Exhibit 10.3
LOAN AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into this 16th day of
January, 2003, by and between International Travel CD's, Inc., a Colorado
corporation (the "Borrower") and Trident Growth Fund, LP, a Delaware limited
partnership (the "Lender").
WITNESSETH:
WHEREAS, the Borrower (f/k/a Gemini Growth Fund, LP) and Lender entered
into a previous lending relationship which is governed by various agreements
executed by and between Borrower and Lender. Other than certain agreement
regarding. security for the loans, the documents governing this advance shall be
governed by these agreements and the previous advance governed by the prior
agreements.
WHEREAS, the Borrower has requested that Lender make a loan to Borrower of
up to $400,000 (the "Loan"); and
WHEREAS, Lender has agreed to make such a loan available to Borrower upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, it is agreed as follows:
SECTION 1. DEFINITIONS. All of the terms defined in this Agreement shall
have such defined meanings when used in the other Loan Documents (as hereinafter
defined) and any certificates, reports or other documents or instruments issued
under or delivered pursuant to this Agreement unless the context shall require
otherwise. For purposes of this Agreement, the following terms shall have the
following meanings:
1.1 "Affiliate" shall mean an entity that is a member of a "controlled
group of corporations" (within the meaning of Section 414(b) of the Internal
Revenue Code), an "affiliated service group" (within the meaning of Section
414(m) of the Internal Revenue Code), or a group of trades or business under
common control (within the meaning of Section 414(c) of the Internal Revenue
Code) that also includes the Borrower as a member.
1.2 "Agreement" shall include this Agreement as amended, modified or
supplemented from time to time.
1.3 "Authorized Officer" shall mean the Chief Executive Officer or the
President of the Borrower or such other person designated in writing to the
Lender, who is authorized to act on behalf of the Borrower hereunder.
1.4 "Business Day" means a day upon which banks are open for the
transaction of business of the nature required by this Agreement in Texas.
1.5 "Capital Expenditure" means any payment made directly or indirectly for
the purpose of acquiring or constructing fixed assets, real property or
equipment which in
accordance with GAAP would be added as a debit to the fixed asset account of the
Person making such expenditure, including, without limitation, amounts paid or
payable under any conditional sale or other title retention agreement or under
any lease or other periodic payment arrangement which is of such a nature that
payment obligations of the lessee or obligor thereunder would be required by
generally accepted accounting principles to be capitalized and shown as
liabilities on the balance sheet of such lessee or obligor.
1.6 "Cash Flow" means an amount equal to (i) the Borrower' Consolidated
EBITDA, minus (ii) the Borrower's Consolidated non-financed Capital
Expenditures.
1.7 "Capital Lease" means any lease of property (real, personal or mixed)
which, in accordance with GAAP,. should be capitalized on the lessee's balance
sheet or for which the amount of the asset and liability thereunder as if so
capitalized should be disclosed in a note to such balance sheet.
1.8 "Change of Control" means (a) a Change of Ownership; (b) during any
period of twelve consecutive calendar months, individuals who at the beginning
of such period constituted the board of directors of the Borrower (together with
any new directors whose election by the board of directors of the Borrower or
whose nomination for election by the shareholders of Borrower was approved by a
vote of at least two-thirds of the directors then in office who either were
directors at the beginning of such period or whose elections or nomination for
election was previously so approved) cease for any reason other than death or
disability to constitute a majority of the directors then in office.
1.9 "Change of Ownership" means any person or group of persons (other than
the Lender and/or the shareholders of the Borrower on the Closing Date) shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended) of forty percent (40%) or more (computed on a fully diluted
basis) of the issued and outstanding shares of capital stock of Borrower having
the right to vote for the election of directors of Borrower under ordinary
circumstances.
1.10 "Closing Date" means the date first set forth above.
1.11 "Committed Amount" means the principal amount of $400,000 which Lender
has agreed to lend to Borrower as evidenced by the Convertible Note.
1.12 "Common Stock" shall have the meaning as defined in Section 3.3.
1.13 DELETED.
1.14 "Consolidated EBITDA" means, for any Person for any period:
(i) the consolidated net income of such Person and its Consolidated
Subsidiaries for such period (after Income Taxes), but excluding:
(a) any gain arising from the sale of capital assets,
(b) any gain arising from any write-up of assets,
(c) earnings of any other Person, substantially all of the assets of which
have been acquired by such Person or its Consolidated Subsidiaries in any
manner, to the extent that such earnings were realized by such other Person
prior to the date of such acquisition.
(d) earnings of any Person in which the Person or its Consolidated
Subsidiaries has an ownership interest (other than wholly owned Subsidiaries of
such Person ), unless such earnings have actually been received by the Person or
its Consolidated Subsidiaries in the form of cash distributions,
(e) earnings of any Person to which assets of the Person or its
Consolidated Subsidiaries shall have been sold, transferred or disposed of, or
into which the Person shall have merged, to the extent that such earnings arise
prior to the date of such transaction,
(f) any gain arising from the acquisition of any securities of such Person
or any of its Consolidated Subsidiaries, and
(g) any extraordinary gain realized by such Person or any of its
Consolidated Subsidiaries during such period.
(ii) plus the following, but only in each case to the extent incurred
by the Borrower and its Consolidated Subsidiaries during such period and
deducted in the calculation above for such period,
(a) all income and franchise taxes,
(b) all Interest Expense,
(c) all depreciation expense, and
(d) all amortization expense.
1.15 "Consolidated Subsidiary" or "Consolidated Subsidiaries" means, for
any Person, any Subsidiary or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
as of such date in accordance with GAAP.
1.16 "Current Assets" means, at any particular time, all amounts which, in
conformity with GAAP, would be included as current assets on a consolidated
balance sheet of the Borrower and its Subsidiaries; provided however, there
shall be excluded therefrom (a) all prepaid expenses of every type and nature,
(b) all amounts due from partners, officers, stockholders or other Affiliates,
and all loans due from employees, and (c) all deferred charges.
1.17 "Current Liabilities" means, at any particular time, all amounts
(including deferred taxes) which, in conformity with GAAP, would be included as
current liabilities on a consolidated balance sheet of the Borrower and its
Subsidiaries.
1.18 "Current Ratio" means the ratio of Current Assets to Current
Liabilities.
1.19 "Debt" means, with respect to any Person on any date of determination
(without duplication), (i) all obligations for borrowed money, (ii) all
obligations evidenced by bonds, debentures, notes or similar instruments, (iii)
all obligations to pay the deferred purchase price of property or services
except trade accounts payable arising in the ordinary course of business which
are paid when due in accordance with ordinary-course payment terms, (iv) all
obligations arising under acceptance facilities or facilities for the discount
or sale of accounts receivable, (v) all direct or contingent obligations in
respect of letters of credit, (vi) lease obligations (other than lease
obligations with respect to operating leases) that have been (or under GAAP
should be) capitalized for financial reporting purposes, (vii) liabilities
secured (or for which the holder of any obligations or liabilities has an
existing right, contingent or otherwise, to _be so secured) by any Lien existing
on property owned or acquired by that Person and (viii) all guaranties,
endorsements and other contingent obligations for liabilities or obligations or
the maintenance of financial condition of others, including obligations to
repurchase or purchase properties or to maintain or cause to maintain any
financial condition.
