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EXHIBIT 10.2
East Bay Regional Office Date: September 11, 1997
0000 X. Xxxxxxxxxx Xxxx.
Xxxxx 000
Xxxxxx Xxxxx, Xx. 94596-9504
Borrower: New Arts Acquisition, Inc.
Subject: CREDIT TERMS AND CONDITIONS ("AGREEMENT")
Gentlemen:
To induce Imperial Bank (herein sometimes herein referred to as "you" and
sometimes as "Bank") to make loans to the undersigned (herein called
"Borrower"), and in consideration of any loan or loans you, in your sole
discretion, may make to Borrower, Borrower warrants and agrees as follows:
A. Borrower represents and warrants that:
1. EXISTENCE AND RIGHTS. Borrower is a Delaware Corporation. Borrower is
duly organized and existing and in good standing under the laws of
the State of Delaware (without limit as to the duration of its
existence); Borrower has powers and adequate authority, rights and
franchises to own its property and to carry on its business as now
conducted, and is duly qualified and in good standing in each State
in which the character of the properties owned by it therein or the
conduct of its business makes such qualification necessary; and
Borrower has the corporate power and adequate corporate authority to
make and carry out this Agreement. Borrower has no investment in any
other business entity except as follows:
(a) Pinnacle American Realty Tax Services, Inc.
(b) Pinnacle American Realty Tax Service of New York, Inc.
2. AGREEMENT AUTHORIZED. The execution, delivery and performance of this
Agreement are duly authorized and do not require the consent or
approval of any governmental body or other regulatory authority; are
not in contravention of or in conflict with any law or regulation or
any term or provision of Borrower's articles of incorporation,
by-laws, or Articles of Association, as the case may be, and this
Agreement is the valid, binding and legally enforceable obligation of
Borrower in accordance with its terms.
3. NO CONFLICT. The execution, delivery and performance of this
Agreement are not in contravention of or in conflict with any
agreement, indenture or undertaking to which Borrower is a party or
by which it or any of its property may be bound or affected, and do
not cause any lien, charge or other encumbrance to be created or
imposed upon any such property by reason thereof.
4. LITIGATION. To the knowledge of Borrower (i) there is no litigation
or other legal proceedings pending or threatened against Borrower,
which individually or in the aggregate would have a material adverse
effect on the financial condition, operations, or business of
Borrower; and (ii) Borrower is not in default with respect to any
order, writ, injunction, decree or demand of any court or other
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governmental or regulatory authority, where such default would have a
material adverse effect to the financial condition, operations or
business of Borrower.
5. FINANCIAL CONDITION. The Recasted and Forecasted Income Statement,
Summary Cash Flow & Dividend Analysis, Proforma Balance Sheets, Cash
Flow Forecast and Financing Analysis of Borrower, copy of which has
heretofore been delivered to you by Borrower, and all other statements
and data submitted in writing by Borrower to you in connection with this
request for credit are prepared in good faith based upon reasonable
assumptions, and have been prepared in accordance with generally
accepted accounting principles on a basis consistently maintained.
6. TITLE TO ASSETS. Borrower has good title to its assets.
7. TAX STATUS. Borrower has no liability for any delinquent state, local or
federal taxes, not subject to dispute by Borrower and for which
reasonable reserves have been established and, if Borrower has
contracted with any government agency, Borrower has no liability for
renegotiation of profits.
8. TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights,
and licenses to conduct its business as now operated, without any known
conflict with the valid trademarks, trade names, copyrights, patents and
license rights of others.
9. REGULATION U. The collateral for this loan is not margin stock within
the definition of Regulation U of the Board of Governors of the Federal
Reserve system.
B. Borrower agrees that so long as it is indebted to you, it will, unless you
shall otherwise consent in writing:
1. RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises and
other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct
its business in an orderly manner without voluntary interruption and, if
a corporation or partnership, maintain and preserve its existence.
2. INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property
against fire and other hazards with responsible insurance carriers to
the extent usually maintained by similar businesses.
3. TAXES AND OTHER LIABILITIES. Pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties,
and all its other liabilities at any time existing, except to the extent
and so long as:
(a) The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse
effect upon its financial condition or the loss of any right of
redemption from any sale thereunder; and
(b) It shall have set aside on its books reserves (segregated to the
extent required by generally accepted accounting practice) deemed
adequate with respect thereto.
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4. PROFITABILITY. Borrower, on a consolidate basis with National
Insurance Group ("Guarantor") to be profitable on a fiscal year basis
and shall not have losses for any two consecutive quarters.
5. NOTICE OF DEFAULT. Promptly notify the Bank in writing of the
occurrence of any event of default hereunder or any event which upon
notice and lapse of time would be an event of default.
