EXHIBIT 99.4
--------------------------------------------------------------------------------
PACIFIC TITLE AND ARTS STUDIO, INC.
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into as
of January 31, 2005, by and between COMERICA BANK ("Bank") and PACIFIC TITLE AND
ARTS STUDIO, INC. ("Borrower").
RECITALS
Bank, Borrower, Educational Marketing Concepts, Inc., a Delaware
corporation, and Hi-Tech Theatre Equipment Service Company, Inc., a Florida
corporation, are parties to that certain Loan and Security Agreement, dated as
of July 3, 2003, as amended from time to time, including but not limited to by
that certain Amendment to Loan Documents dated as of July 9, 2003 and that
certain Second Amendment to Loan and Security Agreement dated as of September
12, 2003 (collectively, the "Original Agreement"). Borrower and Bank wish to
amend and restate the terms of the Original Agreement to, among other things,
release Educational Marketing Concepts, Inc. and Hi-Tech Theatre Equipment
Service Company, Inc. from their obligations under the Original Agreement so
that Borrower shall hereafter be the only borrower hereunder. This Agreement
sets forth the terms on which Bank will advance credit to Borrower, and Borrower
will repay the amounts owing to Bank
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, payment intangibles, and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods
(including, without limitation, the licensing of software and other technology)
or the rendering of services by Borrower, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor, as
well as all merchandise returned to or reclaimed by Borrower and Borrower's
Books relating to any of the foregoing.
"Advance" or "Advances" means a cash advance or cash advances
under the Revolving Line.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses, whether generated in-house
or by outside counsel) incurred in connection with the preparation, negotiation,
administration, and enforcement of the Loan Documents; reasonable Collateral
audit fees; and Bank's reasonable attorneys' fees and expenses (whether
generated in-house or by outside counsel) incurred in amending, enforcing or
defending the Loan Documents (including fees and expenses of appeal), incurred
before, during and after an Insolvency Proceeding, whether or not suit is
brought.
"Borrower State" means Delaware, the state under whose laws
Borrower is organized.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" means an amount equal to eighty percent (80%)
of Eligible Accounts, as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrower.
- 1 -
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California are authorized or
required to close.
"Cash" means unrestricted cash and cash equivalents.
"Change in Control" shall mean a transaction in which any
"person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of a sufficient number of shares of all classes of stock then outstanding of
Borrower ordinarily entitled to vote in the election of directors, empowering
such "person" or "group" to elect a majority of the Board of Directors of
Borrower, who did not have such power before such transaction.
"Chief Executive Office State" means California, where
Borrower's chief executive office is located.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code, as
amended or supplemented from time to time.
"Collateral" means the property described on Exhibit A
attached hereto and all Negotiable Collateral and Intellectual Property
Collateral to the extent not described on Exhibit A, except to the extent any
such property (i) is nonassignable by its terms without the consent of the
licensor thereof or another party (but only to the extent such prohibition on
transfer is enforceable under applicable law, including, without limitation,
Sections 9406 and 9408 of the Code), or (ii) the granting of a security interest
therein is contrary to applicable law, provided that upon the cessation of any
such restriction or prohibition, such property shall automatically become part
of the Collateral; provided that in no case shall the definition of "Collateral"
exclude any Accounts, proceeds of the disposition of any property, or general
intangibles consisting of rights to payment.
"Collateral State" means the state or states where the
Collateral is located, which is California.
"Consolidated Net Income (or Deficit)" means the consolidated
net income (or deficit) of any Person and its Subsidiaries, after deduction of
all expenses, taxes, and other proper charges, determined in accordance with
GAAP, after eliminating therefrom all extraordinary nonrecurring items of
income.
Consolidated Total Interest Expense" means with respect to any
Person for any period, the aggregate amount of interest required to be paid or
accrued by a Person and its Subsidiaries during such period on all Indebtedness
of such Person and its Subsidiaries outstanding during all or any part of such
period, whether such interest was or is required to be reflected as an item of
expense or capitalized, including payments consisting of interest in respect of
any capitalized lease or any synthetic lease, and including commitment fees,
agency fees, facility fees, balance deficiency fees and similar fees or expenses
in connection with the borrowing of money.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit, corporate credit cards, or merchant services issued for the
account of that Person; and (iii) all obligations arising under any interest
rate, currency or commodity swap agreement, interest rate cap agreement,
interest rate collar agreement, or other agreement or arrangement designated to
protect a Person against fluctuation in interest rates, currency exchange rates
or commodity prices; provided, however, that the term "Contingent Obligation"
shall not include endorsements for collection or deposit in the ordinary course
of business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in
- 2 -
respect thereof as determined by such Person in good faith; provided, however,
that such amount shall not in any event exceed the maximum amount of the
obligations under the guarantee or other support arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance, the Existing Term Loan,
or any other extension of credit by Bank to or for the benefit of Borrower
hereunder.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, but specifically excluding any cash-secured Obligations and Subordinated
Debt.
"EBITDA" means with respect to any fiscal period an amount
equal to the sum of (a) Consolidated Net Income of the Borrower and its
Subsidiaries for such fiscal period, plus (b) in each case to the extent
deducted in the calculation of the Borrower's Consolidated Net Income and
without duplication, (i) depreciation and amortization for such period, plus
(ii) income tax expense for such period, plus (iii) Consolidated Total Interest
Expense paid or accrued during such period, plus (iv) non-cash expense
associated with granting stock options, all as determined in accordance with
GAAP.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.3; provided, that
Bank may change the standards of eligibility by giving Borrower thirty (30) days
prior written notice. Unless otherwise agreed to by Bank, Eligible Accounts
shall not include the following:
(a) Accounts that the account debtor has failed to pay in full
within ninety (90) days of invoice date;
(b) Credit balances over ninety (90) days;
(c) Accounts with respect to an account debtor, twenty-five
percent (25%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
(d) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed twenty
five percent (25%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
(e) Accounts with respect to which the account debtor does not
have its principal place of business in the United States, except for Eligible
Foreign Accounts;
(f) Accounts with respect to which the account debtor is the
United States or any department, agency, or instrumentality of the United
States, except for Accounts of the United States if the payee has assigned its
payment rights to Bank and the assignment has been acknowledged under the
Assignment of Claims Act of 1940 (31 U.S.C. 3727);
(g) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(h) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, xxxx and hold,
demo or promotional, or other terms by reason of which the payment by the
account debtor may be conditional;
- 3 -
(i) Accounts with respect to which the account debtor is an
officer, employee, agent or Affiliate of Borrower;
(j) Accounts that have not yet been billed to the account
debtor or that relate to deposits (such as good faith deposits) or other
property of the account debtor held by Borrower for the performance of services
or delivery of goods which Borrower has not yet performed or delivered;
(k) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(l) Accounts the collection of which Bank reasonably
determines after inquiry and consultation with Borrower to be doubtful; and
(m) Retentions and hold-backs.
"Eligible Foreign Accounts" means Accounts with respect to
which the account debtor does not have its principal place of business in the
United States and that are (i) supported by one or more letters of credit in an
amount and of a tenor, and issued by a financial institution, acceptable to
Bank, (ii) insured by the Export Import Bank of the United States, (iii)
generated by an account debtor with its principal place of business in Canada,
provided that the Bank has perfected its security interest in the appropriate
Canadian province, or (iv) approved by Bank on a case-by-case basis. All
Eligible Foreign Accounts must be calculated in U.S. Dollars.
"Environmental Laws" means all laws, rules, regulations,
orders and the like issued by any federal state, local foreign or other
governmental or quasi-governmental authority or any agency pertaining to the
environment or to any hazardous materials or wastes, toxic substances,
flammable, explosive or radioactive materials, asbestos or other similar
materials.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"GAAP" means generally accepted accounting principles (in the
United States of America), consistently applied, as in effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money
or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations, and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means all of Borrower's
right, title, and interest in and to the following:
(a) Copyrights, Trademarks and Patents;
- 4 -
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to xxx for and collect such damages for said use or infringement
of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in which
Borrower has any interest.
"Investment" means any beneficial ownership of (including
stock, partnership or limited liability company interest other securities) any
Person, or any loan, advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other document, instrument or agreement
entered into in connection with this Agreement, all as amended or extended from
time to time.
