EXHIBIT 10.4
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into as of July 17, 1997, by and between THE LAW AND ECONOMICS CONSULTING
GROUP, INC., a California corporation ("Borrower"), and ▇▇▇▇▇ FARGO BANK,
NATIONAL ASSOCIATION ("Bank").
RECITALS
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WHEREAS, Borrower is currently indebted to Bank pursuant to the terms
and conditions of that certain Credit Agreement between Borrower and Bank
dated as of May 31, 1996, as amended from time to time ("Credit Agreement").
WHEREAS, Bank and Borrower have agreed to certain changes in the terms
and conditions set forth in the Credit Agreement and have agreed to amend the
Credit Agreement to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that
the Credit Agreement shall be amended as follows:
1. The first sentence of Section 1.1(c) is hereby deleted in its
entirety, and the following substituted therefor:
"SECTION 1.1(c). Letter of Credit Subfeature. As a subfeature
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under the Line of Credit, Bank agrees from time to time during the
term thereof to issue standby letters of credit for purposes deemed
acceptable by Bank (each, a "Letter of Credit" and collectively,
"Letters of Credit"); provided however, that the form and substance
of each Letter of Credit shall be subject to approval by Bank, in
its sole discretion; and provided further, that the aggregate
undrawn amount of all outstanding Letters of Credit shall not at
any time exceed Five Hundred Thousand Dollars ($500,000.00)."
2. Except as specifically provided herein, all terms and conditions of
the Credit Agreement remain in full force and effect, without waiver or
modification. All terms defined in the Credit Agreement shall have the same
meaning when used in this Amendment. This Amendment and the Credit Agreement
shall be read together, as one document.
3. Borrower hereby remakes all representations and warranties
contained in the Credit Agreement and reaffirms all covenants set forth
therein. Borrower further certifies that as of the date of this Amendment
there exists no Event of Default as defined in the Credit Agreement, nor any
condition, act or event which with the giving of notice or the passage of time
or both would constitute any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the day and year first written above.
THE LAW AND ECONOMICS ▇▇▇▇▇ FARGO BANK,
CONSULTING GROUP, INC. NATIONAL ASSOCIATION
By: /s/ [Signature] By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
Title: President
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By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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CREDIT AGREEMENT
THIS AGREEMENT is entered into as of May 31, 1996, by and between THE LAW
AND ECONOMICS CONSULTING GROUP, INC., a California corporation ("Borrower"), and
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITAL
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Borrower has requested from Bank the credit accommodations described below
(each, a "Credit" and collectively, the "Credits"), and Bank has agreed to
provide the Credits to Borrower on the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
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THE CREDITS
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SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the term and conditions of this Agreement,
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Bank hereby agrees to make advances to Borrower from time to time up to and
including May 31, 2000, not to exceed .at any time the aggregate principal
amount of Three Million Dollars ($3,000,000.00) ("Line of Credit"), the proceeds
of which shall be used solely to finance Borrower's working capital
requirements. Borrower's obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note substantially in the form of Exhibit A
attached hereto ("Line of Credit Note"), all terms of which are incorporated
herein by this reference.
(b) Optional Commitment Increase. Once during the term of the Line of
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Credit, upon Bank's receipt of Borrower's written request for an increase in the
maximum principal amount then available thereunder, Bank agrees to review said
request and, so long as all of the conditions set forth herein are met to Bank's
satisfaction, to provide an increase in said maximum principal amount to an
amount which Bank deems acceptable, in its discretion:
(i) Bank shall have obtained such audits and appraisals of all
collateral for the Line of Credit as Bank deems necessary, all in
form, substance and performed by auditors and appraisers
satisfactory to Bank, and assuring that Bank's security interests in
and liens on, said collateral shall remain of first priority
following any such increase, if granted, with all costs and expenses
of such audits and appraisals to be paid by Borrower;
(ii) Bank shall have determined that there is sufficient collateral value
to support a Line of Credit increase, based upon Bank's then current
loan-to-value ratios and other policies and procedures in effect at
the time such increase is requested for each type of collateral
which secures the Line of Credit;
(iii) Borrower shall have paid to Bank a non-refundable commitment fee for
such increase equal to one-quarter percent (1/4%) of the new maximum
principal amount available under the Line of Credit;
(iv) Borrower shall have executed, or caused to be executed, and
delivered to Bank any and all documents required by Bank to evidence
such increase and Bank's continued security interests in and liens
on all collateral for the Line of Credit, including without
limitation, a Modification to the Line of Credit Note, all of which
shall be in form and substance satisfactory to Bank; and
(v) at the time an increase is requested and the time, if any, any such
increase is granted, there exists no Event of Default hereunder, nor
any condition, act or event which with the giving of notice or the
passage of time, or both, would constitute any such Event of
Default.
