, the outstanding principal balance of the Obligations shall remain
outstanding, the outstanding principal balance of the Obligations shall at no
time be greater than 90% of the value of the Possessory Collateral specifically
identified in the "Collateral" section of this Agreement (or in any attached
schedule) at its then current market value (as determined by the Bank) (the
"Loan-to-Value Ratio").
To the extent that such Possessory Collateral Loan-to-Value Ratio is not
maintained, the Borrower shall promptly, upon the Bank's request: (i) assign and
pledge to the Bank such additional assets of a character satisfactory to the
Bank and having a market value sufficient to reinstate and maintain such
Possessory Collateral Loan-to-Value Ratio, or (ii) make payment to the Bank in
an amount sufficient to reduce the outstanding principal balance of the
Obligations so that such Possessory Collateral Loan-to-Value Ratio is reinstated
and maintained.
6.06 INSPECTION RIGHTS. At any reasonable time and from time to time permit the
Bank or any representative thereof to examine and make copies of the records and
visit the properties of the Borrower and to discuss the business and operations
of the Borrower with any employee or representative thereof. If the Borrower now
or at any time hereafter maintains any records (including, but not limited to,
computer generated records and computer programs for the generation of such
records) in the possession of a third party, the Borrower hereby agrees to
notify such third party to permit the Bank free access to such records at all
reasonable times and to provide the Bank with copies of any records it may
request, all at the Borrower's expense, the amount of which shall be payable
immediately upon demand. In addition, the Bank may, at any reasonable time and
from time to time, conduct inspections and audits of the Collateral and the
Borrower's accounts payable, the cost and expenses of which shall be paid by the
Borrower to the Bank upon demand.
6.07 REPORTING REQUIREMENTS. Deliver or cause to be delivered to the Bank in
form and detail satisfactory to the Bank:
A. 10-K REPORT. Not later than 30 days after filing with the Securities
and Exchange Commission (SEC), a copy of the 10K report filed for that
period.
B. 10-Q REPORT. Not later than 75 days after the end of each quarter, a
copy of the 10Q report for that period.
C. OTHER INFORMATION. Promptly upon the Bank's request, such other
information pertaining to the Borrower, the Collateral, or any Guarantor
as the Bank may reasonably request.
6.08 TRANSFER ASSETS. Not sell, contract for sale, transfer, convey, assign,
lease or sublet any assets of the Borrower, including, but not limited to, the
Collateral, except in the ordinary course of business as presently conducted by
the Borrower, and then, only for full, fair and reasonable consideration.
6.09 CHANGE IN THE NATURE OF BUSINESS. Not make any material change in the
Borrower's financial structure or in the nature of the Borrower's business as
existing or conducted as of the date of this Agreement.
6.10 NET WORTH. Maintain at all times a minimum Effective Tangible Net Worth of
not less than $1.00.
6.11 COMPENSATION OF EMPLOYEES. Compensate the employees of the Borrower for
services rendered at an hourly rate at least equal to the minimum hourly rate
prescribed by any applicable federal or state law or regulation.
6.12 ENVIRONMENTAL COMPLIANCE. The Borrower shall:
A. Conduct the Borrower's operations and keep and maintain all of its
properties in compliance with all Environmental Laws.
B. Give prompt written notice to the Bank, but in no event later than 10
days after becoming aware, of the following: (i) any enforcement, cleanup,
removal or other governmental or regulatory actions instituted, completed
or threatened against the Borrower or any of its affiliates or any of its
respective properties pursuant to any applicable Environmental Laws, (ii)
all other Environmental Claims, and (iii) any
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environmental or similar condition on any real property adjoining or in
the vicinity of the property of the Borrower or its affiliates that could
reasonably be anticipated to cause such property or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability
or use of such property under any Environmental Laws.
C. Upon the written request of the Bank, the Borrower shall submit to the
Bank, at its sole cost and expense, at reasonable intervals, a report
providing an update of the status of any environmental, health or safety
compliance, hazard or liability issue identified in any notice required
pursuant to this Section.
D. At all times indemnify and hold harmless the Bank from and against any
and all liability arising out of any Environmental Claims.
6.13 NOTICE. Give the Bank prompt written notice of any and all (i) Events of
Default; (ii) litigation, arbitration or administrative proceedings to which the
Borrower is a party and which affects the Collateral; (iii) any change in the
place of business of the Borrower or the acquisition of more than one place of
business by the Borrower; (iv) any proposed or actual change in the name,
identity or the business nature of the Borrower; and (v) other matters which
have resulted in, or might result in a material adverse change in the Collateral
or the financial condition or business operations of the Borrower.
SECTION VII
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an event of
default under this Agreement:
7.01 NON-PAYMENT. The Borrower shall fail to pay any Obligations within 10 days
of when due.
7.02 PERFORMANCE UNDER THIS AND OTHER AGREEMENTS. The Borrower shall fail in any
material respect to perform or observe any term, covenant or agreement contained
in this Agreement or in any document, instrument or agreement evidencing or
relating to any indebtedness of the Borrower (whether owed to the Bank or third
persons), and any such failure (exclusive of the payment of money to the Bank
under this Agreement or under any other document, instrument or agreement, which
failure shall constitute and be an immediate Event of Default if not paid when
due or when demanded to be due) shall continue for more than 30 days after
written notice from the Bank to the Borrower of the existence and character of
such Event of Default.
7.03 REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS. Any representation or
warranty made by the Borrower under or in connection with this Agreement or any
financial statement given by the Borrower or any Guarantor shall prove to have
been incorrect in any material respect when made or given or when deemed to have
been made or given.
7.04 INSOLVENCY. The Borrower or any Guarantor shall: (i) become insolvent or be
unable to pay its debts as they mature; (ii) make an assignment for the benefit
of creditors or to an agent authorized to liquidate any substantial amount of
its properties or assets; (iii) file a voluntary petition in bankruptcy or
seeking reorganization or to effect a plan or other arrangement with creditors;
(iv) file an answer admitting the material allegations of an involuntary
petition relating to bankruptcy or reorganization or join in any such petition;
(v) become or be adjudicated a bankrupt; (vi) apply for or consent to the
appointment of, or consent than an order be made, appointing any receiver,
custodian or trustee for itself or any of its properties, assets or businesses;
or (vii) any receiver, custodian or trustee shall have been appointed for all or
a substantial part of its properties, assets or businesses and shall not be
discharged within 30 days after the date of such appointment.
7.05 EXECUTION. Any writ of execution or attachment or any judgment lien shall
be issued against any property of the Borrower and shall not be discharged or
bonded against or released within 30 days after the issuance or attachment of
such writ or lien.
7.06 REVOCATION OR LIMITATION OF GUARANTY. Any Guaranty shall be revoked or
limited or its enforceability or validity shall be contested by any Guarantor,
by operation of law, legal proceeding or otherwise or any Guarantor who is a
natural personal shall die.
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7.07 SUSPENSION. The Borrower shall voluntarily suspend the transaction of
business or allow to be suspended, terminated, revoked or expired any permit,
license or approval of any governmental body necessary to conduct the Borrower's
business as now conducted.
7.08 IMPAIRMENT OF COLLATERAL. There shall occur any injury or damage to all or
any part of the Collateral or all or any part of the Collateral shall be lost,
stolen, or destroyed, or, with respect to Possessory Collateral, there shall
occur any deterioration or impairment of all or any part of such Collateral or a
decline or depreciation in the value or market price of such Collateral, which
changes cause the Collateral, in the sole and absolute judgement of the Bank, to
become unacceptable as to character and value.
