EXHIBIT 10.37
AMENDED AND RESTATED LOAN AGREEMENT
DATED AS OF OCTOBER 31, 1996
BY AND BETWEEN
PETRUS FUND, L.P.,
THE "LENDER"
AND
IRATA, INC.,
THE "COMPANY"
REGARDING
12% SENIOR NOTE
TABLE OF CONTENTS
Page
I. DESCRIPTION OF SENIOR NOTE AND ADVANCES......................... 1
1.1 Description of Senior Note.................................. 1
1.2 Advances.................................................... 1
1.3 Facility Fee................................................ 2
1.4 Use of Proceeds............................................. 2
1.5 Notice and Manner of Credit Borrowing....................... 2
II. PAYMENT AND PREPAYMENT OF SENIOR OBLIGATIONS.................... 2
2.1 Principal and Interest Payments............................. 2
2.2 Optional Prepayments........................................ 3
2.3 Additional Payments......................................... 3
2.4 Direct Payment.............................................. 3
2.5 Payments Payable on Business Days........................... 3
2.6 Interest Laws............................................... 3
2.7 Security.................................................... 4
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 4
3.1 Corporate Existence and Authority........................... 4
3.2 Financial Statements........................................ 4
3.3 Default..................................................... 5
3.4 Authorization and Compliance with Laws
and Material Agreements................................... 5
3.5 Environmental Condition of the Photo Booths................. 5
3.6 Litigation and Judgments.................................... 5
3.7 Rights in Properties; Liens................................. 5
3.8 Enforceability.............................................. 6
3.9 Indebtedness................................................ 6
3.10 Taxes...................................................... 6
3.11 Use of Proceeds; Margin Securities......................... 6
3.12 ERISA...................................................... 6
3.13 Disclosure................................................. 6
3.14 Subsidiaries and Capitalization............................ 7
3.15 Current Locations.......................................... 7
3.16 No Burdensome Restrictions................................. 7
3.17 Securities Laws............................................ 7
3.18 No Labor Disputes.......................................... 7
3.19 Brokers.................................................... 7
3.20 Liens...................................................... 7
3.21 Insurance.................................................. 7
3.22 Conduct of Business........................................ 7
IV. CONDITIONS PRECEDENT TO INITIAL OBLIGATIONS OF LENDER........... 8
4.1 No Litigation; Consummation of Transactions................. 8
4.2 Documents................................................... 8
4.3 Private Placement........................................... 9
4.4 Trade Creditors............................................. 10
4.5 Material Adverse Changes.................................... 10
4.6 Lender's Fees, Costs and Expenses........................... 10
4.7 Subordinated Debt........................................... 10
4.8 No Default.................................................. 10
4.9 Interest.................................................... 10
4.10 Securities Laws............................................ 10
4.11 Representations and Warranties............................. 10
4.12. Depository, Concentration Investment and Accounts......... 10
i
V. CONDITIONS PRECEDENT TO EACH ADVANCE............................ 11
5.1. Notice of Borrowing........................................ 11
5.2 Representations and Warranties.............................. 11
5.3 No Event of Default......................................... 11
5.4. Compliance with Procedures................................. 11
5.5 Adjusted Maximum Facility Amount............................ 11
VI. AFFIRMATIVE COVENANTS........................................... 11
6.1 Financial Statements........................................ 11
6.2 Certificates; Other Information............................. 13
6.3 Books and Records........................................... 14
6.4 Financial Disclosure........................................ 14
6.5 Disclosure of Material Matters.............................. 14
6.6 Performance of Obligations.................................. 14
6.7 Preservation of Existence and Conduct of Business........... 14
6.8 Maintenance of Properties................................... 14
6.9 Payment of Taxes............................................ 14
6.10 Payment of Impositions..................................... 15
6.11 Compliance with Laws....................................... 15
6.12 Payment of Expenses........................................ 15
6.13 Leasehold Obligations...................................... 15
6.14 Insurance.................................................. 15
6.15 Inspection Rights.......................................... 16
6.16 Negative Pledge............................................ 16
6.17 Maintenance of Equipment................................... 16
6.18 Notices.................................................... 16
6.19 Further Assurances......................................... 16
6.20 Compliance with ERISA and the Code......................... 16
6.21 Compliance with Regulations G, T, U and X.................. 17
6.22 Fiscal Year............................................... 17
6.23 Board Observation and Membership........................... 17
6.24 Environmental Costs........................................ 17
6.25 Audits..................................................... 17
6.26 Replacement of Senior Note................................. 18
6.27 Board Meetings............................................. 18
6.28 Depository and Concentration Accounts...................... 18
6.29 Investment Account......................................... 18
6.30 Shareholder Subscription Agreements........................ 18
6.31 Performance of Settlement Agreements....................... 18
6.32 Tax and Payroll Accounts................................... 18
VII. NEGATIVE COVENANTS.............................................. 19
7.1 Indebtedness................................................ 19
7.2 Commitments................................................. 19
7.2 Limitation on Liens......................................... 19
7.3 Merger, Acquisition, Dissolution and Sale of Assets......... 19
7.4 Restricted Payments......................................... 19
7.5 Loans and Investments....................................... 19
7.6 Transactions with Affiliates................................ 19
7.7 Nature of Business.......................................... 20
7.8 Financial Covenants......................................... 20
7.9 Capital Expenditures........................................ 20
7.10 Remuneration............................................... 20
VIII. FINANCIAL COVENANTS............................................. 20
8.1 Minimum Tangible Net Worth.................................. 20
ii
8.2 Maximum Total Liabilities to Tangible Net Worth Ratio....... 20
8.3 Minimum Working Capital..................................... 21
8.4 Minimum Gross Cash Flow to Total Debt Service Ratio......... 21
8.5 Minimum Gross Cash Flow..................................... 23
8.6 Minimum Net Income.......................................... 23
8.7 Maximum Current Liability + Commitments..................... 24
8.8 Maximum Component/WIP Inventory............................. 24
IX. EVENTS OF DEFAULT AND REMEDIES THEREFOR........................ 25
9.1 Events of Default........................................... 25
9.2 Remedies of Holders upon Occurrence of Event of Default..... 26
9.3 Payment of Senior Obligations............................... 26
9.4 Remedies.................................................... 26
9.5 Conduct No Waiver........................................... 26
9.6 Notice of Default........................................... 26
X. INTERPRETATION OF AGREEMENT..................................... 27
10.1 Certain Terms Defined...................................... 27
10.2 Accounting Principles...................................... 34
10.3 Directly or Indirectly..................................... 34
XI. MISCELLANEOUS................................................... 34
11.1 Expenses................................................... 34
11.2 Indemnification............................................ 34
11.3 Notices.................................................... 35
11.4 Reproduction of Documents.................................. 35
11.5 Assignment, Sale of Interest............................... 35
11.6 Successors and Assigns..................................... 35
11.7 Headings................................................... 35
11.8 Counterparts............................................... 36
11.9 Reliance on and Survival Provisions........................ 36
11.10 Integration and Severability.............................. 36
11.11 LAW GOVERNING............................................. 36
11.12 WAIVERS; MODIFICATION..................................... 36
11.13 WAIVER OF JURY TRIAL...................................... 36
11.14 Agreement for Binding Arbitration......................... 36
11.15 Amendment and Restatement................................. 36
ANNEX, SCHEDULES AND EXHIBITS
Annex I - Information Concerning the Lender
Schedule 1.2(b) - Fees and Expenses Paid
Schedule 1.5(b) - Authorized Persons
Schedule 3.2 - Operating Plan
Schedule 3.3 - Defaults under Existing Agreements
Schedule 3.4 - Authorizations, Approvals, Consents and Filings
Schedule 3.5 - Environmental Condition of Property
Schedule 3.6 - Litigation and Judgments
Schedule 3.9 - Indebtedness to Affiliates
Schedule 3.10 - Tax Proceedings
Schedule 3.14 - Capitalization
Schedule 3.15 - Current Locations
Schedule 3.22 - Conduct of Business
Schedule 6.25 - Procedures
Schedule 7.1 - Indebtedness
iii
Schedule 7.11 - Remuneration
Exhibit A - Form of Senior Note
Exhibit B - Form of Legal Opinion
Exhibit C - Form of Officer's Compliance Certificate
Exhibit D - Permitted Liens
Exhibit E - Depository Accounts
Exhibit F - Arbitration Program
Exhibit G - Form of Other Reports
Exhibit H - Form of Contribution Analysis Report
iv
AMENDED AND RESTATED LOAN AGREEMENT
This Amended and Restated Loan Agreement (this "Agreement"),
dated as of October 31, 1996, is by and between IRATA, INC., a Texas
corporation (the "Company"), and PETRUS FUND, L.P., a Texas limited
partnership (the "Lender"). Capitalized terms used in this Agreement
are defined in Section 10.1.
The Company and the Lender entered into that certain Loan
Agreement (the "Original Agreement") dated June 2, 1995, under which
the principal amount of $2,115,000.00 is presently advanced and
outstanding. Various Events of Default have occurred and are existing
under the Original Agreement. These Events of Default are more
particularly described in the letter dated February 15, 1996 from the
Lender to the Company (the "Existing Defaults"). The Company has
requested and the Lender has agreed to reinstate the Original
Agreement, waive the Existing Defaults, and agree to make advances in
an aggregate amount of funds up to $290,000.00. Subject to the terms
and conditions set forth below, Lender has agreed to reinstate the
Original Agreement, to waive the Existing Defaults and to make the
requested advances.
I. DESCRIPTION OF SENIOR NOTE AND ADVANCES
1.1 Description of Senior Note. The Company has issued a Senior
Note which is dated June 2, 1995, and is in the original principal
amount of $3,500,000.00. The outstanding principal balance of the
Senior Note, together with accrued and unpaid interest thereof bears
interest at the fixed rate of twelve percent (12%) per annum (the
"Contract Rate"); provided, however, that upon the occurrence of any
Event of Default, and during the continuation thereof, the unpaid
principal amount of the Senior Note shall bear interest at the Maximum
Rate. The Senior Note is substantially in the form attached hereto as
Exhibit A. Interest on the Senior Note that accrues at the Contract
Rate shall be computed on the basis of the actual number of days
elapsed over a 360 day year. Interest on the Senior Note that accrues
at the Maximum Rate shall be computed on the basis of a year of 365 or
366 days, as the case may be.
1.2 Advances.
(a) Present Advances Outstanding. As of the date of this
Agreement, the aggregate amount of outstanding, unpaid advances under
this Agreement is Two Million, One Hundred Fifteen and No/100 Dollars
($2,115,000.00).
(b) Additional Advances. The Company's right to receive
any and all Advances under this Agreement from and after the date
hereof, will be limited up to a maximum additional amount of Two
Hundred Ninety Thousand Dollars ($290,000.00), in the aggregate,
subject, however, to the provisions of Section 1.2(c) below. Such
additional Advances will be made solely for the following purposes:
(i) payment for additional installed Photo
Booths, limited to One Thousand Two Hundred Fifty Dollars
($1,250.00) per additional installed and operational Photo Booth
in excess of 755 installed and operational Photo Booths, as
determined at the time of each Advance, and
(ii) payment of fees and expenses as expressly set
forth in Schedule 1.2(b) attached hereto.
The Company will have no right to any other Advances under this
Agreement.
(c) Limitation on Advances. In the event that the funds
raised by the Company in the Private Placement are less than
$1,500,000.00, then, so long as the funds raised by the Company in the
Private Placement are at least One Million Two Thousand and No/100
Dollars ($1,200,000.00) and such amount, net of commissions of
$156,000, is transferred to the Investment Account upon the execution
and delivery of this Agreement, then this Agreement nevertheless shall
be in force and effect, with the exception that Lender will have no
obligation to make any further Advance under this Agreement, other
than the Advance for payment of fees and
RESTATED LOAN AGREEMENT - Page 1
expenses as provided in Section 1.2(b)(ii), unless the Company achieves the
$1,500,000.00 level of funds raised by November 30, 1996.
1.3 Facility Fee. The Company shall pay to the Lender a
facility fee of Twenty-Four Thousand Fifty and No/100 Dollars
($24,050.00), which shall be due and payable on June 2, 1997. The
facility fee shall be deemed fully earned and non-refundable on the
due date thereof.
1.4 Use of Proceeds. The proceeds of Advances made under the
Senior Note from and after the Closing Date shall be used solely to
(a) finance installed Photo Booths for use by the Company in the
ordinary course of business, as contemplated in Section 1.2(b) above,
and (b) make the payment of fees and expenses more specifically
described in Section 1.2 and in Section 4.6.