(c) Letter of Credit Subfeature. As a subfeature under the Line of
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Credit, Bank agrees from time to time up to and including May 31, 1997, to issue
standby letters of credit for the account of Borrower and for purposes deemed
acceptable by Bank (each, a "Letter of Credit" and collectively, "Letters of
Credit"); provided however, that the form and substance of each Letter of
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Credit shall be subject to approval by Bank, in its sole discretion; and
provided further, that the aggregate undrawn amount of all outstanding Letters
of Credit shall not at any time exceed Two Hundred Fifty Thousand Dollars
($250,000.00). Each Letter of Credit shall be issued for a term not to exceed
three hundred sixty (360) days, as designated by Borrower; provided however,
that no Letter of Credit shall have an expiration date subsequent to the
maturity date of the Line of Credit. The undrawn amount of all Letters of Credit
shall be reserved under the Line of Credit and shall not be available for
borrowings thereunder. Each Letter of Credit shall be subject to the additional
terms and conditions of the Continuing Standby Letter of Credit Agreement and
related documents, if any, required by Bank in connection with the issuance
thereof (each, a "Letter of Credit Agreement" and collectively, "Letter of
Credit Agreements"). Each draft paid by Bank under a Letter of Credit shall be
deemed an advance under the Line of Credit and shall be repaid by Borrower in
accordance with the terms and conditions of this Agreement applicable to such
advances; provided however, that if advances under the Line of Credit are not
available, for any reason, at the time any draft is paid by Bank, then Borrower
shall immediately pay to Bank the full amount of such draft, together with
interest thereon from the date such amount is paid by Bank to the date such
amount is fully repaid by Borrower, at the rate of interest applicable to
advances under the Line of Credit. In such event Borrower agrees that Bank, in
its sole discretion, may debit any demand deposit account maintained by Borrower
with Bank for the amount of any such draft.
(d) Borrowing and Repayment. Borrower may from time to time during the
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term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed
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the maximum principal amount available thereunder, as set forth above or such
other amount as shall then be available thereunder pursuant to the terms hereof.
SECTION 1.2. BMSC LETTER OF CREDIT.
(a) BMSC Letter of Credit. In addition to and separate from the Line of
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Credit subfeature for Letters of Credit, Bank has issued a standby letter of
credit for the account of Borrower and for the benefit of ▇▇▇▇▇▇▇-▇▇▇▇▇ Squibb
Company in support of Borrower's long term lease obligations (the "BMSC Letter
of Credit") in the amount of Sixty-Nine Thousand Dollars ($69,000.00). Subject
to the terms and conditions of this Agreement, Bank hereby confirms that the
BMSC Letter of Credit remains in full force and effect. The BMSC Letter of
Credit has an expiration date of April 30, 1997, and shall be automatically
extended pursuant to its terms, without written amendment, to April 30 of each
succeeding calendar year up to April 30, 2002, and then up to but not beyond
December 29, 2002, and is subject to the additional terms of the Application and
Agreement for Standby Letter of Credit attached hereto as Exhibit B (the "BMSC
Letter of Credit Agreement"), all terms of which are incorporated herein by this
reference.
(b) Repayment of Drafts. Each draft paid by Bank under the BMSC Letter
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of Credit shall be repaid by Borrower in accordance with the provisions of the
BMSC Letter of Credit Agreement.
SECTION 1.3. INTEREST/FEES.
