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EXHIBIT 10.26
EQUIPMENT SECURITY AGREEMENT
This EQUIPMENT SECURITY AGREEMENT, is entered into as of October 9,
1998, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 00000 Xxxxx Xxxxxx Xxxxxxxxx,
Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000, and LEISURE TIME TECHNOLOGY,
INC., a Georgia corporation ("Obligor"), with its chief executive office located
at 0000 Xxxxxx Xxxx, Xxxx, Xxxx 00000.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Agreement" means this Equipment Security Agreement and any
extensions, riders, supplements, notes, amendments, or modifications to or in
connection with this Equipment Security Agreement.
"Borrower" means Leisure Time Cruise Corporation, a Colorado
corporation.
"Closing Date" means the date on which Foothill makes the loan
to Borrower as evidenced by the Term Note.
"Code" means the California Uniform Commercial Code.
"Collateral" means: Obligor's Books; the Equipment; and the
proceeds and products, whether tangible or intangible, of any of the foregoing
including proceeds of insurance covering any or all of the Collateral, and any
and all accounts, equipment, general intangibles, chattel paper, inventory,
negotiable instruments or other negotiable collateral, money, deposit accounts,
investment property, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of the Collateral, or any
portion thereof or interest therein, and the proceeds thereof.
"Equipment" means the video gaming machines described on
SCHEDULE E-1 attached hereto, the products and proceeds thereof, any interest in
any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions, enhancements, upgrades, and improvements
to any of the foregoing, in each case whether now owned or existing or hereafter
arising or acquired and wherever located, and all general intangibles and
chattel paper related to or arising from any of the foregoing.
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"Event of Default" has the meaning set forth in Section 8.
"Foothill Expenses" means all: reasonable costs or expenses
(including taxes, photocopying, notarization, telecommunication, and insurance
premiums) required to be paid by Obligor under the Agreement, Guaranty, or any
other documents executed in connection therewith, that are paid or advanced by
Foothill; documentation, filing, recording, publication, appraisal (including
periodic Collateral appraisals), and search fees assessed, paid, or incurred by
Foothill in connection with Foothill's transactions with Obligor; costs and
expenses incurred by Foothill in the disbursement of funds to Obligor (by wire
transfer or otherwise); charges paid or incurred by Foothill resulting from the
dishonor of checks; costs and expenses paid or incurred by Foothill to correct
any default or enforce any provision of this Agreement or the Guaranty, or in
gaining possession of, maintaining, handling, preserving, removing (including,
but not limited to, all costs and expenses incurred by Foothill with respect to
any obligations of Foothill under a landlord's or mortgagee's waiver and consent
entered into in connection with this Agreement or the Guaranty), storing,
shipping, selling, preparing for sale, or advertising to sell the Collateral, or
any portion thereof, whether or not a sale is consummated; costs and expenses
paid or incurred by Foothill in examining Obligor's Books; costs and expenses of
third party claims or any other suit paid or incurred by Foothill in enforcing
or defending this Agreement or the Guaranty; and Foothill's reasonable
attorneys' fees and expenses incurred in advising, structuring, drafting,
reviewing, administering, amending, terminating, enforcing (including attorneys'
fees and expenses incurred in connection with a "workout", a "restructuring," or
an Insolvency Proceeding concerning Obligor or any guarantor of the
Obligations), defending, or concerning this Agreement or the Guaranty, whether
or not suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"Guaranty" means that certain Continuing Guaranty of even date
herewith, executed by Obligor in favor of Foothill, pursuant to which Obligor
guarantees the obligations of Borrower contained in that certain Security
Agreement of even date herewith, by and between Borrower and Foothill, the Term
Note, and the other loan documents executed by Borrower in connection therewith.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
"Judicial Officer or Assignee" means any trustee, receiver,
controller, custodian, assignee for the benefit of creditors, or any other
person or entity having powers or duties like or similar to the powers and
duties of a trustee, receiver, controller, custodian, or
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assignee for the benefit of creditors.