"Material Adverse Effect" means a material adverse effect on
(i) the business operations, condition (financial or otherwise) or prospects of
Borrower and its Subsidiaries taken as a whole, (ii) the ability of Borrower to
repay the Obligations or otherwise perform its obligations under the Loan
Documents, (iii) Borrower's interest in, or the value, perfection or priority of
Bank's security interest in the Collateral.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, drafts, instruments
(including promissory notes), securities, documents of title, and chattel paper,
and Borrower's Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
- 5 -
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Indebtedness not to exceed Two Hundred Thousand Dollars
($200,000) in the aggregate in any fiscal year of Borrower secured by a lien
described in clause (c) of the defined term "Permitted Liens;" provided such
Indebtedness does not exceed the lesser of the cost or fair market value of the
equipment financed with such Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(f) Extensions, refinancings and renewals of any items of
Permitted Indebtedness, provided that the principal amount is not increased or
the terms modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) Marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having rating of at least A-2 or P-2 from either
Standard & Poor's Corporation or Xxxxx'x Investors Service, (iii) Bank's
certificates of deposit maturing no more than one year from the date of
investment therein, and (iv) Bank's money market accounts;
(c) Repurchases of stock from former employees or directors of
Borrower under the terms of applicable repurchase agreements (i) in an aggregate
amount not to exceed One Hundred Thousand Dollars ($100,000) in any fiscal year,
provided that no Event of Default has occurred, is continuing or would exist
after giving effect to the repurchases, or (ii) in any amount where the
consideration for the repurchase is the cancellation of indebtedness owed by
such former employees to Borrower regardless of whether an Event of Default
exists;
(d) Investments accepted in connection with Permitted
Transfers;
(e) Investments of Subsidiaries in or to other Subsidiaries or
Borrower and Investments by Borrower in Subsidiaries not to exceed One Hundred
Thousand Dollars ($100,000) in the aggregate in any fiscal year;
(f) Investments not to exceed One Hundred Thousand Dollars
($100,000) in the aggregate in any fiscal year consisting of (i) travel advances
and employee relocation loans and other employee loans and advances in the
ordinary course of business, and (ii) loans to employees, officers or directors
relating to the purchase of equity securities of Borrower or its Subsidiaries
pursuant to employee stock purchase plan agreements approved by Borrower's Board
of Directors;
- 6 -
(g) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of Borrower's business;
(h) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business, provided that this subparagraph
(h) shall not apply to Investments of Borrower in any Subsidiary; and
(i) Joint ventures or strategic alliances in the ordinary
course of Borrower's business consisting of the non-exclusive licensing of
technology, the development of technology or the providing of technical support,
provided that any cash Investments by Borrower do not exceed One Hundred
Thousand Dollars ($100,000) in the aggregate in any fiscal year.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in
the Schedule (excluding Liens to be satisfied with the proceeds of the Advances)
or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings and for which Borrower maintains adequate reserves,
provided the same have no priority over any of Bank's security interests;
(c) Liens not to exceed Two Hundred Thousand Dollars
($200,000) in the aggregate (i) upon or in any Equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such Equipment, or (ii) existing on such Equipment at
the time of its acquisition, provided that the Lien is confined solely to the
property so acquired and improvements thereon, and the proceeds of such
Equipment;
(d) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase; and
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Sections 8.5 or 8.9;
"Permitted Transfer" means the conveyance, sale, lease,
transfer or disposition by Borrower or any Subsidiary of:
(a) Inventory in the ordinary course of business;
(b) licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries in the ordinary course of business;
(c) worn-out or obsolete Equipment not financed with the
proceeds of Advances; or
(d) other assets of Borrower or its Subsidiaries that do not
in the aggregate exceed One Hundred Thousand Dollars ($100,000) during any
fiscal year.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
- 7 -
"Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Operating Officer, the Chief Financial Officer and the
Controller of Borrower.
"Revolving Line" means a Credit Extension of up to Two Million
Dollars ($2,000,000).
"Revolving Maturity Date" means January 31, 2006.
"Schedule" means the schedule of exceptions attached hereto
and approved by Bank, if any.
"Shares" means (i) sixty-six and two-thirds percent (66-2/3%)
of the issued and outstanding capital stock, membership units or other
securities owned or held of record by Borrower in any Subsidiary of Borrower
which is not an entity organized under the laws of the United States or any
territory thereof, and (ii) one hundred percent (100%) of the issued and
outstanding capital stock, membership units or other securities owned or held of
record by Borrower in any Subsidiary of Borrower which is an entity organized
under the laws of the United States or any territory thereof.
"SOS Reports" means the official reports from the Secretaries
of State of each Collateral State, Chief Executive Office State and the Borrower
State and other applicable federal, state or local government offices
identifying all current security interests filed in the Collateral and Liens of
record as of the date of such report.
"Subordinated Debt" means any debt incurred by Borrower that
is subordinated in writing to the debt owing by Borrower to Bank on terms
reasonably acceptable to Bank (and identified as being such by Borrower and
Bank).
"Subsidiary" means any corporation, partnership or limited
liability company or joint venture in which (i) any general partnership interest
or (ii) more than fifty percent (50%) of the stock, limited liability company
interest or joint venture of which by the terms thereof has the ordinary voting
power to elect the Board of Directors, managers or trustees of the entity, at
the time as of which any determination is being made, is owned by Borrower,
either directly or through an Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the sum of the capital stock, partnership interest
or limited liability company interest of Borrower and its Subsidiaries minus
intangible assets, net of amortization, determined in accordance with GAAP.
"Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event, to the extent not already included, all Indebtedness and
all Contingent Liabilities.
"Trademarks" means any trademark and servicemark rights,
whether registered or not, applications to register and registrations of the
same and like protections, and the entire goodwill of the business of Borrower
connected with and symbolized by such trademarks.
1.2 Accounting Terms. Any accounting term not specifically defined
herein shall be construed in accordance with GAAP and all calculations shall be
made in accordance with GAAP. The term "financial statements" shall include the
accompanying notes and schedules.
2. LOAN AND TERMS OF PAYMENT.
2.1 Credit Extensions.
- 8 -
(a) Promise to Pay. Borrower promises to pay to Bank, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower, together with interest
on the unpaid principal amount of such Credit Extensions at rates in accordance
with the terms hereof.
(b) Advances Under Revolving Line.
(i) Amount. Subject to and upon the terms and conditions
of this Agreement (1) Borrower may request Advances in an aggregate outstanding
amount not to exceed the lesser of (A) the Revolving Line or (B) the Borrowing
Base and (2) amounts borrowed pursuant to this Section 2.1(b) may be repaid and
reborrowed at any time prior to the Revolving Maturity Date, at which time all
Advances under this Section 2.1(b) shall be immediately due and payable.
Borrower may prepay any Advances without penalty or premium.
(ii) Form of Request. Whenever Borrower desires an
Advance, Borrower will notify Bank by facsimile transmission or telephone no
later than 3:00 p.m. Pacific time (1:00 p.m. Pacific time for wire transfers),
on the Business Day that the Advance is to be made. Each such notification shall
be promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1(b) to Borrower's deposit account.
(c) Existing Term Loans. As of January 31, 2005, there are
outstanding advances under an amortizing term loan facility executed under the
Original Agreement (the "Existing Term Loan") in the principal amount of
$180,833.35. Borrower shall not request or receive any further advances under
the Existing Term Loan. Interest shall continue to accrue on the Existing Term
Loan at the rate specified in Section 2.3(a). Borrower shall continue to make
payments on the Existing Term Loan in equal payments of principal plus all
accrued interest on the first calendar (or immediately next Business) day of
each month in accordance with the Original Agreement until paid in full. The
Existing Term Loan, once repaid, may not be reborrowed. Borrower may prepay the
Existing Term Loan without penalty or premium.
2.2 Overadvances. If the aggregate amount of the outstanding
Advances exceeds the lesser of the Revolving Line or the Borrowing Base at any
time, Borrower shall immediately pay to Bank, in cash, the amount of such
excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rates.
(i) Advances. Except as set forth in Section 2.3(b), the
Advances shall bear interest, on the outstanding daily balance thereof, at a
rate equal to one and one quarter percent (1.25%) above the Prime Rate.
(ii) Existing Term Loan. Except as set forth in Section
2.3(b), the Existing Term Loan shall bear interest, on the outstanding daily
balance thereof, at a rate equal to one and three quarters percent (1.75%) above
the Prime Rate.
(b) Late Fee; Default Rate. If any payment is not made within
ten (10) days after the date such payment is due, Borrower shall pay Bank a late
fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid
amount or (ii) the maximum amount permitted to be charged under applicable law.
All Obligations shall bear interest, from and after the occurrence and during
the continuance of an Event of Default, at a
- 9 -
rate equal to five (5) percentage points above the interest rate applicable
immediately prior to the occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on
the first calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of Borrower's deposit accounts or against the Revolving Line, in
which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased, effective as of the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies, except that
to the extent Borrower uses the Advances to purchase Collateral, Borrower's
repayment of the Advances shall apply on a "first-in-first-out" basis so that
the portion of the Advances used to purchase a particular item of Collateral
shall be paid in the chronological order the Borrower purchased the Collateral.