(a) Interest. The outstanding principal balance of the Line of Credit
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shall bear interest at the rate of interest set forth in the Line of Credit
Note. The amount of each draft paid by Bank under the BMSC Letter of Credit
shall bear interest from the date such draft is paid by Bank to the date such
amount is fully repaid by Borrower at the rate of interest set forth in the BMSC
Letter of Credit Agreement.
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(b) Computation and Payment. Interest shall be computed on the basis of
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a 360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Line of Credit Note and the BMSC Letter of Credit
Agreement.
(c) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to
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one-eighth percent (1/8%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Line of Credit,
which fee shall be calculated on a quarterly basis by Bank and shall be due and
payable by Borrower in arrears on each February 28, May 31, August 31, and
November 30.
(d) BMSC Letter of Credit Fees. Borrower shall pay to Bank a fee upon
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each annual anniversary date of the BMSC Letter of Credit, commencing as of
April 30, 1997, equal to two percent (2%) per annum (computed on the basis of a
360-day year, actual days elapsed) of the face amount thereof, and fees upon the
payment or negotiation of each draft under the BMSC Letter of Credit and upon
the occurrence of any other activity with respect to the BMSC Letter of Credit
(including without limitation, the transfer, amendment or cancellation thereof)
determined in accordance with Bank's standard fees and charges then in effect
for such activity.
(e) Letter of Credit Fees. Borrower shall pay to Bank fees upon the
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issuance of each Letter of Credit, upon the payment or negotiation by Bank of
each draft under any Letter of Credit and upon the occurrence of any other
activity with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank's standard fees and charges then in effect for such
activity.
SECTION 1.4. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all interest and fees due under each Credit by charging Borrower's demand
deposit account number
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4125-108456 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.
SECTION 1.5. COLLATERAL. As security for all indebtedness of Borrower to
Bank, Borrower hereby grants to Bank security interests of first priority in all
Borrower's accounts receivable and other rights to payment, general intangibles,
inventory and equipment. All of the foregoing shall be evidenced by and subject
to the terms of such security agreements, financing statements, deeds of trust
and other documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for
all costs and expenses incurred by Bank in connection with any of the foregoing
security, including without limitation, filing fees and costs of appraisals and
audits.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES
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Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of California, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which
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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.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Line of
Credit Note, the BMSC Letter of Credit Agreement, and each other document,
contract and instrument required hereby or at any time hereafter delivered to
Bank in connection herewith (collectively, the "Loan Documents") have been duly
authorized, and upon their execution and delivery in accordance with the
provisions hereof will constitute legal, valid and binding agreements and
obligations of Borrower or the party which executes the same, enforceable in
accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement
of Borrower dated December 31, 1995, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the
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financial condition of Borrower, (b) discloses all liabilities of Borrower that
are required to be reflected or reserved against under generally accepted
accounting principles, whether liquidated or unliquidated, fixed or contingent,
and (c) has been prepared in accordance with generally accepted accounting
principles consistently applied. Since the date of such financial statement
there has been no material adverse change in the financial condition of
Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or
otherwise encumbered any of its assets or properties except in favor of Bank or
as otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower is a party or by which Borrower may be bound
that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, franchises and licenses required and rights to all
trademarks, trade names, patents, and fictitious names, if any, necessary to
enable it to conduct the business in which it is now engaged in compliance with
applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with
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respect to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable Federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, the Federal Toxic Substances Control Act and the California Health and
Safety Code, as any of the same may be amended, modified or supplemented from
time to time. None of the operations of Borrower is the subject of any Federal
or state investigation evaluating whether any remedial action involving a
material expenditure is needed to respond to a release of any toxic or hazardous
waste or substance into the environment. Borrower has no material contingent
liability in connection with any release of any toxic or hazardous waste or
substance into the environment.
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ARTICLE III
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CONDITIONS
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SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to grant any of the Credits is subject to the fulfillment to Bank's
satisfaction of all of the following conditions :
(a) Approval of Bank Counsel. All legal matters incidental to the
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granting of each of the Credits shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
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satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Line of Credit Note.
(ii) Continuing Standby Letter of Credit Agreement.
(iii) BMSC Letter of Credit Agreement
(iv) Corporate Borrowing Resolution.
(v) Certificate of Incumbency.
(vi) Security Agreement Covering Equipment.