"Obligations" means all loans, advances, debts, principal,
interest (including any interest that, but for the provisions of the United
States Bankruptcy Code, would have accrued), premiums, liabilities (including
all amounts charged to Obligor's loan account pursuant to any agreement
authorizing Foothill to charge Obligor's loan account), obligations, fees, lease
payments, guaranties, covenants, and duties owing by Obligor to Foothill of any
kind and description (whether pursuant to or evidenced by this Agreement or the
Guaranty, by any note or other instrument, or by any other agreement between
Foothill and Obligor, and whether or not for the payment of money), whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, and including any debt, liability, or obligation owing
from Obligor to others that Foothill may have obtained by assignment or
otherwise, and further including all interest not paid when due and all Foothill
Expenses that Obligor is required to pay or reimburse by this Agreement or the
Guaranty, by law, or otherwise. All Obligations shall accrue interest at the
rate(s) set forth in the Term Note from the date such Obligations arise, and
such interest shall in turn be deemed "Obligations" for all purposes under this
Agreement and shall be due and payable when interest is due and payable under
the Term Note. Without limiting the generality of the foregoing, Obligations
shall include all obligations of Obligor under the Guaranty.
"Obligor's Books" means all of Obigor's books and records
including: ledgers; records indicating, summarizing, or evidencing Obligor's
assets or liabilities, or the Collateral; all information relating to Obligor's
business operations or financial condition; and all computer programs, disc or
tape files, printouts, runs, or other computer prepared information, and the
equipment containing such information.
"Pay-Off Letters" means letters, in form and substance
reasonably satisfactory to Foothill, from other lenders and secured creditors
respecting the amount necessary to repay in full all of the obligations of
Obligor owing to such lenders and secured creditors and obtain
terminations/releases of all of the security interests or liens existing in
favor of such lenders and secured creditors in and to the properties or assets
of Obligor.
"Permitted Liens" means: (a) liens and security interests held
by Foothill; (b) liens for unpaid taxes that are not yet due and payable; and
(c) liens and security interests set forth on SCHEDULE P-1 attached hereto but
no extensions, renewals, refinancings or replacements thereof to the extent they
increase the principal or interest of, or extend the maturity of, the
obligations secured by such liens.
"Permitted Protest" means the right of Obligor to protest any
lien, tax, rental payment, or other charge, other than any such lien or charge
that secures the Obligations, provided (i) a reserve with respect to such
obligation is established on the books of Obligor in an amount that is
reasonably satisfactory to Foothill, (ii) any such protest is instituted and
diligently prosecuted by Obligor in good faith, and (iii) Foothill is satisfied
that,
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while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the liens or security interests
of Foothill in and to the property or assets of Obligor.
"Term Note" means that certain Secured Promissory Note, of even
date herewith, executed by Obligor to the order of Foothill, in the original
principal amount of Three Million Dollars ($3,000,000), and any extensions,
renewals, replacements, or substitutions therefor.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto.
1.3 Code. Any terms used in this Agreement which are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, to the
singular include the plural, and the term "including" is not limiting. The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Section, subsection, clause, and exhibit references are to this
Agreement unless otherwise specified.
1.5 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. CONDITIONS TO EFFECTIVENESS: TERM OF AGREEMENT.