After the occurrence of an Event of Default, Bank shall have the right, in its
sole discretion, to immediately apply any wire transfer of funds, check, or
other item of payment Bank may receive to conditionally reduce Obligations, but
such applications of funds shall not be considered a payment on account unless
such payment is of immediately available federal funds or unless and until such
check or other item of payment is honored when presented for payment.
Notwithstanding anything to the contrary contained herein, any wire transfer or
payment received by Bank after 12:00 noon Pacific time shall be deemed to have
been received by Bank as of the opening of business on the immediately following
Business Day. Whenever any payment to Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a
Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Unused Line Fee. A fee equal to one quarter of one percent
(0.25%) per annum of the difference between the amount then available under the
Revolving Line and the amount of Advances made during the term hereof, paid
quarterly in arrears, which shall be nonrefundable and which may be debited from
any of Borrower's accounts with Bank; and
(b) Bank Expenses. On the Closing Date, all reasonable Bank
Expenses incurred through the Closing Date, and, after the Closing Date, all
Bank Expenses as and when they become due.
2.6 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 13.7, shall continue in full force and effect for so
long as any Obligations remain outstanding or Bank has any obligation to make
Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default.
3. CONDITIONS OF LOANS.
3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
(a) this Agreement;
- 10 -
(b) an officer's certificate of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) an amended and restated intellectual property security
agreement;
(d) an affirmation of subordination agreement;
(e) current SOS Reports indicating that except for Permitted
Liens, there are no other security interests or Liens of record in the
Collateral;
(f) agreement to provide insurance;
(g) payment of the fees and Bank Expenses then due specified
in Section 2.5 hereof;
(h) current financial statements, including audited statements
for Borrower's most recently ended fiscal year, together with an unqualified
opinion, company prepared consolidated and consolidating balance sheets and
income statements for the most recently ended month in accordance with Section
6.2, and such other updated financial information as Bank may reasonably
request;
(i) current Compliance Certificate in accordance with Section
6.2;
(j) such other documents or certificates, and completion of
such other matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date). The making of each Credit Extension shall be
deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section
3.2.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower grants and pledges to Bank
a continuing security interest in the Collateral to secure prompt repayment of
any and all Obligations and to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in later-acquired Collateral. Notwithstanding
any termination, Bank's Lien on the Collateral shall remain in effect for so
long as any Obligations are outstanding.
4.2 Perfection of Security Interest. Borrower authorizes Bank to
file at any time financing statements, continuation statements, and amendments
thereto that (i) either specifically describe the Collateral or describe the
Collateral as all assets of Borrower of the kind pledged hereunder, and (ii)
contain any other information required by the Code for the sufficiency of filing
office acceptance of any financing statement, continuation statement, or
amendment, including whether Borrower is an organization, the type of
organization and any organizational identification number issued to Borrower, if
applicable. Any such financing statements may be signed by Bank on behalf of
Borrower, as provided in the Code, and may be filed at any time in any
jurisdiction whether or not Revised Article 9 of the Code is then in effect in
that jurisdiction. Borrower shall from time to time
- 11 -
endorse and deliver to Bank, at the request of Bank, all Negotiable Collateral
and other documents that Bank may reasonably request, in form satisfactory to
Bank, to perfect and continue perfected Bank's security interests in the
Collateral and in order to fully consummate all of the transactions contemplated
under the Loan Documents. Borrower shall have possession of the Collateral,
except where expressly otherwise provided in this Agreement or where Bank
chooses to perfect its security interest by possession in addition to the filing
of a financing statement. Where Collateral is in possession of a third party
bailee, Borrower shall take such steps as Bank reasonably requests for Bank to
(i) obtain an acknowledgment, in form and substance satisfactory to Bank, of the
bailee that the bailee holds such Collateral for the benefit of Bank, (ii)
obtain "control" of any Collateral consisting of investment property, deposit
accounts, letter-of-credit rights or electronic chattel paper (as such items and
the term "control" are defined in Revised Article 9 of the Code) by causing the
securities intermediary or depositary institution or issuing bank to execute a
control agreement in form and substance satisfactory to Bank. Borrower will not
create any chattel paper without placing a legend on the chattel paper
acceptable to Bank indicating that Bank has a security interest in the chattel
paper. Borrower from time to time may deposit with Bank specific cash collateral
to secure specific Obligations; Borrower authorizes Bank to hold such specific
balances in pledge and to decline to honor any drafts thereon or any request by
Borrower or any other Person to pay or otherwise transfer any part of such
balances for so long as the specific Obligations are outstanding.
4.3 Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours but no more than twice a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
4.4 Pledge of Collateral. Borrower hereby pledges, assigns and
grants to Bank a security interest in all the Shares, together with all proceeds
and substitutions thereof, all cash, stock and other moneys and property paid
thereon, all rights to subscribe for securities declared or granted in
connection therewith, and all other cash and noncash proceeds of the foregoing,
as security for the performance of the Obligations. The certificate or
certificates for the Shares will be delivered to Bank within 30 days of the date
hereof, accompanied by an instrument of assignment duly executed in blank by
Borrower. To the extent required by the terms and conditions governing the
Shares, Borrower shall cause the books of each entity whose Shares are part of
the Collateral and any transfer agent to reflect the pledge of the Shares. Upon
the occurrence of an Event of Default hereunder, Bank may effect the transfer of
any securities included in the Collateral (including but not limited to the
Shares) into the name of Bank and cause new certificates representing such
securities to be issued in the name of Bank or its transferee. Borrower will
execute and deliver such documents, and take or cause to be taken such actions,
as Bank may reasonably request to perfect or continue the perfection of Bank's
security interest in the Shares. Unless an Event of Default shall have occurred
and be continuing, Borrower shall be entitled to exercise any voting rights with
respect to the Shares and to give consents, waivers and ratifications in respect
thereof, provided that no vote shall be cast or consent, waiver or ratification
given or action taken which would be inconsistent with any of the terms of this
Agreement or which would constitute or create any violation of any of such
terms. All such rights to vote and give consents, waivers and ratifications
shall terminate upon the occurrence and continuance of an Event of Default.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary
is duly existing under the laws of the state in which it is organized and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified, except
where the failure to do so could not reasonably be expected to cause a Material
Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement by which it is
bound, except to the extent such default could not reasonably be expected to
cause a Material Adverse Effect.
- 12 -
5.3 Collateral. Borrower has rights in or the power to transfer the
Collateral, and its title to the Collateral is free and clear of Liens, adverse
claims, and restrictions on transfer or pledge except for Permitted Liens. All
Collateral is located solely in the Collateral States. The Eligible Accounts are
bona fide existing obligations. The property or services giving rise to such
Eligible Accounts has been delivered or rendered to the account debtor or its
agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent Insolvency
Proceeding of any account debtor whose accounts are included in any Borrowing
Base Certificate as an Eligible Account. All Inventory is in all material
respects of good and merchantable quality, free from all material defects,
except for Inventory for which adequate reserves have been made. Except as set
forth in the Schedule, none of the Collateral is maintained or invested with a
Person other than Bank or Bank's Affiliates.
5.4 Intellectual Property Collateral. Except as set forth in the
Schedule, Borrower is the sole owner of the Intellectual Property Collateral,
except for licenses granted by Borrower to its customers in the ordinary course
of business. To the best of Borrower's knowledge, each of the Copyrights,
Trademarks and Patents is valid and enforceable, and no part of the Intellectual
Property Collateral has been judged invalid or unenforceable, in whole or in
part, and no claim has been made to Borrower that any part of the Intellectual
Property Collateral violates the rights of any third party except to the extent
such claim could not reasonably be expected to cause a Material Adverse Effect.
Except as set forth in the Schedule, Borrower's rights as a licensee of
intellectual property do not give rise to more than five percent (5%) of its
gross revenue in any given month, including without limitation revenue derived
from the sale, licensing, rendering or disposition of any product or service.
5.5 Name; Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof, and its exact legal name is as set forth
in the first paragraph of this Agreement. The chief executive office of Borrower
is located in the Chief Executive Office State at the address indicated in
Section 10 hereof.
5.6 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which a likely adverse decision could
reasonably be expected to have a Material Adverse Effect.