6. BANKING RELATIONSHIP. Maintain, and cause all its subsidiaries to
maintain, all significant bank deposit accounts and banking
relationship with Bank.
7. COSTS AND FEES.
(a) Borrower shall pay to Bank all legal fees, documentation costs
and all out of pocket cost and expenses incurred by the Bank in
connection with the negotiation and preparation of this
Agreement, including but not limited to filing fees.
(b) Borrower will pay promptly to Bank without demand, after notice,
with interest thereon from the date of expenditure at the rate
applicable to the loan from Bank to Borrower, reasonable
attorneys' fees and all costs and expenses paid or incurred by
Bank in collecting or compromising any loan whether or not suit
is filed. If suit is brought to enforce any provision of this
Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and court costs in addition to any
other remedy or recovery awarded by the court.
8. EXCESS CASH FLOW PRINCIPAL PAYMENTS. Commencing April 1, 1999, and
on the 91st day of each fiscal year thereafter, pay to Bank as a
principal reduction of any loan made by Bank to Borrower, an Excess
Cash Flow Principal Payment ("ECFPP") equal to Excess Cash Flow
("ECF") times Principal Payment Percentage ("PPP"). For the purpose
of this Section 8 the following definitions shall apply:
(a) "CFBD" means the Guarantor's audited net income after tax, plus
depreciation, amortization, plus (less) changes in working
capital, less principal and interest payments on all debt, less
capital expenditures. CFBD excludes any cash received from
financing activities (i.e. new loans, new equity and other forms
of financing). In addition, CFBD shall not include amounts
reported on Guarantor's consolidated statements of cash flows as
reported in its SEC financial statements representing proceeds
from the sale, maturity or purchase of investment securities, as
reported in accordance with Generally Accepted Accounting
Principals.
(b) "MDA means $0.48 times the number of Guarantor's common shares
outstanding as of any fiscal years.
(c) "ECF" means the difference between CFBD and the MDA measured on
an annual basis on the 91st day following each fiscal year end.
(d) "ECFPP" means the annual payment to be made by Borrower as a
reduction in the principal of the obligations owing Bank from
Borrower paid in accordance with the provisions of this Section
B.8.
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(e) "PPP" means the percentage of ECF to be paid by Borrower each
year to Bank in accordance with the provisions of this Section
B.8. The PPP's for each year is set forth in Schedule A attached
hereto.
9. REPORTING REQUIREMENTS. Borrower will provide the following to Bank,
all in form and substance satisfactory to Bank:
(a) Commencing with the fiscal year 1999, and each year thereafter
no later than the 91st day of each fiscal year, a certificate of
the calculation of ECF, certified to by the Chief Financial
Officer of the Borrower. The calculation shall set forth, in
reasonable detail, the method of determining ECF and such other
variables as are relevant in determining the ECFPP, as estimated
in the attached Schedule A.
(b) Cause the Guarantor to provide those reports required by Section
7 of the Credit Terms and Conditions executed by Guarantor in
favor of Bank dated April 2, 1997, ("Guarantor's Credit
Agreement"), as such may be amended, modified, superseded,
replaced, restated or modified even if the Guarantor's Credit
Agreement is terminated or no longer in effect for any reason.
10. USE OF PROCEEDS. Borrower shall use the proceeds of any loan from
Bank only to purchase the assets of American Realty Tax Services,
Inc. ("Seller") and American Realty Tax Services of New York
pursuant to the terms of that Asset Purchase Agreement ("Purchase
Agreement") dated as of August 15, 1997 between Seller, Borrower and
Guarantor.
11. PURCHASE AGREEMENT. Prior to the Bank making any loans to Borrower,
Borrower shall provide Bank with an executed copy of the Purchase
Agreement.
12. GUARANTEE. Prior to Bank making any loans to Borrower, Borrower
shall cause Guarantor to execute a guarantee in form, substance and
amounts satisfactory to bank guaranteeing Borrower's obligations to
Bank and Bank shall have received an Amendment to the Pledge
Agreement executed by Guarantor and an amendment to the Guarantor's
Credit Agreement.
13. NET WORTH. Maintain, on a consolidated basis with Guarantor and
Guarantor's and Borrower's subsidiaries, a tangible net worth
(meaning the excess of all assets, excluding any value for good
will, provided that good will for Borrower will be included,
trademarks, patents, copyrights, leaseholds, organization expense
and other similar intangible items, over its liabilities) of not
less than $25,000,000 to increase each fiscal year end, commencing
with fiscal year end 1997, by Guarantor's net income minus dividends
paid.