1.20 "Default" or "Event of Default" means the occurrence of all or any of
the events specified in Section 7 and/or set forth in the Convertible Note (as
defined below).
1.21 "Indebtedness" means with respect to any Person, all indebtedness of
such Person for borrowed money, all indebtedness of such Person for the
acquisition of property other than purchases of products and merchandise in the
ordinary course of business, indebtedness secured by a lien, pledge or other
encumbrance on the property of such Person whether or not such indebtedness is
assumed, all liability of such Person by way of endorsements (other than for
collection or deposit in the ordinary course of business); all guarantees of
Indebtedness of any other Person by such Person (including any agreement,
contingent or otherwise, to purchase any obligation representing such
Indebtedness or property constituting security therefor, or to advance or supply
funds for such purpose or to maintain working capital or other balance sheet or
income statement condition, or any other arrangement in substance effecting any
of the foregoing); all leases and other items which in accordance with Generally
Accepted Accounting Principles are classified as liabilities on a balance sheet.
1.22 "Interest Expense" means, with respect to any Person and for any
period (without duplication), all interest on that Person's Debt, whether paid
in cash or accrued as a liability and payable in cash during any subsequent
period (including, without limitation, the interest component of Capital
Leases), as determined by GAAP.
1.23 "Liabilities" mean all liabilities, obligations and indebtedness of
any and every kind and nature (including, without limitation, lease obligations,
accrued interest, charges, expenses, attorneys' fees and other sums) chargeable
to the Borrower and made to or for the benefit of the Borrower, whether arising
under this Agreement or arising under the Note or any
of the Loan Documents of the Borrower, whether heretofore, now or hereafter
owing, arising, due or payable from Borrower to the Lender and however
evidenced, credited, incurred, acquired or owing, whether primary, secondary,
direct, contingent, fixed, or otherwise, including obligation of performance.
1.24 "Liens" shall have the meaning set forth in Section 3.9.
1.25 "Loan Amount" means the principal amount of up to $400,000 which
Lender has agreed to lend Borrower at Lender's sole option.
1.26 "Loan Documents" means this Agreement, the Convertible Note, the
Pledge Agreement, the Warrant, the Security Agreement, and all documents,
instruments, certificates, reports and all other written matters whether
heretofore, now, or hereafter executed by or on behalf of the Borrower and/or
delivered to Lender in connection herewith.
1.27 "Convertible Note" or "Note" means one or more Senior Secured
Promissory Notes, to be executed by the Borrower in favor of the Lender,
substantially in the form of Exhibit 1 attached hereto.
1.28 "Material Adverse Effect" shall have the meaning set forth in Section
3.1.
1.29 "Net Income" or "Net Loss" means, with respect to any Person for any
period, the net income or net loss of such Person determined in accordance with
GAAP, after payment of income Taxes but excluding any extraordinary or
non-recurring items.
1.30 "Obligation" shall mean the principal amount of the Loan, plus nine
percent (9%) interest per annum (subject to adjustment) together with such costs
and reimbursements as may be due under the Loan Agreement and the Note.
1.31 "Pledge Agreement", if any, means the pledge agreement of approximate
even date herewith executed by pledgor in favor of the Lender.
1.32 "Registrable Securities" shall mean (i) the Common Stock issued upon
conversion of the Convertible Notes, or (ii) any Common Stock issued upon the
exercise of the Warrant, right or other security which is issued in conjunction
with this transaction (i) above by way of stock dividend; any other distribution
with respect to or in exchange for, or in replacement of Common Stock; stock
split; or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
1.33 "Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated organization, association,
joint venture or a government or agency or political subdivision thereof.
1.34 "Security Agreement" means that certain Security Agreement of
approximate even date herewith executed by the Borrower in favor of the Lender.
1.35 "Subsidiary" means any corporation or limited liability company of
which at least a 50% of the outstanding securities having ordinary voting powers
for the election of Board of Directors (or similar governing body) are at the
time owned by Borrower. As used herein, the term "Borrower" shall be deemed to
include all of Borrower's Subsidiaries, if any.
1.36 "Termination Date" means the earlier of: (a) January 31, 2004; (b) the
date of the occurrence and continuance of an Event of Default (as hereinafter
defined); (c) the date of repayment of the Loan Amount plus accrued interest;
(d) the date of the closing of a secondary public offering by the Borrower
and/or its shareholders; or (e) the date of the Change of Control of the
Borrower.
1.37 "Warrant", if any means that certain warrant of approximate even date
herewith executed by the Borrower in favor of the Lender.
SECTION 2. LOAN.
2.1 COMMITTED LOAN AMOUNT. Subject to the terms and conditions of this
Agreement, the Lender agrees to loan to the Borrower $400,000 pursuant to the
terms of the Convertible Note and the other Loan Documents upon the execution of
this Agreement. The Lender shall provide such funds (via check or wire transfer)
to the Borrower within five (5) business days of receipt by the Lender of such
Loan Documents duly executed by Borrower, or within such shorter period as
Borrower and Lender mutually agree. Nothing set forth herein shall prohibit the
Borrower from making prepayments without penalty at any time and from time to
time (subject to prior conversion rights). All provisions of the Convertible
Note are incorporated herein by reference. Any conflicts between the Convertible
Note and this Loan Agreement shall be resolved by reference to the Convertible
Note. Upon execution of this Agreement, contemporaneous with the funding of the
Loan, Borrower shall promptly pay to the order of the Lender a commitment fee in
the amount of 1 % and an origination fee of 4%. Such fees shall be applicable to
any further lending from Lender to Borrower.
2.2 PAYMENTS OF INTEREST AND PRINCIPAL. Interest on the Loan Amount shall
accrue at the rate of nine percent (9%) per annum from the date of receipt of
funds by Lender, and shall be payable via wire transfer in cash. Unless earlier
repaid in accordance with payment provisions set forth in the Note, Borrower
shall pay to Lender on the Termination Date the entire principal amount of the
outstanding Convertible Notes, via wire transfer, together with accrued interest
thereon and any fees then owed.
2.3 USE OF PROCEEDS. The proceeds of the Loan shall be used by the Borrower
in accordance with the provisions of Schedule 2.3 hereof.
2.4 CONVERSION. Terms found in the Convertible Note.
SECTION 3. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender to
enter into this Agreement and to make the Loan available, the Borrower
represents and warrants to the Lender as of the Closing Date (which
representations and warranties shall survive the delivery of the documents
mentioned herein, and the termination of this Agreement) as follows:
3.1 ORGANIZATION.
(a) The Borrower and each Subsidiary, if any, is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its respective formation, has the power to own its respective
properties and to carry on its respective businesses as now being conducted and
is duly qualified to do business in every jurisdiction in the United States of
America for which the failure to so qualify would have a material impact on the
financial condition, operations, business or prospects of the Borrower
("Material Adverse Effect").
(b) SCHEDULE 3.1 sets forth true and complete copies of the Articles of
Incorporation and Bylaws, as in effect on the date hereof, of the Borrower and
all other corporate formation and governing documents of each of the
Subsidiaries. Except as set forth in Schedule 3.l(b), the Borrower does not own
or control, directly or indirectly, any equity interest in any corporation,
company, limited liability company, association, partnership, limited
partnership, joint venture or other entity.