2.1 Conditions Precedent. The obligation of Foothill to make the
loan evidenced by the Term Note is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions
precedent on or before the Closing Date:
2.1.1 the Closing Date shall occur on or before October 30,
1998;
2.1.2 Other than with respect to Permitted Liens, Obligor's
existing lenders or creditors shall have executed and delivered Pay-Off Letters,
UCC termination statements and other documentation evidencing the termination of
their liens and security interests in the assets of Obligor or a subordination
agreement in form and substance satisfactory to Foothill in its sole discretion;
2.1.3 Foothill shall have received copies of Obligor's By-laws
and Articles or Certificate of Incorporation, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary of Obligor;
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2.1.4 Foothill shall have received a certificate of corporate
status with respect to Obligor, dated within ten (10) days of the Closing Date,
by the Secretary of State of the state of incorporation of Obligor, which
certificate shall indicate that Obligor is in good standing in such state;
2.1.5 Foothill shall have received a certificate from the
Secretary of Obligor attesting to the resolutions of Obligor's Board of
Directors authorizing its execution and delivery of this Agreement, the
Guaranty, and any other documents to which Obligor is a party and authorizing
specific officers of Obligor to execute same;
2.1.6 Foothill shall have received certificates of corporate
status with respect to Obligor, each dated within ten (10) days of the Closing
Date, such certificates to be issued by the Secretary of State of the states in
which its failure to be duly qualified or licensed would have a material adverse
effect on the financial condition or assets of Obligor, which certificates shall
indicate that Obligor is in good standing;
2.1.7 Foothill shall have received the insurance certificates
and certified copies of policies required by Section 5.7 hereof along with a
438BFU Lender's Loss Payable Endorsement naming Foothill as sole loss payee, all
in form and substance satisfactory to Foothill and its counsel;
2.1.8 Foothill shall have received each of the following
documents, in form and substance satisfactory to Foothill and its counsel, duly
executed, and each such document shall be in full force and effect:
(1) This Agreement;
(2) Guaranty;
(3) Such other documents and instruments as Foothill shall
deem necessary or desirable to ensure that Foothill
has a first priority perfected security interest in
and lien on the Collateral;
2.1.9 Foothill shall have received searches reflecting the
filing of its financing statements and fixture filings, and shall have received
certificates of title with respect to the Collateral which shall have been duly
executed in order to perfect all of the security interests granted to Foothill;
2.1.10 Foothill shall have received landlord and mortgagee
waivers from the lessors and mortgagees of the locations where the Equipment is
located;
2.1.11 Foothill shall have received all of Foothill Expenses
incurred as
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of the Closing Date, and all other costs and expenses incurred by Foothill in
connection herewith, including audit fees, search fees, appraisal fees,
documentation, recording and filing fees, and the fees and costs of any attorney
services required for the negotiation, preparation and documentation of this
Agreement, the Guaranty, and any other document reasonably required by Foothill
in connection with this Agreement;
2.1.12 All representations and warranties set forth in this
Agreement, the Guaranty, and any other documents required by Foothill are true
and correct as of the Closing Date, no "Event of Default" has occurred under
this Agreement or any of the other documents reasonably required by Foothill,
and all of such documents are in full force and effect; and
2.1.13 All other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Foothill
and its counsel.
2.2 Term; Automatic Renewal. This Agreement shall become
effective upon the execution and delivery hereof by Obligor and Foothill, and
shall continue in full force and effect until all Obligations have been
indefeasibly paid in full.
3. CREATION OF SECURITY INTEREST
3.1 Grant of Security Interest. Obligor hereby grants to Foothill a
continuing security interest in all currently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Obligor of each of its
covenants and duties under this Agreement, the Guaranty, or any other documents
reasonably required by Foothill. Foothill's security interest in the Collateral
shall attach to all Collateral without further act on the part of Foothill or
Obligor.
3.2 Delivery of Additional Documentation Required. Obligor shall
execute and deliver to Foothill, prior to or concurrently with Obligor's
execution and delivery of this Agreement and at any time thereafter at the
request of Foothill, all financing statements, continuation financing
statements, fixture filings, security agreements, chattel mortgages, pledges,
assignments, endorsements of certificates of title, applications for title,
affidavits, reports, notices, letters of authority, and all other documents that
Foothill may reasonably request, in form satisfactory to Foothill, to perfect
and continue perfected Foothill's security interests in the Collateral and in
order to fully consummate all of the transactions contemplated hereunder.
3.3 Power of Attorney. Obligor hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Obligor's true and lawful attorney, with
power to: (a) sign the name of Obligor on any of
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the documents described in Section 3.2 or on any other similar documents to be
executed, recorded, or filed in order to perfect or continue perfected
Foothill's security interest in the Collateral; (b) at any time that an Event of
Default has occurred or Foothill deems itself insecure, endorse Obligor's name
on any checks, notices, acceptances, money orders, drafts, or other item of
payment or security that may come into Foothill's possession; and (c) at any
time that an Event of Default has occurred or Foothill deems itself insecure,
make, settle, and adjust all claims under Obligor's policies of insurance in
respect of the Collateral and make all determinations and decisions with respect
to such policies of insurance. The appointment of Foothill as Obligor's
attorney, and each and every one of Foothill's rights and powers, being coupled
with an interest, is irrevocable until all of the Obligations have been fully
repaid and performed and Foothill's obligation to provide advances hereunder is
terminated.