SECTION VIII
REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default, the Bank may, at its sole election,
without demand and upon only such notice as may be required by law:
8.01 ACCELERATION. Declare any or all of the Borrower's indebtedness owing to
the Bank, whether under this Agreement or under any other document, instrument
or agreement, immediately due and payable, whether or not otherwise due and
payable.
8.02 CEASE EXTENDING CREDIT. Cease making Advances or otherwise extending credit
to or for the account of the Borrower under this Agreement or under any other
agreement now existing or hereafter entered into between the Borrower and the
Bank.
8.03 TERMINATION. Terminate this Agreement as to any future obligation of the
Bank without affecting the Borrower's obligations to the Bank or the Bank's
rights and remedies under this Agreement or under any other document, instrument
or agreement.
8.04 RECORDS OF COLLATERAL. Require the Borrower to periodically deliver to the
Bank records and schedules showing the status, condition and location of the
Collateral and such contracts or other matters which affect the Collateral. In
connection herewith, the Bank may conduct such audits or other examination of
such records as the Bank, in its sole and absolute discretion, deems necessary.
8.05 PROTECTION OF SECURITY INTEREST. Make such payments and do such acts as the
Bank, in its sole judgment, considers necessary and reasonable to protect its
security interest or lien in the Collateral. The Borrower hereby irrevocably
authorizes the Bank to pay, purchase, contest or compromise any encumbrance,
lien or claim which the Bank, in its sole judgment, deems to be prior or
superior to its security interest. Further, the Borrower hereby agrees to pay to
the Bank, upon demand therefor, all expenses and expenditures (including
attorneys' fees) incurred in connection with the foregoing.
8.06 FORECLOSURE. Enforce any security interest or lien given or provided for
under this Agreement or under any security agreement, mortgage, deed or trust or
other document relating to the Collateral, in such manner and such order, as to
all or any part of the Collateral, as the Bank, in its sole judgment, deems to
be necessary or appropriate and the Borrower hereby waives any and all rights,
obligations or defenses now or hereafter established by law relating to the
foregoing. In the enforcement of its security interest or lien, the Bank is
authorized to enter upon the premises where any Collateral is located and take
possession of the Collateral or any part thereof, together with the Borrower's
records pertaining thereto, or the Bank may require the Borrower to assemble the
Collateral and records pertaining thereto and make such Collateral and records
available to the Bank at a place designated by the Bank. The Bank may sell the
Collateral or any portions thereof, together with all additions, accessions and
accessories thereto, giving only such notices and following only such procedures
as are required by law, at either a public or private sale, or both, with or
without having the Collateral present at the time of sale, which sale shall be
on such terms and conditions and conducted in such manner as the Bank determines
in its sole judgment to be commercially reasonable. Any deficiency which exists
after the disposition or liquidation of the Collateral shall be a continuing
liability of any obligor on or any guarantor of the Obligations and shall be
immediately paid to the Bank.
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8.07 APPLICATION OF PROCEEDS. All amounts received by the Bank as proceeds from
the disposition or liquidation of the Collateral shall be applied to the
Borrower's indebtedness to the Bank as follows: first, to the costs and expenses
of collection, enforcement, protection and preservation of the Bank's lien in
the Collateral, including court costs and reasonable attorneys' fees, whether or
not suit is commenced by the Bank; next, to those costs and expenses incurred by
the Bank in protecting, preserving, enforcing, collecting, selling or disposing
of the Collateral; next to the payment of accrued and unpaid interest on all of
the Obligations; next, to the payment of the outstanding principal balance of
the Obligation; and last, to the payment of any other indebtedness owed by the
Borrower to the Bank. Any excess Collateral or excess proceeds existing after
the disposition or liquidation of the Collateral will be returned or paid by the
Bank to the Borrower.
8.08 NON-EXCLUSIVITY OF REMEDIES. Exercise one or more of the Bank's rights set
forth herein or seek such other rights or pursue such other remedies as may be
provided by law, in equity or in any other agreement now existing or hereafter
entered into between the Borrower and the Bank, or otherwise.
SECTION IX
MISCELLANEOUS PROVISIONS
9.01 DEFAULT INTEREST RATE. If an Event of Default has occurred and is
continuing, the Bank, at its option, may require the Borrower to pay to the Bank
interest on any Indebtedness or amount payable under this Agreement at a rate
which is 3% in excess of the rate or rates otherwise then in effect under this
Agreement.
9.02 BANK'S RIGHTS WITH RESPECT TO POSSESSORY COLLATERAL. With respect to the
Possessory Collateral, at its option, whether or not the Borrower is in default,
and without any obligation of the Bank to do so, the Bank may, either in the
name of the Bank, the Bank's nominee or the Borrower:
A. Collect, endorse and receive all sums including, but not limited to,
dividends, and interest, now or hereafter payable upon or on account of
the Possessory Collateral.
B. Enter into any agreement relating to or affecting the Possessory
Collateral and, in connection therewith, the Bank may surrender control of
any such Collateral, accept other property in exchange for such Collateral
and do and perform such acts as it deems proper. Any money or property
received in exchange for any such Collateral shall be subject to and held
by the Bank pursuant to the terms of this Agreement.
C. Make any compromise or settlement with respect to the Possessory
Collateral that the Bank, in its sole and absolute discretion, deems
proper.
D. Insure and do such other acts as the Bank deems necessary, in its sole
discretion, to preserve or protect the Possessory Collateral.
E. Cause the Possessory Collateral to be transferred to the Bank's name or
the name of the Bank's nominee.
F. With respect to the Possessory Collateral, exercise all rights, powers
and remedies of an owner but excluding any voting rights.
9.03 RELIANCE. Each warranty, representation, covenant and agreement contained
in this Agreement shall be conclusively presumed to have been relied upon by the
Bank regardless of any investigation made or information possessed by the Bank
and shall be cumulative and in addition to any other warranties,
representations, covenants or agreements which the Borrower shall now or
hereafter give, or cause to be given, to the Bank.
9.04 DISPUTE RESOLUTION.
A. DISPUTES. It is understood and agreed that, upon the request of any
party to this Agreement, any dispute, claim or controversy of any kind,
whether in contract or in tort, statutory or common law, legal or
equitable, now existing or hereinafter arising between the parties in any
way arising out of, pertaining to or in connection with: (i) this
Agreement, or any related agreements, documents or instruments, (ii) all
past and present loans, credits, accounts, deposit accounts (whether
demand deposits or time deposits), safe deposit
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boxes, safekeeping agreement, guarantees, letters of credit, goods or
services, or other transactions, contracts or agreements of any kind,
(iii) any incidents, omissions, acts, practices, or occurrences causing
injury to any party whereby another party or its agents, employees or
representatives may be liable, in whole or in part, or (iv) any aspect of
the past or present relationships of the parties, shall be resolved
through two-step dispute resolution process administered by the Judicial
Arbitration & Mediation Services, Inc. ("JAMS") as follows:
B. STEP I - MEDIATION. At the request of any party to the dispute, claim
or controversy, the matter shall be referred to the nearest office of JAMS
for mediation, which is an informal, non-binding conference or conferences
between the parties in which a retired judge or justice from the JAMS
panel will seek to guide the parties to a resolution of the case.