1.5 Notice and Manner of Credit Borrowing. The amount and date
of each Advance shall be made as set forth in this Section.
(a) Request for Loan. The Company shall give the Lender
prior written notice (a "Notice of Borrowing") of each requested
Advance to be made under this Agreement. The Company shall be
entitled to a maximum of one (1) Notice of Borrowing per calendar
week, on a non-cumulative basis. Each Notice of Borrowing shall
specify the following:
(i) the requested amount of the Advance;
(ii) the requested Borrowing Date (such date not to be
less than six (6) Business Days after Lender receives and
confirms such receipt of the Notice of Borrowing and all other
information and documentation Lender may request);
(iii) evidence reasonably satisfactory to the
Lender that Photo Booths are installed and operational at the
time of an Advance;
(iv) a certificate from the President or Chief
Executive Officer of the Company certifying that there has been
no Event of Default under this Agreement and the total number of
the Company's installed and operational Photo Booths as of the
date of the requested Advance; and
(v) wiring instructions for the Advance.
(b) Notice Irrevocable. The individual persons authorized
to deliver a Notice of Borrowing to Lender on behalf of the Company
are set forth on Schedule 1.5(b) attached hereto. Lender is
authorized to rely upon any Notice of Borrowing purportedly signed by
any one of such authorized persons until and unless Lender receives
from the Company a written revocation of such authority.
(c) Funding. If, and only if, each of the requirements in
Section 1.5(a) are satisfied, Lender shall, on the Borrowing Date,
authorize the wire transfer of funds in the amount of such Advance in
immediately available funds in accordance with the wiring instructions
provided to the Lender pursuant to Section 1.5(a)(vi) above. If all
of the requirements set forth in Section 1.5(a) are not satisfied,
then the Lender shall have no obligation to make the requested
Advance.
II. PAYMENT AND PREPAYMENT OF SENIOR OBLIGATIONS.
2.1 Principal and Interest Payments. Principal and interest on
the Senior Note shall be due and payable as follows:
(a) Unless otherwise accelerated pursuant to the terms
hereof, principal shall be due and payable in one (1) installment on
the Maturity Date; and
RESTATED LOAN AGREEMENT - Page 2
(b) Interest on the outstanding principal advanced under
the Senior Note shall be due and payable (i) in arrears on the first
Business Day of each month, commencing October 1, 1996, and (ii) on
the Maturity Date.
2.2 Optional Prepayments. At the Company's option, upon notice
given as provided below, the Company may, at any time and from time to
time, prepay all or any part of the principal of the Senior Note, by
payment to the Lender of the principal amount to be prepaid, plus (a)
accrued unpaid interest on the principal amount so prepaid and (b) any
expenses for which the Lender may be entitled to receive payment or
reimbursement hereunder or, if the Senior Note is being prepaid in
full, the aggregate amount of all other Senior Obligations. Each
partial prepayment under this Section 2.2 shall be in a principal
amount of not less than $100,000.00. Each prepayment under this
Section 2.2 shall be applied first to accrued interest, then to any
expenses for which the Lender may be entitled, and then to
installments of principal in the inverse order of their maturities.
The amount of any such prepayment may not be re-borrowed by the
Company. The Company shall give notice of any optional prepayment to
the Lender not less than thirty (30) days nor more than sixty (60)
days before the date for prepayment, specifying in each such notice
the date upon which prepayment is to be made and the principal amount
(together with accrued interest) to be prepaid on such date. Notice
of prepayment having been so given, the applicable prepayment amount
shall become due and payable on the specified prepayment date. The
Company shall have no right to prepay the Senior Note except as
provided in this Section 2.2.
2.3 Additional Payments. Unless otherwise provided herein or in
the Other Agreements, all Senior Obligations shall be payable by the
Company to the Holder thereof, on demand, and shall bear interest from
the date of demand until paid at the rate of interest then applicable
under Section 1.1.
2.4 Direct Payment. The Company will pay all sums becoming due
hereunder and on the Senior Note to the Lender at the address
specified for the Lender on Annex I hereto, by wire transfer in U.S.
Dollars of Federal Reserve Funds or other immediately available funds,
to the account specified for the Lender on Annex I, or at such other
address or in such other form as the Lender shall have designated by
notice to the Company at least five (5) Business Days prior to the
date of any payment, in each case without presentment and without
notations being made thereon. All payments by the Company shall be
made without set-off or counterclaim. Any wire transfer shall
identify such payment as "Irata, Inc. 12% Senior Note" and shall
identify the payment as principal, premium, interest and/or
reimbursement of costs and expenses, together with the applicable date
or period to which it relates.
2.5 Payments Payable on Business Days. Payments of all amounts
due hereunder or under the Senior Note shall be made on a Business
Day. Any payment due on a day that is not a Business Day shall be
made on the next Business Day, together with all interest (if any)
accrued in the interim.
2.6 Interest Laws. Notwithstanding any provision to the
contrary contained in this Agreement or any Other Agreement, the
Company shall not be required to pay, and the Lender shall not be
permitted to contract for, take, reserve, charge or receive, any
compensation which constitutes interest under applicable law in excess
of the maximum amount of interest permitted by law ("Excess
Interest"). If any Excess Interest is provided for or determined by a
court of competent jurisdiction to have been provided for in this
Agreement or in any Other Agreement or otherwise contracted for,
taken, reserved, charged or received, then in such event: (a) the
provisions of this Section 2.6 shall govern and control; (b) the
Company shall not be obligated to pay any Excess Interest; (c) any
Excess Interest that the Lender may have contracted for, taken,
reserved, charged or received hereunder shall be, at the Lender's
option, (i) applied as a credit against the outstanding principal
balance of the Senior Obligations or accrued and unpaid interest (not
to exceed the maximum amount permitted by law), (ii) refunded to the
payor thereof, or (iii) any combination of the foregoing; (d) the
interest provided for shall be automatically reduced to the maximum
lawful rate allowed from time to time under applicable law (the
"Maximum Rate"), and this Agreement and the Other Agreements shall be
deemed to have been, and shall be, reformed and modified to reflect
such reduction; and (e) the Company shall have no action against the
Lender for any damages arising due to any Excess Interest.
Notwithstanding the foregoing, if for any period of time interest on
any Senior Obligations is calculated at the Maximum Rate rather than
the applicable rate under this Agreement, and thereafter such
RESTATED LOAN AGREEMENT - Page 3
applicable rate becomes less than the Maximum Rate, the rate of
interest payable on such Senior Obligations shall remain at the
Maximum Rate until the Lender shall have received the amount of
interest which the Lender would have received during such period on
such Senior Obligations had the rate of interest not been limited to
the Maximum Rate during such period. All sums paid or agreed to be
paid hereunder or under the Other Agreements for the use, forbearance
or detention of sums due shall, to the extent permitted by applicable
law, be amortized, pro-rated, allocated and spread throughout the full
term of the Senior Obligations until payment in full so that the rate
or amounts of interest on account of the Senior Obligations does not
exceed the Maximum Rate. The terms of this Section 2.6 shall be
deemed incorporated into each Other Agreement and any other document
or instrument between the Company and the Lender or directed to the
Company by the Lender, whether or not specific reference to this
Section 2.6 is made.
2.7 Security. Payment of the Senior Note and the other Senior
Obligations, and the performance of the covenants set forth herein and
in the Other Agreements, will be secured by a perfected security
interest, mortgage, assignment or Lien, as the case may be and in
favor of the Lender, in and upon the Collateral and in favor of the
Lender, subject to no prior or superior Lien except Permitted Liens.
The Company shall execute, acknowledge and deliver, and/or cause to be
executed, acknowledged and delivered, to the Lender such certificates,
stock powers, instruments, security agreements, pledges, statements,
assignments, consents, Lien waivers, financing statements or
amendments thereof, guarantees and other documents, in form and
substance reasonably acceptable to the Lender, as in the Lender's good
faith belief may be required to grant, enforce, perfect and protect
such security interest, assignments, Liens and mortgages, including,
without limitation, the Security Documents.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce the Lender to enter into this Agreement, the Company
represents and warrants to the Lender that the following statements
are true, correct and complete as of the Closing Date and as of each
date on which the Company requests an Advance:
3.1 Corporate Existence and Authority. The Company (a) is a
corporation duly organized, validly existing, and in good standing
under the laws of Texas; (b) has all requisite corporate power and
authority to own its assets and carry on its business as now
conducted; and (c) is qualified to do business in all jurisdictions in
which the nature of its business makes such qualification necessary
and where failure to so qualify would have a Material Adverse Effect.
The Company has the corporate power and authority to execute, deliver,
and perform its obligations under this Agreement and all Other
Agreements to which it is or, in connection with the transactions
contemplated hereby, may become, a party.
3.2 Financial Statements. The Company has delivered to the
Lender (a) unaudited financial statements of the Company as at and for
the fiscal year ended June 30, 1996, (b) unaudited financial
statements of the Company for the one (1) month period ended July 31,
1996, and (c) as set forth in Schedule 3.2, a Company operating plan,
including income statement and balance sheet projections and analyses
of the Company for the period following the Closing Date through the
Maturity Date, together with the assumptions underlying them (the
"Operating Plan"). The financial statements referred to in clauses
(a) and (b) of the first sentence of this Section 3.2 are true and
correct in all material respects, have been prepared in accordance
with GAAP (except as otherwise noted therein), and fairly present both
the financial condition of the Company as of the respective dates
indicated therein and the results of the Company's operations for the
respective periods indicated therein. The Operating Plan fairly
presents the Company's best estimate of the future financial position
of the Company, based on the Company's historical performance and the
Company's knowledge of its business plans and assumptions underlying
them. It is the Company's good faith belief that such projections are
reasonably achievable by the Company. At July 31, 1996, the Company
has no liabilities or obligations (absolute, accrued, contingent or
otherwise) of a nature required by GAAP to be reflected in such
financial statements which are, individually or in the aggregate,
material to the condition, financial or otherwise, or operations of
the Company as of that date which are not reflected on such financial
statements. There has been no material adverse change in the
condition, financial or otherwise, or operations of the Company since
July 31, 1996, nor has there otherwise occurred a Material Adverse
Effect.
RESTATED LOAN AGREEMENT - Page 4
3.3 Default. Except as disclosed on Schedule 3.3, the Company
is not in default under any loan agreement, indenture, mortgage,
security agreement, lease, franchise, permit, license or other
agreement or obligation to which it is a party or by which any of its
properties may be bound and the Company is paying its debts as they
become due.
3.4 Authorization and Compliance with Laws and Material
Agreements. The execution, delivery and performance by the Company of
this Agreement and the Other Agreements to which it is or may in
connection with the transactions contemplated hereby become a party,
have been or prior to the consummation of such transactions will be
duly authorized by all requisite action on the part of the Company and
do not and will not violate its Articles of Incorporation or Bylaws or
any law or any order of any court, governmental authority or
arbitrator, and do not and will not upon the consummation of the
transactions contemplated hereby conflict with, result in a breach of,
or constitute a default under, or result in the imposition of any Lien
(except Permitted Liens) upon any assets of the Company pursuant to
the provisions of any loan agreement, indenture, mortgage, security
agreement, franchise, permit, license or other instrument or agreement
by which the Company or any of its properties is bound. Except as set
forth on Schedule 3.4, no authorization, approval or consent of, and
no filing or registration with, any court, governmental authority or
third Person is or will be necessary for the execution, delivery or
performance by the Company of this Agreement and the Other Agreements
to which it is a party or the validity or enforceability thereof. All
such authorizations, approvals, consents, filings and registrations
described in Schedule 3.4 have been obtained. The Company is not in
violation of any term of its Articles of Incorporation or Bylaws or
any contract, agreement, judgment or decree and, to the best of its
knowledge, is in full compliance with all applicable laws, regulations
and rules.
3.5 Environmental Condition of the Photo Booths. Except as
disclosed on Schedule 3.5, the location, construction, occupancy,
operation and use of the Photo Booths do not violate any applicable
law, statute, ordinance, rule, regulation, order or determination of
any governmental authority or other body exercising similar functions,
or any restrictive covenant or deed restriction (recorded or
otherwise) affecting the Photo Booths, including, without limitation,
all applicable zoning ordinances and building codes, occupational
health and safety laws and Environmental Laws and regulations
(hereinafter sometimes collectively called "applicable laws").