14. CASH FLOW COVERAGE. Commencing with fiscal year 1997 and thereafter
on an annual basis, the aggregate sum of Borrower's and Guarantor's
net profit plus period depreciation divided by the current portion
of long term debt and capitalized leases shall not be less than 1.4.
15. QUALIFICATION TO DO BUSINESS. Within 90 days from the date of this
Agreement qualify as a foreign corporation to do business in
California.
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C. Borrower agrees that so long as it is indebted to you, it will not,
without your written consent:
1. TYPE OF BUSINESS; MANAGEMENT. Make any substantial change in its
business or operations or make any change in incumbency of Xxxx X.
Xxxxxxx as chairman and Chief Executive Officer of Borrower or of
Xxxxx X. Xxxx as President of Borrower.
D. The occurrence of any one of the following events of default shall, at your
option, terminate your commitment to lend and make all sums of principal
and interest then remaining unpaid on all Borrower's indebtedness to you
immediately due and payable, all without demand, presentment or notice, all
of which are hereby expressly waived:
1. FAILURE TO PAY. Failure to pay any installment of principal or of
interest on any indebtedness of Borrower to you within 10 days of the
date when due.
2. BREACH OF COVENANT. Failure of Borrower to perform any other term or
condition of this Agreement, or any other agreement or document
executed by Borrower in favor of Bank, binding upon Borrower, which
failure continues and is not cured within thirty days after written
notice from Bank to Borrower.
3. BREACH OF WARRANTY. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in
writing pursuant hereto or in connection herewith shall be false or
misleading in any material respect.
4. INSOLVENCY; RECEIVER OR TRUSTEE. Borrower or Guarantor shall become
insolvent; or admit its inability to pay its debts as they mature; or
make an assignment for the benefit of creditors; or apply for or
consent to the appointment of a receiver or trustee for it or for a
substantial part of its property or business.
5. JUDGMENTS, ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against
Borrower or Guarantor or any of its assets, which judgment, writ or
warrant of attachment or similar process will have a material adverse
effect on the financial condition, operations and business of
Borrower or Guarantor and which remains unvacated, unbonded or
unstayed for a period of 30 days or in any event later than five days
prior to the day of any proposed sale or execution under such
judgment, writ, warrant of attachment or similar process.
6. BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or
against Borrower or Guarantor and, if instituted against it, shall be
consented to.
7. REVOCATION OF GUARANTEE. The revocation of any guarantee by the
Guarantor.
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8. DEFAULT BY GUARANTOR. An event of default shall occur in the Guarantor's
Credit Agreement as such may be amended, modified, superseded, replaced
or restated, or modified or in any other agreement or document executed
by Guarantor in favor of Bank.
E. Miscellaneous Provisions.
1. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
your Bank or any holder of Notes issued hereunder, in the exercise of
any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any
other right, power or privilege. All rights and remedies existing under
this agreement of any note issued in connection with a loan that your
Bank may make hereunder, are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
2. TERMINATION. Upon thirty days written notice to Lender, Borrower may
terminate this agreement in full, provided that, upon such time of
notice and upon the effective termination date, the Borrower has no
outstanding principal, interest, penalties, or any other amounts due
under this agreement. Upon termination, Lender's interest in all
Collateral of Borrower shall cease.
3. NOTICES. All notices, demands, requests or other communications that
may be or are required to be given, served, or sent by any party to
any other party pursuant to this agreement shall be in writing and
shall be mailed by first-class registered or certified mail, return
receipt requested, postage prepaid, or transmitted by hand delivery,
with signature required by recipient, addressed as follows:
Notices to Borrower:
Xxxxxxx X. Xxxxxxxx
Chief Financial Officer
New Arts Acquisition, Inc.
000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
With a copy (which shall
not constitute notice) to:
Xxxxxx X. Xxxxxxxxxxx
Secretary
000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
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Notices to Bank:
Xxxxxx X. XxXxxxxx, Vice President
Imperial Bank
East Bay Regional Office
0000 X. Xxxxxxxxxx Xxxx.
Xxxxx 000
Xxxxxx Xxxxx, Xx 00000-0000
Atten: Commercial Lending
Each party may designate by notice in writing a new address to which
any notice, demand, request or communication may thereafter be so
given, served or sent. Each notice, demand, request or communication
that is mailed shall be deemed sufficiently given, served, sent, and
received for all purposes at such time as it is delivered to the
addressees (with the return receipt, the delivery receipt, the
affidavit of messenger being conclusive evidence of such delivery) or
at such time as delivery refused by the addressees upon presentation.
F. Applicable Law and Reference Provisions
1. APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed
by and construed according to the laws of the State of California, to
the jurisdiction of which the parties hereby agree to submit.