C. STEP II - ARBITRATION (CONTRACTS NOT SECURED BY REAL PROPERTY). Should
any dispute, claim or controversy remain unresolved at the conclusion of
the Step I Mediation Phase, then (subject to the restriction at the end of
this subparagraph) all such remaining matters shall be resolved by final
and binding arbitration before a different judicial panelist, unless the
parties shall agree to have the mediator panelist act as arbitrator. The
hearing shall be conducted at a location determined by the arbitrator in
Los Angeles, California (or such other city as may be agreed upon by the
parties) and shall be administered by and in accordance with the then
existing Rules of Practice and Procedure of JAMS and judgement upon any
award rendered by the arbitrator may be entered by any State or Federal
Court having jurisdiction thereof. The arbitrator shall determine which is
the prevailing party and shall include in the award that party's
reasonable attorneys' fees and costs. This subparagraph shall apply only
if, at the time of the submission of the matter to JAMS, the dispute or
issues involved do not arise out of any transaction which is secured by
real property collateral or, if so secured, all parties consent to such
submission
As soon as practicable after selection of the arbitrator, the arbitrator,
or the arbitrator's designated representative, shall determine a
reasonable estimate of anticipated fees and costs of the arbitrator, and
render a statement to each party setting forth that party's pro-rata share
of said fees and costs. Thereafter, each party shall, within 10 days of
receipt of said statement, deposit said sum with the arbitrator. Failure
of any party to make such a deposit shall result in a forfeiture by the
non-depositing party of the right to prosecute or defend the claim which
is the subject of the arbitration, but shall not otherwise serve to xxxxx,
stay or suspend the arbitration proceedings.
D. STEP II - TRIAL BY COURT REFERENCE (CONTRACTS SECURED BY REAL
PROPERTY). If the dispute, claim or controversy is not one required or
agreed to be submitted to arbitration, as provided in the above
subparagraph, and has not been resolved by Step I mediation, then any
remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired
judge or justice from the panel of JAMS appointed pursuant to the
provisions of Section 638(1) of the California Code of Civil Procedure, or
any amendment, addition or successor section thereto, to hear the case and
report a statement of decision thereon. The parties intend this general
reference agreement to be specifically enforceable in accordance with said
section. If the parties are unable to agree upon a member of the JAMS
panel to act as referee, then one shall be appointed by the Presiding
Judge of the county wherein the hearing is to be held. The parties shall
pay in advance, to the referee, the estimated reasonable fees and costs of
the reference, as may be specified in advance by the referee. The parties
shall initially share equally, by paying their proportionate amount of the
estimated fees and costs of the reference. Failure of any party to make
such a fee deposit shall result in a forfeiture by the non-depositing
party of the right to prosecute or defend any cause of action which is the
subject of the reference, but shall not otherwise serve to xxxxx, stay or
suspend the reference proceeding.
E. PROVISIONAL REMEDIES, SELF HELP AND FORECLOSURE. No provision of, or
the exercise of any rights under any portion of this Dispute Resolution
provision, shall limit the right of any party to exercise self help
remedies such as set off, foreclosure against any real or personal
property collateral, or the obtaining of provisional or ancillary
remedies, such as injunctive relief or the appointment of a receiver, from
any court having jurisdiction before, during or after the pendency of any
arbitration. At the Bank's option, foreclosure under a deed of trust or
mortgage may be accomplished either by exercise of power of sale under the
deed of trust or mortgage, or by judicial foreclosure. The institution and
maintenance of an action for provisional
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remedies, pursuit of provisional or ancillary remedies or exercise of self
help remedies shall not constitute a waiver of the right of any party to
submit the controversy or claim to arbitration.
9.05 WAIVER OF JURY. The Borrower and the Bank hereby expressly and voluntarily
waive any and all rights, whether arising under the California constitution, any
rules of the California Code of Civil Procedure, common law or otherwise, to
demand a trial by jury in any action, matter, claim or cause of action
whatsoever arising out of or in any way related to this Agreement or any other
agreement, document or transaction contemplated hereby.
9.06 RESTRUCTURING EXPENSES. In the event the Bank and the Borrower negotiate
for, or enter into, any restructuring, modification or refinancing of the
Indebtedness under this Agreement for the purposes of remedying an Event of
Default, The Bank, may require the Borrower to reimburse all of the Bank's costs
and expenses incurred in connection therewith, including, but not limited to
reasonable attorneys' fees and the costs of any audit or appraisals required by
the Bank to be performed in connection with such restructuring, modification or
refinancing.
9.07 ATTORNEYS' FEES. In the event of any suit, mediation, arbitration or other
action in relation to this Agreement or any document, instrument or agreement
executed with respect to, evidencing or securing the indebtedness hereunder, the
prevailing party, in addition to all other sums to which it may be entitled,
shall be entitled to reasonable attorneys' fees.
9.08 NOTICES. All notices, payments, requests, information and demands which
either party hereto may desire, or may be required to give or make to the other
party shall be given or made to such party by hand delivery or through deposit
in the United States mail, postage prepaid, or by Western Union telegram,
addressed to the address set forth below such party's signature to this
Agreement or to such other address as may be specified from time to time in
writing by either party to the other.
9.09 WAIVER. Neither the failure nor delay by the Bank in exercising any right
hereunder or under any document, instrument or agreement mentioned herein shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any document, instrument or agreement mentioned herein
preclude other or further exercise thereof or the exercise of any other right;
nor shall any waiver of any right or default hereunder or under any other
document, instrument or agreement mentioned herein constitute a waiver of any
other right or default or constitute a waiver of any other default of the same
or any other term or provision.
9.10 CONFLICTING PROVISIONS. To the extent that any of the terms or provisions
contained in this Agreement are inconsistent with those contained in any other
document, instrument or agreement executed pursuant hereto, the terms and
provisions contained herein shall control. Otherwise, such provisions shall be
considered cumulative.
9.11 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the Borrower and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights hereunder
or any interest herein without the Bank's prior written consent. The Bank may
sell, assign or grant participations in all or any portion of its rights and
benefits hereunder. The Borrower agrees that, in connection with any such sale,
grant or assignment, the Bank may deliver to the prospective buyer, participant
or assignee financial statements and other relevant information relating to the
Borrower and any guarantor.
9.12 JURISDICTION. This Agreement, any notes issued hereunder, the rights of the
parties hereunder to and concerning the Collateral, and any documents,
instruments or agreements mentioned or referred to herein shall be governed by
and construed according to the laws of the State of California, to the
jurisdiction of whose courts the parties hereby submit.
9.13 HEADINGS. The heading set forth herein are solely for the purpose of
identification and have no legal significance.
9.14 ENTIRE AGREEMENT. This Agreement and all documents, instruments and
agreements mentioned herein constitute the entire and complete understanding of
the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the parties or pertaining
to the transactions contemplated hereunder that are not incorporated or
referenced in this Agreement or in such documents, instruments and agreements
are superseded hereby.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the date first hereinabove written.
BANK: BORROWER:
SANWA BANK CALIFORNIA NEOTHERAPEUTICS, INC.