5.7 No Material Adverse Change in Financial Statements. All
consolidated and consolidating financial statements related to Borrower and any
Subsidiary that are delivered by Borrower to Bank fairly present in all material
respects Borrower's consolidated and consolidating financial condition as of the
date thereof and Borrower's consolidated and consolidating results of operations
for the period then ended. There has not been a material adverse change in the
consolidated or in the consolidating financial condition of Borrower since the
date of the most recent of such financial statements submitted to Bank.
5.8 Solvency, Payment of Debts. Borrower is able to pay its debts
(including trade debts) as they mature; the fair saleable value of Borrower's
assets (including goodwill minus disposition costs) exceeds the fair value of
its liabilities; and Borrower is not left with unreasonably small capital after
the transactions contemplated by this Agreement.
5.9 Compliance with Laws and Regulations. Borrower and each
Subsidiary have met the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. No event has occurred resulting
from Borrower's failure to comply with ERISA that is reasonably likely to result
in Borrower's incurring any liability that could have a Material Adverse Effect.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940.
Borrower is not engaged principally, or as one of the important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations T and U of the Board of
Governors of the Federal Reserve System). Borrower has complied in all material
respects with all the provisions of the Federal Fair Labor Standards Act.
Borrower is in compliance with all environmental laws, regulations and
ordinances except where the failure to comply is not reasonably likely to have a
Material Adverse Effect. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, the violation of which could reasonably be
expected to have a Material Adverse Effect. Borrower and each Subsidiary have
filed or caused to be filed all tax returns required to be filed, and have paid,
or have made adequate provision for the payment of, all
- 13 -
taxes reflected therein except those being contested in good faith with adequate
reserves under GAAP or where the failure to file such returns or pay such taxes
could not reasonably be expected to have a Material Adverse Effect.
5.10 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.11 Government Consents. Borrower and each Subsidiary have obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted,
except where the failure to do so could not reasonably be expected to cause a
Material Adverse Effect.
5.12 Inbound Licenses. Except as disclosed on the Schedule, Borrower
is not a party to, nor is bound by, any license or other agreement that
prohibits or otherwise restricts Borrower from granting a security interest in
Borrower's interest in such license or agreement or any other property.
5.13 Shares. Borrower has full power and authority to create a first
lien on the Shares and no disability or contractual obligation exists that would
prohibit Borrower from pledging the Shares pursuant to this Agreement. To
Borrower's knowledge, there are no subscriptions, warrants, rights of first
refusal or other restrictions on transfer relative to, or options exercisable
with respect to the Shares. The Shares have been and will be duly authorized and
validly issued, and are fully paid and non-assessable. To Borrower's knowledge,
the Shares are not the subject of any present or threatened suit, action,
arbitration, administrative or other proceeding, and Borrower knows of no
reasonable grounds for the institution of any such proceedings.
5.14 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank taken
together with all such certificates and written statements furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading, it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not to be viewed as facts and that actual results during the
period or periods covered by any such projections and forecasts may differ
materially from the projected or forecasted results.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing and Government Compliance. Borrower shall maintain
its and each of its Subsidiaries' corporate existence and good standing in the
Borrower State, shall maintain qualification and good standing in each other
jurisdiction in which the failure to so qualify could have a Material Adverse
Effect, and shall furnish to Bank the organizational identification number
issued to Borrower by the authorities of the state in which Borrower is
organized, if applicable. Borrower shall meet, and shall cause each Subsidiary
to meet, the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. Borrower shall comply in all material respects
with all applicable Environmental Laws, and maintain all material permits,
licenses and approvals required thereunder where the failure to do so could have
a Material Adverse Effect. Borrower shall comply, and shall cause each
Subsidiary to comply, with all statutes, laws, ordinances and government rules
and regulations to which it is subject, and shall maintain, and shall cause each
of its Subsidiaries to maintain, in force all licenses, approvals and
agreements, the loss of which or failure to comply with which could reasonably
be expected to have a Material Adverse Effect.
6.2 Financial Statements, Reports, Certificates. Borrower shall
deliver the following to Bank: (i) as soon as available, but in any event within
thirty (30) days after the end of each calendar month, a company prepared
consolidated and consolidating balance sheet and income statement covering
Borrower's operations during such period, in a form reasonably acceptable to
Bank and certified by a Responsible Officer; (ii) as soon as available, but in
any event within one hundred twenty (120) days after the end of Borrower's
fiscal year,
- 14 -
audited consolidated and consolidating financial statements of Borrower prepared
in accordance with GAAP, consistently applied, together with an opinion which is
unqualified or otherwise consented to in writing by Bank on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (iii) if applicable, copies of all statements, reports and
notices sent or made available generally by Borrower to its security holders or
to any holders of Subordinated Debt and all reports on Forms 10-K and 10-Q filed
with the Securities and Exchange Commission; (iv) promptly upon receipt of
notice thereof, a report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of One Hundred Thousand Dollars ($100,000) or more; (v) promptly
upon receipt, each management letter prepared by Borrower's independent
certified public accounting firm regarding Borrower's management control
systems; (vi) such budgets, sales projections, operating plans or other
financial information generally prepared by Borrower in the ordinary course of
business as Bank may reasonably request from time to time; and (vii) within
thirty (30) days of the last day of each fiscal quarter, a report signed by
Borrower, in form reasonably acceptable to Bank, listing any applications or
registrations that Borrower has made or filed in respect of any Patents,
Copyrights or Trademarks and the status of any outstanding applications or
registrations, as well as any material change in Borrower's Intellectual
Property Collateral, including but not limited to any subsequent ownership right
of Borrower in or to any Trademark, Patent or Copyright not specified in
Exhibits A, B, and C of any Intellectual Property Security Agreement delivered
to Bank by Borrower in connection with this Agreement.
(a) Within twenty (20) days after the last day of each month,
Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of Exhibit C hereto, together with
aged listings by invoice date of accounts receivable and accounts payable.
(b) Within thirty (30) days after the last day of each month,
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate certified as of the last day of the applicable month and
signed by a Responsible Officer in substantially the form of Exhibit D hereto.
(c) As soon as possible and in any event within three (3)
business days after becoming aware of the occurrence or existence of an Event of
Default hereunder, a written statement of a Responsible Officer setting forth
details of the Event of Default, and the action which Borrower has taken or
proposes to take with respect thereto.
(d) Bank shall have a right from time to time hereafter to
audit Borrower's Accounts and appraise Collateral at Borrower's expense,
provided that such audits will be conducted no more often than every six (6)
months unless an Event of Default has occurred and is continuing.
Borrower may deliver to Bank on an electronic basis any certificates,
reports or information required pursuant to this Section 6.2, and Bank shall be
entitled to rely on the information contained in the electronic files, provided
that Bank in good faith believes that the files were delivered by a Responsible
Officer. If Borrower delivers this information electronically, it shall also
deliver to Bank by U.S. Mail, reputable overnight courier service, hand
delivery, facsimile or .pdf file within five (5) Business Days of submission of
the unsigned electronic copy the certification of monthly financial statements,
the intellectual property report, the Borrowing Base Certificate and the
Compliance Certificate, each bearing the physical signature of the Responsible
Officer.
6.3 Inventory; Returns. Borrower shall keep all Inventory in good
and merchantable condition, free from all material defects except for Inventory
for which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist on the
Closing Date. Borrower shall promptly notify Bank of all returns and recoveries
and of all disputes and claims involving more than One Hundred Thousand Dollars
($100,000).
6.4 Taxes. Borrower shall make, and cause each Subsidiary to make,
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, including, but not
limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state
disability, and will execute and deliver to Bank, on demand, proof satisfactory
to Bank indicating that Borrower or a Subsidiary has made such payments or
deposits and any appropriate certificates attesting to the payment or deposit
thereof; provided that Borrower or a Subsidiary need not make any payment if the
amount or validity of such payment is
- 15 -
contested in good faith by appropriate proceedings and is reserved against (to
the extent required by GAAP) by Borrower.
6.5 Insurance.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain liability
and other insurance in amounts and of a type that are customary to businesses
similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee, and all liability insurance policies shall show Bank as an additional
insured and specify that the insurer must give at least 20 days notice to Bank
before canceling its policy for any reason. Upon Bank's request, Borrower shall
deliver to Bank certified copies of the policies of insurance and evidence of
all premium payments. If no Event of Default has occurred and is continuing,
proceeds payable under any casualty policy will, at Borrower's option, be
payable to Borrower to replace the property subject to the claim, provided that
any such replacement property shall be deemed Collateral in which Bank has been
granted a first priority security interest. If an Event of Default has occurred
and is continuing, all proceeds payable under any such policy shall, at Bank's
option, be payable to Bank to be applied on account of the Obligations.