2. REFERENCE PROVISIONS.
(a). Other than (i) non-judicial foreclosure and all matters in
connection therewith regarding security interests in real or
personal property; or (ii) the appointment of a receiver, or the
exercise of other provisional remedies (any and all of which may
be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating
to this Agreement which controversy, dispute or claim is not
settled in writing within thirty (30) days after the "Claim Date"
(defined as the date on which a party subject to the Agreement
gives written notice to all other parties that a controversy,
dispute or claim exists), will be settled by a reference
proceeding in California in accordance with the provisions of
Section 638 et seq. of the California Code of Civil Procedure, or
their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any controversy, dispute
or claim concerning this Agreement, including whether such
controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their
rights to initiate any legal proceedings against each other in
any court or jurisdiction other than the Superior Court in the
County where the real property securing this Agreement, if any,
is located or Los Angeles County if none (the "Court"). The
referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within
forty-five (45) days after the Claim Date, the referee shall be
promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a
temporary judge, with all of the powers of a temporary judge, as
authorized by law, and upon selection should take and subscribe
to the oath of office as provided for in Rule 244 of the
California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP
Section 170.6. The referee shall (a) be requested to set the
matter for hearing within sixty (60) days after the Claim Date
and (b) try any and all issues of law or fact and report a
statement of decision upon them, if
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possible, within ninety (90) days of the Claim Date. Any decision
rendered by the referee will be final, binding and conclusive and
judgment shall be entered pursuant to CCP Section 644.90 in any
court in the State of California having jurisdiction. Any party
may apply for a reference proceeding at any time after thirty
(30) days following notice to any other party of the nature of
the controversy, dispute or claim, by filing a petition for a
hearing and/or trial. All discovery permitted by this Agreement
shall be completed no later than fifteen (15) days before the
first hearing date established by the referee. The referee may
extend such period in the event of a party's refusal to provide
requested discovery for any reason whatsoever, including, without
limitation, legal objections raised to such discovery or
unavailability of a witness due to absence or illness. No party
shall be entitled to "priority" in conducting discovery.
Depositions may be taken by either party upon seven (7) days
written notice, and request for production or inspection of
documents shall be responded to within ten (10) 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 upon the parties. Pending
appointment of the referee as provided herein, the Superior Court
is empowered to issue temporary and/or provisional remedies, as
appropriate.
(b). 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 all 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. The party making such a
request shall have the obligation to arrange for and pay for the
court reporter. The costs of the court reporter at the trial
shall be borne equally by the parties.
(c). 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, to provide all temporary
and/or provisional remedies and to enter equitable orders that
will be binding upon the parties. The referee shall issue a
single judgment at the close of the reference proceeding which
shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve
the right to contest or appeal from the final judgment or any
appealable order or appealable judgment entered by the referee.
The parties hereto expressly reserve the right to findings of
fact, conclusions of law, 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.
(d). In the event that 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 the reference procedure herein described will be
resolved and determined by arbitration. The arbitration will be
conducted by a retired judge of the Court, 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 as set forth hereinabove shall apply to
any such arbitration proceeding.
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AGREED TO AND ACCEPTED:
NEW ARTS ACQUISITION, INC. IMPERIAL BANK
BY /s/ XXXX XXXXXXX, EVP DATE 9/17/97 BY /s/ XXXXXX XxXXXXXX DATE 9/17/97
-------------------------- -------- --------------------- --------
(SIGNATURE AND TITLE) (SIGNATURE AND TITLE)
BY /s/ XXXXXX X. XXXXXXXXXXX DATE 9/17/97
-------------------------- --------
(SIGNATURE AND TITLE)
EXECUTIVE VICE PRESIDENT &
SECRETARY
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Schedule A Numbers in $000's Fiscal Year
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Amounts herein are estimates only 1998 1999 2000 2001 2002
and subject to change ------ ------ ------- --------- ---------
Total est. XXXX cash flow before dividends, $3,413 $5,718 $ 8,459 $ 12,812 $ 11,185
after debt service
Less Maximum Dividend Allowance (MDA) 1,904 1,904 1,904 1,904 1,904
(based on $.48/sh.)
------ ----- ------ -------- ----------
Excess Cash Flow (ECF) available for $1,509 $3,814 $8,555 $10,908 $9,281
prepayment of term loan
Principal Payment Percentage (PPP) 50.0% 30.0% 20.0% 10.0% 10.0%
------ ----- -------- -------- ---------
Prospective Excess Cash Flow Principal $ 754 $1,144 $1,311 $1,091 $ 928
Payment (ECFPP)
Cumulative prospective ECFPP 754 1,899 3,210 4,300 5,228
------ ------ ------- --------- ---------