3.2 POWER AND AUTHORITY. The Borrower is duly authorized under all
applicable provisions of law, its Articles of Incorporation, and its Bylaws to
execute, deliver and perform this Agreement, the Convertible Note and the other
Loan Documents to which it is a party, and all other action on the part of the
Borrower required for the lawful execution, delivery and performance thereof
have been duly taken. This Agreement and the other Loan Documents, if any, upon
the due execution and delivery thereof, are valid and enforceable instruments,
obligations or agreements of the parties, in accordance with their respective
terms, except as to enforcement of creditors rights generally. Neither the
execution of this Agreement and the Loan Documents, nor the fulfillment of or
compliance with their provisions and terms, conflicts with, or has or will
result in a breach of the terms, conditions or provisions of, or constitute a
violation of or default under: (a) any applicable law, regulation, order, writ
or decree; or (b) any agreement or instrument to which the Borrower is a party,
or create any lien, charge or encumbrance upon any of the property or assets of
any of them pursuant to the terms of any agreement or instrument to which any of
them is a party or by which any of them are bound except those in favor of the
Lender expressly created hereunder.
3.3 CAPITALIZATION. As of the date hereof, the total number of authorized
shares of common stock of the Borrower (the "Common Stock") is of which shares
are issued and outstanding and the total number of authorized shares of
preferred stock of the Borrower (the "Preferred Stock") is shares, of which are
issued and outstanding. Borrower does not have any authorized shares of
preferred stock. The outstanding capitalization of the Borrower as of the date
hereof is set forth in Schedule 3.3 annexed hereto. Except as otherwise
disclosed in Schedule 3.3, there are no warrants, options or preemptive rights
authorized or outstanding with respect to any of the Borrower's capital stock.
The Borrower shall not issue any derivative securities without the express
written consent of the Lender.
3.4 STOCK OWNERSHIP. The stockholders, which are reflected on Schedule 3.3,
are holders of all of the issued and outstanding Common Stock and, except as
contemplated by the
Loan Documents and Schedule 3.3, there are no commitments, agreements or
undertakings with respect to the issuance of any equity or debt securities of
the Borrower.
3.5 MATERIAL LIABILITIES. The sole outstanding material liabilities of the
Borrower are set forth on Schedule 3.5 annexed hereof.
3.6 PROCEEDS OF CONVERTIBLE NOTE. The Borrower shall use the proceeds of
the Convertible Note solely for those purposes set forth on Schedule 2.3 hereof.
3.7 REGISTRATION RIGHTS. Except as set forth in Schedule 3.7, there are no
registration rights agreements with respect to any of the Borrower's capital
stock.
3.8 MATERIAL AGREEMENTS. Except for those agreements set forth on Schedule
3.8 hereof, there are no other material agreements to which the Borrower is a
party.
3.9 TITLE TO ASSETS. Except as set forth on Schedule 3.9 hereof, the
Borrower has good and marketable title to all of its properties and assets, all
of which are free and clear of any and all liens, mortgages, pledges,
encumbrances or charges of any kind or nature whatsoever (collectively,
"Liens").
3.10 LITIGATION. There are no pending or threatened actions or proceedings
before any court, any state, provincial or federal regulatory body, or any
self-regulatory organization arbitrator or governmental or administrative body
or agency which would have a Material Adverse Effect or in any way materially
affect or call into question the power and authority of the Borrower to enter
into or perform this Agreement and the Loan Documents.
3.11 TAXES. The Borrower has filed all income tax returns (if any) required
to be filed by it and all taxes due thereon have been paid, and no controversy
in respect of additional income taxes, municipal, state or federal, of the
Borrower is pending or threatened.
3.12 AGREEMENTS OR RESTRICTIONS AFFECTING THE BORROWER. The Borrower is not
a party to or otherwise bound by any contract or agreement or subject to any
restrictions which would have Material Adverse Effect or restricts the
Borrower's ability to enter into this Agreement or any of the other of the Loan
Documents or the Borrower's ability to effect the transactions contemplated
therein and herein.
3.13 GOVERNMENTAL APPROVAL. No approval of any federal, state, municipal or
other local governmental authorities is necessary to carry out the terms of this
Agreement and the Loan Documents, and no consents or approvals are required in
the making or performance of this Agreement and the Loan Documents.
3.14 BOARD OF DIRECTORS. The Board of Directors of the Borrower consists of
Xxxxxx Xxxxxxxxxx. The Board of Directors will be expanded to include such
number of directors required by the rules promulgated by the Securities and
Exchange Commission. Such directors shall be elected by shareholders or
appointed by the Board of Directors.
3.15 NO UNTRUE STATEMENTS. None of this Agreement or the Loan Documents nor
any other agreements, reports, schedules, certificates or instruments heretofore
or simultaneously with the execution of this Agreement delivered to Lender,
contains any misrepresentation or untrue statement of fact or omits to state any
fact necessary to make any of such agreements, reports, schedules, certificates
or instruments not misleading.
3.16 EMPLOYEE BENEFIT PLANS.
(a) Borrower has disclosed to Lender in writing prior to the execution of
the Agreement and has listed on Schedule 3.16 all Borrower Benefit Plans.
Attached to Schedule 3.16 are correct and complete copies, in each case of all
Borrower Benefit Plans. For purposes of this Agreement, "Borrower Benefit Plans"
means all pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plan, all other written employee agreements or programs, all medical,
vision, dental, or other health plans, all life insurance plans, and all other
employee benefit plans or fringe benefit plans, including, without limitation,
"employee benefit plans" as that term is defined in Section 3(3) of ERISA
maintained by, sponsored in whole or in part by, or contributed to by, the
Borrower or any of its Affiliates for the benefit of managers, members,
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries and under which managers, members, employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate. Any of the Borrower Benefit Plans which is an
"employee welfare benefit plan," as that term is defined in Section 3(1) of
ERISA, or an "employee pension benefit plan," as that term is defined in Section
3(2) of ERISA, is referred to herein as a "Borrower ERISA Plan." Any Borrower
ERISA Plan which is also a "defined benefit plan" (as defined in Section 4l4(j)
of the Internal Revenue Code or Section 3(35) of ERISA) is referred to herein as
a "Borrower Pension Plan." Neither Borrower nor any Affiliate has an "obligation
to contribute" (as defined in ERISA Section 4212) to a "multiemployer plan" (as
defined in ERISA Sections 400l(a)(3) and 3(37)(A)). Each "employee pension
benefit plan," as defined in Section 3(2) of ERISA, ever maintained by the
Borrower or any Affiliate that was intended to qualify under Section 40 1 (a) of
the Internal Revenue Code and with respect to which any Affiliate has any
liability, is disclosed as such in Schedule 3.16.
