Exhibit 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made and entered into as of May
20, 2004, by and between SAVON TEAM SPORTS, INC., a Utah corporation
("Borrower"), and SWT, LLC, a Delaware limited liability company ("Lender").
WITNESSETH:
WHEREAS, Lender desires to make a Term Loan to Borrower, and Borrower
desires to borrow from Lender the amount of such Term Loan, subject to and in
accordance with the terms and conditions set forth herein, and in the Term Note
and the Pledge Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the delivery,
receipt, and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
"BUSINESS DAY" means a day (a) other than Saturday or Sunday, and (b) on
which commercial banks are open for business in Los Angeles, California.
"CLOSING DATE" means the date each of the conditions precedent set forth
in Section 5 hereof is fully satisfied.
"COLLATERAL" has the meaning assigned to such term in the Pledge
Agreement.
"EVENT OF DEFAULT" has the meaning set forth in Section 7.
"INTEREST RATE" has the meaning set forth in Section 2(c).
"LIEN" means any mortgage, deed of trust, pledge, security interest,
assignment, deposit arrangement, charge or encumbrance, lien (statutory or
other), or other preferential arrangement (including any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing or any agreement to give any
security interest).
"MATURITY DATE" has the meaning set forth in Section 2(b).
"NOTE" has the meaning set forth in Section 2(d).
"PERSON" means an individual, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization or any other
juridical entity.
"PERMITTED LIEN" means (i) with respect to Small World, that certain
security interest in all of the assets of Small World granted by Small World to
Manufacturers Bank pursuant to that certain Amended and Restated Loan and
Security Agreement (Streamline), as amended, dated as of July 30, 2003 by and
between Small World and Manufacturers Bank, and (ii) with respect to Borrower,
those Liens disclosed on SCHEDULE II attached to the Pledge Agreement.
"PLEDGE AGREEMENT" means that Pledge Agreement by and between Borrower and
Lender in the form of EXHIBIT B attached hereto.
"SECURED OBLIGATIONS" has the meaning assigned to such term in the Pledge
Agreement.
"SMALL WORLD" means Small World Toys, a California corporation, a
wholly-owned subsidiary of Borrower.
"STOCK PURCHASE AGREEMENT" means that certain Stock Purchase Agreement
dated as of May 20, 2004 by and among Borrower, Xxxxx Xxxx, Small World, Xxxx
Xxxxxxxxxx, and Xxxx X. Xxxxxxxxxx, Trustee of the Xxxx X. Xxxxxxxxxx and Xxxx
Xxxxxxxxx Family Trust.
"TERM LOAN" has the meaning set forth in Section 2(a).
2. AMOUNT AND TERMS OF THE TERM LOAN.
(a) TERM LOAN ADVANCE. Subject to the terms and conditions of this
Agreement, Lender hereby agrees to make a loan to Borrower (the "Term Loan") on
the Closing Date in the principal amount of Five Million Dollars
(U.S.$5,000,000), which amount may be repaid at any time prior to the Maturity
Date without premium or penalty, but may not be reborrowed once repaid.
(b) TERM. All unpaid principal and accrued but unpaid interest of
the Term Loan shall, subject to subsection (c) below, be payable in full on May
20, 2009 (the "Maturity Date").
(c) INTEREST RATE AND INTEREST PAYMENTS. Borrower shall pay interest
on the unpaid principal amount of the Term Loan from the Closing Date until the
Maturity Date, at a rate equal to ten percent (10%) per annum (the "Interest
Rate"). Subject to Section 2(e) and 2(g) below, interest on the outstanding
principal amount of the Term Loan shall be due and payable to Lender, in
arrears, on the last Business Day of each fiscal quarter of Borrower, commencing
on the first of such dates following the Closing Date until the Maturity Date,
at which time all accrued but unpaid interest shall be due and payable.
(d) PROMISSORY NOTE. The Term Loan shall be evidenced by a
promissory note (the "Note") in the form of Exhibit "A" attached hereto, duly
executed and delivered to Lender by Borrower.