3.6 Litigation and Judgments. Except as disclosed on Schedule
3.6, there is no material action, suit, proceeding or investigation
before any court, governmental authority or arbitrator pending, or to
the knowledge of the Company threatened, against or affecting the
Company, this Agreement and/or the Other Agreements. Except as
disclosed on Schedule 3.6, there are no outstanding judgments against
the Company. None of the matters listed on Schedule 3.6 could
reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
3.7 Rights in Properties; Liens. The Company has good and
indefeasible title to all properties and assets reflected on its
balance sheets, and none of such properties or assets is subject to
any Liens, except Permitted Liens. The Company enjoys peaceful and
undisturbed possession under all leases necessary for the operation of
its Photo Booths, other properties, assets, and businesses; and all
such leases are valid and subsisting and are in full force and effect.
There exists no default under any provision of any lease which would
permit the lessor thereunder to terminate any such lease or to
exercise any rights under such lease which, individually or together
with all other such defaults, could have a Material Adverse Effect.
The Company has the exclusive right to use all of the Intellectual
Property necessary to its business as presently conducted, and the
Company's use of the Intellectual Property does not infringe the
rights of any other Person. To the best of the Company's knowledge,
no other Person is infringing the rights of the Company in any of the
Intellectual Property. The Company owes no royalties, honoraria or
fees to any Person by reason of its use of the Intellectual Property.
3.8 Enforceability. This Agreement and the Other Agreements to
which the Company is a party, when delivered, shall constitute the
legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms.
3.9 Indebtedness. The Company has no Indebtedness, except
Permitted Indebtedness. All Indebtedness owed by the Company to any
Affiliate is set forth on Schedule 3.9.
RESTATED LOAN AGREEMENT - Page 5
3.10 Taxes. The Company has filed all tax returns (federal,
state, and local) required to be filed, including, without limitation,
all income, franchise, employment, property, and sales taxes, and has
paid all of its tax liabilities, other than immaterial amounts and
taxes that are being contested by the Company in good faith by
appropriate actions or proceedings, diligently pursued and with
respect to which adequate reserves in accordance with GAAP have been
provided for on the Company's books. The Company knows of no pending
investigation of the Company by any taxing authority or pending but
unassessed tax liability of the Company, except as disclosed on
Schedule 3.10. The Company has made no presently effective waiver of
any applicable statute of limitations or request for an extension of
time to file a tax return, and the Company is not a party to any
tax-sharing agreement.
3.11 Use of Proceeds; Margin Securities. The Company is not
engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System), and no part of the
proceeds of any extension of credit under this Agreement will be used
to purchase or carry any such margin stock or to extend credit to
others for the purpose of purchasing or carrying margin stock.
Neither the Company nor any Person acting on its behalf has taken any
action that might cause the transactions contemplated by this
Agreement or any Other Agreements to violate Regulations G, T, U or X
or to violate the Securities Exchange Act of 1934, as amended.
3.12 ERISA. All members of any Controlled Group have complied
with all applicable minimum funding requirements and all other
applicable and material requirements of ERISA and the Code, applicable
to the Employee Benefit Plans it or they sponsor or maintain, and
there are no existing conditions that would give rise to material
liability thereunder. With respect to any Employee Benefit Plan, all
members of any Controlled Group have made all contributions or
payments to or under each Employee Benefit Plan required by law, by
the terms of such Employee Benefit Plan or the terms of any contract
or agreement. No Termination Event has occurred in connection with
any Pension Plan, and there are no unfunded benefit liabilities, as
defined in Section 4001(a)(18) of ERISA, with respect to any Pension
Plan which poses a risk of causing a Lien to be created on the assets
of the Company or which will result in the occurrence of a Reportable
Event. No member of any Controlled Group has been required to
contribute to a multiemployer plan, as defined in Section 4001(a)(3)
of ERISA, since September 2, 1974. No material liability to the
Pension Benefit Guaranty Corporation has been, or is expected to be,
incurred by any member of a Controlled Group. The term "liability,"
as referred to in this Section 3.12, includes any joint and several
liability. No prohibited transaction under ERISA or the Code has
occurred with respect to any Employee Benefit Plan which could have a
Material Adverse Effect or a material adverse effect on the condition,
financial or otherwise, of an Employee Benefit Plan.
3.13 Disclosure. No representation or warranty made by the
Company in any Other Agreement to which the Company is a party
contains any untrue fact or omits to state any material fact necessary
to make the statements herein or therein not misleading. There is no
fact known to the Company which the Company has determined has a
Material Adverse Effect, or which the Company has determined might in
the future have a Material Adverse Effect, that has not been disclosed
in writing to the Lender.
3.14 Subsidiaries and Capitalization. The Company has no
Subsidiaries. All the issued and outstanding shares of capital stock
of the Company are duly authorized, validly issued, fully paid and non-
assessable. The capitalization of the Company on the Closing Date is
set forth on Schedule 3.14. No violation of any preemptive rights of
shareholders of the Company has occurred by virtue of the transactions
contemplated under this Agreement, or any Other Agreement. Except as
otherwise set forth on Schedule 3.14, there are no outstanding
contracts, options, warrants, instruments, documents or agreements
binding upon the Company granting to any Person or group of Persons
any right to purchase or acquire shares of the Company's capital
stock, except pursuant to the Warrant Documents.
3.15 Current Locations. Schedule 3.15 identifies (a) the
Company's principal place of business and chief executive office, (b)
all the locations where the Company maintains any books or records
relating to any of its assets, (c) all other locations where the
Company has a place of business, and (d) each address where any of the
Company's assets are located. Schedule 3.15 accurately indicates
whether each such location is owned or leased,
RESTATED LOAN AGREEMENT - Page 6
and, if leased, identifies the owner of such location. No Person other than the
Company has possession of any material amount of the assets of the Company
except as disclosed on Schedule 3.15.
3.16 No Burdensome Restrictions. The Company is not a party to,
or bound by any agreement, condition, contract or arrangement which
has, or which the Company reasonably expects in the future will have,
a Material Adverse Effect.
3.17 Securities Laws. The Company has complied with or is exempt
from the registration and/or qualification requirements of all federal
and state securities or blue sky laws applicable to the issuance of
the Senior Note.
3.18 No Labor Disputes. The Company is not involved in any labor
dispute. There are no strikes or walkouts or union organization of
any of the Company's employees threatened, to the knowledge of the
Company, or in existence and no labor contract is scheduled to expire
during the term of this Agreement. The Company is in compliance with
all laws, rules, regulations, orders and decrees applicable to the
Company or its properties, except for instances of noncompliance
which, individually or in the aggregate, will not have a Material
Adverse Effect.
3.19 Brokers. Neither the Company nor any of its shareholders
has dealt with any broker, finder, commission agent or other Person
other than as set forth on Schedule 3.19 in connection with the
transactions referenced in or contemplated by this Agreement, nor is
the Company or any of its shareholders under any obligation to pay any
broker's fee or commission in connection with such transactions.
3.20 Liens. The Lender's Liens attaching to the Collateral will
constitute at all times valid, perfected and enforceable Liens,
subject to no prior or superior Lien, except Permitted Liens. The
Company has taken, or participated with the Lender in taking, all
necessary action (including making all necessary filings) to provide
the Lender with first priority perfected Liens in the Collateral under
the laws of all applicable jurisdictions.
3.21 Insurance. The amount and types of insurance carried by the
Company, and the terms and conditions thereof, are substantially
similar to the coverage maintained by companies in the same or similar
business as the Company and similarly situated.
3.22 Conduct of Business. On the Closing Date, the Company is
engaged only in businesses of the type described in Schedule 3.22.
IV. CONDITIONS PRECEDENT TO INITIAL OBLIGATIONS OF LENDER
The Lender's obligations hereunder to reinstate the Original
Agreement, to waive the Existing Defaults and to make the initial
Advance hereunder shall be subject to the satisfaction of the
following conditions on or before the Closing Date:
4.1 No Litigation; Consummation of Transactions. No injunction,
preliminary injunction, or temporary restraining order shall be
threatened or shall exist which prohibits or may prohibit the
transactions contemplated herein or any other related transaction, and
no litigation or similar proceeding (including, without limitation,
any litigation or other proceeding seeking injunctive or similar
relief) shall be threatened or shall exist with respect to the
transactions contemplated herein, which, if adversely determined,
would in the judgment of the Lender have a Material Adverse Effect.
4.2 Documents. The Lender shall have received the following,
each in form and substance satisfactory to the Lender:
(a) Insurance. Certified copies of all insurance policies
and endorsements thereto required by Section 6.13, together with a
written report from an insurance broker acceptable to the Lender,
confirming that the amount of such insurance coverage and the terms
and conditions thereof, are substantially similar to policies
maintained by companies similarly situated to the Company and engaged
in the same or a similar business;
RESTATED LOAN AGREEMENT - Page 7
(b) Approvals and Consents. Copies, certified by the
Company of all consents, authorizations, filings, licenses and
approvals, if any, required in connection with the execution, delivery
and performance by the Company, or the validity and enforceability of,
this Agreement or the Other Agreements to which the Company is a
party;
(c) Opinion of Counsel to the Company. The written legal
opinion of legal counsel to the Company, such opinion to be
substantially in the form of Exhibit B hereto; except with respect to
Sections (m) and (n) of such opinion, which shall be exactly in the
form of Exhibit B hereto;
(d) General Certificate of the Company's Secretary. A
certificate of the Secretary of the Company together with true,
correct and complete copies of the following:
(i) Articles of Incorporation. The Articles of
Incorporation of the Company, including all amendments thereto,
certified by the Secretary of State of the state of its
incorporation;
(ii) Bylaws. The Bylaws of the Company, including all
amendments thereto;
(iii) Resolutions. The resolutions of the Board of
Directors of the Company authorizing the execution, delivery and
performance of this Agreement and the Other Agreements to which
the Company is a party;
(iv) Existence and Good Standing Certificates.
Certificates of the appropriate government officials of the state
of incorporation of the Company as to its existence and good
standing, and certificates of the appropriate government
officials in each state where the Company does business and where
failure to qualify as a foreign corporation would have a Material
Adverse Effect, as to its good standing and due qualification to
do business in such state, each dated within thirty (30) days
prior to the Closing Date; and
(v) Incumbency. The names of the officers of the
Company authorized to sign this Agreement and the Other
Agreements to be executed by the Company, together with a sample
of the true signature of each such officer;
(e) Transaction Certificate. A certificate of the
President and the Executive Vice President of the Company that, to the
best of their knowledge after due investigation, all conditions
precedent to the effectiveness of this Agreement have been satisfied
or waived;
(f) Financing Statements. UCC-1 financing statements and
all other requisite filing documents, instruments, assignments or
other agreements necessary to ensure a first priority security
interest in the Collateral in favor of the Lender, in form
satisfactory for filing with the appropriate filing officers;
(g) Liens. Evidence satisfactory to the Lender that as of
the Closing Date the Lender has a perfected first priority Lien on the
Collateral; and
(h) Additional Information, Other Documents and Agreements.
Such other information, documents, agreements, commitments and
undertakings as the Lender shall reasonably request.
4.3 Private Placement. The Company shall have raised at least
One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00),
which shall result in at least One Million Two Hundred Fifty Thousand
and No/100 Dollars ($1,250,000.00) net proceeds to the Company, in a
private placement (the "Private Placement"), subject to the following
additional conditions:
(a) If the over allotment is sold, the Company may raise up
to an additional Two Hundred Twenty-Five Thousand and No/100
($225,000.00) gross proceeds;
RESTATED LOAN AGREEMENT - Page 8
(b) Total cash fees payable to third parties shall not exceed 13% of
the capital raised, plus a $30,000 consulting fee;
(c) The Private Placement shall be subordinate in all respects to the
Senior Obligations;
(d) The Private Placement shall be structured as the sale of sixty
(60) units for Twenty-Five Thousand and No/100 Dollars ($25,000.00) each; and
each unit will consist of fifty thousand (50,000) common shares of the Company
and a warrant to purchase another fifty thousand (50,000) common shares of the
Company exercisable at $1 per share, increasing to $1.50 per share after two (2)
years from the consummation of the Private Placement;
(e) All proceeds of the Private Placement shall be deposited in
escrow with Continental Stock Transfer & Trust Company, New York, New York,
pending consummation of the Private Placement and execution and delivery of this
Agreement; and
(f) Upon execution and delivery of this Agreement, the net proceeds
to the Company from the Private Placement shall be transferred to the Investment
Account.