3.4 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Obligor's Books and to check, test, and appraise the Collateral in order
to verify Obligor's financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral.
4. REPRESENTATIONS AND WARRANTIES.
Obligor represents and warrants as follows:
4.1 Prior Encumbrances. Obligor has good and indefeasible title to
the Collateral, free and clear of liens, claims, security interests, or
encumbrances except for Permitted Liens. None of the Collateral has been
purchased by Obligor within the six (6) month period preceding the Closing Date,
except for sales to Obligor in the ordinary course of the seller's business.
None of the personal property described on Schedule E-1 is leased.
4.2 Location of Equipment. The Equipment is not now and shall not at
any time hereafter be stored with a bailee, warehouseman, or similar party
without Foothill's prior written consent. Obligor shall keep the Equipment only
at the following locations: (1) 0000 Xxxxxx Xxxx, Xxxx, Xxxx 00000, or (2) 000
Xxxxxxxx Xxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx.
None of the Equipment has been located, during the six (6) month
period prior to the Closing Date, in any jurisdiction other than the county(ies)
and state(s) set forth in this Section 4.2.
4.3 Location of Chief Executive Office; Fictitious Names. The chief
executive office of Obligor is located at the address indicated in the first
paragraph of this Agreement and Obligor covenants and agrees that it will not,
without thirty (30) days prior written notification to Foothill, relocate such
chief executive office. Obligor does not operate under or otherwise use any
fictitious names or trade names other than: [none].
4.4 Due Organization and Qualification. Obligor is and shall at all
times
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hereafter be duly organized and existing and in good standing under the laws of
the state of its incorporation and qualified and licensed to do business in, and
in good standing in, any state in which the conduct of its business or its
ownership of the Collateral requires that it be so qualified.
4.5 Due Authorization; No Conflict. The execution, delivery, and
performance of this Agreement, the Guaranty, and any other documents reasonably
required by Foothill are within Obligor's corporate powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Obligor's Articles or Certificate of Incorporation, or
Bylaws, nor will they constitute an event of default under any material
agreement to which Obligor is a party.
4.6 Litigation. There are no actions or proceedings pending by or
against Obligor before any court or administrative agency and Obligor does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Obligor or any guarantor of the Obligations, except for ongoing
collection matters in which the Obligor is the plaintiff.
4.7 No Material Adverse Change in Financial Condition. All financial
statements relating to Obligor or any guarantor of the Obligations that have
been or may hereafter be delivered by Obligor to Foothill have been prepared in
accordance with GAAP and fairly present Obligor's financial condition as of the
date thereof and Obligor's results of operations for the period then ended.
There has not been a material adverse change in the financial condition of
Obligor or any guarantor since the date of the latest financial statements
submitted to Foothill on or before the Closing Date.
4.8 Solvency. Obligor's assets at a fair valuation exceed the amount
of all of its debts at a fair valuation and Obligor is able to pay all of its
debts (including trade debts and contingent liabilities) as they become due.
4.9 Environmental Condition. None of Obligor's properties or assets
has ever been used by Obligor or, to the best of Obligor's knowledge, by
previous owners or operators in the disposal of, or to produce, store, handle,
treat, release, or transport, any hazardous waste or hazardous substance in
violation of any law, statute, rule, regulation, or policy of any federal or
state governmental agency. None of Obligor's properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental protection statute. No lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned or operated by Obligor. Obligor has
not received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal or state governmental agency concerning
any action or omission by Obligor resulting in the releasing or disposing of
hazardous waste or hazardous substances into the environment.
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4.10 Reliance by Foothill; Cumulative. Each warranty and
representation contained in this Agreement shall be conclusively presumed to
have been relied on by Foothill regardless of any investigation made or
information possessed by Foothill. The warranties and representations set forth
herein shall be cumulative and in addition to any and all other warranties and
representations that Obligor shall now or hereinafter give, or cause to be
given, to Foothill.
