EXHIBIT 10.46
CREDIT AGREEMENT
This Credit Agreement ("Agreement") is made and entered into on
December 8 , 1998, by and between Asset Liquidation Group, Inc., a corporation,
("Borrower") and Imperial Bank, a California banking corporation, ("Bank").
Subject to the terms and conditions of this Agreement, any security
agreement(s) executed by Borrower in favor of Bank, any note(s) executed by
Borrower in favor of Bank, or any other agreements executed in conjunction
therewith (collectively, the "Loan Documents"), Bank shall make the loans and or
advances (individually a "Loan" and collectively "Loans") referred to below to
Borrower.
In consideration of mutual covenants and conditions hereof, the parties
hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.01 Revolving Credit Commitment.
(a). Revolving Line of Credit. Subject to the terms and conditions of
this Agreement, provided that no event of default then has occurred and is
continuing, Bank shall, upon Borrower's request make advances ("Revolving
Loans") to Borrower, for working capital purposes, in an amount not to exceed
$3,000,000 (the "Revolving Line of Credit") until December 8, 2000 (the
"Revolving Line of Credit Maturity Date"). Revolving Loans may be repaid and
reborrowed, provided that all outstanding principal and accrued interest on the
Revolving Loans shall be payable in full on the Revolving Credit Maturity Date.
(b) Revolving Note. The interest rate, principal and interest payments,
maturity date and certain other terms of the Revolving Loan will be contained in
a promissory note dated the date of this agreement, as such may be amended or
replaced from time to time.
1.02 Loan Fee. In addition to any other amounts due, or to become due,
concurrent with the execution hereof, in connection with the Revolving Line of
Credit, Borrower shall pay to Bank a loan fee of Thirty Thousand Dollars
($30,000), Borrower has paid, and Bank hereby acknowledges receipt of in respect
of the Revolving Line of Credit, a loan fee in the amount of Thirty Thousand
Dollars ($30,000).
1.03. Documentation Fee, Costs and Expenses. In addition to any other amounts
due, or to become due, concurrently with the execution hereof, Borrower agrees
to pay to Bank a documentation fee in the amount of $250, and all other costs
and expenses incurred by the Bank in the preparation of this Agreement, the
other Loan Documents and the perfection of any security interest granted to Bank
by Borrower.
1.04 Collateral. Borrower shall grant or cause to be granted to Bank a first
priority lien on any and all personal property assets of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest or pursuant to the terms of any
security agreement, an intellectual property security agreement or otherwise as
security for all of Borrower's obligations to Bank.
1.05 Collection of Payments. Borrower authorizes Bank to collect all interest,
fees, costs, and/or expenses due under this Agreement by charging Borrower's
demand deposit account number ▇▇▇▇▇▇▇▇ with Bank, or any other demand deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such demand deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
2. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
2.01 Existence and Rights. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the state of California, without
limit as to the duration of its existence each Borrower is authorized and in
good standing to do business in the state of its incorporation; each Borrower
has the appropriate 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 power and adequate authority to
make and carry out this Agreement.
2.02 Agreement Authorized. The execution, delivery and performance of this
Agreement and the Loan Documents 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 charter/articles of incorporation, by-laws, operating
agreement, or similar document as the case may be, and this Agreement is the
valid, binding and legally enforceable obligation of Borrower in accordance with
its terms; subject only to bankruptcy, insolvency or similar laws affecting
creditors rights generally.
2.03 No Conflict. The execution, delivery and performance of this Agreement and
the Loan Documents 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.
2.04 Litigation. Except as disclosed in writing to bank by Borrower, there is no
litigation or other proceeding pending or threatened against or affecting
Borrower which if determined adversely to Borrower or its interest would have a
material adverse effect on the financial condition of Borrower, and Borrower is
not in default with respect to any order, writ, injunction, decree or demand of
any court or other governmental or regulatory authority.