In the event that the funds raised by the Company in the Private Placement
are less than $1,500,000.00, then, so long as the funds raised by the Company in
the Private Placement are at least One Million Two Thousand and No/100 Dollars
($1,200,000.00) and such amount, net of commissions of $156,000, is transferred
to the Investment Account upon the execution and delivery of this Agreement,
then this Agreement nevertheless shall be in force and effect, with the
exception that Lender will have no obligation to make any further Advance under
this Agreement, other than the Advance for payment of fees and expenses as
provided in Section 1.2(b)(ii), unless the Company achieves the $1,500,000.00
level of funds raised by November 30, 1996.
4.4 Trade Creditors. The Company shall have restructured at least Seven
Hundred Thousand and No/100 ($700,000.00) of past due trade accounts payable
owing by the Company to its trade creditors, in accordance with the following
terms and conditions:
(a) The trade creditors shall receive one-third (1/3) of their claims
in cash, payable 15% of the total claim upon consummation of the Private
Placement. The balance of cash payment shall be made in equal monthly
installments over fifteen (15) months.
(b) The balance of each trade claim (i.e., two-thirds of the whole
claim) shall be exchanged for the common stock of the Company to be issued upon
completion of the pricing of the stock. The stock will be priced at a price
equal to the lower of (a) 80% of the average daily closing price during the
thirty (30) days following the consummation of the Private Placement, or (b) the
lowest closing price during such 30-day period, but in no event will the price
at which the shares are issued to the trade creditors be less than $2.25 per
share.
4.5 Material Adverse Changes. During the period beginning March 31, 1996
and continuing through the Closing Date, and, except for inventory write-offs
and operating losses disclosed to Lender in writing, there will have been (a) no
material adverse change in the business, financial or other conditions of the
Company, or in the Collateral which will be subject to Lender's security
interest, or in the prospects or projections of the Company, (b) there will have
been no material increase in the liabilities (absolute or contingent) of the
Company, whether or not disclosed or required to be reserved against on any pro
forma balance sheet, and (c) no material decrease in the assets of the Company
nor distribution by the Company either by dividends or otherwise.
4.6 Lender's Fees, Costs and Expenses. On the Closing Date, all of
Lender's legal and other fees shall be paid by the Company as an additional
Advance under the Senior Note. Included within such legal and other fees will be
the $35,000 facility fee due on June 2, 1996, all legal expenses and other
consulting expenses (including all expenses associated with this transaction).
RESTATED LOAN AGREEMENT - Page 9
4.7 Subordinated Debt. The Company shall have entered into
binding agreements ("Shareholder Subscription Agreements") for the
conversion of the Shareholder Subordinated Debt, together with accrued
interest, into equity of the Company on substantially the same terms
as subscribers to the Private Placement.
4.8 No Default. As of the Closing Date, there shall not have
occurred and be continuing any Event of Default under the Loan
Agreement, except for the Existing Defaults.
4.9 Interest. The Company shall have made all interest payments
to Lender that become due under the Loan Agreement from the date
hereof through and including the Closing Date.
4.10 Securities Laws. The Company and its underwriters and
investment advisors shall have complied with all applicable state and
federal securities laws in connection with the Private Placement.
4.11 Representations and Warranties. All representations and
warranties contained in this Agreement and the Other Agreements shall
be true and correct on the Closing Date.
4.12. Depository, Concentration Investment and Accounts.
(a) Prior to the Closing Date, the Company shall have
established one or more Depository Accounts into which the cash
receipts for Photo Booths shall be deposited, and shall have delivered
to the Lender, with respect to such Depository Accounts, a depository
account agreement (as amended, modified or supplemented from time to
time, a "Depository Account Agreement"), duly executed and delivered
by the Company and duly acknowledged by the financial institution at
which such Depository Account is established.
(b) Prior to the Closing Date, the Company shall have
established a Concentration Account at a financial institution
acceptable to the Lender and shall have delivered to the Lender, with
respect to such Concentration Account, a concentration account
agreement (as amended, modified or supplemented from time to time, a
"Concentration Account Agreement"), duly executed and delivered by the
Company and duly acknowledged by the financial institution at which
such Concentration Account is established.
(c) Prior to the Closing Date, the Company shall have
established an Investment Account at a financial institution
acceptable to the Lender and shall have delivered to the Lender, with
respect to such Investment Account, an account agreement (as amended,
modified or supplemented from time to time, the "Investment Account
Agreement"), duly executed and delivered by the Company and duly
acknowledged by the financial institution at which such Investment
Account is established.
V. CONDITIONS PRECEDENT TO EACH ADVANCE
The Lender's obligations hereunder to make any Advance shall be
subject to satisfaction of the following conditions precedent on each
Borrowing Date:
5.1. Notice of Borrowing. The Company delivers to the Lender a
Notice of Borrowing.
5.2 Representations and Warranties. All representations and
warranties made by the Company contained in this Agreement or
otherwise made in any Other Agreements, officer's certificate or any
agreement, instrument, certificate, document or other writing
delivered to the Lender in connection herewith or therewith, shall be
true and correct in all material respects with the same effect as
though such representations and warranties had been made on and as of
the date of such borrowing.
5.3 No Event of Default. On each Borrowing Date, there shall
exist no Event of Default or Potential Default.
5.4. Compliance with Procedures. The Company shall have complied
with all procedures and given all certificates, notices and other
documents required hereunder for such Advance.
RESTATED LOAN AGREEMENT - Page 10
5.5 Adjusted Maximum Facility Amount. The making of such
Advance shall not cause the outstanding principal balance of the
Senior Note to exceed the Adjusted Maximum Facility Amount.
VI. AFFIRMATIVE COVENANTS.
The Company covenants and agrees that, from the date hereof and
until the Senior Obligations have been finally and irrevocably paid in
full in accordance with the terms hereof and thereof:
6.1 Financial Statements. The Company will furnish to the
Lender:
(a) As soon as available, and in any event within ninety
(90) days after the end of each fiscal year of the Company, beginning
with the fiscal year ending June 30, 1996, (i) a copy of the annual
audit report of the Company for such fiscal year containing a balance
sheet, statement of income, statement of stockholders' equity, and
statement of cash flow as at the end of such fiscal year and for the
fiscal year then ended, in each case setting forth in comparative form
the figures for the preceding fiscal year, along with management's
discussion and analysis of variances, all in reasonable detail and
audited and certified by Lane, Gorman & Trubitt, L.L.P. or other
independent certified public accountants of recognized national
standing selected by the Company and consented to by the Lender
(provided the Lender's consent shall not unreasonably be withheld) to
the effect that such report has been prepared in accordance with GAAP;
(ii) a certificate delivered to the Lender by such independent
certified public accountants confirming the calculations set forth in
the officers' certificate delivered to the Lender simultaneously
therewith in accordance with Section 6.2(a); and (iii) a comparison of
the actual results during such fiscal year to those originally
budgeted by the Company prior to the beginning of such fiscal year,
along with management's discussion and analysis of variances. Further,
the Company agrees to indicate in footnotes to such financial
statements the specific dollar amount of any line item required for
the calculations set forth in the officers' certificate required by
Section 6.2, where the financial statements delivered pursuant to this
Section do not present a corresponding line item.
(b) As soon as available, and in any event either (i)
within forty-five (45) days after the end of each calendar month for
the period beginning September 30, 1996 until November 30, 1996, or
(ii) within thirty (30) days after the end of each calendar month for
the period beginning December 31, 1996 and thereafter, a copy of an
unaudited financial report of the Company as of the end of such
calendar month and for the portion of the fiscal year then ended,
containing balance sheets, statements of income, and statements of
cash flow, in each case setting forth in comparative form the figures
for the corresponding period of the preceding fiscal year, along with,
on a quarterly basis, management's discussion and analysis of
variances, all in reasonable detail, including, without limitation, a
comparison of the actual results during such period to those
originally budgeted by the Company prior to the beginning of such
fiscal period. Further, the Company agrees to indicate in footnotes
to such financial statements the specific dollar amount of any line
item required for the calculations set forth in the officers'
certificate required by Section 6.2, where the financial statements
delivered pursuant to this Section do not present a corresponding line
item.
(c) On or before sixty (60) days prior to the beginning of
each fiscal year of the Company, an annual budget or business plan for
such fiscal year showing monthly detail, including a projected
consolidated and consolidating balance sheet, income statement, and
cash flow statement for such year, and, promptly during each fiscal
year, all revisions thereto approved by the board of directors of the
Company.
(d) As soon as available, and in any event not later than
either (x) forty-five (45) days after the end of each calendar month
for the period beginning with the month ending September 30, 1996
through November 30, 1996, or (y) thirty (30) days after the end of
each calendar month for the period beginning with the month ending
December 31, 1996 and thereafter, a copy of the following:
(i) summary booth inventory report;
RESTATED LOAN AGREEMENT - Page 11
(ii) detailed inventory of booths including state, city and
county location detail;
(iii) detailed list of booths in process;
(iv) list of outstanding booth commitments;
(v) list of all bank accounts, together with account
balances;
(vi) summary accounts payable aging with detail for accounts
over ninety (90) days;
(vii) summary accounts receivable aging with detail for
accounts over ninety (90) days;
(viii) inventory report classified as (1) consumable, (2)
work-in-process, (3) new parts and (4) used parts;
(ix) budget versus actual maintenance expense analysis;
(x) budget versus actual maintenance capital expenditures
analysis, and
(xi) budget versus actual analysis of all financial
statements.
Such reports shall be in substantially the form as set forth in
Exhibit G attached hereto.
(e) As soon as available, and in any event not later than
forty-five (45) days after the end of each calendar month, beginning
with the month ending September 30, 1996 and continuing regularly
thereafter, a copy of the contribution analysis of each booth location
formatted on a computer readable diskette in Microsoft Excel, version
5.0, in substantially the form as set forth in Exhibit H attached
hereto.
6.2 Certificates; Other Information. The Company will furnish
to the Lender all of the following:
(a) Concurrently with the delivery of each of the financial
statements referred to in Section 6.1(a) and Section 6.1(b) and the
business plans and projections referred to in Section 6.1(c), a
certificate of the President and the Executive Vice President of the
Company in the form of the officers' certificate attached hereto as
Exhibit C (i) stating that no Potential Default or Event of Default
has occurred and is continuing or, if such officers have knowledge of
a Potential Default or Event of Default, the nature thereof and
specifying the steps taken or proposed to remedy such matter, (ii)
showing in reasonable detail the calculations showing compliance with
Sections 7.9 and 7.10, (iii) stating that the financial statements
attached have been prepared in accordance with GAAP and fairly and
accurately present (subject to year-end audit adjustments, for the
annual certificates) the financial condition and results of operations
of the Company at the date and for the period indicated therein, (iv)
containing a schedule of the outstanding Indebtedness for borrowed
money of the Company and its Subsidiaries describing in reasonable
detail each such debt issue or loan outstanding and the principal
amount and amount of accrued and unpaid interest with respect to each
such debt issue or loan, and (v) a report detailing (A) all matters
materially affecting the value, enforceability or collectibility of
any material portion of its assets including, without limitation, the
Company's reclamation or repossession of, or the return to the Company
of, a material amount of goods and material claims or disputes
asserted by any customer or other obligor, and (B) any material
adverse change in the relationship between the Company and any of its
material suppliers or customers.
(b) On or before forty-five (45) days after the end of each
fiscal quarter, a copy of the Form 10QSB filed by the Company with the
Securities and Exchange Commission.
(c) On or before ninety (90) days after the end of each
fiscal year, (i) a copy of the Form 10KSB filed by the Company with
the Securities and Exchange Commission, (ii) annual report prepared by
the Company for its stockholders, (iii) a report by the Company's
independent auditors of the cash management
RESTATED LOAN AGREEMENT - Page 12
procedures utilized by the Company, and (iv) a copy of each financial statement,
report, notice or proxy statement sent by the Company to its stockholders in
their capacity as stockholders.
(d) Within fifteen (15) days of availability, (i) all
budget updates and revisions prepared by the Company, (ii) a copy of
each regular, periodic or special report, registration statement, or
prospectus filed by the Company with any securities exchange or the
Securities and Exchange Commission or any successor agency, and any
material order issued by any court, governmental authority, or
arbitrator in any material proceeding to which the Company is a party,
(iii) copies of all public announcements, press releases and other
statements made available generally by the Company to the public
generally concerning material developments in the Company's business,
(iv) copies of the minutes of each meeting of the board of directors
of the Company, and (v) copies of any offering memoranda issued in
conjunction with the sale of securities by the Company.
(e) Promptly, such additional information concerning the
Company as the Lender may reasonably request.