6.6 Accounts. Borrower shall maintain all its depository and
operating accounts with Bank, and its primary investment accounts with Bank or
Bank's Affiliates.
6.7 Financial Covenants. Borrower shall at all times maintain the
following financial ratios and covenants:
(a) Quick Ratio. A ratio of Cash plus net accounts receivable
to Current Liabilities plus (to the extent not already included therein) all
Indebtedness to Bank (except for Indebtedness in connection with the Original
Term Loan) of at least 1.00 to 1.00.
(b) Debt to Effective Tangible Net Worth. A ratio of Total
Liabilities less Subordinated Debt to Tangible Net Worth plus Subordinated Debt
of not more than 1.00 to 1.00.
(c) Performance to Plan. Measured on a rolling twelve month
basis, Borrower's EBITDA shall be at least seventy five percent (75%) of the
monthly, quarterly and/or yearly projections that have been approved by
Borrower's Board of Directors and attached to the Schedule hereto.
Upon execution and delivery of this Agreement, Bank shall be
deemed to have waived Borrower's violation of Section 6.11 of the Original
Agreement for the period beginning July 31, 2004 through the date of the this
Agreement.
6.8 Intellectual Property Rights.
(a) Borrower shall register or cause to be registered on an
expedited basis (to the extent not already registered) with the United States
Patent and Trademark Office or the United States Copyright Office, as the case
may be, those registrable intellectual property rights now owned or hereafter
developed or acquired by Borrower, to the extent that Borrower, in its
reasonable business judgment, deems it appropriate to so protect such
intellectual property rights.
(b) Borrower shall promptly give Bank written notice of any
applications or registrations of intellectual property rights filed with the
United States Patent and Trademark Office, including the date of such filing and
the registration or application numbers, if any.
- 16 -
(c) Borrower shall (i) give Bank not less than ten (10) days
prior written notice of the filing of any applications or registrations with the
United States Copyright Office, including the title of such intellectual
property rights to be registered, as such title will appear on such applications
or registrations, and the date such applications or registrations will be filed;
(ii) prior to the filing of any such applications or registrations, execute such
documents as Bank may reasonably request for Bank to maintain its perfection in
such intellectual property rights to be registered by Borrower; (iii) upon the
request of Bank, either deliver to Bank or file such documents simultaneously
with the filing of any such applications or registrations; (iv) upon filing any
such applications or registrations, promptly provide Bank with a copy of such
applications or registrations together with any exhibits, evidence of the filing
of any documents requested by Bank to be filed for Bank to maintain the
perfection and priority of its security interest in such intellectual property
rights, and the date of such filing.
(d) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect and maintain the perfection and priority of Bank's security interest in
the Intellectual Property Collateral.
(e) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the trade secrets, Trademarks, Patents and
Copyrights, (ii) use commercially reasonable efforts to detect infringements of
the Trademarks, Patents and Copyrights and promptly advise Bank in writing of
material infringements detected and (iii) not allow any material Trademarks,
Patents or Copyrights to be abandoned, forfeited or dedicated to the public
without the written consent of Bank, which shall not be unreasonably withheld.
(f) Bank may audit Borrower's Intellectual Property Collateral
to confirm compliance with this Section, provided such audit may not occur more
often than twice per year, unless an Event of Default has occurred and is
continuing. Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section.
6.9 Consent of Inbound Licensors. Prior to entering into or becoming
bound by any material license or agreement, Borrower shall: (i) provide written
notice to Bank of the material terms of such license or agreement with a
description of its likely impact on Borrower's business or financial condition;
and (ii) in good faith use commercially reasonable efforts to obtain the consent
of, or waiver by, any person whose consent or waiver is necessary for Borrower's
interest in such licenses or contract rights to be deemed Collateral and for
Bank to have a security interest in it that might otherwise be restricted by the
terms of the applicable license or agreement, whether now existing or entered
into in the future, provided, however, that the failure to obtain any such
consent or waiver shall not constitute a default under this Agreement.
6.10 Creation/Acquisition of Subsidiaries. In the event Borrower or
any Subsidiary creates or acquires any Subsidiary, Borrower and such Subsidiary
shall promptly notify Bank of the creation or acquisition of such new Subsidiary
and take all such action as may be reasonably required by Bank to cause such
Subsidiary to guarantee the Obligations of Borrower under the Loan Documents and
grant a continuing pledge and security interest in and to the collateral of such
Subsidiary (substantially as described on Exhibit A hereto), and Borrower shall
grant and pledge to Bank a perfected security interest in the stock, units or
other evidence of ownership of such Subsidiary.
6.11 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until the outstanding Obligations are paid in full or for
so long as Bank may have any commitment to make any Credit Extensions, Borrower
will not do any of the following without Bank's prior written consent, which
shall not be unreasonably withheld:
- 17 -
7.1 Dispositions. Convey, sell, lease, license, transfer or
otherwise dispose of (collectively, to "Transfer"), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, or move
cash balances on deposit with Bank to accounts opened at another financial
institution, other than Permitted Transfers.
7.2 Change in Name, Location, Executive Office, or Executive
Management; Change in Business; Change in Fiscal Year; Change in Control. Change
its name or the Borrower State or relocate its chief executive office without
thirty (30) days prior written notification to Bank; replace its chief executive
officer without thirty (30) days prior written notification to Bank; engage in
any business, or permit any of its Subsidiaries to engage in any business, other
than or reasonably related or incidental to the businesses currently engaged in
by Borrower; change its fiscal year end; suffer or permit a Change in Control.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization (other than mergers or consolidations of a Subsidiary into another
Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person except where (i) such transactions do not in the aggregate exceed One
Hundred Thousand Dollars ($100,000) during any fiscal year, (ii) no Event of
Default has occurred, is continuing or would exist after giving effect to such
transactions, (iii) such transactions do not result in a Change in Control, and
(iv) Borrower is the surviving entity.
7.4 Indebtedness. Create, incur, assume, guarantee or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness, or prepay any Indebtedness or take any
actions which impose on Borrower an obligation to prepay any Indebtedness,
except Indebtedness to Bank.
7.5 Encumbrances. Create, incur, assume or allow any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens, or covenant to any other
Person that Borrower in the future will refrain from creating, incurring,
assuming or allowing any Lien with respect to any of Borrower's property.
7.6 Distributions. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any capital
stock, except that Borrower may (i) repurchase the stock of former employees
pursuant to stock repurchase agreements as long as an Event of Default does not
exist prior to such repurchase or would not exist after giving effect to such
repurchase, (ii) repurchase the stock of former employees pursuant to stock
repurchase agreements by the cancellation of indebtedness owed by such former
employees to Borrower regardless of whether an Event of Default exists and (ii)
make payments to Borrower's Affiliates in reimbursement for Federal Income Tax
payments made on Borrower's behalf.
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments, or maintain or invest any of its property with
a Person other than Bank or Bank's Affiliates or permit any Subsidiary to do so
unless such Person has entered into a control agreement with Bank, in form and
substance satisfactory to Bank, or suffer or permit any Subsidiary to be a party
to, or be bound by, an agreement that restricts such Subsidiary from paying
dividends or otherwise distributing property to Borrower.
7.8 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a non-affiliated Person and the
distributions permitted in Section 7.6 above.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision affecting Bank's rights contained in any documentation relating to the
Subordinated Debt without Bank's prior written consent which shall not be
unreasonably withheld.
- 18 -
7.10 Inventory and Equipment. Store the Inventory or the Equipment
with a bailee, warehouseman, or similar third party unless the third party has
been notified of Bank's security interest and Bank (a) has received an
acknowledgment from the third party that it is holding or will hold the
Inventory or Equipment for Bank's benefit or (b) is in possession of the
warehouse receipt, where negotiable, covering such Inventory or Equipment.
Except for Inventory sold in the ordinary course of business and except for such
other locations as Bank may approve in writing, Borrower shall keep the
Inventory and Equipment only at the location set forth in Section 10 and such
other locations of which Borrower gives Bank prior written notice and as to
which Bank files a financing statement, or takes other action, where needed to
perfect its security interest.
7.11 No Investment Company; Margin Regulation. Become or be
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Credit Extension
for such purpose.
