1
EXHIBIT 10.31
SANWA
BANK
CALIFORNIA
LINE OF CREDIT AGREEMENT
This Line of Credit Agreement ("Agreement") is made and entered into this 15th
day of January 1997 by and between SANWA BANK CALIFORNIA (the "Bank") and
INTERACTIVE GROUP, 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. "DEBT" shall mean all liabilities of the Borrower less Subordinated
Debt.
E. "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).
F. "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.
G. "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.
H. "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.
I. "EVENT OF DEFAULT" shall have the meaning set forth in the section
herein entitled "Events of Default".
J. "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.
K. "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.
L. "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.
M. "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.
N. "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.
O. "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
(1)
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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 in this Agreement
shall be prepared in accordance with such principles .
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 $500,000.00. This Line of Credit
facility is on a non-revolving basis and any amounts repaid under this facility
may not be reborrowed.
A. PURPOSE. Advances made under this Line of Credit shall be used to
refinance fixed assets purchased over the past nine months (primarily
computer equipment and software).
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, as it may change from time to time, plus
0.500% per annum. (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 January
31, 1997.
D. REPAYMENT OF PRINCIPAL. Unless sooner due in accordance with the
terms of this Agreement, on December 31, 1997 the Borrower hereby
promises and agrees to pay to 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 Rate Advances"), at the Borrower's
election, the Bank hereby agrees to make Advances to the Borrower under
this Line of Credit at a fixed rate ("Fixed Rate") which shall be
approximately equivalent to 2.000% per annum in excess of the rate
which the Bank determines, in its sole and absolute discretion, to be
equal to the Bank's cost of acquiring funds 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 (as defined below).
Such cost of funds shall be adjusted for any and all assessments,
surcharges and reserve requirements pertaining to the borrowing or
purchase of such funds by the Bank. 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
minimum of at least 7 days and not exceed a maximum of 90 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.
(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 days 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.
(2)
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(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 reasons 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.
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. FACILITY FEES. The following fees for this facility shall be paid in cash
upon execution of this Agreement or prior to funding of this facility: Loan Fees
in the amount of $2,500.00.
I. 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 2713-04607 on a monthly basis commencing on January 31, 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.
J. 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 December 31,
1997 (the "Expiration Date"), and the Bank shall be under no further obligation
to advance any monies thereafter.
K. 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.
L. 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.
M. CONVERSION TO TERM LOAN. It is hereby agreed that the Borrower may, by giving
written notice to the Bank at least one (1) day prior to December 31, 1997,
convert the principal balance outstanding under the Line of Credit as of
December 31, 1997 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 note 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, as it may change from
time to time, plus 0.50% per annum; or (ii) a fixed rate to be quoted and
offered by the Bank which shall be approximately equal to 2.00% per annum in
excess of the rate which the Bank determines, in its sole and absolute
discretion, to be equal to the Bank's cost of acquiring funds in an amount
approximately equal to the amount of the converted term note and for a period of
time approximately equal to the term of the converted term note, which cost of
funds shall be adjusted for any assessments, surcharges and reserve requirements
pertaining to the borrowing or purchase of such funds by the Bank. 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 note in the
minimum amount of $100,000.00. Repayment under the converted term note shall be
made in 48 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 converted term note. 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.
(3)
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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. EQUIPMENT. All goods and equipment ("Equipment") now owned or
hereafter acquired by the Borrower or in which the Borrower now has or
may hereafter acquire any interest including, but not limited to, all
machinery, furniture, furnishings, fixtures, tools, supplies and motor
vehicles of every kind and description and all additions, accessions,
improvements, replacements and substitutions thereto and thereof.
B. INVENTORY. All inventory ("Inventory") now owned or hereafter
acquired by the Borrower including, but not limited to, all raw
materials, work in process, finished goods, merchandise, parts and
supplies of every kind and description, including inventory temporarily
out of the Borrower's custody or possession, together with all returns
on accounts.
