EXHIBIT 10.3
LOAN NUMBER GP-471769-30-02-SEA
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U.S. SMALL BUSINESS ADMINISTRATION
SEATTLE DISTRICT XXXXXX
000 XXXXXX XXXXXX
XXXXXXX, XXXXXXXXXX 00000-0000
AUTHORIZATION AND LOAN AGREEMENT
(GUARANTY LOANS)
TOWNE BANK OF WOODINVILLE
X.X. XXX 000
XXXXXXXXXXX, XXXXXXXXXX 00000
Your request dated JANUARY 23, 1992, for SBA to Guarantee 85% of a Loan in the
amount of $625,000.00, to be made by Lender to:
PATHWAYS INTERNATIONAL LTD.
00000 XXXX-XXX XXXX
XXXXXXXXXXX, XXXXXXXXXX 00000
is hereby approved pursuant to Section 7(a) of the Small Business Act as
amended.
1. The following forms are herewith enclosed:
(a) SBA Note to be executed by the Borrower. The original Note must be
retained by you and one conformed copy must be sent to SBA immediately
after first disbursement, together with a guaranty fee of 2% of the
amount guaranteed. This fee shall be paid by Lender within 90 days of
the date of this Authorization and may be charged to Borrower only
after Lender has paid the fee to SBA and an initial disbursement has
been made to Borrower. This fee may be deducted from loan proceeds.
(b) Copies of the SBA Settlement Sheet, Form 1050, are to be completed and
executed by Lender and Borrower to reflect each disbursement. Prompt
reporting of disbursements is necessary. Return the first two copies
("Denver FOD" copy and "Servicing Office" copy) to SBA.
(c) Compensation Agreements, Form 159, shall be executed by Borrower, its
representative and Lender and returned to SBA if Borrower has employed
an attorney, accountant or other representative, or if Borrower is
charged fees for services by Lender or an associate of Lender. If no
such fees have been charged, please write "None" and return the form,
executed by the Lender, to SBA.
(d) The original copy of this Authorization and SBA forms as required by
this Authorization shall be executed prior to first disbursement and
retained in loan file by the Lender. When collateral is required that
is subject to a prior lien the Lender shall take action necessary to
preclude the possibility of its lien being junior to any future
advances made by the prior lien holder.
2. This Authorization is Subject to:
(a) Provisions of the Guaranty Agreement between Lender and SBA dated,
JUNE 14, 1991.
(b) First disbursement of the Loan being made not later than SIX months,
and no disbursement being made later than TWELVE months, from the date
of this Authorization, unless such time is extended pursuant to prior
written consent by SBA.
(c) Receipt by Lender of evidence that there has been no unremedied
adverse change since the date of the application, or since any of the
preceding disbursements, in the financial or any other condition of
Borrower, which would warrant withholding or not making any such
disbursement or any further disbursement.
(d) The representations made by Borrower in its loan application, the
requirements or conditions set forth in Lender's application form,
including the supporting documents thereto, the conditions set forth
herein and any future conditions imposed by Lender (with prior SBA
approval).
3. Terms of Loan:
(a) Repayment term, interest rate(s), and maturity.
Note payable with interest at the rate of (See below), and
installments, including principal and interest, each in the amount of
$10,135.00, payable monthly beginning ONE month from date of Note and
the balance of principal and interest payable SEVEN years from date of
Note.
The interest rate as of the date hereof is NINE AND ONE-QUARTER
percent (9.25%) per annum. This is a variable interest rate loan in
which the interest rate will fluctuate in accordance with the low
prime rate (hereinafter referred to as the "base rate") published in
the Wall Street Journal. The base rate published as of JANUARY 23,
1992 in that publication was 6.50%. The interest rate (spread) to be
added to the base rate on the beginning of each adjustment period will
be 2.75%. Each adjustment period will be for ONE month, beginning the
first business day of the first MONTH after first disbursement.
The interest rate on this Note shall increase or decrease by adding
the interest rate spread to the base rate as of the beginning of each
adjustment period, commencing with the adjustment period beginning the
first business day of the first month after first disbursement. If
the interest rate is increased or decreased, the monthly installment
of principal and interest shall be adjusted to reflect such change.
Holder should give written notice to the Borrower of each increase or
decrease in the interest rate and the reamortized installment payment
amount within thirty days after the effective date of each rate
adjustment; however, the fluctuation of the interest rate is not
contingent on whether the notice is given.