6.3 Books and Records. The Company shall (a) keep proper books
of record and account in which full, true and correct entries will be
made of all dealings or transactions of or in relation to its business
and affairs; (b) set up on its books accruals with respect to all
taxes, assessments, charges, levies and claims; and (c) on a
reasonably current basis set up on its books from its earnings
allowances against doubtful receivables, advances and investments and
all other proper accruals (including, without limitation, by reason of
enumeration, accruals for premiums, if any, due on required payments
and accruals for depreciation, obsolescence, or amortization of
properties), which should be set aside from such earnings in
connection with its business. All determinations pursuant to this
Section shall be made in accordance with, or as required by, GAAP
consistently applied.
6.4 Financial Disclosure. The Company hereby irrevocably
authorizes and directs all accountants and auditors employed by it at
any time during the term of this Agreement to exhibit and deliver to
the Lender copies of any of the Company's financial statements, trial
balances or other accounting records of any sort in the accountant's
or auditor's possession, and to disclose to the Lender any
information they may have concerning the Company's financial status
and business operations. The Company hereby irrevocably authorizes
all federal, state and municipal authorities to furnish to the Lender
copies of reports or examinations relating to the Company, whether
made by the Company or otherwise.
6.5 Disclosure of Material Matters. The Company will,
immediately upon learning thereof, report to the Lender (a) all
matters materially affecting the value, enforceability or
collectibility of any material portion of the Collateral or its other
assets including, without limitation, the Company's reclamation or
repossession of, or the return to the Company of, a material amount of
goods and material claims or disputes asserted by any customer or
other obligor, and (b) any material adverse change in the relationship
between the Company and any of its suppliers or customers.
6.6 Performance of Obligations. The Company will duly and
punctually pay and perform its obligations under this Agreement and
the Other Agreements to which it is a party.
6.7 Preservation of Existence and Conduct of Business. The
Company will preserve and maintain its corporate existence and all of
its leases, privileges, franchises, qualifications and rights that are
necessary or desirable in the ordinary conduct of its business, and
conduct its business as presently conducted in an orderly and
efficient manner in accordance with good business practices.
6.8 Maintenance of Properties. The Company will operate and
maintain in good condition and repair (ordinary wear and tear
excepted) and replace as necessary, all of its assets and properties
which are necessary or useful in accordance with sound business
practices in the proper conduct of its business so that the value and
operating efficiency of its assets and properties are maintained and
preserved. The Company will at all times maintain the Intellectual
Property in full force and effect, and will defend and protect the
Intellectual Property against all adverse claims.
RESTATED LOAN AGREEMENT - Page 13
6.9 Payment of Taxes. The Company will file all tax returns
(federal, state, and local) required to be filed, including, without
limitation, all income, franchise, employment, property, and sales
taxes, and will pay all of its tax liabilities other than:
(a) immaterial amounts and taxes that are being contested
by the Company in good faith by appropriate actions or proceedings,
diligently pursued and with respect to which adequate reserves in
accordance with GAAP have been provided for on the Company's books;
and
(b) sales taxes, the payment of which is pending issuance
or assignment to the Company of appropriate taxpayer identification
number(s) by the applicable state taxing authority, but only so long
as (i) the Company has accrued such taxes as a current liability in
accordance with GAAP, (ii) the Company has deposited the amount of
such tax liability into a special sales tax deposit account of the
Company on a regular basis, but not less often than monthly, (iii) the
Company is diligently taking reasonable action to complete the process
of obtaining appropriate taxpayer identification numbers from the
applicable state taxing authority, (iv) upon issuance of the
appropriate taxpayer identification number(s) to the Company, the
Company promptly pays then due and payable liability for sales taxes
owing to the applicable state tax authority, and (v) the Company
reports to the Lender, in writing, on a monthly basis, concurrently
with the submission of the financial statements as required in
Section 6.1(b), the amount of taxes collected, but not paid, and, if
requested by the Lender, the applicable taxing authority to which
the taxes are payable, together with such other information as the
Lender may reasonably request.
The Company will promptly notify the Lender in writing of any pending
investigation of the Company by any taxing authority or pending but
unassessed tax liability of the Company.
6.10 Payment of Impositions. The Company will pay or discharge,
at or before maturity or before becoming delinquent (a) all taxes,
levies, assessments, vault, water and sewer rents, rates, charges,
levies, permits, inspection and license fees and other governmental
and quasi-governmental charges and any penalties or interest for
nonpayment thereof, heretofore or hereafter imposed or which may
become a Lien upon any property owned by the Company or arising with
respect to the occupancy, use, possession or leasing thereof
(collectively the "Impositions") and (b) all lawful claims for labor,
material, and supplies, which, if unpaid, might become a Lien upon
any of its property; provided, however, that the Company shall not be
required to pay or discharge any claim for labor, material, or
supplies or any Imposition which is being contested in good faith by
appropriate actions or proceedings diligently pursued, and for which
adequate reserves in conformity with GAAP have been established.
6.11 Compliance with Laws. The Company shall comply with all
acts, rules, regulations and orders of any legislative, administrative
or judicial body or official applicable to the operation of the
Company's business; provided, however, the Company may contest or
dispute any acts, rules, regulations, orders and directions of those
bodies or officials by appropriate actions or proceedings diligently
pursued, if adequate reserves with respect thereto are established to
the reasonable satisfaction of the Lender.
6.12 Payment of Expenses. All Miscellaneous Expenses shall be
payable to the Lender, on demand, shall be secured by the Collateral,
and shall accrue interest from the date of demand until paid at the
same rate(s) of interest as the outstanding principal balance of the
Senior Note.
6.13 Leasehold Obligations. The Company shall provide copies of
all leases under which it is a tenant or lessee, at the Lender's
request. The Company shall at all times pay, when and as due, its
rental obligations under all leases under which it is a tenant or
lessee, and shall otherwise comply, in all material respects, with all
other terms of such leases and keep them in full force and effect and,
at the Lender's request, will provide evidence of its having done so;
provided, however, the Company may contest or dispute its obligations
under such leases, by appropriate actions or proceedings diligently
pursued if adequate reserves with respect thereto are established to
the reasonable satisfaction of the Lender.
6.14 Insurance. The Company will maintain, with financially
sound, reputable and solvent companies, insurance policies (a)
insuring its assets against loss by fire, explosion, theft and other
risks and
RESTATED LOAN AGREEMENT - Page 14
casualties as are customarily insured against by companies engaged in the same
or a similar business, (b) insuring it against liability for personal injury and
property damages relating to its assets, such policies to be in such amounts and
covering such risks as are usually insured against by companies engaged in the
same or a similar business, and (c) insuring such other matters as may from time
to time be requested by the Lender. All policies shall be endorsed in favor of
the Lender as an additional insured, loss payee or assignee, as appropriate. The
Company shall provide copies of all such insurance policies to the Lender within
ten (10) days following the Lender's request for the same. The Company shall (i)
deliver copies of all such policies to the Lender immediately upon the Company's
receipt thereof, (ii) pay, or cause to be paid, all premiums for such insurance
at least thirty (30) days before such premiums become due, (iii) furnish to the
Lender satisfactory proof of the timely making of such payments, (iv) deliver
copies of all renewal policies to the Lender at least five (5) days before the
expiration date of each expiring policy, (v) cause such policies to require the
insurer to give notice to the Lender of termination of any such policy at least
thirty (30) days before such termination is to be effective, and (vi)
immediately deliver written notice to the Lender of any casualty loss affecting
the Collateral.
6.15 Inspection Rights. At any reasonable time and from time to
time, the Company will permit representatives of the Lender to examine
and make copies of the books and records of, and visit and inspect the
properties of, the Company, and to discuss the business, operations,
and financial condition of the Company with its respective officers
and employees and with its independent certified public accountants.
In accordance with the terms of Section 6.12 hereof, the Company will
promptly reimburse the Lender for all reasonable expenses incurred by
representatives of the Lender in connection with such inspections.
6.16 Negative Pledge. Until payment and performance in full of
all of the Senior Obligations and termination of this Agreement, the
Company shall not, without the Lender's prior written consent, pledge,
sell (except inventory in the ordinary course of business), assign,
transfer, create or suffer to exist any Lien (except for Permitted
Liens) upon any part of its assets.
6.17 Maintenance of Equipment. The Company's equipment shall be
maintained in its existing repair and condition (reasonable wear and
tear excepted); and all necessary replacements of and repairs thereto
shall be made so that the value and operating efficiency of the
equipment shall be maintained and preserved.
6.18 Notices. The Company will promptly, but in any event within
two (2) business days after first becoming aware thereof, notify the
Lender in writing of:
(a) the commencement of any event, including but not
limited to, any action, suit, or proceeding against the Company that
could have a Material Adverse Effect which notice shall specify the
nature of such event and what action the Company has taken or is
taking or proposes to take with respect thereto;
(b) the occurrence of a default, or an event which with the
passage of time or giving of notice or both constitutes a default or
event of default under any instrument or agreement evidencing any
other Indebtedness of the Company;
(c) any other matter that might have a Material Adverse
Effect; and
(d) the occurrence of a Potential Default or an Event of
Default.
Any notification required by this Section 6.18 shall be accompanied by
a certificate of the President or Executive Vice President setting
forth the details of the specified events and the action which the
Company proposes to take with respect thereto.
6.19 Further Assurances. The Company shall execute and deliver
to the Lender from time to time, upon demand, such supplemental
agreements, statements, assignments and transfers, or instructions or
documents as the Lender may request, in order that the full intent of
this Agreement and the Other Agreements may be carried into effect.
RESTATED LOAN AGREEMENT - Page 15
6.20 Compliance with ERISA and the Code. The Company will
comply, and will cause each other member of any Controlled Group to
comply, with all minimum funding requirements, and all other material
requirements, of ERISA and the Code, if applicable, to any Employee
Benefit Plan it or they sponsor or maintain, so as not to give rise to
any liability thereunder. The Company will pay and will cause each
other member of any Controlled Group to pay when due any amount
payable by it to the Pension Benefit Guaranty Corporation. Promptly
after the filing thereof, the Company shall furnish to the Lender with
regard to each Employee Benefit Plan, copies of each annual report
required to be filed pursuant to Section 104 of ERISA in connection
with each such plan for each plan year.
6.21 Compliance with Regulations G, T, U and X. Neither the
Company nor any Person acting on its behalf will take any action which
might cause this Agreement, the Senior Note, the Warrant Documents or
any Other Agreement to violate, and the Company will take all actions
necessary to cause compliance with, Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System and the Securities
Exchange Act of 1934, in each case as now in effect or as the same may
hereafter be in effect.
6.22 Fiscal Year. The Company will cause its fiscal year to be
the twelve month period ending on the last day of June of each year.
6.23 Board Observation and Membership. The Company will deliver
to the Lender a certified copy of the minutes of and all materials
distributed at or prior to all meetings of the Board of Directors of
the Company, certified as true and accurate by the Secretary of the
Company, promptly following each such meeting. The Company will (a)
permit the Lender so long as the Lender is a Holder or owns any stock,
warrants or other equity interest in the Company, to designate one
person that is not directly or indirectly a competitor of the Company
to attend all meetings of the Company's board of directors, (b)
provide such designee not less than ten (10) business days actual
notice of all regular meetings and three (3) calendar days' actual
notice of all special meetings of the Company's board of directors,
(c) permit such designee to attend such meetings as an observer, and
(d) provide to such designee a copy of all materials distributed at
such meetings.
6.24 Environmental Costs.
(a) The Company hereby indemnifies and holds the Lender
harmless from and against any liability, loss, damage, suit, action or
proceeding pertaining to solid or hazardous waste materials or other
waste-like or toxic substances, including, but not limited to, claims
of any federal, state or municipal government or quasi-governmental
agency or any third person, whether arising under any federal, state
or municipal law or regulation, or tort, contract or common law that
relates to the Company.
(b) To the extent the laws of the United States or any
state in which property, leased or owned, of the Company provide that
a lien upon the property of the Company may be obtained for the
removal of Polluting Substances which have been or may be released, no
later than sixty (60) days after notice is given by the Lender to the
Company, the Company shall deliver to the Lender a report issued by a
qualified, third party engineer certifying as to the existence of any
Polluting Substances located upon or beneath the specified property,
leased or owned. To the extent any such Polluting Substance is
located therein or thereunder that either (i) subjects the property to
Lien or (ii) requires removal to safeguard the health of any Person,
the Company shall remove, or cause to be removed, such lien and such
Polluting Substance at the Company's expense.