(b) Borrower has attached to Schedule 3.16 correct and complete copies of
the following documents: (i) all trust agreements or other funding arrangements
for such Borrower Benefit Plans (including insurance contracts), and all
amendments thereto; (ii) with respect to any such Borrower Benefit Plans or
amendments, all determination letters, rulings, opinion letters, information
letters, or material advisory opinions issued by the Internal Revenue Service,
the United States Department of Labor, or the Pension Benefit Guaranty
Corporation after December 31, 1994; (iii) annual reports or returns, audited or
unaudited financial statements, actuarial valuations and reports, and summary
annual reports prepared for any Borrower Benefit Plan with respect to the most
recent plan year; and (iv) the most recent summary plan descriptions and any
material modifications thereto.
(c) All Borrower Benefit Plans are in material compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
laws, the breach or violation of which is reasonably likely to have,
individually or in the aggregate, a Material
Adverse Effect on the Borrower. Each Borrower ERISA Plan currently maintained by
Borrower which is intended to be qualified under Section 40l(a) of the Internal
Revenue Code has received a favorable determination letter from the Internal
Revenue Service, and Borrower is not aware of any circumstances which will or
could reasonably result in revocation of any such favorable determination
letter. Each trust created under any Borrower ERISA Plan, which is an "employee
pension benefit plan" as defined in Section 3(2) of ERISA, has been determined
to be exempt from tax under Section 501 (a) of the Internal Revenue Code and
Borrower is not aware of any circumstance which will or could reasonably result
in revocation of such exemption. With respect to each Borrower Benefit Plan to
the best knowledge of Borrower, no event has occurred which will or could
reasonably give rise to a loss of any intended tax consequences under the
Internal Revenue Code or to any tax under Section 511 of the Internal Revenue
Code that is reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on Borrower. There is no material pending or, to the
best knowledge of the Borrower, threatened litigation relating to any Borrower
ERISA Plan.
(d) No Affiliate has engaged in a transaction with respect to any Borrower
Benefit Plan that, assuming the taxable period of such transaction expired as of
the date of this Agreement, would subject any Affiliate to a material tax or
penalty imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA in amounts which are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Borrower. Neither Borrower nor,
to the best of Borrower's knowledge, any administrator or fiduciary of any
Borrower Benefit Plan (or any agent of any of the foregoing) has engaged in any
transaction, or acted or failed to act in any manner which could subject
Borrower to any direct or indirect liability (by indemnity or otherwise) for
breach of any fiduciary, co-fiduciary, or other duty under ERISA, where such
liability, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on the Borrower. To its best knowledge, no oral or
written representation or communication with respect to any aspect of the
Borrower Benefit Plans has been made to employees of the Borrower or any
Affiliate which is not in accordance with the written or otherwise preexisting
terms and provisions of such plans, where any liability with respect to such
representation or disclosure is reasonably likely to have a Material Adverse
Effect on Borrower.
(e) Since the date of the most recent actuarial valuation, there has been
(i) no material change in the financial position or funded status of any
Borrower Pension Plan, (ii) no change in the actuarial assumptions with respect
to any Borrower Pension Plan, and (iii) no increase in benefits under any
Borrower Pension Plan as a result of plan amendments or changes in applicable
Law, any of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Borrower. No Borrower Pension Plan has
an "accumulated funding deficiency" within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA. All contributions with respect to
a Borrower Pension Plan have or will be timely made and there is no lien or
expected to be a lien under Internal Revenue Code Section 412(n) or ERISA
Section 302(f) or tax under Internal Revenue Code Section 4971. Neither the
Borrower nor any Affiliate has provided, or is required to provide, security to
a Borrower Pension Plan pursuant to Section 401(a)(29) of the Internal Revenue
Code. All premiums required to be paid under ERISA Section 4006 have been timely
paid by Borrower, except to the extent any failure would not have a Material
Adverse Effect on Borrower.
(f) No liability under Title IV of ERISA has been or is expected to be
incurred by the Borrower or any Affiliate with respect to any defined benefit
plan currently or formerly maintained by any of them that has not been satisfied
in full (other than liability for Pension Benefit Guaranty Corporation premiums,
which have been paid when due), except to the extent any failure would not have
a Material Adverse Effect on Borrower.
(g) The Borrower and any Affiliate have no obligations for retiree health
and retiree life benefits under any of the Borrower Benefit Plans other than
with respect to benefit coverage mandated by applicable Law.
(h) Except as disclosed in Schedule 3 .16(h), neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will, by themselves, (1) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any manager, director or any employee of the Borrower
or Affiliate under any Borrower Benefit Plan or otherwise, (2) increase any
benefits otherwise payable under any Borrower Benefit Plan, or (3) result in any
acceleration of the time of payment or vesting of any such benefit.
(i) Except as set forth in the Schedule 3.16(i), Borrower does not
maintain or otherwise pay for life insurance policies (other than group term
life policies on employees) with respect to any manager, director, officer or
employee. Schedule 3.16(i) lists each such insurance policy and includes a copy
of each agreement with a party other than the insurer with respect to the
payment, funding or assignment of such policy. To the best of Borrower's
knowledge, neither Borrower nor any Borrower Pension Plan or Borrower Benefit
Plan owns any individual or group insurance policies issued by an insurer which
has been found to be insolvent or is in rehabilitation pursuant to a state
proceeding.
SECTION 4. CONDITIONS PRECEDENT TO MAKING LOAN.
The Lender shall not be obligated to make the Loan until all of the
following conditions have been satisfied by proper evidence, execution and/or
delivery to the Lender of the following items, all in form, and substance
reasonably satisfactory to the Lender:
(a) The Convertible Note;
(b) This Agreement;
(c) Guaranty by 1025 Investments, Inc.
(d) A Security Agreement and UCC-I for the Borrower and any
Subsidiary;
(e) Unanimous consent of the Board of Directors of the
Borrower and all Subsidiaries, certified by the Secretary of the Borrower as of
the Closing Date, approving or otherwise ratifying the transactions contemplated
by this Agreement, and approving the form of this Agreement and the Loan
Documents, and authorizing execution, delivery, and performance thereof;
(f) Specimen signatures of the officer of the Borrower and
Subsidiary executing this Agreement and the Loan Documents, and the officer
authorized to borrow under the Loan Documents, certified by the Secretary of the
Borrower or Subsidiary;
(g) A copy of the Articles of Incorporation, certified by an
official of the Borrower's jurisdiction of formation or incorporation and
further certified by the Secretary of Borrower not to have been altered or
amended since certification by such official; and a copy of the Bylaws of the
Borrower, certified as true and correct by the Secretary of the Borrower;
(h) Such other instruments, documents or items as the Lender
may reasonably request;
(i) No Event of Default shall have occurred and be continuing
under this Agreement, the Convertible Note or any other Loan Document, nor shall
the Borrower be in default under any other document or agreement to which it is
a party or by which it or any of its properties or assets are bound; and
(j) Payment of the origination and commitment fees referenced
in Section 2.1 hereof.
SECTION 5. AFFIRMATIVE COVENANTS. The Borrower covenants that, so long as
any portion of the Liabilities remains unpaid and unless the Lender otherwise
consents in writing, it will:
5.1 TAXES AND LIENS. Promptly pay, or cause to be paid, all taxes,
assessments and other governmental charges which may lawfully be levied or
assessed upon the income or profits of the Borrower, or upon any property, real,
personal or mixed, belonging to the Borrower, or upon any part thereof, and also
any lawful claims for labor, material and supplies which if unpaid, might become
a lien or charge against any such property; provided, however, the Borrower
shall not be required to pay any such tax, assessment, charge, levy or claim so
long as the validity thereof shall be actively contested in good faith by proper
proceedings; but provided further that any such tax, assessment, charge, levy or
claim shall be paid or bonded in a manner satisfactory to the Lender forthwith
upon the commencement of proceedings to foreclose any lien securing the same.