By /s/Xxxx X. Xxxxxxxx By /s/Xxxxx X. Xxxxxx
------------------------------------ --------------------------
Xxxx X. Xxxxxxxx, Authorized Officer Xxxxx X. Xxxxxx, President
Address: Address:
Xxxxxxx Xxxxx Xxxxxx 000 Xxxxxxxxxx Xxxxx
0000 XxxXxxxxx Xxxxxxxxx Xxxxxx, XX 00000
Xxxxxxx Xxxxx, XX 00000
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SECURITIES SCHEDULE
The securities described below are part of the Collateral as defined and
described in this Line of Credit Agreement dated August 20, 1997 to which this
Schedule is attached.
--------------------------------------------------------------------------------
BONDS:
$1,750,000.00 par value Federal Home Loan Banks Consolidated Bond dated December
28, 1995 at 6.03% maturing December 28, 1998 held by Bank of America Illinois in
Account No.
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SECURITY AGREEMENT
This Security Agreement ("Agreement") is made and entered into this 14th day of
November 1997 by and between SANWA BANK CALIFORNIA (the "Bank") and
NEOTHERAPEUTICS, INC. (the "Grantor").
1. GRANT OF SECURITY INTEREST. The Grantor hereby grants to the Bank a security
interest in and to all of the following property (hereinafter collectively
referred to as the "Collateral"):
A. SECURITIES. Those shares of stock, bonds, and other negotiable and
non-negotiable securities listed on the "Collateral Securities Schedule"
attached to this Agreement and on any additional and supplemental
schedules or exhibits now or thereafter attached hereto, together with
all warrants, options, stock rights, rights to subscribe, liquidating
dividends, payments, dividends paid in stock, new securities or other
property derived therefrom or to which the Grantor may become entitled
to receive on account thereof.
B. MONIES AND OTHER PROPERTY IN POSSESSION. In addition to the above,
all monies, and property of the Grantor now or hereafter in the
possession of the Bank or the Bank's agents, or any one of them,
including, but not limited to, all deposit accounts, certificates of
deposit, stocks, bonds, indentures, warrants, options and other
negotiable and non-negotiable securities and instruments, together with
all stock rights, rights to subscribe, liquidating dividends, cash
dividends, payments, dividends paid in stock, new securities or other
property to which the Grantor may become entitled to receive on account
of such property.
The Bank's security interest in the Collateral shall be a continuing lien and
shall include all proceeds and products of the Collateral including but not
limited to, the proceeds of any insurance thereon.
2. THE INDEBTEDNESS. The Collateral secures payment of all obligations and
indebtedness pursuant to that certain Line of Credit Agreement dated August 20,
1997 between the Bank and the Borrower in the original aggregate principal
balance of $1,600,000.00. The indebtedness and obligations secured hereby
(hereinafter referred to as the "Indebtedness") shall include any and all
modifications, extensions and renewals of such obligations or indebtedness and
performance of all the terms, covenants and agreements contained in this
Security Agreement and in any other document, instrument or agreement evidencing
or related to the Indebtedness or the Collateral.
The Indebtedness secured hereby shall not include any indebtedness incurred for
personal, family or household purposes except to the extent any disclosure
required under any consumer protection law (including but not limited to the
Truth in Lending Act) or any regulation thereto, as now existing or hereafter
amended, is or has been given.
(1)
19
3. GRANTOR'S REPRESENTATIONS AND WARRANTIES. The Grantor hereby makes the
following representations and warranties to the Bank, which representations and
warranties are continuing:
A. STATUS. The Grantor is a corporation duly organized and validly
existing under the laws of the State of Colorado and is properly
licensed, qualified to do business and in good standing in, and, where
necessary to maintain the Grantor's rights and privileges, has complied
with the fictitious name statute of every jurisdiction in which the
Grantor is doing business.
B. AUTHORITY. The execution, delivery and performance by the Grantor of
this Security Agreement and any instrument, document or agreement
required hereunder have been duly authorized and do not and will not:
(i) violate any provision of any law, rule, regulation, writ, judgment
or injunction presently in effect affecting the Grantor; (ii) require
any consent or approval of the stockholders or violate any provision of
the articles of incorporation or by-laws of the Grantor; or (iii) result
in a breach of or constitute a default under any material agreement to
which the Grantor is a party or by which the Grantor's properties may be
bound or affected.
C. LEGAL EFFECT. This Security Agreement constitutes, and any document,
instrument or agreement required hereunder when delivered will
constitute, legal, valid and binding obligations of the Grantor
enforceable against the Grantor in accordance with their respective
terms.
D. FICTITIOUS TRADE STYLES. The Grantor currently uses no fictitious
trade styles in connection with its business operations. The Grantor
shall notify the Bank within thirty (30) days of the use of any
fictitious trade style at any future date, indicating the trade style
and state(s) of its use.
E. TITLE TO COLLATERAL; PERMITTED LIENS. The Grantor has good and
marketable title to the Collateral and the same is not now and shall not
become subject to any security interest, encumbrance, lien or claim of
any third person other than: (i) liens and security interests securing
the Indebtedness or other indebtedness owed to the Bank; (ii) liens for
taxes, assessments or similar charges either not yet due or being
contested in good faith; (iii) liens of mechanics, materialmen,
warehousemen, carriers or other like liens arising in the ordinary
course of business and securing obligations which are not yet
delinquent; (iv) purchase money liens or purchase money security
interests upon or in any property acquired or held by the Grantor in the
ordinary course of business to secure indebtedness outstanding on the
date hereof or permitted to be incurred hereunder; (v) liens and
security interests which, as of the date hereof, have been disclosed to
and approved by the Bank in writing; and (vi) those liens and security
interests which in the aggregate constitute an immaterial and
insignificant monetary amount which respect to the net value of the
Grantor's assets (collectively, the "Permitted Liens").
F. FINANCIAL STATEMENTS. All financial statements, information and other
data now or hereafter submitted to the Bank by the Grantor in connection
with the transaction with respect to which this Security Agreement is
entered into are true, accurate and correct and have been or will be
prepared in accordance with generally accepted accounting principles
consistently applied. Since the most recent submission of any such
financial statement, information or other data to the Bank, the Grantor
represents and warrants that no material adverse change in the financial
condition or operations as disclosed therein or thereby has occurred
which has not been fully disclosed to the Bank in writing.
G. LITIGATION. Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the knowledge
of the Grantor, threatened against or affecting the Grantor's properties
before any court of administrative agency which, if determined adversely
to the Grantor, would have a material adverse effect on the Grantor's
financial condition, operations or the Collateral.
H. TAXES The Grantor has filed all tax returns required to be filed and
paid all taxes shown thereon to be due, including interest and
penalties, other than taxes which are currently payable without penalty
or interest or those which are being duly contested in good faith.
(2)
20
4. GRANTOR'S COVENANTS. The Grantor covenants and agrees that, unless the Bank
otherwise consents in writing, the Grantor shall at all times:
A. MAINTENANCE OF COLLATERAL. Except for Permitted Liens, keep and
maintain the Collateral free and clear of all levies, liens,
encumbrances and other security interests (including, but not limited
to, any lien of attachment, judgment or execution) and defend the
Collateral against any such levy, lien, encumbrance or security
interest; comply with all laws, statutes and regulations pertaining to
the Collateral and take such actions and execute such agreements and
other documents necessary to perfect, evidence and continue the Bank's
security interest in the Collateral and the priority thereof.