2.05 Financial Condition. The consolidated balance sheet of Borrower as of
August 31, 1998, and the related profit and loss statement for the eight months
(8) ended as of that date, a copy of which has heretofore been delivered to Bank
by Borrower, and all other statements and data submitted in writing by Borrower
to Bank in connection with this request for credit are true and correct, and
said balance sheet truly presents the financial condition of Borrower as of the
date thereof, and has been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since such date there
have been no material adverse changes in the financial condition or business of
Borrower. Borrower has no knowledge of any liabilities, contingent or otherwise,
at such date not reflected in said balance sheet, and Borrower has not entered
into any special commitments or substantial contracts which are not reflected in
said balance sheet, other than in the ordinary and normal course of its
business, which may have a materially adverse effect upon its financial
condition, operations or business as now conducted.
2.06 Title to Assets. Borrower has good title to its assets, and the same are
not subject to any liens or encumbrances other than those permitted by Section
5.03 hereof.
2.07 Tax Status. Borrower has no liability for any delinquent state, local or
federal taxes, and, if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
2.08 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.
2.09 Regulation U. None of the proceeds of any Loan shall be used to purchase or
carry margin stock (as defined within Regulation U of the Board of Governors of
the Federal Reserve system).
2.10 ERISA. All defined benefit pension plans as defined in the Employees
Retirement Income Security Act of 1974, as amended ("ERISA"), of Borrower meet,
as of the date hereof, the minimum funding standards of Section 302 of ERISA,
and no Reportable Event or Prohibited Transaction as defined in ERISA has
occurred with respect to any such plan.
2.11 Year 2000 Compliance. Borrower and its subsidiaries, as applicable, have
reviewed the areas within their operations and business which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis, the Year 2000 Problem and have made related appropriate inquiry of
material suppliers and vendors, and based on such review and program, the Year
2000 Problem will not have a material adverse effect upon its financial
condition, operations or business as now conducted. "Year 2000 Problem" means
the possibility that any computer applications or equipment used by Borrower may
be unable to recognize and properly perform date sensitive functions involving
certain dates prior to and any dates one or after December 31, 1999.
3. CONDITIONS PRECEDENT TO LOAN.
Prior to Bank being obligated to make any Loan pursuant to
this Agreement, Bank must receive all of the following, each of which must be in
form and substance satisfactory to Bank:
3.01 Promissory Note(s). Original, executed promissory note(s).
3.02 Security Agreement. Original, executed security agreements covering the
personal property collateral securing the Loans and the collateral securing the
Continuing Guarantee of Public Liquidation systems, Inc..
3.03 Financing Statement. Financing statements executed by Borrower and any
grantor of security.
3.04 Guarantee(s). Continuing Guarantee(s) in favor of Bank executed by ▇▇▇▇▇▇
▇▇▇▇▇ in the amount of $3,000,000 and Public Liquidation Systems, Inc., in the
amount of $3,000,000, "Guarantor" individually a Guarantor and jointly the "
Guarantors".
3.05 Insurance. Borrower shall have delivered to Bank evidence of insurance
coverage required pursuant to Section 4.03 in form, substance, amounts, covering
risks and issued by companies satisfactory to Bank, and where required by Bank,
with loss payable endorsements in favor of Bank.
3.06 Organizational Documents. Copies of the charter/articles of incorporation
or similar document as the case may be, of the Borrower and Guarantor.
3.07 Authorizations. Certified copies of all action taken by the Borrower to
authorize the execution, delivery and performance of the Loan Documents.
3.08 Good Standing . Good standing certificates from the appropriate secretary
of state of the state in which the Borrower and Guarantor is required to be
qualified to do business.
3.09 Additional Documents. Such other documents as Bank may reasonable deem
necessary.
4. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under
borrowings, or other indebtedness, or so long as Bank has any obligation to
extend credit to Borrower it will, unless Bank shall otherwise consent in
writing:
4.01 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.
4.02 Use of Proceeds. Use the proceeds of the Loans only for purposes specified
in Section 1 of this Agreement.
4.03 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 and/or in the exercise of good business
judgment. Bank to be shown as Lenders Loss Payee on such policies.