(e) INTEREST ON EVENT OF DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, Borrower agrees to pay interest on the
entire unpaid principal amount of the Term Loan, as well as on any interest or
other amount past due, from the date of such Event of Default until the date the
same is cured in full, payable on demand, at a fluctuating rate per annum equal
at all times to the Interest Rate PLUS two percent (2.0%).
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(f) MANNER OF PAYMENT. All payments of principal or interest
hereunder or under the Note shall be delivered to Lender in immediately
available funds on the date due at such place as Lender may from time to time
designate.
(g) LIMITATION ON INTEREST RATE. In no contingency or event
whatsoever shall the aggregate of all amounts deemed interest hereunder and
charged or collected by Lender or any holder of the Note exceed the highest rate
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto. In the event that such a court
determines that Lender has charged or received interest hereunder or under the
Note in excess of the highest applicable rate, the rate in effect hereunder and
under the Note shall automatically be reduced to the maximum rate permitted by
applicable law and Lender shall apply all interest paid in excess of the maximum
lawful rate to the principal balance of the amounts outstanding hereunder and
under the Note. It is the intent of the parties hereto that Borrower not pay or
contract to pay, and that Lender not receive or contract to receive, directly or
indirectly in any manner whatsoever, interest in excess of that which may be
paid by Borrower to Lender under applicable law.
(h) LOAN FEES. Borrower shall pay loan fees ("Loan Fees") in the
amount of $1500 per quarter. The Loan Fees shall be due and payable to Lender on
the last Business Day of each fiscal quarter of Borrower, commencing on the
first of such dates following the Closing Date until the Maturity Date.
3. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter into
this Agreement and to make the Term Loan contemplated hereunder, Borrower hereby
represents and warrants to Lender as follows:
(a) LEGAL STATUS. Borrower is a corporation duly incorporated,
validly existing, and in good standing under the laws of the State of Utah.
Borrower is qualified or licensed to do business, and is in good standing as a
foreign corporation in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.
(b) AUTHORIZATION AND VALIDITY. This Agreement, the Pledge Agreement
and the Note have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof and thereof will constitute legal, valid
and binding agreements and obligations of Borrower, enforceable in accordance
with their respective terms.
(c) NO CONFLICT. The execution, delivery, and performance by
Borrower of this Agreement, the Pledge Agreement and the Note do not and will
not conflict with the terms of the Articles or Certificate of Incorporation or
Bylaws of Borrower, violate any provision of any judgment, decree or order of
any court or governmental authority by which Borrower is bound, or any provision
of any law or regulation applicable to Borrower, or result in a breach of or
constitute a default under any contract, obligation, indenture, or other
instrument to which Borrower is a party or by which Borrower may be bound.
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(d) NO CONSENTS. The execution, delivery, and performance by
Borrower of this Agreement, the Pledge Agreement and the Note do not and will
not require any authorization, approval, or other action by, or notice to or
filing with, any governmental authority, regulatory body, or any other person or
entity.
(e) USE OF PROCEEDS. No proceeds of the Term Loan will be used to
acquire any equity security of a class that is registered pursuant to Section 12
of the Securities Exchange Act of 1934, as amended.
(f) MARGIN STOCK. Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of the Term Loan will be used to purchase or
carry any margin stock or extend credit to others for the purpose of purchasing
or carrying any margin stock, or be used for any purpose which violates or is
inconsistent with the provisions of Regulation X of said Board of Governors.
4. COVENANTS. Borrower hereby covenants that until all amounts outstanding
hereunder and under the Note have been indefeasibly paid in full, it shall:
(a) PUNCTUAL PAYMENTS. Punctually pay the interest and principal
with respect to the Term Loan as provided herein and in the Note.
(b) EXISTENCE. Do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its existence and comply with
the provisions of all documents pursuant to which it is organized and/or which
govern its continued existence; maintain all licenses, permits, governmental
approvals, rights, privileges, and franchises necessary for the conduct of its
business; and conduct its business in an orderly and regular manner and in
accordance with all laws, rules, regulations, and orders of any governmental
authority having jurisdiction over it or its business.
(c) BOOKS AND RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Lender or any Lender, at any reasonable time,
to inspect, audit and examine such books and records, to make copies of the
same, and to inspect its assets and properties.