B. COVENANTS WITH RESPECT TO POSSESSORY COLLATERAL. With respect to
Possessory Collateral, (which is defined to mean that portion of the
Collateral which consists of securities, certificates of deposit,
savings or checking accounts, notes and instruments and any other
similar collateral in which a security interest is normally perfected
through possession by the Bank or its agent), the Grant covenants and
agrees:
(i) The Possessory Collateral shall at all times be of a
character and value acceptable to the Bank, as determined
by the Bank in its sole and absolute judgment.
(ii) The Grantor shall not withdraw or seek to withdraw any of
the Possessory Collateral now or hereafter in the
possession of the Bank or the Bank's agents.
(iii) The Grantor shall make timely payments of all taxes,
charges, liens and assessments against the Possessory
Collateral.
C. REPORTING REQUIREMENTS. Promptly upon the Bank's request, deliver or
cause to be delivered to the Bank such information pertaining to the
Grantor, the Collateral or such other matters as the Bank may reasonably
request.
D. PAYMENT OF OBLIGATIONS. Pay all of the Grantor's liabilities and
obligations when due.
E. COMPENSATION OF EMPLOYEES. Compensate the Grantor's employees for
services rendered at an hourly rate at least equal to the minimum hourly
rate prescribed by any applicable federal or state law or regulation.
F. POSSESSORY COLLATERAL LOAN-TO-VALUE RATIO. The Grantor covenants and
agrees that so long as all or any part of the Indebtedness shall remain
outstanding, the outstanding principal balance of the obligations
secured by this Agreement shall at no time be greater than 90.00% of the
value of the Possessory Collateral at its then current market value (as
determined by the Bank) "the "Loan-to-Value Ratio").
G. NOTICES. Give the Bank prompt written notice of: (i) any change in
the Grantor's place of business or the acquisition of more than one
place of business; (ii) any proposed or actual change in the Grantor's
name, identify or business nature; (iii) any change in the location of
any Collateral; (iv) any Event of Default; (v) litigation, arbitration
or administrative proceedings to which the Grantor is a party and which
affects the Collateral;
(3)
21
and (vi) any other matter which has resulted in, or might result in, a
material adverse change in the Collateral or the financial condition or
business operations of the Grantor.
5. BANK'S RIGHTS REGARDING POSSESSORY COLLATERAL. With respect to the Possessory
Collateral, at its option and without any obligation to do so, the Bank may,
either in the name of the Bank, the Bank's nominee or the Grantor:
A. Collect, endorse and receive all sums including, but not limited to,
dividends, and interest, now or hereafter payable upon or on account of
the Possessory Collateral.
B. Enter into any agreement relating to or affecting the Possessory
Collateral and, in connection therewith, the Bank may surrender control
of any such Collateral, accept other property in exchange for such
Collateral and do and perform such acts as it deems proper. Any money or
property received in exchange for any such Collateral shall be subject
to and held by the Bank pursuant to the terms of this Security
Agreement.
C. Make any compromise or settlement with respect to the Possessory
Collateral that the Bank, in its sole and absolute discretion, deems
proper.
D. Insure and do such other acts as the Bank deems necessary, in its
sole discretion, to preserve or protect the Possessory Collateral.
E. Cause the Possessory Collateral to be transferred to the Bank's name
or the name of the Bank's nominee.
F. With respect to the Possessory Collateral, exercise all rights,
powers and remedies of an owner but excluding any voting rights.
6. EVENTS OF DEFAULT. Any one or more of the following described events shall
constitute an event of default ("Event of Default") hereunder.
A. NON-PAYMENT. There shall occur a failure to pay when due any payment
of principal or interest or any other sum referred to in this Security
Agreement or under any other document, instrument or agreement
evidencing or relating to any indebtedness owed by the Grantor to the
Bank or owed to the Bank by any obligor on the Indebtedness.
B. PERFORMANCE UNDER THIS AND OTHER AGREEMENTS. The Grantor shall fail
in any material respect to perform or observe any term, covenant or
agreement contained in this Security Agreement or in any document,
instrument or agreement evidencing or relating to any indebtedness of
the Grantor or any indebtedness of any obligor on the Indebtedness
(whether such indebtedness is owed to the Bank or third persons), and
any such failure (exclusive of the payment of money to the Bank, which
failure shall constitute and be an immediate Event of Default if not
paid when due or when demanded to be due) shall continue for more than
30 days after written notice from the Bank to the Grantor or the obligor
on the Indebtedness of the existence and character of such Event of
Default.
C. REPRESENTATIONS AND WARRANTIES: FINANCIAL STATEMENTS. Any
representation or warranty made under or in connection with this
Security Agreement or any financial statement or information given in
connection with the transaction with respect to which this Security
Agreement is entered into shall prove to have been incorrect in any
material respect when made or given or when deemed to have been made or
given.
D. INSOLVENCY. The Grantor or any obligor on or any guarantor of the
Indebtedness shall: (i) become insolvent or be unable to pay its debts
as they mature; (ii) make an
(4)
22
assignment for the benefit of creditors or to an agent authorized to
liquidate any substantial amount of its properties or assets; (iii) file
a voluntary petition in bankruptcy or seeking reorganization or to
effect a plan or other arrangement with creditors; (iv) file an answer
admitting the material allegations of an involuntary petition relating
to bankruptcy or reorganization or join in any such petition; (v) become
or be adjudicated a bankrupt; (vi) apply for or consent to the
appointment of, or consent that an order be made appointing, any
receiver, custodian or trustee, for itself or any of its properties,
assets or business; of (vii) any receiver, custodian or trustee shall
have been appointed for all or a substantial part of its properties,
assets or businesses and shall not be discharged within 30 days after
the date of such appointment.
E. EXECUTION. Any writ of execution or attachment or any judgment lien
shall be issued against the Collateral and shall not be discharged or
bonded against or released within 30 days after the issuance or
attachment of such writ or lien.
F. IMPAIRMENT OF COLLATERAL. There shall occur any deterioration or
impairment of all or any part of the Collateral or any decline or
depreciation in the value or market price of the Collateral which causes
the Collateral, in the sole and absolute judgment of the Bank, to become
unacceptable as to character or value.
G. REVOCATION OR LIMITATION OF GUARANTY. Any guaranty given with respect
to the Indebtedness shall be revoked or limited or its enforceability or
validity shall be contested by any guarantor, by operation of law, legal
proceeding or otherwise or any guarantor who is a natural person shall
die.
H. SUSPENSION. The Grantor or any obligor on the Indebtedness shall
voluntarily suspend the transaction of business or allow to be
suspended, terminated, revoked or expired any permit, license or
approval of any federal, state or municipal agency or authority
necessary to conduct such person's business as now conducted.
I. CHANGE IN OWNERSHIP. There shall occur a sale, transfer, disposition
or encumbrance (whether voluntary or involuntary), or an agreement shall
be entered into to do so, with respect to more than 10% of the issued
and outstanding capital stock of the Grantor or any obligor on the
Indebtedness, if a corporation, or there shall occur a change in any
general partner or a change affecting the control of the Grantor or any
obligor on the Indebtedness, if a partnership.
7. BANK'S RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any Event of
Default, the Bank may, at its sole and absolute election, without demand and
only upon such notice as may be required by law:
A. ACCELERATION. Declare the Indebtedness and any or all other
indebtedness owing to the Bank by the Grantor or any obligor on the
Indebtedness (however such indebtedness may be evidence or secured)
immediately due and payable, whether or not otherwise due and payable.