7.12 Negative Pledge Agreements. Permit the inclusion in any
contract to which it or a Subsidiary becomes a party of any provisions that
could restrict or invalidate the creation of a security interest in any of
Borrower's or such Subsidiary's property.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay any of the Obligations
when due;
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Article
6 or violates any of the covenants contained in Article 7 of this Agreement; or
(b) If Borrower fails or neglects to perform or observe any
other material term, provision, condition, covenant contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition or covenant that can be cured, has failed to cure such
default within ten (10) days after Borrower receives notice thereof or any
officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event
of Default (provided that no Credit Extensions will be required to be made
during such period);
8.3 Defective Perfection. If Bank shall receive at any time
following the Closing Date an SOS Report indicating that except for Permitted
Liens, Bank's security interest in the Collateral is not prior to all other
security interests or Liens of record reflected in such SOS Report;
8.4 Material Adverse Effect. If there occurs any circumstance or
circumstances that could have a Material Adverse Effect;
8.5 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or
- 19 -
instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within ten (10) days after Borrower receives
notice thereof, provided that none of the foregoing shall constitute an Event of
Default where such action or event is stayed or an adequate bond has been posted
pending a good faith contest by Borrower (provided that no Credit Extensions
will be made during such cure period);
8.6 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);
8.7 Other Agreements. If there is a default or other failure to
perform in any agreement to which Borrower is a party with a third party or
parties resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness in an amount in excess
of One Hundred Thousand Dollars ($100,000) or that could have a Material Adverse
Effect;
8.8 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.9 Judgments. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment); or
8.10 Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.6, all Obligations shall become immediately due and payable without
any action by Bank);
(b) Demand that Borrower (i) deposit cash with Bank in an
amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and (ii) pay in advance all Letter of Credit fees scheduled to be
paid or payable over the remaining term of the Letters of Credit, and Borrower
shall promptly deposit and pay such amounts;
(c) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(d) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(e) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to
- 20 -
be prior or superior to its security interest and to pay all expenses incurred
in connection therewith. With respect to any of Borrower's owned premises,
Borrower hereby grants Bank a license to enter into possession of such premises
and to occupy the same, without charge, in order to exercise any of Bank's
rights or remedies provided herein, at law, in equity, or otherwise;
(f) Set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by Bank, and (ii) indebtedness at any
time owing to or for the credit or the account of Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(h) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate. Bank may sell the Collateral
without giving any warranties as to the Collateral. Bank may specifically
disclaim any warranties of title or the like. This procedure will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral. If Bank sells any of the Collateral upon credit, Borrower will be
credited only with payments actually made by the purchaser, received by Bank,
and applied to the indebtedness of the purchaser. If the purchaser fails to pay
for the Collateral, Bank may resell the Collateral and Borrower shall be
credited with the proceeds of the sale;
(i) Bank may credit bid and purchase at any public sale;
(j) Apply for the appointment of a receiver, trustee,
liquidator or conservator of the Collateral, without notice and without regard
to the adequacy of the security for the Obligations and without regard to the
solvency of Borrower, any guarantor or any other Person liable for any of the
Obligations; and
(k) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
Bank may comply with any applicable state or federal law requirements in
connection with a disposition of the Collateral and compliance will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral.
9.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower's policies of insurance; (f) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; (g)
to modify, in its sole discretion, any intellectual property security agreement
entered into between Borrower and Bank without first obtaining Borrower's
approval of or signature to such modification by amending Exhibits A, B, and C,
thereof, as appropriate, to include reference to any right, title or interest in
any Copyrights, Patents or Trademarks acquired by Borrower after the execution
hereof or to delete any reference to any right, title or interest in any
Copyrights, Patents or Trademarks in which Borrower no longer has or claims to
have any right, title or interest; and (h) to file, in its sole discretion, one
or more financing or continuation statements and amendments thereto, relative to
any of the Collateral without the signature of Borrower where permitted by law;
provided Bank may exercise such power
- 21 -
of attorney to sign the name of Borrower on any of the documents described in
clauses (g) and (h) above, regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide Credit Extensions hereunder is terminated.
9.3 Accounts Collection. At any time after the occurrence and during
the continuance of an Event of Default, Bank may notify any Person owing funds
to Borrower of Bank's security interest in such funds and verify the amount of
such Account. Borrower shall collect all amounts owing to Borrower for Bank,
receive in trust all payments as Bank's trustee, and immediately deliver such
payments to Bank in their original form as received from the account debtor,
with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following
after reasonable notice to Borrower: (a) make payment of the same or any part
thereof; (b) set up such reserves under the Revolving Line as Bank deems
necessary to protect Bank from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type discussed in Section 6.5 of
this Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral. Bank has no obligation to clean
up or otherwise prepare the Collateral for sale. All risk of loss, damage or
destruction of the Collateral shall be borne by Borrower.
9.6 No Obligation to Pursue Others. Bank has no obligation to
attempt to satisfy the Obligations by collecting them from any other Person
liable for them and Bank may release, modify or waive any collateral provided by
any other Person to secure any of the Obligations, all without affecting Bank's
rights against Borrower. Borrower waives any right it may have to require Bank
to pursue any other Person for any of the Obligations.
9.7 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given. Borrower expressly agrees that this Section may
not be waived or modified by Bank by course of performance, conduct, estoppel or
otherwise.
9.8 Demand; Protest. Except as otherwise provided in this Agreement,
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment and any other notices relating to the
Obligations.
10. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: PACIFIC TITLE AND ARTS STUDIO, INC.
0000 Xxxxx Xxxxxx Xxxx.
Xxxxxxxxx, XX 00000
- 22 -
Attn: President
FAX: (000) 000-0000
If to Bank: Comerica Bank
0000 Xxxxxxxxx Xxx., Xxxxx 0000
Xx Xxxxxxx, XX 00000
Attn: Manager
FAX: (000) 000-0000
with a copy to: Comerica Bank
0000 Xxxxxxx Xxx. Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxx
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Xxxxx, State of California. BANK AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH OF THEM,
AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM. THESE PROVISIONS SHALL NOT
BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR
BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.
12. REFERENCE PROVISION.
The parties prefer that any dispute between them be resolved in
litigation subject to a Jury Trial Waiver as set forth in Section 11 of this
Agreement, but the availability of that process is in doubt because of the
opinion of the California Court of Appeal in Grafton Partners LP v. Superior
Court, 9 Cal.Rptr.3d 511. This Reference Provision will be applicable until the
California Supreme Court completes its review of that case, and will continue to
be applicable if either that court or a California Court of Appeal publishes a
decision holding that a pre-dispute Jury Trial Waiver provision similar to that
contained in the Loan Documents is invalid or unenforceable. Delay in requesting
appointment of a referee pending review of any such decision, or participation
in litigation pending review, will not be deemed a waiver of this Reference
Provision.
12.1 Mechanics.
(a) Other than (i) nonjudicial foreclosure of security
interests in real or personal property, (ii) the appointment of a receiver or
(iii) the exercise of other provisional remedies (any of which may be initiated
pursuant to applicable law), any controversy, dispute or claim (each, a "Claim")
between the parties arising out of or relating to this Agreement or any other
document, instrument or agreement between the Bank and the undersigned
(collectively in this Section, the "Loan Documents"), will be resolved by a
reference proceeding in California in accordance with the provisions of Section
638 et seq. of the California Code of Civil Procedure ("CCP"), or their
successor sections, which shall constitute the exclusive remedy for the
resolution of any Claim, including whether the Claim is subject to the reference
proceeding. Except as otherwise provided in the Loan
- 23 -
Documents, venue for the reference proceeding will be in the Superior Court or
Federal District Court in the County or District where venue is otherwise
appropriate under applicable law (the "Court").
(b) The referee shall be a retired Judge or Justice selected
by mutual written agreement of the parties. If the parties do not agree, the
referee shall be selected by the Presiding Judge of the Court (or his or her
representative). A request for appointment of a referee may be heard on an ex
parte or expedited basis, and the parties agree that irreparable harm would
result if ex parte relief is not granted. The referee shall be appointed to sit
with all the powers provided by law. Each party shall have one peremptory
challenge pursuant to CCP Section 170.6. Pending appointment of the referee, the
Court has power to issue temporary or provisional remedies.
(c) The parties agree that time is of the essence in
conducting the reference proceedings. Accordingly, the referee shall be
requested to (a) set the matter for a status and trial-setting conference within
fifteen (15) days after the date of selection of the referee, (b) if
practicable, try all issues of law or fact within ninety (90) days after the
date of the conference and (c) report a statement of decision within twenty (20)
days after the matter has been submitted for decision. Any decision rendered by
the referee will be final, binding and conclusive, and judgment shall be entered
pursuant to CCP Section 644.
(d) The referee will have power to expand or limit the amount
and duration of discovery. The referee may set or extend discovery deadlines or
cutoffs for good cause, including a party's failure to provide requested
discovery for any reason whatsoever. Unless otherwise ordered, no party shall be
entitled to "priority" in conducting discovery, depositions may be taken by
either party upon seven (7) days written notice, and all other discovery shall
be responded to within fifteen (15) days after service. All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding.