(d) MANDATORY PREPAYMENT. Notwithstanding any provision to the
contrary contained herein, upon the issuance and sale of any equity securities
by Borrower subsequent to the date hereof, Borrower shall, within thirty (30)
Business Day(s) of Borrower's receipt of the proceeds thereof, prepay the
outstanding principal amount of the Term Loan in an amount equal to seventy-five
percent (75.0%) of all cash proceeds therefrom, net of underwriting discounts
and commissions and all other reasonable costs paid to non-affiliates in
connection therewith.
5. CONDITIONS PRECEDENT TO TERM LOAN. The obligation of Lender to make the
Term Loan shall be subject to the condition precedent that Lender shall have
received each of the following, each in form and substance satisfactory to
Lender:
(a) This Agreement, duly executed by all of the parties hereto;
(b) The Note, duly executed by Borrower;
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(c) The Pledge Agreement, duly executed by Borrower;
(d) An irrevocable stock power certificate in form and substance
acceptable to Lender, duly executed by Borrower;
(e) Original stock certificate(s) representing the Pledged Shares
(as such term is defined in the Pledge Agreement); and
(f) Such additional supporting documents as Lender or its counsel
may reasonably request.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower covenants,
warrants and represents to Lender that all representations and warranties of
Borrower contained in this Agreement, the Pledge Agreement and the Note shall be
true at the time of Borrower's execution of this Agreement, the Pledge Agreement
and the Note, and shall survive the execution, delivery and acceptance thereof
by Lender and the parties thereto and the closing of the transactions described
therein or related thereto.
7. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" and shall, at the option of Lender, require
immediate payment in full of all sums then remaining unpaid hereunder and under
the Note:
(a) FAILURE TO PAY THE NOTE. The failure of Borrower to pay any
principal, interest or other amount due under the Note when due and payable.
(b) SELLER NOTES. The failure of Borrower to pay any principal,
interest or other amount due under (i) the Six Month Note, (ii) the Seven Month
Note, or (iii) the Two Year Note (each as defined in the Stock Purchase
Agreement).
(c) BREACH OF COVENANT, REPRESENTATION OR WARRANTY. The failure of
Borrower to perform or observe any covenant, condition or agreement contained in
this Agreement or the Pledge Agreement (other than the payment obligations, the
breach of which shall be governed by subsection (a) above) where such failure is
not cured within five (5) Business Days, or any representation or warranty made
or deemed made by any of them under or in connection with this Agreement or the
Pledge Agreement, shall prove to have been false or misleading in any material
respect when made.
(d) LIENS. Borrower creates, incurs, assumes or suffers to exist, or
permits Small World to create, incur, assume or suffer to exist, any Lien upon
or with respect to any of its or Small World's properties or assets, as the case
may be, whether now owned or hereafter acquired, including, without limitation,
any governmental, tax, or judgment Lien, other than Permitted Liens, and fails
to have, or to cause to have, the same removed or released within two Business
Days after the creation thereof.
(e) INSOLVENCY. Borrower shall become insolvent; admit in writing
its inability to pay its debts as they mature; make an assignment for the
benefit of creditors; or if bankruptcy proceedings or other proceedings for
relief under any bankruptcy law or any law for the relief of debtors shall be
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instituted by or against it and, if instituted against it, the same is not
dismissed within thirty (30) days of the filing thereof. (f) DISSOLUTION. Any
order, judgment, or decree shall be entered against Borrower decreeing its
involuntary dissolution or split up and such order shall remain undischarged and
unstayed for a period in excess of thirty (30) days; or Borrower shall otherwise
dissolve or cease to exist.
8. REMEDIES. If an Event of Default shall occur, (a) all amounts
outstanding hereunder or under the Note, notwithstanding any term of this
Agreement, the Pledge Agreement, or the Note to the contrary, shall at Lender's
option and without notice to Borrower become immediately due and payable,
without presentment, demand, protest or notice of dishonor, all of which are
hereby expressly waived by Borrower, and (b) Lender shall have all rights,
powers and remedies available hereunder, under the Pledge Agreement, or accorded
by law, including without limitation the right to resort to any or all security
for the Secured Obligations and to exercise any or all of the rights of a
beneficiary or secured party pursuant to applicable law. All rights, powers and
remedies of Lender in connection with this Agreement, the Pledge Agreement, and
the Note may be exercised at any time by Lender and from time to time after the
occurrence of an Event of Default, are cumulative and not exclusive, and shall
be in addition to any other rights, powers or remedies provided by law or
equity.