4.04 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 by it to be adequate with respect thereto.
4.05 Records and Reports. Maintain a standard and modern system of accounting in
accordance with generally accepted accounting principles on a basis consistently
maintained; permit Bank's representatives to have access to, and to examine its
properties, books and records at all reasonable times and upon reasonable notice
during normal business hours; and furnish Bank:
(a) Quarterly Financial Statement. As soon as available, and
in any event within forty five (45) days after the close of each
quarter, a consolidated balance sheet, profit and loss statement and
reconciliation of Borrower's capital balance accounts as of the close
of such period and covering operations for the portion of Borrower's
fiscal year ending on the last day of such period, all in reasonable
detail and reasonably acceptable to Bank, in accordance with generally
accepted accounting principles on a basis consistently maintained by
Borrower and certified by an appropriate officer of Borrower.
(b) Annual Financial Statement. As soon as available, and in
any event within one hundred twenty (120) days after and as of the
close of each fiscal year of Borrower, a consolidated report of audit
of Company, all in reasonable detail, prepared on a audited basis by an
independent certified public accountant selected by Borrower and
reasonably acceptable to Bank, in accordance with generally accepted
accounting principles on a basis consistently maintained by Borrower
and certified by an appropriate officer of Borrower;
(c) Audit Reports. Promptly after the receipt thereof by
Borrower, copies of any detailed audit reports submitted to Borrower by
independent accountants in connection with each annual or interim work
on the accounts of Borrower made by such accountants;
(d) Guarantors' Financial Statements. Cause each Guarantor to
submit to Bank such Guarantor's financial statement, confirmed as to
its correctness by Guarantor's signature, either on Bank's form or
prepared by an independent certified public accountant, together with a
copy of such Guarantor's federal income tax return for the previous
calendar year, no later than ten (10) after filing of same with the
Internal Revenue Service.
(e) Other Information. Such other information relating to the
affairs of Borrower as the Bank reasonably may request from time to
time.
4.06 Liquidity Ratio. Maintain on a quarterly basis a consolidated minimum ratio
of cash plus accounts receivable divided by trade accounts payable to consignors
of 1.10:1.00 beginning on March 31, 1999 and every quarter thereafter.
4.07 Tangible Net Worth. Maintain on a quarterly basis a consolidated Tangible
Net Worth (defined as stockholder's equity less any value for goodwill,
trademarks, patents, copyrights, leaseholds, organization expense and other
similar intangible items, and any amounts due from stockholders, officers and
affiliates) plus Subordinated Debt of not less than Five Hundred Thousand
Dollars ($500,000) beginning March 31, 1999 increased to One Million Dollars
($1,000,000) at December 31, 1999 and every quarter thereafter.
4.08 Debt to Net Worth. Maintain on a quarterly basis a consolidated ratio of
total liabilities to Tangible Net Worth of not greater than 6.00:1.0 beginning
March 31, 1999 reduced to 4.00:1.0 at December 31, 1999 and every quarter
thereafter..
4.09 Profitability. Maintain and retain on a consolidated basis, profitable
operations (meaning a net profit after taxes) of at least Five Hundred Thousand
Dollars ($500,000) on a annual basis at fiscal year end.
4.10 Guarantor Liquidity. Cause the persoanl guarantor, ▇▇▇▇▇▇ ▇▇▇▇▇, to
maintain on a daily basis a minimum of $1,000,000 in liquid assets (defined as
cash, cash equivalents and marketable securities).
4.11 ERISA. Cause all defined benefit pension plans, as defined in ERISA, of
Borrower to, at all times, meet the minimum funding standards of Section 302 of
ERISA, and ensure that no Reportable Event or Prohibited Transaction, as defined
in ERISA, will occur with respect to any such plan.
4.12 Laws. At all times comply with, or cause to be complied with, all laws,
statues, rules, regulations, orders and directions of any governmental authority
having jurisdiction over Borrower or Borrower's business.
4.13 Use of Proceeds. Use the proceeds of the Loans only for the purposes
specified in Section 1
herein.