C. ACCOUNTS AND CONTRACT RIGHTS. All accounts and contract rights now
owned or hereafter created or acquired by the Borrower, including but
not limited to, all receivables and all rights and benefits due to the
Borrower under any contract or agreement.
D. GENERAL INTANGIBLES. All general intangibles now owned or hereafter
created or acquired by the Borrower, including but not limited to,
goodwill, trademarks, trade styles, trade names, patents, patent
applications, software, customer lists and business records.
E. CHATTEL PAPER AND DOCUMENTS. All documents, instruments and chattel
paper now owned or hereafter acquired by the Borrower.
F. MONIES AND OTHER PROPERTY IN POSSESSION. 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 thereon
as well as all accounts, contract rights, documents, instruments and chattel
paper resulting from the sale or disposition of any Equipment.
3.03. 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 this
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.
(4)
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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 Delaware 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 or 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 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. 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, judgement 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.
(5)
6
6.04. LOCATION AND MAINTENANCE OF EQUIPMENT.
A. LOCATION. The Equipment shall at all times be in the Borrower's
physical possession, shall not be held for sale or lease and shall be
kept only at the following location(s): 0000 Xxxxxx Xxxxxx Xxxx, Xxx
Xxxxx, XX 00000.
The Borrower shall not secrete, abandon or remove, or permit the
removal of, the Equipment, or any part thereof, from the location(s)
shown above or remove or permit to be removed any accessories now or
hereafter placed upon the Equipment.
B. EQUIPMENT SCHEDULES. Upon the Bank's demand, the Borrower shall
immediately provide the Bank with a complete and accurate description
of the Equipment including, as applicable, the make, model,
identification number and serial number of each item of Equipment. In
addition, the Borrower shall immediately notify the Bank of the
acquisitions of any new or additional Equipment or the replacement of
any existing Equipment and shall supply the Bank with a complete
description of any such additional or replacement Equipment.
C. MAINTENANCE OF EQUIPMENT. The Borrower shall, at the Borrower's sole
cost and expense, keep and maintain the Equipment in a good state of
repair and shall not destroy, misuse, abuse, illegally use or be
negligent in the care of the Equipment or any part thereof. Time
Borrower shall not remove, destroy, obliterate, change, cover, paint,
deface or alter the name plates, serial numbers, labels or other
distinguishing numbers or identification marks placed upon time
Equipment or any part thereof by or on behalf of the manufacturer, any
dealer or rebuilder thereof, or the Bank. The Borrower shall not be
released from any liability to the Bank hereunder because of any injury
to or loss or destruction of the Equipment. The Borrower shall allow
the Bank and its representatives free access to and the right to
inspect the Equipment at all times and shall comply with the terms and
conditions of any leases covering the real property on which the
Equipment is located and any orders, ordinances, laws, regulations or
rules of any federal, state or municipal agency or authority having
jurisdiction of such real property or the conduct of business of the
persons having control or possession of the Equipment.
D. FIXTURES. The Equipment is not now and shall not at any time
hereafter be so affixed to the real property on which it is located as
to become a fixture or a part thereof. The Equipment is now and shall
at all times hereafter be and remain personal property of the Borrower.
6.05. LOCATION AND QUALITY OF INVENTORY. The Inventory (i) is now and shall at
all times hereafter be of good and merchantable quality and free from defects;
(ii) is not now and shall not at any time hereafter be stored with a bailee,
warehouseman or similar party without the Bank's prior written consent and, in
such event, the Borrower will concurrently therewith cause any such bailee,
warehouseman or similar party to issue and deliver to the Bank, in form
acceptable to the Bank, warehouse receipts in time Bank's name evidencing the
storage of inventory; (iii) shall at all times (except as otherwise permitted by
this section) be in the Borrower's physical possession; (iv) shall not be held
by others on consignment, sale on approval, or sale or return; and (v) shall be
kept only at the following locations(s): 0000 Xxxxxx Xxxxxx Xxxx, Xxx Xxxxx. XX
00000.