5.2 BUSINESS AND EXISTENCE. Do or cause to be done all things necessary to
preserve and to keep in full force and effect any licenses necessary to the
business of the Borrower, its corporate existence and rights of its franchises,
trade names, trademarks, and permits which are reasonably necessary for the
continuance of its business; and continue to engage principally in the business
currently operated by the Borrower.
5.3 INSURANCE AND PROPERTIES. Keep its business and properties insured at
all times with responsible insurance companies and carry such types and amounts
of insurance as are required by all federal, state and local governments in the
areas which Borrower does business and as are usually carried by entities
engaged in the same or similar business similarly situated.
In addition, Borrower shall maintain in full force and effect policies of
liability insurance in amounts at least equal to that currently in effect.
5.4 MAINTAIN PROPERTY. Maintain its property in good order and repair and,
from time to time, make all needed and proper repairs, renewals, replacements,
additions and improvements thereto, so that the business carried on may be
properly and advantageously conducted at all times in accordance with prudent
business management, and maintain annually adequate reserves for maintenance
thereof.
5.5 TRUE BOOKS. Keep true books of record and account in which full, true
and correct entries will be made of all of its dealings and transactions, and
set aside on its books such reserves as may be required by Generally Accepted
Accounting Principles, consistently applied, with respect to all taxes,
assessments, charges, levies and claims referred to in Section 5.1 hereof, and
with respect to its business in general, and include such reserves in interim as
well as year-end financial statements.
5.6 PAY INDEBTEDNESS TO LENDER AND PERFORM OTHER COVENANTS. (a) Make full
and timely payment of the principal of and interest on the Convertible Note and
all other indebtedness of the Borrower to the Lender, whether now existing or
hereafter arising, including the payment of fees; and (b) duly comply with all
terms and covenants contained in this Agreement, the Convertible Note, the other
Loan Documents and any other instruments and documents given to the Lender
pursuant to this Agreement.
5.7 Right of Inspection. Permit any person designated by the Lender, at the
Lender's expense, to visit and inspect any of the properties, books and
financial reports of the :Borrower, all at such reasonable times upon
forty-eight (48) hours prior notice to Borrower, and as often as the Lender may
reasonably request, provided the Lender does not interfere with the daily
operations of the Borrower.
5.8 OBSERVANCE OF LAWS. Conform to and duly observe all laws, regulations
and other valid requirements of any regulatory authority with respect to the
conduct of its business.
5.9 BORROWER'S KNOWLEDGE OF DEFAULT. Upon an officer or director of the
Borrower obtaining knowledge of, or threat of, an Event of Default hereunder,
cause such officer to promptly, within no more than ten (10) business days,
deliver to the Lender notice thereof specifying the nature thereof, the period
of existence thereof, and what action the Borrower proposes to take with respect
thereto.
5.10 NOTICE OF PROCEEDINGS. Upon an officer or director of the Borrower
obtaining knowledge of any material litigation, dispute or proceedings being
instituted or threatened against the Borrower, or any attachment, levy,
execution or other process being instituted against any assets of the Borrower,
cause such officer to promptly, within no more than ten (10) business days, give
the Lender written notice of such litigation, dispute, proceeding, levy,
execution or other process.
5.11 PAYMENT OF LENDER'S EXPENSES. If at any time or times hereafter,
Lender employs
counsel in connection with the execution and consummation of the transactions
contemplated by this Agreement or to commence, defend or intervene, file a
petition, complaint, answer, motion or other pleading, or to take any action in
or with respect to any suit or proceeding (bankruptcy or otherwise) relating to
this Agreement or any other Loan Document, or any other agreement, guaranty,
Convertible Note, instrument or document heretofore, now or at any time or times
hereafter executed by Borrower and delivered to Lender, or to enforce any rights
of Lender hereunder whether before or after the occurrence of any Event of
Default, or to collect any of the Liabilities, then in any of such events, all
of the reasonable attorneys' fees arising from such services, and any expenses,
costs and charges relating thereto, shall be part of the Liabilities, payable on
demand. In connection the initial loan documentation, counsel fees shall fees
shall not exceed $5,000.
5.12 LENDER'S REPRESENTATIVE. Borrower hereby grants to a representative of
the Lender the right to attend and observe all Meetings of the Borrower's Board
of Directors held during the period commencing on the Closing Date and for so
long as any Liabilities are due and owing to Lender, provided that said designee
is reasonably acceptable to the Board of Directors of the Borrower. The Borrower
shall cause such designee to receive written notice of all meetings of
Borrower's Board of Directors as if such designee was a member of Borrower's
Board of Directors. Lender's designee shall be reimbursed for all reasonable and
customary out of pocket expenses relating to his service on the Board and or any
Committee thereof, and shall receive such compensation, if any, all as shall be
commensurate with reimbursements and payments received by other non-employee
directors. Borrower hereby agrees to provide Lender's designee with a copy of
all written consents of Borrower's Board of Directors within ten business days
after the date of any such consent.
5.13 FINANCIAL REPORTING. The Borrower shall provide to Lender audited
annual financial statements, audited by mutually agreed upon independent
certified public accounting firm. Said financial statements shall be prepared in
accordance with Generally Accepted Accounting Principles, consistently applied,
and shall be delivered to Lender within ninety (90) days after the close of the
Borrower's fiscal year. The report of the auditor that accompanies the financial
statements shall not contain any qualifications or limitations. The Borrower's
fiscal year ends on December 31, and shall not be changed without the prior
written consent of the Lender. The Borrower shall provide to Lender unaudited
monthly financial statements (including month to date and year to date actual to
prior periods) and a report in the form of Exhibit 2, both presented in
accordance with Generally Accepted Accounting Principles ("GAAP"), consistently
applied, and shall be delivered to Lender within twenty-five (25) days after the
close of the Borrower's month. Borrower shall also deliver any other reports
reasonably requested by Lender. If the reports are not delivered within 25 days
of the month or request date, whichever is applicable, then the Borrower will
pay a late fee of $250 per day until the report is delivered.
5.14 FINANCIAL COVENANTS. As of the date hereof and until the Termination
Date, the Borrower must maintain the following ratios:
(a) Cash Interest Coverage. Until the Termination Date, the
Borrower shall maintain a Consolidated EBITDA ratio, based on any of the
Borrower's quarterly financial statements (as determined on the last day of each
fiscal quarter for the immediately preceding
quarter), of 2.0 or greater. The Consolidated EBITDA ratio is defined as
Consolidated EBITDA divided by Interest Expense (Consolidated EBITDA / Interest
Expense).
(b) Cash Flow Coverage Ratio. The ratio of (a) the Borrower's
Cash Flow to (b) the sum of (i) the Borrower's consolidated Interest Expense
plus (ii) the Borrower's scheduled payments of principal (including the
principal component of Capital Leases) to be paid during the 12 months following
any date of determination shall at all times exceed 1.5 to 1.0. Compliance with
the ratio will be tested as of the last day of each month, with Cash Flow and
Interest Expense being calculated for the twelve months then ended.