5. AFFIRMATIVE COVENANTS.
Obligor covenants and agrees that, so long as any credit under this
Agreement, the Guaranty, or any other documents reasonably required by Foothill
shall be available and until payment in full of the Obligations, and unless
Foothill shall otherwise consent in writing, Obligor shall do all of the
following:
5.1 Financial Statements, Reports, Certificates. Obligor agrees to
deliver to Foothill: (a) as soon as available, but in any event within thirty
(30) days after the end of each month during each of Obligor's fiscal years, a
company prepared balance sheet, income statement, and cash flow statement
covering Obligor's operations during such period; and (b) as soon as available,
but in any event within ninety (90) days after the end of each of Obligor's
fiscal years, financial statements of Obligor for each such fiscal year,
reviewed by independent certified public accountants acceptable to Foothill and
certified, without any qualifications, by such accountants to have been prepared
in accordance with GAAP, together with a certificate of such accountants
addressed to Foothill stating that such accountants do not have knowledge of the
existence of any event or condition constituting an Event of Default, or that
would, with the passage of time or the giving of notice, constitute an Event of
Default. Such reviewed financial statements shall include a balance sheet,
profit and loss statement, and cash flow statement, and such accountants' letter
to management. Obligor shall have issued written instructions to its independent
certified public accountants authorizing them to communicate with Foothill and
to release to Foothill whatever financial information concerning Obligor that
Foothill may request. If Obligor is a parent company of one or more
subsidiaries, or affiliates, or is a subsidiary or affiliate of another company,
then, in addition to the financial statements referred to above, Obligor agrees
to deliver financial statements prepared on a consolidating basis so as to
present Obligor and each such related entity separately, and on a consolidated
basis.
Obligor hereby irrevocably authorizes and directs all auditors,
accountants, or other third parties to deliver to Foothill, at Obligor's
expense, copies of Obligor's financial statements, papers related thereto, and
other accounting records of any nature in their possession, and to disclose to
Foothill any information they may have regarding Obligor's business affairs and
financial conditions.
5.2 Tax Returns. Obligor agrees to deliver to Foothill copies of
each of Obligor's future federal income tax returns, and any amendments thereto
as soon as the same
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are available and in any event no later than thirty (30) days after the same are
required to be filed by law.
5.3 Guarantor Reports. Obligor agrees to cause any guarantor of any
of the Obligations to deliver its annual financial statements at the time when
Obligor provides its reviewed financial statements to Foothill and copies of all
federal income tax returns as soon as the same are available and in any event no
later than thirty (30) days after the same are required to be filed by law.
5.4 Title to Equipment. Upon Foothill's request, Obligor shall
immediately deliver to Foothill, properly endorsed, any and all evidences of
ownership of, certificates of title, or applications for title to any items of
Equipment.
5.5 Maintenance of Equipment. Obligor shall keep and maintain the
Equipment in good operating condition and repair, and make all necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Obligor shall not permit any item of
Equipment to become a fixture to real estate or an accession to other property,
and the Equipment is now and shall at all times remain personal property.
5.6 Taxes. All assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Obligor or
any of its property have been paid, and shall hereafter be paid in full, before
delinquency or before the expiration of any extension period. Obligor shall make
due and timely payment or deposit of all federal, state, and local taxes,
assessments, or contributions required of it by law, and will execute and
deliver to Foothill, on demand, appropriate certificates attesting to the
payment or deposit thereof. Obligor shall make timely payment or deposit of all
tax payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and shall, upon request, furnish Foothill with proof
satisfactory to Foothill indicating that Obligor has made such payments or
deposits.
5.7 Insurance.
(a) Obligor, at its expense, shall keep the Collateral insured
against "all risks" including loss or damage by fire, theft, explosion,
sprinklers, and all other hazards and risks, and in the full insurable value
thereof. Obligor also shall maintain public liability, product liability, and
property damage insurance relating to Obligor's ownership and use of the
Collateral, as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as may be satisfactory to Foothill. All such
policies of insurance (except those of public liability and property damage)
shall contain a 438BFU
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lender's loss payable endorsement, or an equivalent endorsement in a form
satisfactory to Foothill, showing Foothill as loss payee thereof, and shall
contain a waiver of warranties, and shall specify that the insurer must give at
least ten (10) days prior written notice to Foothill before canceling its policy
for any reason. Obligor shall deliver to Foothill certified copies of such
policies of insurance and evidence of the payment of all premiums therefor. All
proceeds payable under any such policy shall be payable to Foothill to be
applied on account of the Obligations.