(vii) Continuing Security Agreement Covering Rights to Payment and
Inventory.
(viii) UCC-1 Financing Statements covering accounts receivable,
general intangibles, inventory and equipment.
(ix) Such other documents as Bank may require under any other
Section of this Agreement.
(c) Financial Condition. There shall have been no material adverse change,
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as determined by Bank, in the financial condition or business of Borrower, nor
any material decline, as determined by Bank, in the market value of any
collateral required hereunder or a substantial or material portion of the assets
of Borrower.
(d) Insurance. Borrower shall have delivered to Bank evidence of insurance
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coverage on all Borrower's property, 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.
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SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) Compliance. The representations and warranties contained herein and in
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each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents which
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may be required in connection with such extension of credit, including without
limitation, prior to the issuance of each Letter of Credit, a properly completed
and duly executed Letter of Credit Agreement or application therefor.
ARTICLE IV
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AFFIRMATIVE COVENANTS
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Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding,.and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:
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SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following,
in form and detail satisfactory to Bank:
(a) not later than 120 days after and as of the end of each fiscal year, a
reviewed financial statement of Borrower, prepared by a certified public
accountant acceptable to Bank, to include a balance sheet, income statement,
statement of cash flows and accompanying notes and schedules;
(b) not later than 60 days after and as of the end of each fiscal quarter,
a financial statement of Borrower, prepared by Borrower, to include a balance
sheet, income statement, and an aged listing of accounts receivable and accounts
payable;
(c) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
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SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation Federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower in excess of an aggregate of
$100,000.00.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial condition
as follows using generally accepted accounting principles consistently applied
and used consistently with prior practices (except to the extent modified by the
definitions herein):
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(a) Tangible Net Worth not at any time less than $5,000,000.00, with
"Tangible Net Worth" defined as the aggregate of total stockholders' equity plus
subordinated debt less any intangible assets.
(b) Total Liabilities divided by Tangible Net Worth not at any time
greater than 1.75 to 1.0, with "Total Liabilities" defined as the aggregate of
current liabilities and non-current liabilities less subordinated debt, and with
"Tangible Net Worth" as defined above.
(c) Net income after taxes on an annual basis, determined as of each
fiscal year end, not less than $1.00.
(d) EBITDA Coverage Ratio not less than 3.0 to 1.0 as of each fiscal year
end, with "EBITDA" defined as net profit before tax plus interest expense (net
of capitalized interest expense), depreciation expense and amortization expense,
and with "EBITDA Coverage Ratio" defined as EBITDA divided by the aggregate of
total interest expense plus the prior period current maturity of long-term debt
and the prior period current maturity of subordinated debt.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or
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through fire, theft or any other cause affecting Borrower's property in excess
of an aggregate of $100,000.00.
ARTICLE V
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NEGATIVE COVENANTS
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Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.
SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint gr several, except (a) the liabilities of Borrower to Bank, and (b) any
other liabilities of Borrower existing as of, and disclosed to Bank prior to,
the date hereof.
SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Except as
provided in this Section 5.3, merge into or consolidate with any other entity;
make any substantial change in the nature of Borrower's business as conducted as
of the date hereof; acquire all or substantially all of the assets of any other
entity; nor sell, lease, transfer or otherwise dispose of all or a substantial
or material portion of Borrower's assets except in the ordinary course of its
business. Notwithstanding the foregoing, so long as there exists no Event of
Default under this Agreement or any other of the Loan Documents, (a) Bank hereby
consents to the consolidation of Borrower with,
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or merger of Borrower into, Coopers & ▇▇▇▇▇▇▇, a New York general partnership,
pursuant to the term of that certain Stock or Asset Purchase Option Agreement
dated as of June 18, 1993 (the "Purchase Option Agreement"), and (b) Bank
further agrees that, following such consolidation or merger, Bank shall permit
Coopers & ▇▇▇▇▇▇▇ to assume Borrower's obligations hereunder with aggregate
future liabilities in excess of $100,000.00 and which are not terminable by
Borrower for a cost of less than $100,000.00, upon similar terms and conditions
as those set forth herein and subject to Bank's prior receipt of notification
from Coopers & ▇▇▇▇▇▇▇ of its intention to assume said obligations as required
by the Purchase Option Agreement.