(c) Current Ratio. The Borrower will at all times maintain a
Current Ratio of not less than 1.5 to 1.0. The Current Ratio shall be calculated
and tested quarterly as of the last day of each fiscal quarter of the Borrower.
(d) Actual versus Budget. The Borrower shall on a quarterly
basis achieve 75 percent of its budgeted revenue and income. Budget numbers
shall be those delivered to Lender contemporaneously herewith and then on an
annual calendar basis.
5.15 CERTIFICATE OF COVENANT COMPLIANCE On the last day of each March,
June, October and December, the Borrower will issue a Certificate of Covenant
Compliance, executed by either the Chief Executive Officer or Chief Financial
Officer in a form acceptable to Lender. If the Borrower is not in compliance
with the covenants specified in Sections 5 and 6 herein, the Borrower will
modify the Certificate of Covenant Compliance by stating the exception and
providing a detailed explanation of the non-compliance.
SECTION 6. NEGATIVE COVENANTS. The Borrower covenants and agrees that, so
long as any portion of the Liabilities remains unpaid and unless the Lender
otherwise gives its prior written consent, it will not, directly or indirectly:
6.1 MORTGAGES, LIENS, ETC. Incur, create, assume or permit to exist, other
than existing liens as disclosed in Schedule 3.5, any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind, including liens arising under
conditional sales or other title retention agreements upon any of its assets or
properties of any character other than in the ordinary course of business,
without the prior written consent of the Lender. Lender shall subordinate its
security position to a senior lender under documentation and terms acceptable to
Lender.
6.2 CAPITAL EXPENDITURES. Make or become committed to make, directly or
indirectly, any capital expenditures (including written limitation, capitalized
leases) amounting to in excess of $50,000 in the aggregate, without the prior
written consent of the Lender.
6.3 LOANS AND INVESTMENTS. Lend or advance money, credit or property to any
Person, or invest in (by capital contribution or otherwise), or purchase or
repurchase the stock or indebtedness or assets or properties of any Person, or
agree to do any of the foregoing, other than in the ordinary course of business,
without the prior written consent of the Lender.
6.4 GUARANTEES. Assume, endorse or otherwise become or remain liable in
connection with the obligations (including accounts payable) of any other
Person, other than in the ordinary course of business.
6.5 SALE OF ASSETS, DISSOLUTION, ETC. Transfer, sell, assign, lease or
otherwise dispose of any of its properties or assets, or any assets or
properties necessary or desirable for the proper conduct of its business, or
transfer, sell, assign or otherwise dispose of any of its Convertible Note,
accounts, or contract rights to any Person, or change the nature of its
business, wind-up, liquidate or dissolve, or agree to any of the foregoing,
other than in the ordinary course of business, without the prior written consent
of the Lender.
6.6 ACQUISITION OF ASSETS. Permit the purchase, acquisition or lease of
assets of any Person or Persons, other than in the ordinary course of business,
without the prior written consent of Lender.
6.7 COMPENSATION. The Borrower must not increase the compensation of any of
its officers or consultants making more than $100,000 per year, hire any
relative of any officer, director or shareholder of the Borrower, or pay a bonus
to any such person.
6.8 INDEBTEDNESS. Incur, create, assume or permit to exist, any
indebtedness or obligation or enter into or extend or amend any material
agreement or lease in excess of $100,000, without the prior written consent of
Lender.
6.9 SUBSIDIARIES. Establish or form a partially or wholly owned subsidiary.
SECTION 7. EVENTS OF DEFAULT.
7.1 DEFAULTS. Each of the following shall constitute an Event of Default
(an "Event of Default") hereunder: (a) the failure to pay when due any principal
or interest hereunder or under the Convertible Note and the continuance of such
failure for a period of ten (10) business days thereafter; (b) any other
violation by the Borrower of any recital, funding condition, representation,
warranty, covenant or agreement contained in this Agreement or in any of the
Loan Documents; or any violation by the Borrower of any recital, funding
condition, representation, warranty, covenant or agreement contained in any
other document or agreement to which the Borrower and the Lender are parties;
(c) any change in the majority of the Board of Directors or of the management or
in the control of the Borrower which is not contemplated in Section 5.12 herein
or previously approved by the advance written consent of the Lender; (d)
execution of any agreement, letter, memorandum of understanding or similar
document relating to the transfer, disposition or sale of all or substantially
all of the assets of the Borrower to anyone without the approval of the Lender;
(e) an assignment for the benefit of creditors by the Borrower; (f) an
application for the appointment of a receiver or liquidator for the Borrower or
any of its material assets; (g) an issuance of an attachment or the entry of a
judgment against the Borrower in excess of $50,000; (h) a default by the
Borrower with respect to any other indebtedness in excess of $50,000 due to the
Lender; (i) the making or sending of a notice of intended bulk sale by the
Borrower; (1) the issuance of a determination by a court of competent
jurisdiction that one or more Loan Documents or one or more material provisions
of any Loan Document is unenforceable, or the issuance of an injunction against
the enforcement of any such
Loan Document or material provision; (m) upon the reasonable determination by
the Lender that there has been a Material Adverse Effect; and (n) the occurrence
of an Activity Event of Default (as defined in Section 8.6 herein). Upon the
occurrence of any of the foregoing Events of Default, the Convertible Note and
the Loan will be considered to be in default and the entire unpaid principal sum
hereof, together with accrued interest, will at the option of the holder thereof
become immediately due and payable in full. Upon the occurrence of an Event of
Default, the Borrower agrees to pay reasonable collection costs and expenses,
including reasonable attorneys' fees and interest (cash only, not stock) at the
lesser of: (i) 18% per annum (cash only, not stock) or (ii) the maximum rate
allowed under applicable law, from the date of the default at the maximum rate
permitted by law computed on the unpaid principal balance.
SECTION 8. SBIC PROVISIONS. The Borrower acknowledges that the Lender is a
small business investment company licensed by the United States Small Business
Administration, and makes the following representations, warranties and
covenants to Lender:
8.1 SMALL BUSINESS CONCERN. The Borrower represents and warrants to the
Lender that the Borrower, taken together with its "affiliates" (as that term is
defined in 13 C.F.R. ss.121.103), is a "Small Business Concern" within the
meaning of 15 U.S.C. ss.662(5), that is Section 103(5) of the Small Business
Investment Act of 1958, as amended (the "Act"), and the regulations thereunder,
including 13 C.F.R. ss. 107, and meets the applicable size eligibility criteria
set forth in 13 C.F.R. ss. 121.30l(c)(1) or the industry standard covering the
industry in which the Borrower is primarily engaged as set forth in 13 C.F.R.
ss.121.30l(c)(2). Neither the Borrower nor any of its subsidiaries presently
engages in any activities for which a small business investment company is
prohibited from providing funds by the SBIC Act, including 13 C.F.R. ss.107.