5.8 Foothill Expenses. Obligor shall immediately and without demand
reimburse Foothill for all sums expended by Foothill which constitute Foothill
Expenses and Obligor hereby authorizes and approves all advances and payments by
Foothill for items constituting Foothill Expenses. Any Foothill Expenses not
paid promptly by Obligor shall constitute Obligations and shall accrue interest
at the rate and in the manner of Obligations existing under the Term Note.
5.9 No Setoffs or Counterclaims. All payments hereunder, under the
Guaranty and any other documents reasonably required by Foothill made by or on
behalf of Obligor shall be made without setoff or counterclaim and free and
clear of, and without deduction or withholding for or on account of, any
federal, state or local taxes.
6. NEGATIVE COVENANTS.
Obligor covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the Obligations, Obligor will
not do any of the following without Foothill's prior written consent:
6.1 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any lien on or with respect to any of the Collateral, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens.
6.2 Restrictions on Fundamental Changes. Enter into any acquisition,
merger, consolidation, reorganization, or recapitalization, or reclassify its
capital stock, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business, property, or assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise all or substantially all
the assets, stock, or other evidence of beneficial ownership of any person or
entity.
6.3 Extraordinary Transactions and Disposal of Collateral. Sell,
lease, or otherwise dispose of, move, relocate, or transfer, whether by sale or
otherwise, any of the Collateral.
6.4 Change Name. Change Obligor's name, business structure, or
identity,
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or add any new fictitious name.
7. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
7.1 If Obligor fails to pay when due and payable or when declared
due and payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the United States
Bankruptcy Code, would have accrued on such amounts), fees and charges due
Foothill, taxes, reimbursement of Foothill Expenses, or otherwise);
7.2 If Obligor fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in this Agreement,
the Guaranty, in any other documents reasonably required by Foothill, or in any
other present or future agreement between Obligor and Foothill;
7.3 If there is a material impairment of the prospect of repayment
of any portion of the Obligations owing to Foothill or a material impairment of
the value or priority of Foothill's security interests in the Collateral;
7.4 If any material portion of Obligor's assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any Judicial Officer or Assignee;
7.5 If an Insolvency Proceeding is commenced by Obligor;
7.6 If an Insolvency Proceeding is commenced against Obligor;
7.7 If Obligor is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
7.8 If a notice of lien, levy, or assessment is filed of record with
respect to any of Obligor's assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether xxxxxx or
otherwise, upon any of Obligor's assets and the same is not paid on the payment
date thereof;
7.9 If a judgment or other claim becomes a lien or encumbrance upon
any material portion of Obligor's assets;
7.10 If there is a default in any material agreement to which
Obligor is a
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party with third parties resulting in a right by such third parties, whether or
not exercised, to accelerate the maturity of Obligor's indebtedness thereunder;
7.11 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by Obligor or any officer, employee, agent, or director of Obligor, or if any
such warranty or representation is withdrawn by any officer or director; or
7.12 If the obligation of any guarantor or other third party under
any Loan Document is limited or terminated by operation of law or by any
guarantor or other third party thereunder, or any guarantor or other third party
becomes the subject of an Insolvency Proceeding.