6.25 Audits. The Company will, in accordance with the procedures
set forth in Schedule 6.25 hereto, provide a letter to the Lender on a
quarterly basis, setting forth the locations of the Collateral, the
Leases under which the Company is a tenant or lessee, and cash
management procedures. In addition, the Company will, on an annual
basis, employ an independent auditor, at the Company's sole expense,
that is acceptable to the Lender in its sole discretion, to audit and
otherwise evaluate the Collateral, the locations of the Collateral,
all leases or other agreements under which the Company is a tenant or
other occupant of premises, and the cash management procedures, such
audits and evaluations prepared on an accounting basis and utilizing
the procedures set forth on Schedule 6.25.
RESTATED LOAN AGREEMENT - Page 16
6.26 Replacement of Senior Note. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or
destruction of the Senior Note and, in the case of any such loss,
theft or destruction, upon delivery of a bond of indemnity in such
form and amount as shall be reasonably satisfactory to the Company or,
in the event of such mutilation upon surrender and cancellation of the
Senior Note, the Company, without charge to the Holder thereof, will
make and deliver a new Senior Note of like tenor and the same series
in lieu of such lost, stolen, destroyed or mutilated Senior Note. If
any such lost, stolen or destroyed Senior Note is owned by the Lender
or any other Holder whose credit is satisfactory to the Company, then
the affidavit of an authorized officer of such owner setting forth the
fact of loss, theft or destruction and of its ownership of the Senior
Note at the time of such loss, theft or destruction shall be accepted
as satisfactory evidence thereof, and no further indemnity shall be
required as a condition to the execution and delivery of a new Senior
Note, other than a written agreement of such owner (in form
reasonably satisfactory to the Company) to indemnify the Company.
6.27 Board Meetings. The Company agrees to hold meetings of the
Board of Directors, such meetings to be held at least quarterly.
6.28 Depository and Concentration Accounts. The Company shall
deposit or cause to be deposited all cash receipts from Photo Booths
into a Depository Account and, on each Business Day, shall transfer
all collected balances from all Depository Accounts to the
Concentration Account. The Company shall deliver, or cause each
financial institution that established a Depository Account or the
Concentration Account, as the case may be, to deliver, to Lender, on a
monthly basis simultaneously upon delivery to the Company, the monthly
account statements that pertain to the Depository Accounts and the
Concentration Account.
6.29 Investment Account. The net proceeds to the Company from
the Private Placement shall be put into an investment account (the
"Investment Account"), which will be subject to the same terms and
conditions as the Concentration Account with respect to the security
interest in favor of the Lender and the occurrence of an Event of
Default. The Company will not make any withdrawals or transfers of
funds from the Investment Account, except for transfers of funds into
the Company's operating account such that the aggregate balance of
funds in the operating account(s) existing from time to time is equal
to or less than $100,000. Further, in the event that the aggregate
balance of funds in the operating account(s) of the Company exceeds a
balance of $100,000, the excess will be transferred into the
Investment Account. The Company shall deliver, or cause the financial
institution that established the Investment Account to deliver, to
Lender, on a monthly basis simultaneously upon delivery to the
Company, the monthly account statement that pertains to the Investment
Account.
6.30 Shareholder Subscription Agreements. The Company will
consummate the transactions contemplated by the Shareholder
Subscription Agreements for the conversion of the Shareholder
Subordinated Debt, together with accrued interest, into equity of the
Company, not later than fifteen (15) days after the Closing Date.
6.31 Performance of Settlement Agreements. The Company will duly
and punctually pay and perform its obligations under the Settlement
Agreements and Releases, which reflect the re-structuring with the
Company's trade creditors, as contemplated by Section 4.4 above, and
which are more fully described in Schedule 7.1 to this Agreement.
6.32 Tax and Payroll Accounts. The Company will maintain the
deposit accounts designated as Tax Account and Payroll Account on
Exhibit E to this Agreement solely for deposit of funds for the
payment of taxes and employee payroll, respectively, and will maintain
the amounts on deposit in such accounts in amounts not in excess of
the amounts respectively due for the then current applicable payment
period.
VII. NEGATIVE COVENANTS
The Company covenants and agrees that from the date hereof until
the Senior Obligations have been finally and irrevocably paid in full
in accordance with the terms hereof and thereof:
RESTATED LOAN AGREEMENT - Page 17
7.1 Indebtedness. Except as set forth in Schedule 7.1, the
Company will not create, incur, issue, assume, guarantee or otherwise
become liable for any Indebtedness except (a) Permitted Indebtedness,
(b) any extension, renewal or refinancing of any Permitted
Indebtedness on such terms and conditions as are, on the whole, no
more onerous to the Company than the terms and conditions of such
Permitted Indebtedness on the date of such extension, renewal or
refinancing and (c) indebtedness subordinate to the Lender on terms
and conditions acceptable to the Lender, in its sole discretion. Any
Permitted Indebtedness which is subordinated to the Senior Obligations
shall continue to be subordinated to the Senior Obligations on terms
and conditions satisfactory to the Lender.
7.2 Commitments. Without the prior written consent of the
Lender, the Company will not enter into any Commitments except (a)
Permitted Indebtedness, and (b) any extension, renewal or refinancing
of any Permitted Indebtedness on such terms and conditions as are, on
the whole, no more onerous to the Company than the terms and
conditions of such Permitted Indebtedness on the date of such
extension, renewal or refinancing.
7.3 Limitation on Liens. The Company will not incur, create,
assume, or permit to exist any Lien upon any of its property, assets,
or revenues, including, but not limited to, its shares of capital
stock of each of its Subsidiaries, whether now owned or hereafter
acquired, except Permitted Liens.
7.4 Merger, Acquisition, Dissolution and Sale of Assets. The
Company will not become a party to a merger or consolidation, or
purchase or otherwise acquire all or a substantial part of the assets
of any Person or any shares or other evidence of beneficial ownership
of any Person, or dissolve or liquidate. The Company will not form,
acquire or permit the existence of any Subsidiary or Subsidiaries of
the Company. The Company will not, without the Lender's prior written
consent, pledge, sell (except inventory in the ordinary course of
business and other assets reasonably and in good faith determined by
the Company to be obsolete or no longer necessary to the Company's
business), assign, transfer, create or suffer to exist a Lien (except
for Permitted Liens) upon any of the Company's assets.
7.5 Restricted Payments. The Company will not at any time make
or become obligated to make, directly or indirectly, any (a)
declaration of any dividend on, or any other payment or distribution
in respect of, any shares of the Company, (b) payment or distribution
on account of the purchase, repurchase, redemption, put, call or other
retirement of any shares of the Company or of any warrant, option or
other right to acquire such shares (except pursuant to the Warrant
Documents), or (c) payment or distribution on account of any
Indebtedness of the Company which is subordinate to the Senior Note.
7.6 Loans and Investments. Except for Permitted Investments and
travel or other advances in the ordinary course of business of
immaterial amounts, the Company will not make any advance, loan,
extension of credit, or capital contribution to or investment in, or
purchase any stock, bonds, notes, debentures, or other securities of
any Person.
7.7 Transactions with Affiliates. Except as contemplated by
this Agreement and the Other Agreements, the Company will not, without
the prior written consent of the Lender, enter into any transaction
with any director, officer, employee, shareholder, or Affiliate of the
Company, other than employee contracts, employee stock options or
grant agreements or other transactions (including those permitted by
Section 7.6, if any) in the ordinary course of business, all such
contracts, stock options and other agreements being subject to the
terms and conditions of the Warrant Purchase Agreement.
7.8 Nature of Business. The Company will not engage in any
business other than the businesses in which it is engaged as of the
date hereof (as more particularly set forth on Schedule 3.22), or any
business reasonably related thereto.
7.9 Financial Covenants. Until payment in full of the Senior
Note and all other Senior Obligations of the Company hereunder, the
Company covenants that it shall (without the Lender's prior written
consent) comply with the financial covenants set forth in Article
VIII.
RESTATED LOAN AGREEMENT - Page 18
7.10 Capital Expenditures. Except the funding leasehold
improvements not to exceed $100,000 in amount and the costs of
construction of Photo Booths, the annual Capital Expenditures of the
Company may not exceed $250,000.00 without the prior written consent
of the Lender. In the event that the Company enters into a capital
lease or other contract with respect to fixed assets, for purposes of
calculating Capital Expenditures under this Section 7.10, the
aggregate amount of all payments due for the entire term of such
contract or capital lease shall be considered expended in full on the
date that the Company enters into such contract or capital lease.
7.11 Remuneration. The Company will not pay salaries and other
direct and indirect remuneration (including, but not limited to,
employee benefits and professional, consulting and management fees and
expenses) during any fiscal year to any of the Persons set forth on
Schedule 7.11 or any member of such Person's immediate family,
without the prior written consent of the Lender, exceeding the amounts
set forth for such Persons in Schedule 7.11.
VIII. FINANCIAL COVENANTS
8.1 Minimum Tangible Net Worth. Tangible Net Worth, as
calculated at any time and from time to time, shall not be less than
the amount indicated below during the respective period of time
indicated below:
Minimum Tangible
Time Period Net Worth
October 31, 1996 through
December 30, 1996 $3,250,000
December 31, 1996 through
March 30, 1997 $3,000,000
March 31, 1997 through
June 29, 1997 $2,850,000
June 30, 1997 through
September 29, 1997 $2,850,000
September 30, 1997 through
December 30, 1997 $3,200,000
December 31, 1997 through
March 30, 1998 $3,550,000
March 31, 1998
and thereafter $3,850,000
8.2 Maximum Total Liabilities to Tangible Net Worth Ratio. The
ratio of Total Liabilities to Tangible Net Worth , as calculated at
any time and from time to time, shall be no greater than the ratio
indicated below during the respective period of time indicated below:
Maximum Total
Liabilities to
Tangible Net
Time Period Worth Ratio
October 31, 1996 through
June 30, 1997 1.10 to 1.0
July 1, 1997 and thereafter 1.00 to 1.0
RESTATED LOAN AGREEMENT - Page 19
8.3 Minimum Working Capital. The Company's working capital,
calculated from time to time and at any time as the Company's current
assets minus the Company's current liabilities (each determined in
accordance with GAAP), shall not be less than the amount indicated
below during the respective period of time indicated below:
Minimum Working
Time Period Capital
October 31, 1996 through
December 30, 1996 $400,000
December 31, 1996 through
March 30, 1997 $250,000
March 31, 1997 through
June 29, 1997 $150,000
June 30, 1997 through
September 29, 1997 $200,000
September 30, 1997
and thereafter $500,000
8.4 Minimum Gross Cash Flow to Total Debt Service Ratio. The
ratio of (a) Gross Cash Flow, as calculated at the end of each month
for the three (3)-month period consisting of the month then ended plus
the two preceding months, divided by 3, to (b) Total Debt Service, as
calculated at the end of each month for the three (3)-month period
consisting of the month then ended plus the two preceding months,
divided by 3, shall not be less than the ratio indicated below as at
the end of each month occurring during the respective period of time
indicated blow:
Minimum Gross
Cash
Flow to Total Debt
Time Period Service Ratio
October 31, 1996 through
December 30,1996 Not calculated.
December 31, 1996 through
March 30, 1997 Not calculated.