B. CEASE EXTENDING CREDIT. Cease extending credit to or for the account
of the Grantor or any obligor on the Indebtedness under any agreement
now existing or hereafter entered into with the Bank.
C. TERMINATION. Terminate any agreement as to any future obligation of
the Bank without affecting the Grantor's obligations to the Bank or the
Bank's rights and remedies under this Security Agreement or under any
other document, instrument or agreement.
(5)
23
D. PROTECTION OF SECURITY INTEREST IN COLLATERAL. Make such payments and
do such acts as the Bank, in its sole judgment, considers necessary and
reasonable to protect its security interest in the Collateral. The
Grantor hereby irrevocably authorizes the Bank to pay, purchase, contest
or compromise any encumbrance, lien or claim which the Bank, in its sole
judgment, deems to be prior or superior to its security interest.
Further, the Grantor hereby agrees to pay to the Bank, upon demand
therefor, all expenses and expenditures (including attorneys' fees)
incurred in connection with the foregoing.
E. FORECLOSURE. Enforce any security interest or lien given or provided
for under this Security Agreement or under any other document relating
to the Collateral, in such manner and such order, as to all or any part
of the Collateral, as the Bank, in its sole judgment, deems to be
necessary to appropriate and the Grantor hereby waives any and all
rights, obligations or defenses now or hereafter established by law
relating to the foregoing. In the enforcement of its security interest
in the Collateral, the Bank is authorized to enter upon the premises
where any Collateral is located and take possession of the Collateral or
any part thereof, together with the Grantor's records pertaining
thereto, or the Bank may require the Grantor to assemble the Collateral
and records pertaining thereto and make such Collateral and records
available to the Bank at a place designated by the Bank. The Bank may
sell the Collateral or any portions thereof, together with all
additions, accessions and accessories thereto, giving only such notices
and following only such procedures as are required by law, at either a
public or private sale, or both, with or without having the Collateral
present at the time of sale, which sale shall be on such terms and
conditions and conducted in such manner as the Bank determines in its
sole judgment to be commercially reasonable. Any deficiency which exists
after the disposition or liquidation of the Collateral shall be a
continuing liability of any obligor on or any guarantor of the
Indebtedness and shall be immediately paid to the Bank.
F. APPLICATION OF PROCEEDS. All amounts received by the Bank as proceeds
from the disposition or liquidation of the Collateral shall be applied
as follows: first, to the costs and expenses of collection, including
court costs and reasonable attorneys' fees, whether or not suit is
commenced by the Bank; next, to those costs and expenses incurred by the
Bank in protecting, preserving, enforcing, collecting, selling or
disposing of the Collateral; next, to the payment of accrued and unpaid
interest on all of the Indebtedness; next, to the payment of the
outstanding principal balance of the Indebtedness; and last, to the
payment of any other indebtedness owed by the Grantor to the Bank. Any
excess Collateral or excess proceeds existing after the disposition or
liquidation of the Collateral will be returned or paid by the Bank to
the Grantor.
G. NON-EXCLUSIVITY OF REMEDIES. Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other
remedies as may be provided by law, in equity or in any other agreement
now existing or hereafter entered into between the Bank and the Grantor
or any obligor on or guarantor of the Indebtedness, or otherwise.
8. MISCELLANEOUS PROVISIONS.
A. AMOUNTS PAYABLE UNDER THIS SECURITY AGREEMENT. If the Grantor fails
to pay on demand the amount of any obligations referred to in this
Security Agreement, the Bank may pay such amount at its option and
without any obligation to do so and without waiving any default
occasioned by the Grantor's failure to pay such amount. All amounts so
paid by the Bank, together with reasonable attorneys' fees and all other
costs, charges and expenses relating to the Indebtedness, shall be a
part of the Indebtedness and shall bear interest at the highest rate
chargeable on any Indebtedness until paid in full.
(6)
24
B. OTHER TERMS. Terms not otherwise defined in this Security Agreement
shall have the meanings attributed to such terms in the California
Uniform Commercial Code.
C. RELIANCE. Each warranty, representation, covenant and agreement
contained in this Security Agreement shall be conclusively presumed to
have been relief upon by the Bank regardless of any investigation made
or information possessed by the Bank and shall be cumulative and in
addition to any other warranties, representations, covenants or
agreements which the Grantor shall now or hereafter give, or cause to be
given, to the Bank.
D. ATTORNEYS' FEES. In the event of any action in relation to this
Security Agreement, the Collateral or any document, instrument or
agreement secured hereby or related hereto, the prevailing party, in
addition to all other sums to which it may entitled, shall be entitled
to reasonable attorneys' fees.
E. NOTICES. All notices, payments, requests, information and demands
which either party hereto may desire, or be required to give or make to
the other party, shall be given or made to such party by hand delivery
or through deposit in the United States mail, postage prepaid, or by
Western Union telegram, addressed to the address set forth below such
party's signature to this Security Agreement or to such other address as
may be specified from time to time in writing by either party to the
other.
F. WAIVER. Neither the failure nor delay by the Bank in exercising any
right hereunder or under any document, instrument or agreement mentioned
herein shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder or under any other document,
instrument or agreement mentioned herein preclude other or further
exercise thereof or the exercise of any other right, nor shall any
waiver of any right or default hereunder or under any other document,
instrument or agreement mentioned herein constitute a waiver of any
other right or default or constitute a waiver of any other default of
the same or any other term or provision.
G. ASSIGNMENT. This Security Agreement shall be binding upon and inure
to the benefit of the Grantor and the Bank and their respective
successors and assigns, except that the Grantor shall not have the right
to assign the Grantor's rights hereunder or any interest herein without
the Bank's prior written consent. The Bank may sell or assign all or any
portion of its rights and benefits hereunder and, in connection
therewise, may deliver to such prospective buyer or assignee financial
statements and other relevant information pertaining to the Grantor or
any obligor on the Indebtedness.
H. SEVERABILITY. Should any one or more provisions of this Security
Agreement be determined to be illegal or unenforceable, all other
provisions shall remain effective.
I. JURISDICTION. This Security Agreement and the rights of the parties
hereunder to and concerning the Collateral, and any documents,
instruments or agreements mentioned or referred to herein, shall be
governed by and construed according to the laws of the State of
California, to the jurisdiction of whose courts the parties hereby
submit.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
executed as of the date first hereinabove written.
BANK:
SANWA BANK CALIFORNIA
(7)
25
BY: /S/ XXXX X. XXXXXXXXX
--------------------------
XXXX X. XXXXXXXXX
COMMERCIAL BANKING OFFICER
ADDRESS:
NEWPORT BEACH XXXXXX
0000 XXXXXXXXX XXXXXXXXX
XXXXXXX XXXXX, XX 00000
GRANTOR:
NEOTHERAPEUTICS, INC.
BY: /S/ XXXXX X. XXXXXX
--------------------------
XXXXX X. XXXXXX, PRESIDENT
ADDRESS:
000 XXXXXXXXXX XXXXX
XXXXXX, XX 00000
(8)
26
SECURITIES SCHEDULE
The securities described below are part of the Collateral as defined and
described in this Security Agreement dated November 14, 1997 to which this
Schedule is attached.
--------------------------------------------------------------------------------
BONDS:
$1,750,000.00 par value Federal Home Loan Banks Consolidated Bond dated December
28, 1995 at 6.030% maturing December 28, 1998 held by Sanwa Bank California's
Trust Department in account No. 00X000000.