SECTION 5.4. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity.
SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to
or investments in any person or entity in amounts in excess of an aggregate of
$150,000.00 outstanding at any one time, except loans or advances to any
existing or new shareholder made in connection with such shareholder's purchase
of shares of stock in Borrower.
SECTION 5.6. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist
a security interest in, or lien upon, all or any portion of Borrower's assets
now owned or hereafter acquired, except any of the foregoing in favor of Bank.
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ARTICLE VI
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EVENTS OF DEFAULT
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SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees or
other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower has incurred any debt
or other liability to any person or entity, including Bank.
(e) The filing of a notice of judgment lien against Borrower; or the
recording of any abstract of judgment against Borrower in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process,.against the
assets of Borrower; or the entry of a judgment against Borrower.
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(f) Borrower shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors;
Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or
any other relief under the Bankruptcy Reform Act, Title 11 of the United States
Code, as amended or recodified from time to time ("Bankruptcy Code"), or under
any state or Federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the Bankruptcy
Code or any other applicable state or Federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower, or Borrower shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition; or Borrower
shall be adjudicated a bankrupt, or an order for relief shall be entered against
Borrower by any court of competent jurisdiction under the Bankruptcy Code or any
other applicable state or Federal law relating to bankruptcy, reorganization or
other relief for debtors.
(g) There shall exist or occur any event or condition which Bank in good
faith believes impairs, or is substantially likely to impair, the prospect of
payment or performance by Borrower of its obligations under any of the Loan
Documents.
(h) The dissolution or liquidation of Borrower; or Borrower, or any of its
directors, stockholders or members, shall take action seeking to effect the
dissolution or liquidation of Borrower.
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(i) Any change in ownership during the term of this Agreement of an
aggregate of twenty-five percent (25%) or more of the common stock of Borrower,
except pursuant to the Purchase Option Agreement.
ARTICLE VII
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MISCELLANEOUS
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SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: THE LAW AND ECONOMICS CONSULTING GROUP, INC.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
BANK: ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION
East Bay Regional Commercial Banking ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery,
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upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or
three (3) days after deposit in the U.S. mail, first class and postage prepaid;
and (c) if sent by telecopy, upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), incurred by
Bank in connection with (a) the negotiation and preparation of this Agreement
and the other Loan Documents, Bank's continued administration hereof and
thereof, and the preparation of any amendments and waivers hereto and thereto,
(b) the enforcement of Bank's rights and/or the collection of any amounts which
become due to Bank under any of the Loan Documents, and (c) the prosecution or
defense of any action in any way related to any of the Loan Documents, including
without limitation, any action for declaratory relief, and including any of the
foregoing incurred in connection with any bankruptcy proceeding relating to
Borrower.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any of the Credits, Borrower or its business, or any
collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to the
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Credits and supersede all prior negotiations, communications, discussions and
correspondence concerning the subject matter hereof. This Agreement may be
amended or modified only by a written instrument executed by each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, except to the
extent Bank has greater rights or remedies under Federal law, whether as a
national bank or otherwise, in which case such choice of California law shall
not be deemed to deprive Bank of any such rights and remedies as may be
available under Federal law.
SECTION 7.10. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
THE LAW AND ECONOMICS ▇▇▇▇▇ FARGO BANK,
CONSULTING GROUP, INC. NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------- -----------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President Assistant Vice President
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
Title: Chairman of the Board
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EXHIBIT A
▇▇▇▇▇ LINE OF CREDIT
6/1/96 RENEWAL
▇▇▇▇▇ FARGO BANK REVOLVING LINE OF CREDIT NOTE
--------------------------------------------------------------------------------
$3,000,000.00 OAKLAND, CALIFORNIA
MAY 31, 1996
FOR VALUE RECEIVED, the undersigned THE LAW AND ECONOMICS CONSULTING
GROUP, INC. ("Borrower") promises to pay to the order of ▇▇▇▇▇ FARGO BANK,
NATIONAL ASSOCIATION ("Bank") at its office at EAST BAY RCBO, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such other place as the holder hereof may
designate, in lawful money of the United States of America and in immediately
available funds, the principal sum of $3,000,000.00, or so much thereof as may
be advanced and be outstanding, with interest thereon, to be computed on each
advance from the date of its disbursement as set forth herein.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall
--------
bear interest at a rate per annum (computed on the basis of a 360-day year,
actual days elapsed) EQUAL TO the Prime Rate in effect from time to time. The
"Prime Rate" is a base rate that Bank from time to time establishes and which
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto. Each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is
announced within Bank.