March 31, 1997 through
June 29, 1997 1.00 to 1.0
June 30, 1997
and thereafter 2.00 to 1.0
RESTATED LOAN AGREEMENT - Page 20
8.5 Minimum Gross Cash Flow. Gross Cash Flow, as calculated at
the end of each month for the three (3)-month period consisting of the
month then ended plus the two preceding months, divided by 3, shall be
no less than the amount indicated below as at the end of each month
occurring during the respective period of time indicated below:
Minimum Gross
Time Period Cash Flow
October 31, 1996 through
December 30, 1996 $ (50,000)
December 31, 1996 through
March 30, 1997 $ (50,000)
March 31, 1997 through
June 29, 1997 $ - 0 -
June 30, 1997 through
September 29, 1997 $ 50,000
September 30, 1997
and thereafter $175,000
8.6 Minimum Net Income. Net Income as calculated at the end of
each month for the three (3)-month period consisting of the month then
ended plus the two preceding months, divided by 3, shall be no less
than the amount indicated below as at the end of each month occurring
during the respective period of time indicated below:
Minimum Net
Time Period Income
October 31, 1996 through
December 30, 1996 $(200,000)
December 31, 1996 through
March 30, 1997 $(175,000)
March 31, 1997 through
June 29, 1997 $(125,000)
June 30, 1997 through
September 29, 1997 $(50,000)
September 30, 1997 through
December 30, 1997 $ - 0 -
December 31, 1997
and thereafter $25,000
RESTATED LOAN AGREEMENT - Page 21
8.7 Maximum Current Liabilities Plus Commitments. The sum of
the Company's current liabilities below plus Commitments, as
calculated at any time and from time to time, shall not be greater
than the amount indicated during the respective period of time
indicated below:
Maximum Current
Liabilities plus
Time Period Commitments
October 31, 1996 through
December 30, 1996 $1,200,000
December 31, 1996 through
March 30, 1997 $1,100,000
March 31, 1997 through
June 29, 1997 $1,000,000
June 30, 1997 through
September 29, 1997 $1,000,000
September 30, 1997 through
December 30, 1997 $850,000
December 31, 1997
and thereafter $800,000
8.8 Maximum Component Parts/WIP Inventory. The amount of the
Company's parts inventory (including new and used parts) plus work-in-
process inventory, as calculated at any time and from time to time,
shall be no greater than the amount indicated below during the
respective period of time indicated below:
Maximum
Component Parts/
Time Period WIP Inventory
October 31, 1996 through
December 30, 1996 $550,000
December 31, 1996 through
March 30, 1997 $500,000
March 31, 1997 through
June 29, 1997 $450,000
June 30, 1997 through
September 29, 1997 $400,000
September 30, 1997
and thereafter $350,000
RESTATED LOAN AGREEMENT - Page 22
IX. EVENTS OF DEFAULT AND REMEDIES THEREFOR
9.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(a) Payment Default. The Company shall fail to pay, when
due (whether upon acceleration or otherwise), any principal, interest,
facility fee or other reasonable sums payable under the Senior Note or
this Agreement, or shall fail to pay, when due (whether upon
acceleration or otherwise), any other Senior Obligations;
(b) Payment Default to Third Parties. The Company shall
fail to pay, on or before sixty (60) calendar days after the date when
due and after passage of any other applicable notice and cure periods,
whether upon acceleration or otherwise, any Indebtedness owing to any
Person other than the Lender, and such failure shall remain unremedied
by the Company for a period of ten (10) calendar days following the
Company's receipt of Lender's notice of same;
(c) Covenant Default under Agreement or Senior Note.
Except as specifically provided otherwise in Section 9.1(d), the
Company shall fail to perform or observe any agreement, covenant, term
or condition contained in this Agreement or in the Senior Note, which
failure shall remain unremedied for a period of ten (10) calendar days
after the Company's receipt of Lender's notice regarding such failure;
(d) Certain Covenant Defaults Not Entitled to Notice or
Cure. The Company shall fail to perform or observe any of the
agreements, covenants, terms or conditions referenced below and
contained in this Agreement, with respect to which no notice or cure
whatsoever shall be required of Lender:
(i) Article VIII (pertaining to Financial Covenants),
(ii) Subsections 6.1(a)(i) and (ii), Section
6.1(b), Subsection 6.1(d)(i), and Sections 6.2(a), (b) and (c)
(pertaining to certain Financial Statements, Summary Booth
Inventory Reports, and Certificates),
(iii) Sections 6.28 and 6.29 (pertaining to
Depository, Collection and Investment Accounts), and
(iv) the agreements and covenants that are
addressed separately in Sections 9.1(a), (f), (g), (h) and(i);
(e) Covenant Default under Other Agreements. The Company
shall fail to comply with any agreement, indenture, mortgage, deed of
trust, or other agreement binding on it or affecting its properties or
business, including, without limitation, the Other Agreements, to
which the Company is a party, and such failure remains unremedied by
the Company for a period of ten (10) calendar days from the Company's
receipt of Lender's notice regarding such failure; except with respect
to any failure to comply with the Depository Account Agreements, the
Concentration Account Agreement or the Investment Account Agreement,
for which neither notice nor an opportunity to cure will be required
of Lender;
(f) Breach of Representation or Warranty. Any
representation, warranty or other material information whatsoever made
or provided by the Company in connection with this Agreement or
otherwise to induce the Lender to purchase the Senior Note or the
Warrant was incorrect or misleading in any respect, when made;
(g) Event of Bankruptcy. The Company shall initiate, or
otherwise become the subject of, an Event of Bankruptcy;
RESTATED LOAN AGREEMENT - Page 23
(h) Judgment. Any judgment or order for payment of money
shall be rendered against the Company which exceeds $100,000.00 and
either (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order, or (ii) there shall be a period
of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; or
(i) Change in Management Control. The occurrence of a
material change in management control, directly or indirectly of the
Company, except as specifically contemplated by the Private Placement
Memorandum upon consummation of the Private Placement, unless Lender
has given its prior, written consent to such change.
9.2 Remedies of Holders upon Occurrence of Event of Default.
When any Event of Default described in Section 9.1 above, other than
any Event of Default described in subparagraph (f) thereof, has
occurred and is continuing, the Lender may (in addition to any other
right, power or remedy permitted to the Lender by law) declare the
entire amount of the Senior Obligations, including, without
limitation, the entire principal and all interest accrued then
outstanding under the Senior Note, to be, and the same shall thereupon
become, forthwith due and payable, without any presentment, demand,
protest, notice of default, notice of intention to accelerate, notice
of acceleration or other notice of any kind, all of which are hereby
expressly waived, and in such event the Company shall forthwith pay to
the Lender an amount equal to 100% of the amount thereof. When any
Event of Default described in subparagraph (f) of Section 9.1 above
shall occur, all of the Senior Obligations, including, without
limitation, the entire principal and all accrued interest then
outstanding under the Senior Note, shall thereupon be forthwith due
and payable without any presentment, demand, protest, notice of
default, notice of intention to accelerate, notice of acceleration or
other notice of any kind, all of which are hereby expressly waived by
the Company.
9.3 Payment of Senior Obligations. The Lender shall have the
right, which is absolute and unconditional, to receive payment of the
principal of and interest on such Senior Note and payment of all other
Senior Obligations on the date when due and, upon the occurrence and
continuance of an Event of Default, to institute suit against the
Company for the enforcement of any such payment. Such rights shall
not be impaired without the Lender's prior written consent.
9.4 Remedies. If any Event of Default shall occur and be
continuing, each and every Holder may exercise any right or remedy it
has at law, in equity or under this Agreement or any Other Agreement.
No right or remedy conferred upon or reserved to the Lender under this
Agreement or any Other Agreement is intended to be exclusive of any
other right or remedy, and every right and remedy shall be cumulative
and in addition to every other right or remedy given hereunder or now
or hereafter existing under any applicable law. Every right and
remedy given by this Agreement or by applicable law to the Lender may
be exercised from time to time and as often as may be deemed expedient
by the Lender.
9.5 Conduct No Waiver. No course of dealing on the part of the
Lender, nor any delay or failure on the part of the Lender to exercise
any of its rights, shall operate as a waiver of such right or
otherwise prejudice the Lender's rights, powers and remedies. If the
Company fails to pay, when due, the principal of, or the interest on,
the Senior Note, or fails to comply with any other provision of this
Agreement, the Company shall pay to the Holder, to the extent
permitted by law, on demand, such further amounts as shall be
sufficient to cover any Miscellaneous Expenses.
9.6 Notice of Default. With respect to Events of Default or
claimed defaults, or any condition or event which with notice or lapse
of time, or both, may become an Event of Default, the Company will
give the following notices:
(a) The Company will immediately furnish to the Lender
notice in writing of the occurrence of an Event of Default, or any
condition or event which, after notice or lapse of time, or both,
would constitute such an Event of Default. Such notice shall specify
the nature of such event, condition or default and what action the
Company has taken or is taking or proposes to take with respect
thereto.
RESTATED LOAN AGREEMENT - Page 24
(b) If any holder of any other Indebtedness of the Company
gives any notice or takes any other action with respect to a claimed
default, the Company will immediately give written notice thereof to
the Lender, describing the notice or action and the nature of the
claimed event, condition or default.
X. INTERPRETATION OF AGREEMENT
10.1 Certain Terms Defined. When used in this Agreement, the
terms set forth below are defined as follows:
"Adjusted Maximum Facility Amount" means Two Million Four
Hundred Five Thousand Dollars ($2,405,000), which is the sum of
the outstanding principal balance of the Senior Note on the
Closing Date (i.e., $2,115,000) plus the maximum amount of
Advances that the Lender will be obligated to make under this
Agreement from and after the Closing Date (i.e., $290,000).
"Advance" means any advance of funds by the Lender to or for the
benefit or account of the Company, whether under this Agreement
or the Original Agreement.
"Affiliate" means any Person directly or indirectly controlling,
controlled by, or under common control with, the Person in
question. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of
such corporation, whether through the ownership of voting
securities, by contract, or otherwise.
"Agreement" means this Amended and Restated Loan Agreement,
including all schedules and exhibits hereto, as the same may be
modified, supplemented, extended and/or amended from time to
time.
"Borrowing Date" means the date of an Advance.
"Business Day" means each day of the week except Saturdays,
Sundays, and days on which banking institutions are authorized by
law to close in the State of Texas.
"Capital Expenditures" means expenditures made and liabilities
incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a
useful life of more than one year; including, but not limited to,
the direct or indirect acquisition of such assets or incurrence
of such expenses by way of increased product or service charges,
offset items or otherwise and payments with respect to
capitalized lease obligations.
"Closing Date" means the date on which all of the conditions
stated in Article IV of this Agreement have been met to the
Lender's satisfaction and the purchase price for the Senior Note
has been paid, but in any event not later than October 31, 1996.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, and the regulations promulgated
thereunder.
"Collateral" means all assets of the Company.
"Commitment" means for the Company, the creation, incurrence,
issuance, assumption, guarantee of, and any agreement (e.g.,
purchase orders), whether written or oral, to create, incur,
issue, assume, guarantee or otherwise become liable for: (a)
indebtedness, whether or not represented by notes or other
evidences of indebtedness, for Photo Booths or Photo Booth Parts,
(b) indebtedness representing deferred payment of the purchase
price of Photo Booths or Photo Booth Parts, (c) indebtedness
under any lease which, in conformity with GAAP, is required to be
capitalized for balance sheet purposes and leases of Photo Booths
or Photo Booth Parts made as a part of any sale and lease-back
transaction if required to be capitalized, (d) indebtedness under
guaranties, endorsements, assumptions, or other contractual
obligations, including any
RESTATED LOAN AGREEMENT - Page 25
letters of credit, or the obligations in respect of, or to purchase or
otherwise acquire, Photo Booths or Photo Booth Parts, and (e) trade
accounts payable for Photo Booths or Photo Booth Parts.
"Company" means Irata, Inc. a Texas corporation.
"Concentration Account" shall mean a deposit account of the
Company, established pursuant to Section 4.12(b) hereof, into
which the balances of the Depository Accounts shall be deposited,
which account and proceeds have been pledged to the Lender
pursuant to a Concentration Account Agreement and the Security
Documents.
"Concentration Account Agreement" shall mean a depository account
agreement, as amended, modified or supplemented from time to
time, which provides, among other things, that (1) deposited
funds are forwarded daily from Depository Accounts to the
Concentration Account, (2) collection procedures otherwise
governing the Concentration Account shall be satisfactory to the
Lender and will continue unchanged, (3) the Concentration Account
is pledged to the Lender, (4) the bank that established the
Concentration Account will not change the agreed procedures
without the prior written consent of the Lender, and (5) the
Concentration Account balance will be deposited into the
Company's operating account every day unless and until the Lender
gives notice to the bank that established the Concentration
Account to the effect that the Company is in default under Loan
Agreement, at which point the Concentration Account balance will
be swept every day into a bank account owned and controlled by
the Lender, and those funds will be applied as mandatory
prepayments on the Senior Note, in inverse order of maturity.
"Controlled Group" means any group of organizations within the
meaning of Section 414(b), (c), (m) or (o) of the Code of which
the Company is a member.
"Deferred Loan Costs" means those expenses and costs incurred by
the Company in connection with the Senior Note and other
financing transactions of the Company, but which are properly
chargeable to operations over a period of years by capitalizing,
all in accordance with GAAP.
"Depository Account" shall mean each deposit account of the
Company established pursuant to Section 4.12(a) hereof (or as
otherwise established with the prior written consent of the
Lender), maintained at the banks identified on Exhibit E into
which the Company deposits receipts from Photo Booths, and as to
which all amounts deposited in which and all claims arising under
which have been pledged to the Lender pursuant to a Depository
Account Agreement and the Security Documents.
"Depository Account Agreement" shall mean a depository account
agreement as amended, modified or supplemented from time to time,
which provides, among other things, that (1) deposited funds are
forwarded daily from the Depository Account to the Concentration
Account, (2) collection procedures otherwise governing the
Depository Account shall be satisfactory to the Lender and will
continue unchanged, (3) the Depository Account is pledged to the
Lender and (4) the bank that established the Depository Account
will not change the agreed procedures without the prior written
consent of the Lender.