(9)
27
PLEDGEHOLDER AGREEMENT
THIS PLEDGEHOLDER AGREEMENT (the "Agreement") is made as of this 20th day of
August, 1997 by and between SANWA BANK CALIFORNIA (the "Bank"), NEOTHERAPEUTICS,
INC. (the "Grantor"), and BANK OF AMERICA (the "Pledgeholder") with respect to
the matters that follow:
1. THE COLLATERAL. As security for the payment of certain debts, obligations and
liabilities (hereinafter collectively referred to as the "Indebtedness") owed
and to be owed by NEOTHERAPEUTICS, INC. to the Bank and performance of all the
terms, covenants and agreements contained in certain documents, instruments and
agreements evidencing, securing or related to the Indebtedness, the Grantor has
granted to the Bank, pursuant to the terms, covenants and agreements contained
in a certain security agreement (the "Security Agreement") entered into between
the Bank and the Grantor and relating to the property described below, together
with all proceeds thereof (hereinafter collectively referred to as the
"Collateral"), a security interest in and to, among other items, the following:
Those shares of stock, bonds, indentures, negotiable and non-negotiable
securities and instruments listed on the attached Exhibit "A" and on any
additional and supplemental exhibits to this Agreement, together with all
warrants, options, stock rights, right to subscribe, liquidating dividends, cash
dividends, payments, dividends paid in stock, new securities or other property
derived therefrom or to which the Grantor may become entitled to receive on
account thereof, which are held by the Pledgeholder and which are maintained by
the Pledgeholder in one or more accounts, including but not limited to the
account numbered 01-40-403-0000000 (collectively, the "Account").
2. APPOINTMENT OF PLEDGEHOLDER. In order to perfect the security interest of the
Bank in and to the Collateral, the Bank in and to the Collateral, the Bank
hereby appoints the Pledgeholder, the Grantor hereby acknowledges and
irrevocably authorizes the appointment of the Pledgeholder, and the Pledgeholder
irrevocably accepts its appointment, as agent for and under the instructions of
the Bank, to hold any and all Collateral which is now or shall hereafter be in
the possession or under the control of the Pledgeholder.
3. LIMITATIONS ON DISPOSITION OF COLLATERAL. Except to the extent that the
Pledgeholder is authorized or permitted by the Bank or under this Agreement or
is required by court order, writ or other legal process, the Collateral or any
portion thereof shall not be released by or withdrawn from the possession or
control of the Pledgeholder. Notwithstanding the foregoing, to the extent that
the Collateral or any portion thereof consists of stock, bonds, indentures,
warrants, options, stock rights, or other negotiable or non-negotiable
securities, such item or items of the Collateral may, at the option and
direction of the Grantor, be sold or otherwise disposed of provided that the
proceeds therefrom are reinvested in other securities which are held by the
Pledgeholder and are of a character and value acceptable to the Bank and
provided further that, prior to and following such sale or disposition and such
reinvestment, the then current market value of such securities held by the
Pledgeholder shall not be less than an a mount designated from time to time by
the Bank to the Pledgeholder.
4. TRANSFER OF COLLATERAL TO BANK. Upon such instructions as may be given by the
Bank to the Pledgeholder, the Pledgeholder shall (as directed by the Bank)
either deliver the Collateral or such portions thereof (together with, as
applicable, all stock powers executed by the Grantor, the Pledgeholder and
others) to the Bank or liquidate, sell or otherwise dispose of the Collateral or
(1)
28
such portions thereof and remit the proceeds therefrom to the Bank at the
address set forth herein or in the instructions given by the Bank to the
Pledgeholder.
5. INDEMNIFICATION OF PLEDGEHOLDER. The Pledgeholder is hereby authorized to
comply with the terms and conditions of this Agreement and the instructions
given to the Pledgeholder pursuant hereto, and the Grantor hereby releases and
discharges the Pledgeholder from any and all duties and obligations which the
Pledgeholder may otherwise have to the Grantor under any prior instructions or
agreements which conflict with the matters contained in this Agreement. The
Grantor hereby agrees to and shall indemnify and defend the Pledgeholder and
shall hold the Pledgeholder harmless from and against any and all claims,
demands, costs and expenses (including court costs and attorneys' fees) arising
from any litigation or proceeding which may be commenced with respect to the
Collateral, the Account or the obligations of the Pledgeholder hereunder or
which may be incurred by reason of following any instruction given to the
Pledgeholder pursuant to this Agreement.
6. DEFINITIONS. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the California Uniform Commercial Code.
7. DISPUTE RESOLUTION.
A. DISPUTES. It is understood and agreed that, upon the request of any
party to this Agreement, any dispute, claim or controversy of any kind,
whether in contract or in tort, statutory or common law, legal or
equitable, now existing or hereinafter arising between the parties in
any way arising out of, pertaining to or in connection with: (i) this
Agreement, or any related agreements, documents or instruments, (ii) all
past and present loans, credits, accounts, deposit accounts (whether
demand deposits or time deposits), safe deposit boxes, safekeeping
agreements, guarantees, letters of credit, goods or services, or other
transactions, contracts or agreements of any kind, (iii) any incidents,
omissions, acts, practices, or occurrences causing injury to any party
whereby another party or its agents, employees or representatives may be
liable, in whole or in part, or (iv) any aspect of the past or present
relationships of the parties, shall be resolved through a two-step
dispute resolution process administered by the Judicial Arbitration &
Mediation Services, Inc. ("JAMS") as follows:
B. STEP I - MEDIATION. At the request of any party to the dispute, claim
or controversy, the matter shall be referred to the nearest office of
JAMS for mediation, which is an informal, non-binding conference or
conferences between the parties in which a retired judge or justice from
the JAMS panel will seek to guide the parties to a resolution of the
case.
C. STEP II - ARBITRATION (CONTRACTS NOT SECURED BY REAL PROPERTY).
Should any dispute, claim or controversy remain unresolved at the
conclusion of the Step I Mediation Phase, then (subject to the
restriction at the end of this subparagraph ) all such remaining matters
shall be resolved by final and binding arbitration before a different
judicial panelist, unless the parties shall agree to have the mediator
panelist act as arbitrator. The hearing shall be conducted at a location
determined by the arbitrator in Los Angeles, California (or such other
city as may be agreed upon by the parties) and shall be administered by
and in accordance with the then existing Rules of Practice and Procedure
of JAMS and judgement upon any award rendered by the arbitrator may be
entered by any State or Federal Court, having jurisdiction thereof. The
arbitrator shall determine which is the prevailing party and shall
include in the award that party's reasonable attorneys' fees and costs.
This subparagraph shall apply only if, at the time of the submission of
the matter to JAMS, the dispute or issues involved do not arise out of
any transaction which is secured by real property collateral or, if so
secured, all parties consent to such submission.
(2)
29
As soon as practicable after selection of the arbitrator, the
arbitrator, or the arbitrator's designated representative, shall
determine a reasonable estimate of anticipated fees and costs of the
arbitrator, and render a statement to each party setting forth that
party's pro-rata share of said fees and costs. Thereafter, each party
shall, within 10 days of receipt of said statement, deposit said sum
with the arbitrator. Failure of any party to make such a deposit shall
result in a forfeiture by the non-depositing party of the right to
prosecute or defend the claim which is the subject of the arbitration,
but shall not otherwise serve to xxxxx, stay or suspend the arbitration
proceedings.