8. FOOTHILL'S RIGHTS AND REMEDIES
8.1 Rights and Remedies. Upon the occurrence of an Event of Default
Foothill may, at its election, without notice of its election and without
demand, do any one or more of the following, all of which are authorized by
Obligor:
8.1.1 Declare all Obligations, whether evidenced by this
Agreement, the Guaranty, or by any other documents reasonably required by
Foothill, or otherwise, immediately due and payable;
8.1.2 Terminate this Agreement and any other documents
reasonably required by Foothill as to any future liability or obligation of
Foothill, but without affecting Foothill's rights and security interest in the
Collateral and without affecting the Obligations;
8.1.3 Without notice to or demand upon Obligor or any guarantor,
make such payments and do such acts as Foothill considers necessary or
reasonable to protect its security interest in the Collateral. Obligor agrees to
assemble the Collateral if Foothill so requires, and to make the Collateral
available to Foothill as Foothill may designate. Obligor authorizes Foothill to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien that in Foothill's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Obligor's owned
premises, Obligor hereby grants Foothill a license to enter into possession of
such premises and to occupy the same, without charge, for up to one hundred
twenty (120) days in order to exercise any of Foothill's rights or remedies
provided herein, at law, in equity, or otherwise;
8.1.4 Without notice to Obligor (such notice being expressly
waived) set off and apply to the Obligations any and all (i) balances and
deposits of Obligor
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held by Foothill, or (ii) indebtedness at any time owing to or for the credit or
the account of Obligor held by Foothill;
8.1.5 Store, maintain, repair, prepare for sale, advertise for
sale, and sell (in the manner provided for herein) the Collateral. Foothill is
hereby granted a license or other right to use, without charge, Obligor's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, advertising for sale and
selling any Collateral and Obligor's rights under all licenses and all franchise
agreements shall inure to Foothill's benefit;
8.1.6 Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Obligor's premises) as Foothill
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
8.1.7 Foothill may credit bid and purchase any of the Collateral
at any public sale. Foothill shall give notice of the disposition of the
Collateral as follows:
(1) Foothill shall give Obligor and each holder of a
security interest in the Collateral who has filed with Foothill a written
request for notice, a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a public
sale is to be made of the Collateral, then the time on or after which the
private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Obligor as provided in Section 11, at least five (5)
calendar days before the date fixed for the sale, or at least five (5) calendar
days before the date on or after which the private sale or other disposition is
to be made, unless the Collateral is perishable or threatens to decline speedily
in value. Notice to persons other than Obligor claiming an interest in the
Collateral shall be sent to such addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also
shall give notice of the time and place by publishing a notice one time at least
five (5) calendar days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
8.2 Deficiency; Excess Proceeds. Any deficiency that exists after
disposition of the Collateral as provided above will be paid immediately by
Obligor. Any excess will be returned, without interest and subject to the rights
of third parties, by Foothill to Obligor.
8.3 Remedies Cumulative. Foothill's rights and remedies under this
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Agreement, the other Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by
Foothill of one right or remedy shall be deemed an election, and no waiver by
Foothill of any Event of Default shall be deemed a continuing waiver. No delay
by Foothill shall constitute a waiver, election, or acquiescence by it.
9. TAXES AND EXPENSES REGARDING THE COLLATERAL
Except with respect to Permitted Protests, if Obligor fails to pay
any monies (whether taxes, rents, assessments, insurance premiums, or otherwise)
due to third persons or entities, or fails to make any deposits or furnish any
required proof of payment or deposit, all as required under the terms of this
Agreement, then, to the extent that Foothill determines that such failure by
Obligor could have a material adverse effect on Foothill's interests in the
Collateral, in its discretion and without prior notice to Obligor, Foothill may
do any or all of the following: (a) make payment of the same or any part
thereof; or (b) obtain and maintain insurance policies of the type described in
Section 5.7, and take any action with respect to such policies as Foothill deems
prudent. Any amounts paid or deposited by Foothill shall constitute Foothill
Expenses, shall be immediately charged to Obligor and become additional
Obligations, shall bear interest at the then applicable rate set forth in the
Term Note, and shall be secured by the Collateral. Any payments made by Foothill
shall not constitute an agreement by Foothill to make similar payments in the
future or a waiver by Foothill of any Event of Default under this Agreement.
Foothill need not inquire as to, or contest the validity of, any such expense,
tax, security interest, encumbrance, or lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
10. WAIVERS; INDEMNIFICATION
10.1 Demand; Protest; etc. Obligor waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Foothill on which Obligor may in any way be
liable.