If the Borrower shall be in default in payment due on the indebtedness
herein and the Small Business Administration (SBA) purchases its
guaranteed portion of said indebtedness, the rate of interest on both
the guaranteed and unguaranteed portions herein shall become fixed at
the rate in effect as of the date of default. If the Borrower
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shall not be in default in payment when SBA purchases its guaranteed
portion, the rate of interest on both the guaranteed and unguaranteed
portion herein shall be fixed at the rate in effect as of the date of
purchase by SBA.
Borrower shall provide Lender with written notice of intent to prepay
part or all of the loan at least three (3) weeks prior to the
anticipated prepayment date. A prepayment is any payment made ahead
of schedule that exceeds twenty (20) percent of the then outstanding
principal balance. If Borrower makes a prepayment and fails to give
at least three weeks advance notice of intent to prepay, then
notwithstanding any other provision to the contrary in this Note or
other document, Borrower shall be required to pay lender three weeks
interest on the unpaid principal as of the date of such prepayment.
(b) Use of proceeds of loan as follows: (Show specific uses for which
loan is authorized.)
(1) Approximately $15,000.00 for payment in full for construction of
leasehold improvements.
(2) Approximately $83,150.00 for payment in full for purchase of
MACHINERY AND EQUIPMENT.
(3) Approximately $175,000.00 for payment in full for purchase of
INVENTORY.
(4) Balance, if any, to be used solely for operating expenses of
Borrower.
(c) Collateral:
(1) Deed of Trust (on SBA Form 930) on real estate located at 00000
XX 000XX XXXXXX, XXXXXXXXXXX, XXXXXXXXXX 00000 subject only to
prior liens held by CONTINENTAL, INC. in the approximate amount
of $118,780.00. Mortgagee's Title Insurance Policy is required
insuring Lender's lien.
(2) Perfected FIRST security interest in all fixtures, and proceeds
thereof, now owned by Borrower, and hereafter acquired. U.C.C.
Financing Statement to be filed with County Auditor where
fixtures are located. Financing Statement to show legal
description of real property where fixtures are located. Record
search required showing Lender's lien.
(3) Perfected FIRST security interest in all equipment (INCLUDING
titled motor vehicles), and proceeds thereof, now owned by
Borrower, and hereafter acquired. U.C.C. Searches required after
Lender's Financing Statement(s) are filed.
(4) Perfected FIRST security interest covering all inventory,
accounts, general intangibles, and proceeds thereof, now owned
and hereafter acquired by Borrower. U.C.C. Searches required,
after Lender's Financing Statement(s) are filed.
(5) Guaranty on SBA Form 148 of XXXXX X. XXXX and XXXX X. XXXX,
husband and wife, secured by collateral referenced in
subparagraph 3(c)(1) hereof.
4. To further induce Lender to make and SBA to guarantee this Loan, Lender and
SBA impose the following conditions:
(a) Execution of all documents required in Item 1 above.
(b) Reimbursable expenses - Borrower will, on demand, reimburse Lender for
any and all expenses incurred, or which may be hereafter incurred, by
Lender from time to time in
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connection with or by reason of Borrower's application for, and the
making and administration of the Loan.
(c) Books, Records and Reports - Borrower will at all times keep proper
books of account in a manner satisfactory to Lender and/or SBA.
Borrower hereby authorizes Lender or SBA to make or cause to be made,
at Borrower's expense and in such manner and at such times as Lender
or SBA may require, (a) inspections and audits of any books, records
and papers in the custody or control of Borrower or others, relating
to Borrower's financial or business conditions, including the making
of copies thereof and extracts therefrom, and (b) inspections and
appraisals of any of Borrower's assets. Borrower will furnish to
Lender for the period ending JUNE 31, 1992 and SEMI-ANNUALLY
thereafter (no later than 2 months following the expiration of any
such period) and at such other times and in such form as Lender may
prescribe, Borrower's financial and operating statements. Borrower
hereby authorizes all Federal, State and municipal authorities to
furnish reports of examinations, records, and other information
relating to the conditions and affairs of Borrower and any desired
information from reports, returns, files, and records of such
authorities upon request therefor by Lender or SBA.
(d) Borrower shall not execute any contracts for management consulting
services without prior approval of Lender and SBA.