(b) Payment of Interest. Interest accrued on this Note shall be
-------------------
payable on the LAST day of each MONTH, commencing JUNE 30, 1996.
(c) Default Interest. From and after the maturity date of this Note,
----------------
or such earlier date as all principal owing hereunder becomes due and payable
by acceleration or otherwise, the outstanding principal balance of this Note
shall bear interest until paid in full at an increased rate per annum
(computed on the basis of a 360-day year, actual days elapsed) equal to 4%
above the rate of interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrower may from time to time during the
-----------------------
term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of the Credit Agreement between Borrower and Bank
defined below; provided however, that the total outstanding borrowings under
this Note shall not at any time exceed the principal amount stated above. The
unpaid principal balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the amount of principal
payments made hereon by or for any Borrower, which balance may be endorsed
hereon from time to time by the holder. The outstanding principal balance of
this Note shall be due and payable in full on MAY 31, 2000.
(b) Advances. Advances hereunder, to the total amount of principal sum
--------
available hereunder, may be made by the holder at the oral or written request
of (i) ▇▇▇▇▇ ▇▇▇▇▇ OR ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ OR ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ OR ▇▇▇▇▇▇ ▇▇▇▇▇ OR
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, any one acting alone, who are authorized to request advances
and direct the disposition of any advances until written notice of the
revocation of such authority is received by the holder at the office
designated above, or (ii) any person, with respect to advances deposited to
the credit of any account of any Borrower with the holder, which advances,
when so deposited, shall be conclusively presumed to have been made to or for
the benefit of each Borrower regardless of the fact that persons other than
those authorized to request advances may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by any Borrower.
(c) Application of Payments. Each payment made on this Note shall be
-----------------------
credited first, to any interest then due and second, to the outstanding
principal balance hereof.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of MAY 31, 1996, as amended from time to time (the "Credit Agreement"). Any
default in the payment or performance of any obligation under this Note, or
any defined event of default under the Credit Agreement, shall constitute an
"Event of Default" under this Note.
MISCELLANEOUS:
(a) REMEDIES. Upon the occurrence of any Event of Default as defined
in the Credit Agreement, the holder of this Note, at the holder's option, may
declare all sums of principal and interest outstanding hereunder to be
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Each Borrower shall pay to the holder
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of the holders' in-house counsel),
incurred by the holder in connection with the enforcement of holder's rights
and/or the collection of any amounts which become due to the holder under this
Note, and the prosecution or defense of any action in any way related to this
Note, including without limitation, any action for declaratory relief, and
including any of the foregoing incurred in connection with any bankruptcy
REVOLVING LINE OF CREDIT NOTE, PAGE 1
proceeding relating to any Borrower.
(b) Obligations Joint and Several. Should more than one person or
-----------------------------
entity sign this Note as a Borrower, the obligations of each such Borrower
shall be joint and several.
(c) Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the State of California, except to the extent Bank
has greater rights or remedies under Federal law, whether as a national bank
or otherwise, in which case such choice of California law shall not be deemed
to deprive Bank of any such rights and remedies as may be available under
Federal law.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
THE LAW AND ECONOMICS CONSULTING GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Title: President
------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Title: Chairman of the Board
-------------------------------------
REVOLVING LINE OF CREDIT NOTE, PAGE 2
EXHIBIT B
▇▇▇▇▇ FARGO BANK
APPLICATION AND AGREEMENT
FOR STANDBY LETTER OF CREDIT
This document is a one page application and agreement form which
consists of the following items: applicant's name and address, the amount for
the letter of credit, terms of drawings, terms of transferability, special
instructions, terms of transferability, applicant's signature block and the
bank's signature block.