8.2 SMALL BUSINESS ADMINISTRATION DOCUMENTATION. On or before the Closing
Date, Xxxxx r shall have received SBA Form 480 (Size Status Declaration) and SBA
Form 652 (Assurance of Compliance) which have been completed and executed by the
Borrower, and SBA Form 1031 (Portfolio Finance Report), Parts A and B of which
have been completed by the Borrower (the "SBA Documents").
8.3 INSPECTION. The Borrower will permit the Lender or its representatives,
at Borrower's expense, and examiners of the SBA to visit and inspect the
properties and assets of the Borrower, to examine its books of account and
records, and to discuss the Borrower's affairs, finances and accounts with the
Borrower's officers, senior management and accountants, all at such reasonable
times as may be requested by the Lender or SBA.
8.4 INFORMATIONAL COVENANT. Within sixty (60) days after the end of the
fiscal year of the Borrower, the Borrower will furnish or cause to be furnished
to Lender information required by the SBA concerning the economic impact of the
Lender's investment, for (or as of the end of) each fiscal year, including but
not limited to, board minutes, information concerning full-time equivalent
employees; Federal, state and local income taxes paid; gross revenue; source of
revenue growth; after-tax profit and loss; and Federal, state and local income
tax withholding. Such information shall be forwarded by Borrower on a form
provided by the Lender. The Borrower also will furnish or cause to be furnished
to the Lender such other information
regarding the business, affairs and condition of the Borrower as the Lender may
from time to time reasonably request.
8.5 USE OF PROCEEDS. Subject to Section 2.3, the Borrower certifies that it
will use the proceeds from the Loan for the purposes and in the amounts set
forth on Schedule 2.3. The Borrower will deliver to the Lender from time to time
promptly following the Lender's request, a written report, certified as correct
by an officer, verifying the purposes and amounts for which proceeds from the
Loan have been disbursed. Subject to Section 2.3, the Borrower will supply to
the Lender such additional information and documents as the Lender reasonably
requests with respect to its use of proceeds, and will permit the Lender to have
access to any and all Borrower records and information and personnel as the
Lender deems necessary to verify how such proceeds have been or are being used,
and to assure that the proceeds have been used for the purposes specified on
Schedule 2.3.
8.6 ACTIVITIES AND PROCEEDS.
(a) Neither the Borrower nor any of its affiliates (as defined
in above) will engage in any activities or use directly or indirectly the
proceeds from the Loan for any purpose for which a small business investment
company is prohibited from providing funds by the SBIC Act, including 13 C.F.R.
ss. 107.
(b) Without obtaining the prior written approval of the
Lender, the Borrower will not change within one (1) year of the Closing Date the
Borrower's business activity from that described on Schedule 8.6 to a business
activity which a small business investment company is prohibited from providing
funds by the SBIC Act. The Borrower agrees that any such changes in its business
activity without such prior written consent of the Lender will constitute a
material breach of the obligations of the Borrower under this Agreement and the
Loan Documents (an "Activity Event of Default").
SECTION 9. MISCELLANEOUS.
9.1 REGISTRATION RIGHTS.
(a) Registrable Securities shall be fully registered and
freely tradeable within 180 days from the closing of the Loan. If the Borrower
for any reason fails to have the Registrable Securities fully registered within
180 days from closing of the Loan, then, at the option of Lender, for each full
calendar month that the Registrable Securities are not fully registered,
Borrower shall issue 0.1 % of its common shares then outstanding computed on a
fully diluted basis per day until the shares are registered.
(b) If at any time after the date hereof, the Borrower shall
file a registration statement relating to any of its securities, it will notify
the Holder in writing and, upon the Holder's request, will include the offer and
sale of Registrable Securities in such registration statement. In the event that
the Borrower fails include Registrable Securities in a piggy back statement as
required herein, the Borrower shall give notice demanding a registration and 105
days after the notice the Borrower shall prepare and file a registration
statement with the SEC
with respect to such Registrable Securities. If the Borrower fails to file
within said time period, then, at the option of Lender, for each full calendar
month that the Registrable Securities are not fully registered, Borrower shall
Borrower shall issue 0.1 % of its common shares then outstanding computed on a
fully diluted basis per day until the shares are registered.
(c) Whenever required to include Registrable Securities in any
registration or to effect the registration of any Registrable Securities
pursuant to this Agreement, the Borrower shall, as expeditiously as reasonably
possible prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its absolute best lawful efforts to cause
such registration statement to become effective, and use its absolute best
efforts to keep such registration statement effective until all such Registrable
Securities have been distributed. In addition, the Borrower shall use its best
lawful efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Borrower shall not be required in connection therewith or as a condition thereto
to qualify as a broker-dealer in any states or jurisdictions or to do business
or to file a general consent to service of process in any such states or
jurisdictions.
(d) All expenses, other than underwriting discounts and
commissions incurred in connection the registrations contemplated herein,
including, without limitation, all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Borrower, and the reasonable fees and disbursements of one counsel for the
selling Holders, shall be borne by the Borrower.
(e) Subject to the terms and conditions of this Agreement and
the Convertible Notes, the right to cause the Borrower to register Registrable
Securities pursuant to this Agreement may be assigned by Holder to any
transferee or assignee of such securities; provided that said transferee or
assignee is a transferee or assignee of at least five percent (5%) of the
Registrable Securities.
9.2 COMPUTATION OF INTEREST AND PAYMENT AND PREPAYMENT OF PRINCIPAL.
Interest on the Convertible Note shall be computed on the basis of a year of 365
days. If any principal amount under the Convertible Note becomes due and payable
on other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and interest on such principal shall be payable at the
then applicable rate during such extension period.
9.3 WAIVER OF DEFAULT. The Lender may, by written notice to the Borrower,
at any time and from time to time, waive any default in the performance or
observance of any condition, covenant or other term hereof or any Event of
Default which shall have occurred hereunder and its consequences. Any such
waiver shall be for such period and subject to such conditions as shall be
specified in any such notice. In the case of any such waiver, the Borrower and
the Lender shall be restored to their former position and rights hereunder and
under the other Loan Documents, and any Event of Default so waived shall be
deemed to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Event of Default, or impair any right consequent thereon.
9.4 AMENDMENTS AND WAIVERS. The Lender and the Borrower may, subject to the
provisions of this section, from time to time, enter into written agreements
supplemental hereto for the purpose of adding any provisions to this Agreement
or the other Loan Documents or changing or waiving in any manner the rights or
requirements of the Lender or of the Borrower hereunder. Any such written
supplemental agreement or waiver shall be binding upon the Borrower and Lender.
9.5 NOTICES. Except in cases where it is expressly herein provided that
such notice, request or demand is not effective until received by the party to
whom it is addressed, all notices, requests and demands to or upon the
respective parties hereto under this Agreement and all other Loan Documents
shall be deemed to have been given or made when deposited in the mail, postage
prepaid by registered or certified mail, return receipt requested, addressed as
follows or to such other address as may be hereafter designated in writing by
the respective parties.
The Borrower: International Travel CD's, Inc.
000 Xxxxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxx Cynwyd, P A 19004
Attention: Xxxxxx Xxxxxxxxxx
Phone: (000) 000 0000
Fax (000) 000-0000
The Lender: Trident Growth Fund, LP
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx St. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
9.6 NO WAIVER: Cumulative Remedies. No waiver of any provision hereof shall
be deemed to operate as a waiver of any other provision hereof. In the event
that the Borrower shall be deemed to have waived any provision hereof at any
time, such waiver shall not be deemed to have extended to any other provision
hereof at the time such waiver was deemed to have occurred or at any other time.