10.2 Foothill's Liability for Equipment. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Obligor.
10.3 Indemnification. Obligor agrees to indemnify Foothill and its
officers,
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employees, and agents and hold Foothill harmless against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party, and (b)
all losses in any way suffered, incurred, or paid by Foothill as a result of or
in any way arising out of, following, or consequential to transactions with
Obligor whether under this Agreement, or otherwise. This provision shall survive
the termination of this Agreement.
11. NOTICES
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection therewith shall be in writing and (except for financial statements
and other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by registered or certified mail,
postage prepaid, return receipt requested, or by prepaid telex, TWX,
telefacsimile, or telegram (with messenger delivery specified) to Obligor or to
Foothill, as the case may be, at its addresses set forth below:
If to Obligor: LEISURE TIME TECHNOLOGY, INC.
0000 Xxxxxx Xxxx
Xxxx, Xxxx 00000
Attention: Mr. Xxxx Xxxxxxx
Telecopy No.
If to Foothill: FOOTHILL CAPITAL CORPORATION
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Small Business Lending Division Manager
Telecopy No. 000-000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 11, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
(3) calendar days after the deposit thereof in the mail. Obligor acknowledges
and agrees that notices sent by Foothill in connection with Sections 9504 or
9505 of the Code shall be deemed sent when deposited in the mail or transmitted
by telefacsimile or other similar method set forth above.
12. DESTRUCTION OF OBLIGOR'S DOCUMENTS
All documents, agings, or other papers delivered to Foothill may be
destroyed or otherwise disposed of by Foothill four (4) months after they are
delivered to or received by Foothill, unless Obligor requests, in writing, the
return of said documents, schedules, or other
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papers and makes arrangements, at Obligor's expense, for their return.
13. GENERAL PROVISIONS
13.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Obligor and Foothill.
13.2 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the parties;
provided, however, that Obligor may not assign this Agreement or any rights or
duties hereunder without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Foothill
shall release Obligor from its Obligations. Foothill may assign this Agreement
and/or any other documents reasonably required by Foothill and its rights and
duties hereunder and thereunder. Foothill reserves the right to sell, assign,
transfer, negotiate, or grant participations in all or any part of, or any
interest in Foothill's rights and benefits hereunder and/or under any other
documents reasonably required by Foothill. In connection therewith, Foothill may
disclose all documents and information which Foothill now or hereafter may have
relating to Obligor or Obligor's business. To the extent that Foothill assigns
its rights and obligations hereunder and/or under any other documents reasonably
required by Foothill to a third party, Foothill shall thereafter be released
from such assigned obligations to Obligor and such assignment shall effect a
novation between Obligor and such third party.
13.3 Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each paragraph applies equally to this entire Agreement.
13.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Obligor,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
13.5 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
13.6 Amendments in Writing. This Agreement cannot be changed or
terminated orally. All prior agreements, understandings, representations,
warranties, and negotiations, if any, are merged into this Agreement.
13.7 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed
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and delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.
13.8 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Obligor or any guarantor of the Obligations or the
transfer by either or both of such parties to Foothill of any property of either
or both of such parties should for any reason subsequently be declared to be
improper under any state or federal law relating to creditors' rights, including
provisions of the United States Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if Foothill is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that Foothill is required to repay
or restore, and as to all reasonable costs, expenses and attorneys' fees of
Foothill related thereto, the liability of Obligor or such guarantor shall
automatically be revived, reinstated, and restored and shall exist as though
such Voidable Transfer had never been made.
13.9 Integration. This Agreement, together with the Guaranty and
any other documents reasonably required by Foothill, reflects the entire
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted, modified, or qualified by any other
agreement, oral or written, whether before or after the date hereof.
14. CHOICE OF LAW AND VENUE; JURY TRIAL
WAIVER THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE
OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR
EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. EACH OF OBLIGOR AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 15. OBLIGOR AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS,
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TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS. OBLIGOR AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed at Los Angeles, California.
LEISURE TIME TECHNOLOGY, INC.,
a Georgia corporation
By: /s/
--------------------------------------
Print Name:
Title:
Accepted and effective this 9th day of October, 1998
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/
-------------------------------
Print Name:
Title:
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SCHEDULE E-1
List of Equipment
(continues on the following pages)
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SCHEDULE P-1
List of Permitted Liens
[NONE]
22