4.14 GAAP. Compliance with all financial covenants shall be calculated based on
generally accepted accounting principles applied on a consistent basis as
maintained by Borrower.
4.15 Year 2000 Compliant. Borrower shall perform all acts reasonably necessary
to ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors that are
material to Borrower's business, become Year 2000 Compliant in a timely manner.
Such acts shall include, without limitation, performing a comprehensive review
and assessment of all Borrower's systems and adopting a detailed plan, with
itemized budget, for the remediation, monitoring and testing of such systems. As
used in this paragraph, "Year 2000 Compliant" shall mean, in regard to any
entity, that all software, hardware, firmware, equipment, goods or systems
utilized by or material to the business operations or financial condition of
such entity, will properly perform date sensitive functions before, during and
after the year 2000. Borrower shall, immediately upon request, provide to Agent
such certifications or other evidence of Borrower's compliance with the terms of
this paragraph as Bank may from time to time require.
4.16 Operating Accounts. Maintain all primary accounts and banking relationship
with the Bank. Maintain, or cause to be maintained, on deposit with Bank,
non-interest bearing demand deposit balances sufficient to compensate Bank for
all services provided by Bank. Balances shall be calculated after reduction for
the reserve requirement of the Federal Reserve Board and uncollected funds. Any
deficiencies shall be charged directly to the Borrower on a monthly basis.
4.17 Notices. Promptly notify Bank in writing of (i) the occurrence of any Event
of Default hereunder or any event which upon notice and lapse of time would be
an Event of Default; (ii) all litigation affecting Borrower where the amount is
$10,000 or more; any substantial dispute which may exist between Borrower and
any governmental regulatory body or law enforcement authority; any change in
Borrower's name or principal place of business; or any other matter which has
resulted or might result in a material adverse change in Borrower's financial
condition or operations.
5. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, or so long as Bank has
any obligation to extend credit to Borrower, it will not, without Bank's written
consent:
5.01 Type of Business; Management; Change in Control. Make any substantial
change in the character of its business; make any change in its executive
management or permit the current shareholders to decrease their ownership in
Borrower.
5.02 Outside Indebtedness. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than Loans from the Bank except
obligations now existing as shown in the financial statement dated August 31,
1998, excluding those obligations being refinanced by Bank and other than
indebtedness incurred to purchase that property located at ▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇ and the unsecured term loan financing the improvements for said
property, or sell or transfer, either with or without recourse, any accounts or
notes receivable or any moneys due or to become due.
5.03 Liens and Encumbrances. Create, incur, or assume any mortgage, pledge,
encumbrance, lien or charge of any kind upon any asset now owned or hereafter
acquired by it, other than liens for taxes not delinquent and liens in Bank's
favor and other than lies agreed to in writing by Bank.
5.04 Loans, Investments, Secondary Liabilities. Make any loans or advances to
any person or other entity other than in the ordinary and normal course of its
business as now conducted or make any investment in the securities of any person
or other entity other than the United States Government; or guarantee or
otherwise become liable upon the obligation of any person or other entity,
except by endorsement of negotiable instruments for deposit or collection in the
ordinary and normal course of its business.
5.05 Sale of Business; Merger or Consolidation. Liquidate, dissolve, merge or
consolidate, or commence any proceedings therefor; or sell any assets except in
the ordinary and normal course of its business as now conducted; or sell, lease,
assign, or transfer any substantial part of its business or fixed assets, or any
property or other assets necessary for the continuance of its business as now
conducted, including without limitation the selling of any property or other
asset accompanied by the leasing back of the same.
5.06 Capital Expenditures. Make or incur obligations for fixed or capital
assets, which includes purchase money indebtedness or capital lease obligations,
but excluding real estate property in excess of $500,000 from the date hereof
until December 31, 1999 or $500,000 in any twelve (12) month period thereafter.
5.07 Operating Lease Expenditures. Make or incur obligations for operating
leases for real or personal property in excess of $1,000,000 from the date
hereof until December 31, 1999 or $1,000,000 in any twelve (12) month period
thereafter.