6.06. 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.
6.07. 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.
6.08. REPORTING REQUIREMENTS, Deliver or cause to be delivered to the Bank in
form and detail satisfactory to the Bank:
A. ANNUAL STATEMENTS. Not later than 90 days after the end of each of
the Borrower's fiscal years, a copy of the annual financial report of
the Borrower for such year, which report shall be CPA audited with
unqualified opinion on a consolidating basis with 10-K.
B. INTERIM STATEMENTS. Not later than 45 days after each of the
Borrower's fiscal quarters, a copy of time Borrower's company prepared
financial statement with 10-Q and detailed schedules and Compliance
Certificate signed by an authorized company officer for such quarter.
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.
6.09. PAYMENT OF DIVIDENDS. Time Borrower shall not declare or pay any dividends
on any class of its stock now or hereafter outstanding except dividends payable
solely in the corporation's capital stock.
6.10. REDEMPTION OR REPURCHASE OF STOCK. The Borrower shall not redeem or
repurchase any class of its corporate stock now or hereafter outstanding.
6.11. ADDITIONAL INDEBTEDNESS. Not, after the date hereof, create, incur or
assume, directly or indirectly, any liability or indebtedness other than (i)
indebtedness owed or to be owed to the Bank, (ii) indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business, or (iii)
indebtedness with The Royal Bank of Scotland for 300,000.00 pounds, (iv)
indebtedness in the amount of $2,500,000.00 to Fourth Shift Corporation, (v)
permitted leases in the aggregate amount of $250,000.00.
6.12. LOANS. Not make any loans or advances or extend credit to any third
person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities or subsidiaries of the Borrower, except
for credit extended in the ordinary course of the Borrower's business as
presently conducted.
6.13. LIENS AND ENCUMBRANCES. Not create, assume or permit to exist any security
interest, encumbrance, mortgage, deed of trust or other lien (including, but not
limited to, a lien of attachment, judgment or execution) affecting any of the
Borrower's properties, or execute or allow to be filed any financing statement
or continuation thereof affecting any such properties, except for Permitted
Liens or as otherwise provided in this Agreement.
6.14. 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.
6.15. 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.
6.16. FINANCIAL CONDITION. Maintain at all times:
A. NET WORTH. A minimum Effective Tangible Net Worth of not less than
$6,000,000.00, increasing by 75% of yearly net income.
B. DEBT TO NET WORTH RATIO. A Debt to Effective Tangible Net Worth
ratio of not more than 2.80 to 1.00.
C. QUICK RATIO. A minimum ratio of the suns of cash, cash equivalents
and accounts receivable to current liabilities of not less than 1.00 to
1.00.
(6)
7
D. DEBT SERVICE COVERAGE RATIO. A minimum debt service coverage ratio
of not less than 1.50 to 1.00, where such ratio is defined as net
profit after taxes plus depreciation and interest expense divided by
the current portion of long term debt and interest expense.
E. PROFITABILITY. The Borrower shall not have two consecutive quarterly
losses.
6.17. COMPENSATION OF EMPLOYEES. Compensate the employees of the Borrower for
services rendered at an hourly note at least equal to the minimum hourly rate
prescribed by any applicable federal or state law or regulation.
6.18. 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 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.
6.19. 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 in which the claim or liability exceeds $100,000.00 or
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 business nature of
the Borrower; (v) any change in the location of the Equipment or Inventory; and
(vi) 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 that 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 person shall die.
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. 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 Borrower.
7.09. 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, 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.
(7)
8
8.04. SEGREGATE COLLECTIONS. Require the Borrower to segregate all collections
and proceeds of the Collateral so that they are capable of identification and to
deliver such collections and proceeds to the Bank, in kind, without commingling,
at such times and in such manner as required by the Bank.
8.05. 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, including, but not limited to, verification of balances owing by
any account debtor of the Borrower, as the Bank, in its sole and absolute
discretion, deems necessary.