D. STEP II - TRIAL BY COURT REFERENCE (CONTRACTS SECURED BY REAL
PROPERTY). If the dispute, claim or controversy is not one required or
agreed to be submitted to arbitration, as provided in the above
subparagraph, and has not been resolved by Step I mediation, then any
remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired
judge or justice from the panel of JAMS appointed pursuant to the
provisions of Section 638(1) of the California Code of Civil Procedure,
or any amendment, addition or successor section thereto, to hear the
case and report a statement of decision thereof. The parties intend this
general reference agreement to be specifically enforceable in accordance
with said section. If the parties are unable to agree upon a member of
the JAMS panel to act as referee, then one shall be appointed by the
Presiding Judge of the county wherein the hearing is to be held. The
parties shall pay in advance, to the referee, the estimated reasonable
fees and costs of the reference, as may be specified in advance by the
referee. The parties shall initially share equally, by paying their
proportionate amount of the estimated fees and costs of the reference.
Failure of any party to make such a fee deposit shall result in a
forfeiture by the non-depositing party of the right to prosecute or
defend any cause of action which is the subject of the reference, but
shall not otherwise serve to xxxxx, stay or suspend the reference
proceeding.
E. PROVISIONAL REMEDIES, SELF HELP AND FORECLOSURE. No provision of, or
the exercise of any rights under any portion of this Dispute Resolution
provision, shall limit the right of any party to exercise self help
remedies such as set off, foreclosure against any real or personal
property collateral, or the obtaining of provisional or ancillary
remedies, such as injunctive relief or the appointment of a receiver,
from any court having jurisdiction before, during or after the pendence
of any arbitration. At the Bank's option, foreclosure under a deed of
trust or mortgage may be accomplished either by exercise of power of
sale under the deed of trust or mortgage, or by judicial foreclosure.
The institution and maintenance of an action for provisional remedies,
pursuit of provisional or ancillary remedies or exercise of self help
remedies shall not constitute a waiver of the right of any party to
submit the controversy or claim or arbitration.
8. ATTORNEY'S FEES. In the event of any mediation, arbitration, suit or other
action to enforce this Agreement or which otherwise arises out of this
Agreement, the prevailing party, in addition to all other sums to which it may
be entitled, shall be entitled to reasonable attorneys' fees.
9. NOTICES. All notices, payments, requests, information and demands which any
party hereto may desire or be required to give or make to any other party shall
be given or made to such party by hand delivery or express mail or through
deposit in the United States mail, postage prepaid, or by Western Union
telegram, or by telex, addressed to the address set forth below such party's
signature to this Agreement or to such other address as may be specified from
time to time in writing by any party to the other parties.
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30
10. NO WAIVER. Neither the failure nor delay by the Bank in exercising any right
hereunder or under any document, instrument or agreement mentioned herein shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any other document, instrument or agreement mentioned
herein preclude other or further exercise thereof or the exercise of any other
right.
11. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and agents.
12. JURISDICTION. This Agreement and the rights of the parties hereunder to and
concerning the Collateral, and any documents, instruments or agreements
mentioned or referred to herein, shall be governed by and construed according to
the laws of the State of California, to the jurisdiction of whose courts the
parties hereby submit.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first hereinabove written.
BANK: GRANTOR:
SANWA BANK CALIFORNIA NEOTHERAPEUTICS, INC.
BY: /S/ XXXX X. XXXXXXXX BY: /S/ XXXXX X. XXXXXX
----------------------------------- ----------------------------------
XXXX X. XXXXXXXX, AUTHORIZED OFFICER XXXXX X. XXXXXX, PRESIDENT
ADDRESS: ADDRESS:
NEWPORT BEACH OFFICE ONE TECHNOLOGY DRIVE
0000 XXXXXXXXX XXXXXXXXX XXXXXX, XX 00000
XXXXXXX XXXXX, XX 00000
PLEDGEHOLDER:
BANK OF AMERICA
BY:
---------------------------------
NAME/TITLE
ADDRESS:
000 XXXXX XXXXXXX XXXXXX
XXXXXXX, XX 00000
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31
EXHIBIT "A"
SECURITIES SCHEDULE
PLEDGEHOLDER AGREEMENT
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VOID
(5)
32
ASSIGNMENT AS SECURITY
FOR VALUE RECEIVED, I, NeoTherapeutics, Inc., Principal Trustor
Beneficiary under the above account number in the files of SANWA BANK
CALIFORNIA, Trust Department (hereinafter referred to as Trustee/Custodian), do
hereby assign and deliver unto Sanwa Bank California, (hereinafter referred to
as Assignee) all my right, title, and interest in and to said account and the
benefits thereof, subject to the rights hereinafter reserved to the undersigned,
and subject to said rights, I do hereby authorize said Trustee/Custodian to pay
and turn unto said Assignee all moneys and benefits growing out of said interest
hereby assigned.
This assignment is made as collateral security for the payment of that
certain promissory note dated August 20, 1997, in favor of Assignee in the
amount of $1,600,000.00, or any extension or renewal thereof, together with any
interest and expenses which may accrue thereon, and in accordance with the terms
thereof, and also as security for any other sums which may be due or become due
said Assignee by the undersigned; provided, however that the Trustee/Custodian
shall distribute the net income derived from the account to the person or
persons entitled thereto by the provisions thereof, until said Trustee/Custodian
shall be otherwise directed by said Assignee; and provided further, that the
undersigned shall not exercise any rights to terminate said account in whole or
in part, and/or to direct the investment or reinvestment of all or any part of
the account, and/or to amend said account in such manner as to affect the rights
of the Assignee hereunder, until said obligations shall be fully satisfied and
discharged and/or all sums owing by the undersigned to said Assignee shall have
been fully repaid, except with the written consent of the said Assignee.
Unless otherwise paid, said Trustee/Custodian is authorized and directed
to pay, when due, the indebtedness hereby secured by the account out of any
funds belonging to the account and available for that purpose, or, in the event
there are not funds belonging to the account available for the payment of said
obligation when due, said Trustee/Custodian is authorized and directed to sell
at public or private sale, in any lawful manner, such property belonging to the
account as may be necessary for the purpose of providing such funds.
Pursuant to the power reserved to the undersigned in and by said
account, the undersigned does hereby alter, amend, and/or change said account,
and the estates and interests thereby created, to such extent and for such
periods as may be necessary to carry out the provisions hereof.
It is understood and agreed that, upon the full payment by the
undersigned of all indebtedness secured hereby, or in connection herewith or
otherwise, this assignment shall terminate and become null, void, and of no
effect, and thereupon the Trustee/Custodian shall hold the entire account then
remaining for the benefit of the person or persons entitled thereto by the
provisions of said account.
The undersigned does hereby agree to indemnify and save harmless said
Trustee/Custodian from any loss, damage, or liability that it may suffer or
incur by reason of complying with the terms of this assignment.
Dated this____________________day of_________________, 19__________.
Signature of Assignor /s/ Xxxxx X. Xxxxxx
-------------------
SANWA BANK OF CALIFORNIA, as Custodian, hereby consents to the above assignment.
DATED this 18th day of November, 1997.
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SANWA BANK OF CALIFORNIA
/s/ Xxxxx Xxx Xxxxxxx /s/ Xxxx X. Xxxxxxxx
------------------------------------------
Trust Officer