12.2 Procedures. Except as expressly set forth in this Agreement,
the referee shall determine the manner in which the reference proceeding is
conducted including the time and place of hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the referee,
except for trial, shall be conducted without a court reporter, except that when
any party so requests, a court reporter will be used at any hearing conducted
before the referee, and the referee will be provided a courtesy copy of the
transcript. The party making such a request shall have the obligation to arrange
for and pay the court reporter. Subject to the referee's power to award costs to
the prevailing party, the parties will equally share the cost of the referee and
the court reporter at trial.
12.3 Application of Law. The referee shall be required to determine
all issues in accordance with existing case law and the statutory laws of the
State of California. The rules of evidence applicable to proceedings at law in
the State of California will be applicable to the reference proceeding. The
referee shall be empowered to enter equitable as well as legal relief, provide
all temporary or provisional remedies, enter equitable orders that will be
binding on the parties and rule on any motion which would be authorized in a
trial, including without limitation motions for summary judgment or summary
adjudication . The referee shall issue a decision at the close of the reference
proceeding which disposes of all claims of the parties that are the subject of
the reference. The referee's decision shall be entered by the Court as a
judgment or an order in the same manner as if the action had been tried by the
Court. The parties reserve the right to appeal from the final judgment or order
or from any appealable decision or order entered by the referee. The parties
reserve the right to findings of fact, conclusions of laws, a written statement
of decision, and the right to move for a new trial or a different judgment,
which new trial, if granted, is also to be a reference proceeding under this
provision.
12.4 Repeal. If the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by reference
procedure will be resolved and determined by arbitration. The arbitration will
be conducted by a retired judge or Justice, in accordance with the California
Arbitration Act Section 1280 through Section 1294.2 of the CCP as amended from
time to time. The limitations with respect to discovery set forth above shall
apply to any such arbitration proceeding.
12.5 THE PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED
UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY,
AND THAT THEY ARE IN EFFECT WAIVING THEIR RIGHT TO TRIAL BY JURY IN AGREEING TO
THIS
- 24 -
REFERENCE PROVISION. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT)
WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY AND FOR
THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY
DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS RELATED TO THIS AGREEMENT OR THE
LOAN DOCUMENTS.
13. GENERAL PROVISIONS.
13.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties and shall bind all Persons who become bound as a debtor to this
Agreement; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
13.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank,
its officers, employees and agents as a result of or in any way arising out of,
following, or consequential to transactions between Bank and Borrower whether
under this Agreement, or otherwise (including without limitation reasonable
attorneys' fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.
13.3 Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.
13.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
13.5 Amendments in Writing, Integration. All amendments to or
terminations of this Agreement or the other Loan Documents must be in writing.
All prior agreements, understandings, representations, warranties, and
negotiations between the parties hereto with respect to the subject matter of
this Agreement and the other Loan Documents, if any, are merged into this
Agreement and the Loan Documents.
13.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
13.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding or Bank has any obligation to make any Credit
Extension to Borrower. The obligations of Borrower to indemnify Bank with
respect to the expenses, damages, losses, costs and liabilities described in
Section 13.2 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run.
13.8 Effect of Amendment and Restatement. Except as otherwise set
forth herein, this Agreement is intended to and does completely amend and
restate, without novation, the Original Agreement. All security interests
granted under the Original Agreement are hereby confirmed and ratified and shall
continue to secure all Obligations under this Agreement.
13.9 Confidentiality. In handling any confidential information Bank
and all employees and agents of Bank, including but not limited to accountants,
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations
- 25 -
with Borrower, (ii) to prospective transferees or purchasers of any interest in
the Loans, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as
required by law, regulations, rule or order, subpoena, judicial order or similar
order, (iv) as may be required in connection with the examination, audit or
similar investigation of Bank and (v) as Bank may determine in connection with
the enforcement of any remedies hereunder. Confidential information hereunder
shall not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
- 26 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PACIFIC TITLE AND ARTS STUDIO, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Title: President & Chief Executive Officer
COMERICA BANK
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Title: VP Technology & Life Sciences
[SIGNATURE PAGE TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT]
DEBTOR PACIFIC TITLE AND ARTS STUDIO, INC.
SECURED PARTY: COMERICA BANK
EXHIBIT A
COLLATERAL DESCRIPTION ATTACHMENT
TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles (including payment
intangibles and software), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities
entitlements), letter of credit rights, money, and all of Debtor's books and
records with respect to any of the foregoing, and the computers and equipment
containing said books and records;
(b) all common law and statutory copyrights and copyright
registrations, applications for registration, now existing or hereafter arising,
in the United States of America or in any foreign jurisdiction, obtained or to
be obtained on or in connection with any of the foregoing, or any parts thereof
or any underlying or component elements of any of the foregoing, together with
the right to copyright and all rights to renew or extend such copyrights and the
right (but not the obligation) of Secured Party to xxx in its own name and/or in
the name of the Debtor for past, present and future infringements of copyright;
(c) all trademarks, service marks, trade names and service names and
the goodwill associated therewith, together with the right to trademark and all
rights to renew or extend such trademarks and the right (but not the obligation)
of Secured Party to xxx in its own name and/or in the name of the Debtor for
past, present and future infringements of trademark;
(d) all (i) patents and patent applications filed in the United
States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (ii)
licenses pertaining to any patent whether Debtor is licensor or licensee, (iii)
income, royalties, damages, payments, accounts and accounts receivable now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, damages and payments for past, present or future infringements
thereof, (iv) right (but not the obligation) to xxx in the name of Debtor and/or
in the name of Secured Party for past, present and future infringements thereof,
(v) rights corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (vi) reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
respect to any of the foregoing; and
(e) any and all cash proceeds and/or noncash proceeds of any of the
foregoing, including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time, including revised Division 9 of
the Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991
(S.B. 45), Section 35, operative July 1, 2001.
EXHIBIT B
TECHNOLOGY & LIFE SCIENCES DIVISION
LOAN ANALYSIS
LOAN ADVANCE/PAYDOWN REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS [3:00* P.M., Pacific Time/ 3:30 P.M.
Eastern Time]
FORMULA BASED LINES: DEADLINE FOR NEXT DAY PROCESSING IS [3:00* P.M., Pacific
Time/ 3:30 P.M. Eastern Time]
DEADLINE FOR WIRE TRANSFERS IS [1:30 P.M., Pacific Time/ 3:30 P.M. Eastern
Time]
[*At month end and the day before a holiday, the cut off time is 1:30 P.M.,
Pacific Time]
To: Loan Analysis DATE: ____________________ TIME: ________________
FAX #: (000) 000-0000
================================================================================
FROM: PACIFIC TITLE AND ARTS TELEPHONE REQUEST (For Bank Use Only):
STUDIO, INC.
Borrower's Name
FROM: _____________________________ The following person is authorized to
Authorized Signer's Name request the loan payment transfer/loan
advance on the designated account and is
known to me.
FROM: _____________________________ ________________________________________
Authorized Signer's Name Authorized Request & Phone #
PHONE #: _____________________________ ________________________________________
Received by (Bank) & Phone #
FROM ACCOUNT#:
(please include Note number, if
applicable)
TO ACCOUNT #: Authorized Signature (Bank)
(please include Note number, if
applicable)
================================================================================
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT For Bank Use Only
PRINCIPAL INCREASE* (ADVANCE) $______________________ Date Rec'd:
PRINCIPAL PAYMENT (ONLY) $______________________ Time:
Comp. Status: YES NO
OTHER INSTRUCTIONS: Status Date:
Time:
______________________________________________________ Approval:
______________________________________________________
================================================================================
All representations and warranties of Borrower stated in the Loan Agreement are
true, correct and complete in all material respects as of the date of the
telephone request for and advance confirmed by this Borrowing Certificate,
including without limitation the representation that Borrower has paid for and
owns the equipment financed by the Bank; provided, however, that those
representations and warranties the date expressly referring to another date
shall be true, correct and complete in all material respects as of such date.
*IS THERE A WIRE REQUEST TIED TO THIS LOAN ADVANCE? (PLEASE CIRCLE ONE YES NO
If YES, the Outgoing Wire Transfer Instructions must be completed below.
================================================================================
OUTGOING WIRE TRANSFER INSTRUCTIONS Fed Reference Number Bank Transfer Number
THE ITEMS MARKED WITH AN ASTERISK (*) ARE REQUIRED TO BE COMPLETED.