6. EVENTS OF DEFAULT
The occurrence of any of the following events of default ("Events of Default")
shall, at Bank's option, terminate Bank's commitment to lend and make all sums
of principal and interest then remaining unpaid on all Borrower's indebtedness
to Bank immediately due and payable, all without demand, presentment or notice,
all of which are hereby expressly waived:
6.01 Failure to Pay. Failure to pay any installment of principal or of interest
on any indebtedness of Borrower to Bank within, five (5) days of its due date.
6.02 Breach of Covenant. Failure of Borrower to perform any other term or
condition of this Agreement or any Loan Document binding upon Borrower.
6.03 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 respect.
6.04 Insolvency; Receiver or Trustee. Borrower 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.
6.05 Judgments, Attachments. Any money judgment in excess of $10,000, writ or
warrant of attachment, or similar process shall be entered or filed against
Borrower or any of its assets and shall remain unvacated, unbonded or unstayed
for a period of ten (10) days or in any event later than five (5) days prior to
the date of any proposed sale thereunder.
6.06 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 and, if
instituted against it, shall not be dismissed within thirty (30) days
thereafter.
6.07 Revocation of Guarantee Subordination Agreement. Any Guarantee or
subordination agreement required hereunder is breached or becomes ineffective;
or any Guarantor or subordination creditor disavows or attempts to revoke or
terminate such guarantee or subordination agreement.
6.08 Cessation of Business. Borrower shall voluntarily suspend its business.
6.09 Adverse Change. Any change which, in the opinion of Bank, is materially
adverse to the financial condition of Borrower or any Guarantor; or should Bank,
for any reason, believe that the prospect of Borrower's payment or performance
hereunder or under any other agreement or instrument with Bank be impaired.
6.10 Other Defaults. Borrower, or any Guarantor of Borrower's obligations to
Bank, shall commit or do or fail to commit or do any act or thing which would
constitute an event of default under any of the terms of any other agreement,
document or instrument executed or to be executed by it concerning the
obligation to pay money.
6.11 Advances. Notwithstanding anything to the contrary contained herein, Bank
shall have no duty to make advances while any event of default exists
notwithstanding any cure period provided for herein.
7. MISCELLANEOUS PROVISIONS
7.01 Failure or Indulgence Not Waiver. No failure or delay on the part of 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 or any note (s) issued in connection with
a Loan that Bank may make hereunder, are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
7.02 Counterparts; Entire Agreement. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement, and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersede any prior agreements, written or oral, with respect thereto.
7.03 Attorney's Fees. 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, reasonable attorneys' fees and all costs and expenses
paid or incurred by Bank in collecting or compromising the Loan after the
occurrence of an Event of Default, 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.
7.04 Additional Remedies. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.05 Inurement. The benefits of this Agreement shall inure to the successors and
assigns of Bank and the permitted successors and assigns of Borrower.
7.06 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 whose
courts the parties hereby agree to submit.
7.07 Offset. In addition to and not in limitation of all rights of offset that
Bank or other holder of the Loan may have under applicable law, Bank or other
holder of any note issued hereunder shall, upon the occurrence of any Event of
Default or any event which with the passage of time or notice would constitute
such an Event of Default, have the right to appropriate and apply to the payment
of the Loan any and all balances, credits, deposits, accounts or monies of
Borrower then or thereafter with Bank or other holder, within ten (10) days
after the Event of Default, and notice of the occurrence of any Event of Default
by Bank to Borrower.
7.08 Severability. Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
7.09 Time of the Essence. Time is hereby declared to be of the essence of this
Agreement and of every part hereof.
7.10 Accounting. All accounting terms shall have the meanings applied under
generally accepted accounting principles unless otherwise specified.