8.06. NOTIFICATION OF ACCOUNT DEBTORS.
A. Notify any or all of the Borrower's Account Debtors, or any buyers
or transferees of the Collateral or other persons of the Bank's
interest in the Collateral and the proceeds thereof and instruct such
person(s) to thereafter make any payment due the Borrower directly to
the Bank.
B. The Borrower hereby irrevocably and unconditionally appoints the
Bank as its attorney-in-fact to: (i) endorse the Borrower's name on any
notes, acceptances, checks, drafts, money orders or other evidence of
payment that may come into the Bank's possession; (ii) sign the
Borrower's name on any invoice or xxxx of lading relating to any of the
Collateral; (iii) notify post office authorities to change the address
for delivery of mail addressed to the Borrower to such address as the
Bank may designate and take possession of and open mail addressed to
the Borrower and remove therefrom, proceeds of and payments on the
Collateral; and (iv) demand, receive and endorse payment and give
receipts, releases and satisfactions for and xxx for all money payable
to the Borrower. All of the preceding may be done either in the name of
the Bank or in the name of the Borrower with the same force and effect
as the Borrower could have done had this Agreement not been entered
into.
C. Require the Borrower to indicate on the face of all invoices (or
such other documentation as may be specified by the Bank relating to
the sale, delivery or shipment of goods giving rise to the account)
that the account has been assigned to the Bank and that all payments
are to be made directly to the Bank at such address as the Bank may
designate.
8.07. COMPROMISE. Grant extensions, compromise claims and settle any account for
less than the amount owing thereunder, all without notice to the Borrower or any
obligor on or guarantor of the Obligations.
8.08. 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.
8.09. FORECLOSURE. Enforce any security interest or lien given or provided for
under this Agreement or under any security agreement, mortgage, deed of 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.
8.10. 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 Obligations; 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.
8.11. 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. 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.
9.03. 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
(8)
9
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
parry'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 l 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 patties 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 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.
9.04. 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.
9.05. 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.
9.06. 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.
9.07. 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.
9.08. 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.
9.09. 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.
9.10. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Bank 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.
9.11. 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.
9.12. HEADINGS. The headings set forth herein are solely for the purpose of
identification and have no legal significance.
9.13. 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.
(9)
10
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the date first hereinabove written.
BANK: BORROWER:
SANWA BANK CALIFORNIA INTERACTIVE GROUP, INC.
BY: BY: /s/ Xxxxxx X. Xxxxxx
----------------------------- ----------------------------
XXXXXX X. XXXX, AUTHORIZED OFFICER XXXXXX X. XXXXXX, CHIEF EXECUTIVE
OFFICER & CHAIRMAN
BY: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
XXXXXXX X. XXXXXXXX, CHIEF
FINANCIAL OFFICER & SECRETARY
ADDRESS: ADDRESS
San Diego Main Office (CBC) 0000 Xxxxxx Xxxxxx Xxxx
0000 Xxxxxx Xxxxxx Xxx Xxxxx, XX 00000
Xxx Xxxxx, XX 00000
(10)
11
[LOGO]
SANWA
BANK
CALIFORNIA
LOAN DISBURSEMENT INSTRUCTIONS
($500,000.00 Line of Credit)
Date: _______________________________ Loan Number:___________________
The undersigned hereby instructs Sanwa Bank California to disburse the proceeds
of this loan as shown below:
DISBURSEMENT AMOUNT
1. CREDITED TO THE FOLLOWING ACCOUNT: All advances
to be credited to account number 2713-04607. $500,000.00
===========
TOTAL: $500,000.00
BORROWER:
INTERACTIVE GROUP, INC.
BY: /s/ Xxxxxx X. Xxxxxx
----------------------------
XXXXXX X. XXXXXX, CHIEF EXECUTIVE
OFFICER & CHAIRMAN
BY: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
XXXXXXX X. XXXXXXXX, CHIEF
FINANCIAL OFFICER & SECRETARY
(1)