No failure to exercise and no delay in exercising, on the part of Lender, any
right, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein and in the other Loan
Documents provided are cumulative and not exclusive of any rights or remedies
provided by law.
9.7 SURVIVAL OF AGREEMENTS. All agreements, representations and warranties
made herein shall survive the execution and delivery of this Agreement and the
other Loan Documents and the making and renewal of loans hereunder and the
termination of this Agreement and the other Loan Documents.
9.8 GOVERNING LAW. This Agreement and the legal relations among the parties
hereto shall be governed by and construed in accordance with the laws of the
State of Texas withou
regard to its conflicts of law doctrine. Each of the parties hereto irrevocably
consents to the jurisdiction of the federal and state courts located in Dallas
County, the State of Texas.
9.9 ENFORCEABILITY OF AGREEMENT. Should anyone or more of the provisions of
this Agreement be determined to be illegal or unenforceable as to one or more of
the parties, all other provisions nevertheless shall remain effective and
binding on the parties hereto, up to the full amount permitted by law.
9.10 USURY SAVINGS CLAUSE. Notwithstanding any other provision herein, in
the event that the aggregate interest rate charged under the Loan Documents,
including all charges or fees in connection therewith deemed in the nature of
interest, exceeds the maximum legal rate, then the Lender shall have the right
to make such adjustments as are necessary to reduce the aggregate interest rate
to the maximum legal rate. The Borrower waives any right to prior notice of such
adjustment and further agrees that such adjustment may be made by the Lender
subsequent to notification from the Borrower that the aggregate interest charged
exceeds the maximum legal rate. There are no unwritten oral agreement between
Borrower and Lender.
9.11 Execution of Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument.
9.12 STAMP OR OTHER TAXES. The Borrower agrees to pay any and all
documentary, intangible stamp or excise taxes now or hereafter payable in
respect to this Agreement and the other Loan Documents or any modification
thereof, and shall hold the Lender harmless with respect thereto. The Borrower
further agrees that Lender may deduct from any account of the Borrower the
amount of any such documentary or intangible stamp or tax payable, the decision
of the Lender as to the amount thereof to be conclusive, absent manifest error.
9.13 INTENTIONALLY DELETED
9.14 FEES AND EXPENSES. The Borrower shall reimburse the Lender for all
reasonable past and future fees and expenses (including but not limited to the
origination and commitment fee, reasonable out-of-pocket costs, legal expenses
(as detailed above), offering fees, advisory and consulting fees, travel and
communication expenses, and reproduction costs) incurred in connection with the
Loan Documents ("Fees and Expenses"). Fees and Expenses incurred through the
Closing Date by the Borrower will be netted against the initial proceeds
received under this Agreement. Fees and Expenses incurred after the Closing Date
shall promptly be paid by the Borrower upon receipt from Lender of an invoice
itemizing such Fees and Expenses. Fees and Expenses incurred hereof to an
affiliate of the Lender shall be included with the Borrower's Liabilities.
9.15 ASSIGNABILITY. This Agreement shall inure to the benefit and be
binding upon the parties hereto and their respective successors and permitted
assigns. This Agreement and the Convertible Note will not be assignable, in
whole or in part, by the Borrower, without the prior written consent of the
Lender. This Agreement may be assigned or transferred, in whole or in part, by
the Lender upon written notice to the Borrower. A change in control of either
party shall
be deemed to be an assignment. Any purported assignment effected without such
consent shall be null and void.
9.16 COMPLETE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all agreements, representations, warranties,
statements, promises and understanding, whether oral or written, with respect to
the subject matter hereof.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written.
WITNESS: TRIDENT GROWTH FUND, LP
By: GEMINI MANAGEMENT, LLC, its
GENERAL PARTNER
_______________________________ By: _______________________________
Name: Xxxxx Xxxx, Authorized Member
WITNESS: INTERNATIONAL TRAVEL CD'S, INC.
_______________________________ By: _______________________________
Name: Xxxxxx Xxxxxxxxxx
President
ATTACHMENTS
Exhibit 1 Form of Convertible Note
Exhibit 2 Financial Summary
Schedule 2.3 Use of Proceeds
Schedule 3.1 Organization
Schedule 3.1(b) Subsidiaries
Schedule 3.3 Outstanding Equity Rights
Schedule 3.5 Material Liabilities
Schedule 3.8 Material Agreements
Schedule 3.16 Employee Benefit Plans
Schedule 5.15 Certificate of Covenant Compliance
Schedule 8.6 Business Activity
EXHIBIT 2
QTD
06/30/31 09/30/01 12/31/01 3/31/02
---------------------------------------------------------
Revenue
Gross Margin
Operating Expense ---------------------------------------------------------
EBITDA
Depreciation
Loan Fees
Interest ---------------------------------------------------------
Net Income (Loss)
=========================================================
MTD
2002 2001 Diff & Budget Actual Diff %
-------------------------------------------------------------
Revenue
Gross Margin
Operating Expense --------------------------------------------------------------
EBITDA
Depreciation
Loan Fees
Interest --------------------------------------------------------------
Net Income (Loss)
==============================================================
YTD
2000 2001 2002 2002 2001 Diff %
----------------------------------- ---------------------------------------
Revenue
Gross Margin
Operating Expense ----------------------------------- ---------------------------------------
EBITDA
Depreciation
Loan Fees
Interest ----------------------------------- ---------------------------------------
Net Income (Loss)
=================================== =======================================
Budget Actual Diff %
-----------------------------------
Revenue
Gross Margin
Operating Expense -----------------------------------
EBITDA
Depreciation
Loan Fees
Interest -----------------------------------
Net Income (Loss)
===================================
As of As of As of Variance
Balance Sheet 12/31/01 Diff Explanation
--------------------------------------------------------------------------------------------------
Cash & AIR
Other Current Assets _________ _________ _________
Current Assets:
Other Assets _________ _________ _________
TOTAL ASSETS:
========= ========
Total Current Liabilities
Debt _________ _________ _________
Total LIT Liabilities _________ _________ _________
TOTAL LIABILITIES:
EQUITY _________ _________ _________
TOTAL LIAB. & EQUITY: ========= ========
CURRENT RATIO:
EBITDA
Less: Non-Financed
Capital Expenditures _________ Current Liabilities: _________
Cash Flow RATIO:
========
Interest Expense
Principal Payments _________
Debt Service _________
CASH FLOW COVERAGE
RATIO: ========
CASH FLOW COVERAGE
EBITDA
Interest Expense _________
CASH FLOW COVERAGE
RATIO: ========
Schedule 5.15
I, the undersigned hereby represent that International Travel CD's Inc.
is in compliance with all of its covenants specified in Sections 5 and 6 of the
LOAN AGREEMENT originally dated as of January ___, 2003, executed by
International Travel CD's Inc, with its principal place of business at ________,
in favor of Trident Growth Fund, LP., with its principal place of business at
000 Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000.
By: _______________________________