7.11 Reference Provision.
(a) Other than (i) nonjudicial 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 Credit Agreement, any security agreement executed by Borrower
in favor of Bank or any note executed by Borrower in favor of Bank or any other
agreement or instrument issued in favor of Bank by Borrower (collectively in
this Section, the "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 this 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, if any, is
located or San Diego 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 for 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 ss.170.6. The
referee shall (a) be requested to set the matter for hearing within sixty (60)
days after the date of selection of the referee and (b) try any and all issues
of law or fact and report a statement of decision upon them, if 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
ss.644 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 laws, 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, ss.1280 through ss.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.
7.12 Suretyship Waivers and Consents. Each Borrower agrees that it is jointly
and severally, directly, and primarily liable to Bank for payment in full of all
obligations under the Loan Documents ("Obligations") and that such liability is
independent of the duties, obligations and liabilities of the other Borrower.
The Loan Documents are a primary and original obligation of each Borrower, are
not the creation of a surety relationship, and are an absolute, unconditional,
and continuing promise of payment and performance which shall remain in full
force and effect without respect to future changes in conditions, including any
change of law or any invalidity or irregularity with respect to the Loan
Documents. Each Borrower acknowledges that the obligations of such Borrower
undertaken herein might be construed to consist, at least in part, of the
guaranty of obligations of persons or entities other than such Borrower
(including any other Borrower party hereto) and, in full recognition of that
fact, each Borrower consents and agrees that the Bank may, at any time and from
time to time, without notice or demand, whether before or after any actual or
purported termination, repudiation, or revocation of this Agreement by any one
or more Borrowers, and without affecting the enforceability or continuing
effectiveness hereof as to each Borrower: (a) supplement, restate, modify,
amend, increase, decrease, extend, renew, accelerate, or otherwise change the
time for payment or the terms of the Obligations or any part thereof, including
any increase or decrease of the rate(s) of interest thereon; (b) supplement
restate, modify, amend, increase, decrease or waive, or enter into or give any
agreement, approval, or consent with respect to, the Obligations or any part
thereof, or any of the Loan Documents or any additional security or guaranties,
or any condition covenant, default, remedy, right, representation or term
thereof or thereunder; (c) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan Documents or the
Obligations or any part thereof; (d) accept partial payments on the Obligations;
(e) receive and hold additional security or guaranties for the Obligations or
any part thereof; (f) release, reconvey, terminate, waive, abandon, fail to
perfect, subordinate, exchange, substitute, transfer, or enforce any security or
guaranties, and apply any security and direct the order or manner of sale
thereof as the Bank in its sole and absolute discretion may determine; (g)
release any Person from any personal liability with respect to the Obligations
or any part thereof; (h) settle, release on terms satisfactory to the Bank or by
operation of applicable laws, or otherwise liquidate or enforce any Obligations
and any security therefor or guaranty thereof in any manner, consent to the
transfer of any security and bid and purchase at any sale; or (i) consent to the
merger, change, or any other restructuring or termination of the corporate or
partnership existence of any Borrower or any other Person, and correspondingly
restructure the Obligations, and any such merger, change, restructuring, or
termination shall not affect the liability of any Borrower or the continuing
effectiveness hereof, or the enforceability hereof with respect to all or any
part of the Obligations.
Upon the occurrence and during the continuance of any Event of
Default, the Bank may enforce this Agreement independently as to each Borrower
and independently of any other remedy or security the Bank at any time may have
or hold in connection with the Obligations, and it shall not be necessary for
the Bank to marshal assets in favor of any Borrower or any other Person or to
proceed upon or against or exhaust any security or remedy before proceeding to
enforce this Agreement. Each Borrower expressly waives any right to require the
Bank to marshal assets in favor of any Borrower or any other Person or to
proceed against any other Borrower or any Collateral provided by any Person, and
agrees that the Bank may proceed against Borrowers or any Collateral in such
order as it shall determine in its sole and absolute discretion.
The Bank may file a separate action or actions against any Borrower,
whether action is brought or prosecuted with respect to any security or against
any other person, or whether any other person is joined in any such action or
actions. Each Borrower agrees that the Bank and any Borrower and any affiliate
of any Borrower may deal with each other in connection with the Obligations or
otherwise, or alter any contracts or agreements now or hereafter existing
between any of them, in any manner whatsoever, all without in any way altering
or affecting the continuing efficacy of this Agreement.