--------------------------------------------------------------------------------
*Beneficiary Name
--------------------------------------------------------------------------------
*Beneficiary Account Number
--------------------------------------------------------------------------------
*Beneficiary Address
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Currency Type US DOLLARS ONLY
--------------------------------------------------------------------------------
*ABA Routing Number (9 Digits)
--------------------------------------------------------------------------------
*Receiving Institution Name
--------------------------------------------------------------------------------
*Receiving Institution Address
--------------------------------------------------------------------------------
*Wire Account $
================================================================================
EXHIBIT C
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower: PACIFIC TITLE AND ARTS STUDIO, INC. Lender: Comerica Bank
Commitment Amount: $2,000,000
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ___ $___________
2. Additions (please explain on reverse) $___________
3. TOTAL ACCOUNTS RECEIVABLE $___________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $___________
5. Balance of 25% over 90 day accounts $___________
6. Concentration Limits
7. Foreign Accounts $___________
8. Governmental Accounts $___________
9. Contra Accounts $___________
10. Demo Accounts $___________
11. Intercompany/Employee Accounts $___________
12. Other (please explain on reverse) $___________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $___________
14. Eligible Accounts (#3 minus #13) $___________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $___________
BALANCES
16. Maximum Loan Amount $2,000,000
17. Total Funds Available [Lesser of #16 or #15] $___________
18. Present balance owing on Line of Credit $___________
19. Outstanding under Sublimits (e.g., Letters of Credit) $___________
20. RESERVE POSITION (#17 minus #18 and #19) $___________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Amended and
Restated Loan and Security Agreement between the undersigned and Comerica Bank.
PACIFIC TITLE AND ARTS STUDIO, INC.
By: _____________________________________
Authorized Signer
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: COMERICA BANK
FROM: PACIFIC TITLE AND ARTS STUDIO, INC.
The undersigned authorized officer of PACIFIC TITLE AND ARTS STUDIO, INC.
hereby certifies that in accordance with the terms and conditions of the Amended
and Restated Loan and Security Agreement between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending
_______________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct as of the date hereof. Attached herewith are the required documents
supporting the above certification. The Officer further certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP) and
are consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 120 days Yes No
10K and 10Q (as applicable) Yes No
A/R & A/P Agings, Borrowing Base Cert. Monthly within 20 days Yes No
Compliance Cert. Monthly within 30 days Yes No
A/R Audit Initial and Semi-Annual Yes No
IP Report Quarterly within 30 days Yes No
Total amount of Borrower's cash and investments Amount: $________ Yes No
Total amount of Borrower's cash and investments Amount: $________ Yes No
maintained with Bank
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Measured on a Monthly Basis:
Minimum Quick Ratio 1.00:1.00 _____:1.00 Yes No
Maximum Debt-ETNW 1.00:1.00 _____:1.00 Yes No
Measured on a Rolling 12 Month Basis:
EBITDA $________ $________ Yes No
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Received by: ____________________
Sincerely, AUTHORIZED SIGNER
Date: ___________________________
__________________________________ Verified: _______________________
SIGNATURE AUTHORIZED SIGNER
Date: ___________________________
___________________________________
TITLE
Compliance Status Yes No
___________________________________
DATE
SCHEDULE OF EXCEPTIONS
Permitted Indebtedness (Section 1.1)
Indebtedness to AGFA Corp. in the aggregate amount of $3,598 as of 12/31/04
pursuant to a capital lease between Borrower and such creditor.
Indebtedness to CIT Technologies Corporation in the aggregate amount of $
$164,800 as of 12/31/04 pursuant to Master Lease PTA-2000-2001 between Borrower
and such creditor.
Indebtedness to Information Leasing Corporation in the aggregate amount of
$34,448 as of 12/31/04 pursuant to Equipment Lease #11020859 between Borrower
and such creditor.
Indebtedness to Xxxxx Fargo Equipment Finance, Inc. in the aggregate amount of
$274,413 as of 12/31/04 pursuant to an operating lease between Borrower and such
creditor.
Indebtedness to Xxxxx Fargo Equipment Finance, Inc. in the aggregate amount of
$40,445 as of 12/31/04 pursuant to an operating lease between Borrower and such
creditor.
Indebtedness to CIT Communications Finance Corporation in the aggregate amount
of $68,555 as of 12/31/04 pursuant to Lease No. W328617 between Borrower and
such creditor.
Indebtedness to Pullman Bank and Trust Company in the aggregate amount of
$315,013 as of 12/31/04 pursuant to Master Lease PTA-2000-200 between Borrower
and such creditor.
Indebtedness to Brentwood Credit Corporation and Xxxxx Fargo Equipment Finance,
Inc. in the aggregate amount of $ 271,184 as of 12/31/04 pursuant to Master
Lease PTA-2000-200 between Borrower and such creditors.
Indebtedness to General Electric Credit Corporation in the aggregate amount of
$32,536 as of 12/31/04 pursuant to Business Lease Agreement No. 4183699-001
between Borrower and such creditor.
Indebtedness to Sony financial Services, LLC in the aggregate amount of $127,160
as of 12/31/04 pursuant to Master Lease Agreement No. 683328 between Borrower
and such creditor.
Permitted Investments (Section 1.1)
Borrower owns 100% of the issued and outstanding stock of Educational Marketing
Concepts, Inc., a Delaware corporation, and Hi-Tech Theatre Equipment Service
Company, Inc., a Florida corporation and Xxxxxxxx, Inc., a Delaware Corporation.
Permitted Liens (Section 1.1)
UCC Financing Statement No. 21031883 filed with the Delaware Secretary of State
naming Borrower as Debtor and AGFA Corp. as Secured Party.
UCC Financing Statement No. 22821290 filed with the Delaware Secretary of State
naming Borrower as Debtor and Brentwood Credit Corporation as Secured Party as
assigned to CIT Technologies Corporation by Filing No. 40823502.
UCC Financing Statement No. 30050701 filed with the Delaware Secretary of State
naming Borrower as Debtor and Global Vantage Ltd. as Secured Party assigned to
Information Leasing Corporation by Filing No. 30301765
UCC Financing Statement No. 31511214 filed with the Delaware Secretary of State
naming Borrower as Debtor and Brentwood Credit Corporation as Secured Party (to
be terminated at or immediately after Closing).
UCC Financing Statement No. 31511230 filed with the Delaware Secretary of State
naming Borrower as Debtor and Brentwood Credit Corporation as Secured Party as
assigned to CIT Technologies Corporation by Filing No. 40822785 and as amended
to change secured party to Xxxxx Fargo Equipment Finance, Inc.
UCC Financing Statement No. 31923948 filed with the Delaware Secretary of State
naming Borrower as Debtor and Xxxxx Fargo Equipment Finance, Inc. as Secured
Party.
UCC Financing Statement No. 31946402 filed with the Delaware Secretary of State
naming Borrower as Debtor and Sunrise Leasing Corporation as Secured Party.
UCC Financing Statement No. 32430240 filed with the Delaware Secretary of State
naming Borrower as Debtor and CIT Communications Finance Corporation as Secured
Party.
UCC Financing Statement No. 40021701 filed with the Delaware Secretary of State
naming Borrower as Debtor and Brentwood Credit Corporation as Secured Party
amended to correct Organizational ID by Filing No. 40352395, assigned to Pullman
Bank and Trust Company by Filing No. 40352569
UCC Financing Statement No. 40415663 filed with the Delaware Secretary of State
naming Borrower as Debtor and Brentwood Credit Corporation as Secured Party and
Xxxxx Fargo Equipment Finance, Inc. as additional Secured Party
UCC Financing Statement No. 30162217 filed with the Delaware Secretary of State
naming Borrower as Debtor and Brentwood Credit Corporation as Secured Party as
amended by filing No. 40552598 (to be terminated at or immediately after
Closing).
UCC Financing Statement No. 31280737 filed with the Delaware Secretary of State
naming Borrower as Debtor and General Electric Credit Corporation as Secured
Party.
UCC Financing Statement No. 02-11660097 filed with the California Secretary of
State naming Borrower as Debtor and Sony financial Services, LLC as Secured
Party.
Intellectual Property Collateral (Section 5.4)
None.
Prior Names (Section 5.5)
MegaSystems, Inc.
PTM Productions, Inc.
Pacific Title/Mirage, Inc.
Pacific Title and Art Studio, Inc.
Litigation (Section 5.6)
None.
Inbound Licenses (Section 5.12)
License Agreement dated August 10, 2003 between Hi-Tech Theater Equipment and
Services Group and Ballantyne of Omaha, Inc. The Company has assigned the patent
rights of Hi-Tech U.S. Patent No. 5,875,020 to Ballantyne and it receives and
royalty on each projector sold using this technology.