(e) Distributions and Compensation - Borrower will not, without the prior
written consent of Lender or SBA (a) if Borrower is a corporation,
declare or pay any dividend or make any distribution upon its capital
stock, or purchase or retire any of its capital stock, or consolidate,
or merge with any other company, or give any preferential treatment,
make any advance, directly or indirectly, by way of loan, gift, bonus,
or otherwise, to any company directly or indirectly controlling or
affiliated with or controlled by Borrower, or any other company, or to
any officer, director or employee of Borrower, or of any such company,
(b) if Borrower is a partnership or individual, make any distribution
of assets of the business of Borrower, other than reasonable
compensation for services, or give any preferential treatment, make
any advance, directly or indirectly, by way of loan, gift, bonus, or
otherwise, to any partner or any of its employees, or to any company
directly or indirectly controlling or affiliated with or controlled by
Borrower, or any other company.
(f) Other Provisions:
(1) Interim funds advanced by participating bank in accordance with
this Authorization between loan approval date and loan closing
date, may be paid from the proceeds of this loan upon closing,
provided the amounts expended are documented and are in
accordance with the use of proceeds as detailed above.
(2) Borrower agrees to pay in full all outstanding or delinquent
local, state or federal taxes.
(3) Borrower and Guarantor(s) shall provide and maintain hazard
insurance (fire and extended coverage) for the full insurable
value on business personal property assets and real property
collateral. General Public Liability insurance in an amount
satisfactory to Lender is required. Lender shall be named loss
payee/mortgagee of the hazard insurance.
(4) Borrower agrees to post in his place of business SBA Form 722,
"Equal Opportunity Poster," where it will be clearly visible to
employees, applicants for employment, and the general public.
(5) Borrower covenants and warrants that:
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1. Borrower is in compliance with all applicable Federal and
State environmental laws and regulations and that they will
continue to comply with all such laws and regulations in the
future.
2. No proceedings alleging violations of environmental laws are
pending, on property owned or property to be purchased,
leased or rented by Borrower.
3. Borrower has no knowledge of hazardous waste contamination
on property owned or property to be purchased, leased or
rented by Borrower.
4. Borrower assumes all responsibility and all liability for
toxic substance cleanup resulting from any violations, past,
present, or future, and agrees to indemnify the Lender and
SBA for any and all resulting liabilities or costs.
(6) Resolution of Board of Directors, of Borrower corporation,
authorizing the corporation to obtain the loan and give
collateral to secure it.
(7) Prior to any disbursement, Lender must be in receipt of evidence
satisfactory to it that Borrower and/or Guarantor corporation is
a registered corporation listed in good standing with the Office
of the Washington Secretary of State. Loan documentation must
reflect correct spelling of corporate name.
(8) Prior to any disbursement, Lender must be in receipt of evidence
satisfactory to it that Borrower has installed and is maintaining
an adequate accounting system under the supervision of a
qualified public accountant, which system is satisfactory to
Lender.
(9) Prior to any disbursement, Lender shall be furnished with a copy
of a lease covering the premises at BUSINESS LOCATION, which
lease shall have an unexpired term, including options to renew,
of approximately SEVEN years. In addition, the Lessor of said
premises must consent to the security interest granted to the
Lender in the Collateral referenced in subparagraph 3(c)(1)
hereof and subordinate any lien or claim which the lessor may
have or hereafter acquire in said Collateral, whether arising by
statute, agreement or otherwise, to the lien of the Lender/SBA in
said Collateral. The Lessor must also agree that the Lender may,
at its option, enter upon the premises and remove said Collateral
at its sole cost and expense, and agree to provide Lender with at
least 30 days written notice of any action to retake possession
of the premises.
(g) Prior to commencement of construction and any disbursement pursuant to
paragraph 3(b)(1) above, Borrower must execute SBA Form 601 and must
have his contractor and each subcontractor with a subcontract in
excess of $10,000.00 execute SBA Form 601. These forms must be
returned to SBA.
5. Parties Affected - This Agreement shall be binding upon Borrower and
Borrower's successors and assigns. No provision stated herein shall be
waived without the prior written consent of SBA.
XXXXXXXX XXXXX
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ADMINISTRATOR
/S/ XXXXXX X. XXXXXX ADD/F&I FEBRUARY 13, 1992
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By: Signature Title Date
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Borrower agrees to the conditions imposed herein; and further acknowledges that
this authorization and Loan Agreement does not create a commitment by lender to
disburse any funds pursuant hereto and oral agreements or oral commitments to
loan money, extend credit or to forebear enforcing repayment of a debt are not
enforceable.
Pathways International, Ltd.
By: /S/ XXXXX X. XXXX, XX
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President Date
NOTE: Corporate borrowers must execute this Authorization, in corporate
names, by duly authorized officer, and seal must be affixed and duly
attested; partnership borrowers must execute in firm name, together
with signature of all general partners.
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