The Bank's hereunder shall be reinstated and revived, and the
enforceability of this Agreement shall continue, with respect to any amount at
any time paid on account of the Obligations which thereafter shall be required
to be restored or returned by the Bank, all as though such amount had not been
paid. The rights of the Bank created or granted herein and the enforceability of
this Agreement at all times shall remain effective to cover the full amount of
all the Obligations even though the Obligations, including any part thereof or
any other security or guaranty therefor, may be or hereafter may become invalid
or otherwise unenforceable as against any Borrower and whether or not any other
Borrower shall have any personal liability with respect thereto.
To the maximum extent permitted by applicable law and to the extent
that a Borrower is deemed a guarantor, each Borrower expressly waives any and
all defenses now or hereafter arising or asserted by reason of (a) any
disability or other defense of any other Borrower with respect to the
Obligations, (b) the unenforceability or invalidity of any security or guaranty
for the Obligations or lack of perfection or continuing perfection or failure of
priority of any security for the Obligations, (c) the cessation for any cause
whatsoever of the liability of any other Borrower (other than by reason of the
full payment and performance of all Obligations), (d) any failure of the to
marshal assets in favor Bank of any Borrower or any other person, (e) any
failure of the Bank to give notice of sale or other disposition of collateral to
any Borrower or any other Person or any defect in any notice that may be given
in connection with any sale or disposition of collateral, (f) any failure of the
Bank to comply with applicable law in connection with the sale or other
disposition of any collateral or other security for any Obligation, including
any failure of the Bank to conduct a commercially reasonable sale or other
disposition of any collateral or other security for any Obligation, (g) any act
or omission of the Bank or others that directly or indirectly results in or aids
the discharge or release of any Borrower or the Obligations or any security or
guaranty therefor by operation of law or otherwise, (h) any law which provides
that the obligation of a surety or guarantor must neither be larger in amount
nor in other respects more burdensome than that of the principal or which
reduces a surety's or guarantor's obligation in proportion to the principal
obligation, (i) any failure of the Bank to file or enforce a claim in any
bankruptcy or other proceeding with respect to any Person, (j) the election by
the Bank of the application or non-application of Section 1111(b)(2) of the
United States Bankruptcy code, (k) any extension of credit or the grant of any
lien under ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy code, (1) any use of cash
collateral under Section 363 of the United States Bankruptcy Code, (m) any
agreement or stipulation with respect to the provision of adequate protection in
any bankruptcy proceeding of any Person, (n) the avoidance of any lien in favor
of the Bank for any reason, or (o) any action taken by the Bank that is
authorized by this section or any other provision of any Loan Document. Until
such time as all of the Obligations have been fully, finally, and indefeasibly
paid in full in cash: (i) each Borrower hereby waives and postpones any right of
subrogation it has or may have as against any other Borrower respect to the
Obligations; and (ii) in addition, each borrower also hereby waives and
postpones any right to proceed or to seek recourse against or with respect to
any property or asset of any other Borrower. Each borrower expressly waives all
setoffs and counterclaims and all presentments, demands for payment or
performance, notices of nonpayment or nonperformance, protests, notices of
protest, notices of dishonor and all other notices or demands of any kind or
nature whatsoever with respect to the Obligations, and all notices of acceptance
of this Agreement or of the existence, creation or incurring of new or
additional Obligations.
In the event that all or any part of the Obligations at any
time are secured by any one or more deeds of trust or mortgages or other
instruments creating or granting liens on any interests in real property, each
Borrower authorizes the Bank, upon the occurrence of and during the continuance
of any Event of Default, at its sole option, without notice or demand and
without affecting the obligations of any Borrower, the enforceability of this
Agreement, or the validity or enforceability of any Liens of th Bank , to
foreclose any or all of such deeds of trust or mortgages or other instruments by
judicial or nonjudicial sale.