9. SECURITY. As security for the obligations of Borrower hereunder and
under the Note, Borrower shall grant to Lender a security interest in certain of
its assets pursuant to the Pledge Agreement. 10. MISCELLANEOUS.
(a) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of Lender or any holder of a Note in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof or of any other right, power or privilege.
(b) MODIFICATION. No modification, amendment or waiver of any
provision of this Agreement, the Pledge Agreement, or the Note, nor the consent
to any departure by Borrower therefrom, shall in any event be effective unless
the same shall have been approved by Lender and shall be in writing signed by
Lender and, with respect to any amendment, Borrower. Such waiver or consent
shall then be effective only in the specific instance and for the purpose for
which given. No notice to or demand on Borrower in any case shall entitle
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
(c) NOTICES. Except as otherwise expressly provided herein, any
notice herein required or permitted to be given shall be in writing and shall be
deemed effective when personally delivered, mailed, telecopied (with a
confirming copy sent by mail) or delivered by telex to the appropriate party at
the address set forth below (or at such other address as may be designated by
either party in a written notice sent in accordance with this Section):
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If to Borrower: Savon Team Sports, Inc.
c/o Small World Toys, Inc.
0000 Xxxxxxxxxx Xxxxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
with a copy to:
Loeb & Loeb LLP
00000 Xxxxx Xxxxxx Xxxx., Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxxxxx, Esq.
Facsimile No: (000) 000-0000
If to Lender: SWT, LLC
c/o Glenhaven Corporation
0000 Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000
(d) SEVERABILITY. In case any provision in this Agreement, the
Pledge Agreement, or the Note shall be invalid, illegal or unenforceable, such
provision shall be severable from the remainder of such contract and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
(e) APPLICABLE LAW. This Agreement, the Pledge Agreement, and the
Note, and the rights and obligations of the parties thereto, shall be governed
by the laws of the State of California, exclusive of its conflicts of laws and
choice of laws rules that would or may cause the application of the laws of any
jurisdiction other than the State of California.
(f) ASSIGNABILITY. Borrower shall not assign its rights or
obligations hereunder, under the Pledge Agreement, or under the Note to any
other Person without the prior written consent of Lender, and any attempted
assignment in violation hereof shall be null and void AB INITIO. Lender shall
have the right to assign their rights and obligations hereunder and no consent
or approval from Borrower is required in connection with any such assignment.
(g) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(h) SECTION HEADINGS. The various headings used in this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretations of this Agreement or any provision hereof.
(i) ATTORNEYS' FEES. In the event any party institutes any action or
proceeding to enforce the terms and conditions of this Agreement, the Pledge
Agreement, or the Note, the prevailing party shall be entitled to reasonable
attorneys' fees and costs.
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(j) WAIVER OF TRIAL BY JURY. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
AGREEMENT, THE NOTE, OR THE SECURITY AGREEMENT, THE SUBJECT MATTER HEREOF AND
THEREOF OR ANY DOCUMENT RELATING HERETO OR THERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT, TORT OR OTHERWISE. (k)
INTEGRATION. This Agreement, the Pledge Agreement and the Note reflect the
entire understanding of the parties with respect to the transactions
contemplated hereby and shall not be contradicted or qualified by any other
agreement, oral or written, whether before or after the date hereof.
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IN WITNESS WHEREOF, the parties hereto do execute this Agreement as
of the date first above written.
BORROWER"
SAVON TEAM SPORTS, INC.
By:
------------------------------------------
Xxxxx Xxxx, Chief Executive Officer
"LENDER"
SWT, LLC
By: Glenhaven Corporation, a
California corporation, its manager
--------------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
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EXHIBITS
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Exhibit "A" - Term Note
Exhibit "B" - Pledge Agreement
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