To the fullest extent permitted by applicable law, to the extent that a
Borrower is deemed a guarantor, each Borrower expressly waives any defenses to
the enforcement of this Agreement or any rights of the Bank created or granted
hereby or to the recovery by the Bank against any Borrower or any other Person
liable therefor of any deficiency after a judicial or nonjudicial foreclosure or
sale, even though such a foreclosure or sale may impair the subrogation rights
of Borrowers and may preclude Borrowers from obtaining reimbursement or
contribution from other Borrowers. To the fullest extent permitted by applicable
law, each Borrower expressly waives any suretyship defenses or benefits that it
otherwise might or would have under applicable law. WITHOUT LIMITING THE
GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS SECTION, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER WAIVES ALL RIGHTS
AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY THE BANK, EVEN THOUGH
THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO
SECURITY FOR THE OBLIGATIONS, HAS DESTROYED SUCH BORROWER'S RIGHTS OF
SUBROGATION AND REIMBURSEMENT AGAINST THE OTHER BORROWERS BY THE OPERATION LAW,
INCLUDING BUT NOT LIMITED TO SECTION 580d OF THE CODE OF CIVIL PROCEDURE, OR
OTHERWISE.
Borrower and each of them warrant and agree that each of the waivers
and consents set forth herein are made after consultation with legal counsel and
with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Borrower otherwise
may have against any other Borrower, the Bank or others, or against Collateral.
If any of the waivers or consents herein are determined to be contrary to any
applicable law or public policy, such waivers and consents shall be effective to
the maximum extent permitted by law.
7.13 This Agreement may be modified only by a writing signed by all parties
hereto.
This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.
IMPERIAL BANK Asset Liquidation Group, Inc.
("Bank") ("Borrower")
By:________________________ By:__________________________
Its:_________________________ Its:
First Amendment to the Credit Agreement.
This First Amendment ("First Amendment") amends that certain Credit Agreement
("Agreement") dated December 8, 1998 by and between Imperial Bank ("Bank") and
Asset Liquidation Group, Inc. ("Borrower") as follows:
1. Section 4.06 of the Agreement is hereby amended in full to read as
"Intentionally Left Blank".
2. Section 4.07 of the Agreement is hereby amended in full to read as
follows:
"4.07 Tangible Net Worth. Maintain on a quarterly basis a consolidated
Tangible Net Worth (defined as stockholder's equity less any value for
goodwill, trademarks, patents, copyrights, leaseholds, organization expense
and other similar intangible items, and any amounts due from stockholders,
officers and affiliates) plus Subordinated Debt of not less than:
o $1,250,000 at 3/31/2000;
o $1,500,000 at 6/30/2000;
o $2,000,000 at 9/30/2000;
o $3,000,000 at 12/31/2000 and every quarter thereafter."
3. Section 4.08 of the Agreement is hereby amended in full to read as
follows:
"4.08 Debt to Net Worth. Maintain on a quarterly basis a consolidated
ratio of total liabilities to
Tangible Net Worth of not greater than:
o 5.20 : 1.00 at 3/31/2000;
o 4.50 : 1.00 at 6/30/2000;
o 3.50 : 1.00 at 9/30/2000;
o 3.00 : 1.00 at 12/31/2000 and every quarter thereafter."
4. Section 4.09 of the Agreement is hereby amended in full to read as follows:
"4.09 EBITDA. Report on a consolidated basis, EBITDA (meaning earnings
before interest, taxes, depreciation and amortization of at least:
o $400,000 at 3/31/2000 measured for the 3 months ended;
o $1,800,000 at 6/30/2000 measured for the 6 months ended;
o $3,000,000 at 9/30/2000 measured for the 9 months ended;
o $4,500,000 at 12/31/2000 measured for the 12 months ended."
5. Except as provided above, the Agreement remains unchanged.
6. This First Amendment is effective as of February 3, 2000 and the parties
hereby confirm that the Agreement as amended is in full force and effect.
Asset Liquidation Group, Inc.
By:_________________________________
Name: _____________________________
Title: _______________________________
IMPERIAL BANK
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Commercial Loan Officer