"Employee Benefit Plan" means any employee benefit plan, as
defined in Section 3(3) of ERISA, which is, previously has been
or will be established or maintained by any member of a
Controlled Group.
"Environmental Laws" means all federal, state, or local laws,
ordinances, rules, regulations, interpretations and orders of
courts or administrative agencies or authorities relating to
pollution or protection of the environment (including, without
limitation, ambient air, surface water, ground water, land
surface, and subsurface strata), and other laws relating to (a)
Polluting Substances or (b) the manufacture, processing,
distribution, use, treatment, handling, storage, disposal, or
transportation of Polluting Substances.
RESTATED LOAN AGREEMENT - Page 26
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended and in effect from time to time, and the
regulations promulgated thereunder.
"Event of Bankruptcy" means any of (a) the filing by a Person of
a voluntary petition in bankruptcy under any provision of any
bankruptcy law or a petition to take advantage of any insolvency
act, (b) the admission in writing by the Company of its inability
to pay its debts generally as they become due, (c) the
appointment of a receiver or receivers for all or a material part
of a Person's assets with the consent of such Person, (d) the
filing of any bankruptcy, arrangement or reorganization petition
by or, with the consent of a Person, against such Person under
any provision of any bankruptcy law, (e) a receiver, liquidator
or trustee of a Person or a substantial part of its assets shall
be appointed pursuant to the Federal Bankruptcy Code by the order
of a court of competent jurisdiction which shall not be dismissed
or stayed within thirty (30) days, or (f) an involuntary petition
to reorganize or liquidate a Person pursuant to the Federal
Bankruptcy Code shall be filed against such Person and shall not
be dismissed or stayed within thirty (30) days.
"Event of Default" is defined in Section 9.1.
"Excess Interest" is defined in Section 2.6.
"GAAP" means generally accepted accounting principles, applied on
a consistent basis, as set forth in Opinions of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting
Standards Board and/or their respective successors and which are
applicable in the circumstances as of the date in question,
provided that the Company may not change the use or application
of any accounting method, practice or principle without the prior
written consent of the Lender, which consent may require that an
adjustment be made to any and all the financial covenants set
forth and the capital expenditures limitation covenant set forth
herein. Accounting principles are applied on a "consistent
basis" when the accounting principles observed in a current
period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Gross Cash Flow" for any period means Net Income plus
depreciation, plus amortization of Intangible Assets, plus
amortization of Deferred Loan Costs, plus amortization of
Organizational Costs, each as calculated for such period.
"Holder" when used in reference to the Senior Note and/or the
Senior Obligations, means the Person or Persons who, at the time
of determination, is the lawful owner of all or a portion of the
Senior Note or an obligee of all or a portion of the Senior
Obligations.
"Impositions" is defined in Section 6.10.
"Indebtedness" means for any Person: (a) all indebtedness,
whether or not represented by bonds, debentures, notes,
securities, or other evidences of indebtedness, for the repayment
of money borrowed, (b) all indebtedness representing deferred
payment of the purchase price of property or assets, (c) all
indebtedness under any lease which, in conformity with GAAP, is
required to be capitalized for balance sheet purposes and leases
of property or assets made as a part of any sale and lease-back
transaction if required to be capitalized, (d) all indebtedness
under guaranties, endorsements, assumptions, or other contractual
obligations, including any letters of credit, or the obligations
in respect of, or to purchase or otherwise acquire, indebtedness
of others, (e) all indebtedness secured by a Lien existing on
property owned, subject to such Lien, whether or not the
indebtedness secured thereby shall have been assumed by the owner
thereof, (f) trade accounts payable more than 60 days past due,
except such accounts as may be protested in good faith by the
Company and are immaterial in amount (it being the intention that
trade accounts payable do not become "Indebtedness" for purposes
of this definition until they are 60 days past due), (g) all
amendments, renewals, extensions, modifications and refundings of
any indebtedness or obligations referred to above in clauses (a),
(b), (c), (d) or (e), excluding trade accounts payable in the
ordinary course of business.
RESTATED LOAN AGREEMENT - Page 27
"Intangible Assets" means all patents, copyrights, trademarks,
tradenames, franchises, goodwill, experimental expenses and other
similar assets that would be classified as an intangible asset on
the balance sheet.
"Intellectual Property" means all patents, patent rights, patent
applications, licenses, inventions, trade secrets, know-how,
proprietary techniques (including processes and substances),
trademarks, service marks, trade names and copyrights.
"Investment Account" shall mean a deposit account of the Company,
established pursuant to Section 4.12(c) hereof, into which the
net cash proceeds to the Company of the Private Placement shall
be deposited, which account and proceeds have been pledged the
Lender pursuant to an Investment Account Agreement and Security
Documents.
"Investment Account Agreement" shall mean a depository account
agreement, as amended, modified or supplemented from time to
time, which provides, among other things, that (1) collection
procedures otherwise governing the Investment Account shall be
satisfactory to the Lender and will continue unchanged, (2) the
Investment Account is pledged to the Lender, (3) the bank that
established the Investment Account will not change the agreed
procedures without the prior written consent of the Lender, (4)
investment of the funds on deposit therein shall be limited to
Permitted Investments, and (5) upon notice by the Lender to the
bank that established the Investment Account to the effect that
the Company is in default under this Agreement, the Investment
Account balance will be swept every day into a bank account owned
and controlled by the Lender, and those funds will be applied to
mandatory prepayments on the Senior Note, in inverse order of
maturity.
"Lender" means the Lender, together with all of their respective
transferees, successors and assigns of all or any portion of the
Senior Note or the Senior Obligations and any nominees on whose
behalf any of the foregoing purchase or otherwise acquire any of
such Indebtedness of the Company, and shall include, but not be
limited to, each and every "Holder" as defined herein.
"Lien" means any lien, mortgage, security interest, tax lien,
pledge, encumbrance, financing statement, or conditional sale or
title retention agreement, or any other interest in property
designed to secure the repayment of Indebtedness or any other
obligation, whether arising by agreement, operation of law, or
otherwise.
"Material Adverse Effect" means (a) a material adverse effect
upon the business, operations, properties, assets, Collateral or
condition (financial or otherwise) of the Company or (b) the
impairment of the ability of any party to perform its obligations
under the Agreement or any of the Other Agreements to which it is
a party or of the Lender to enforce or collect any of the Senior
Obligations. In determining whether any individual event would
result in a Material Adverse Effect, notwithstanding that such
event does not of itself have such effect, a Material Adverse
Effect shall be deemed to have occurred if the cumulative effect
of such event and all other then existing events would result in
a Material Adverse Effect.
"Maturity Date" means the earliest to occur of (a) June 2, 1998,
(b) the date on which the Senior Note is accelerated pursuant to
Article IX, or (c) the date on which the Senior Obligations are
paid in full.
"Maximum Facility Amount" means Three Million Five Hundred
Thousand Dollars ($3,500,000.00).
"Maximum Rate" is defined in Section 2.6.
"Miscellaneous Expenses" is defined in Section 11.1.
"Net Income" means, for any period of determination, the net
earnings (or loss) after taxes of the Company for such period.
RESTATED LOAN AGREEMENT - Page 28
"Operating Plan" is defined in Section 3.2.
"Organizational Costs" means those costs and expenses incurred by
the Company in connection with its creation and organization, all
as determined in accordance with GAAP.
"Original Agreement" is defined in the Preamble to this
Agreement.
"Other Agreements" means the Senior Note, the Warrant Documents,
the Security Documents and all other agreements, instruments and
documents (including, without limitation, notes, guarantees,
powers of attorney, consents, assignments, contracts, notices,
subordination agreements and all other written matter), and all
renewals, modifications and extensions thereof, whether
heretofore, now or hereafter executed by or on behalf of the
Company and delivered to and for the benefit of the Lender or any
Person participating with the Lender in the Senior Note with
respect to this Agreement or any of the transactions contemplated
by this Agreement.
"Pension Plan" means any employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is, was or will be
established or maintained by any member of the Controlled Group.
"Permitted Indebtedness" means (a) any Indebtedness in favor of
the Lender under this Agreement and/or the Other Agreements and
created pursuant thereto, (b) presently existing or hereafter
arising purchase money Indebtedness incurred by the Company to
finance the acquisition of capital assets by the Company, subject
to the limitations placed on capital expenditures in Section 7.9,
and (c) the other Indebtedness set forth on Schedule 7.1.
"Permitted Investments" means the following:
(a) securities issued or directly and fully guaranteed or
insured by the United States Government or any agency or
instrumentality thereof (provided that the full faith and credit
of the United States Government is pledged in support thereof),
having maturities of not more than twelve months from the date of
acquisition;
(b) time deposits and certificates of deposit (i) of any
commercial bank incorporated in the United States of recognized
standing having capital and surplus in excess of $100,000,000
with maturities of not more than twelve (12) months from the date
of acquisition or (ii) which are fully insured by the Bank
Insurance Fund with maturities of not more than twelve months
from the date of acquisition;
(c) commercial paper issued by any Person incorporated in
the United States rated at least A-1 or the equivalent thereof by
Standard & Poor's Corporation or at least P-1 or the equivalent
thereof by ▇▇▇▇▇'▇ Investors Service, Inc. and in each case
maturing not more than twelve months after the date of
acquisition; or
(d) investments in money market funds substantially all of
whose assets are comprised of securities of the types described
in clauses (a) through (c) above.
"Permitted Liens" means (a) Liens in Favor of the Lender under
the Security Documents, (b) Liens securing purchase money
Indebtedness incurred to finance the acquisition of capital
assets by the Company, subject to the limitations placed on
Capital Expenditures in Section 7.9 hereof, but not encumbering
any assets other than those acquired with the proceeds of such
purchase money Indebtedness, (c) Liens for property taxes not yet
due, (d) materialmen's, mechanics', landlord's, worker's,
repairmen's, employees' or other like Liens arising against the
Company in the ordinary course of business, in each case which
are either not delinquent or are being contested in good faith
and by appropriate proceedings conducted with due diligence and
for the payment of which adequate reserves
RESTATED LOAN AGREEMENT - Page 29
have been established by the Company, (e) deposits to secure payment of
worker's compensation, unemployment insurance or other social security
benefits and (f) Liens disclosed on Exhibit D.
"Person" means any individual, sole proprietorship, corporation,
business trust, unincorporated organization, association,
company, partnership, joint venture, governmental authority
(whether a national, federal, state, county, municipality or
otherwise, and shall include without limitation any
instrumentality, division, agency, body or department thereof),
or other entity.
"Photo Booth" means any video photo booth.
"Photo Booth Parts" means any and all materials used in
connection with the manufacturing, processing, constructing, re-
furbishing, packing, shipping and furnishing of a Photo Booth,
including without limitation, all raw materials, supplies,
component parts, accessions, attachments, replacements and
improvements to or for a Photo Booth.
"Polluting Substances" means all pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes
and shall include, without limitation, any flammable explosives,
radioactive materials, oil, hazardous materials, hazardous or
solid wastes, hazardous or toxic substances or related materials
defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Resource Conservation and
Recovery Act of 1976, the Hazardous and Solid Waste Amendments of
1984, and the Hazardous Materials Transportation Act, as any of
the same are hereafter amended, and in the regulations adopted
and publications promulgated thereto; provided, in the event any
of the foregoing Environmental Laws is amended so as to broaden
the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment
and, provided, further, to the extent that the applicable laws
of any state establish a meaning for "hazardous substance,"
"hazardous waste," "hazardous material," "solid waste," or "toxic
substance" which is broader than that specified in any of the
foregoing Environmental Laws, such broader meaning shall apply.
"Potential Default" means the occurrence of any condition or
event which, with the passage of time or giving of notice or
both, would constitute an Event of Default.
"Prepaid Assets" means expenditures made or expenses incurred by
the Company during one accounting period for benefits to be
received in a future accounting period, all as determined in
accordance with GAAP.
"Property" means all real property owned, leased or operated by
the Company.
"Private Placement" is defined in Section 4.3 hereof.
"Private Placement Memorandum" means the Confidential Term Sheet,
dated September 6, 1996, which sets forth the terms of the
Private Placement.
"Reportable Event" means (i) any of the events set forth in
Sections 4043(b) (other than a merger, consolidation or transfer
of assets in which no Pension Plan involved has any unfunded
benefit liabilities), 4068(f) or 4063(a) of ERISA, (ii) any event
requiring any member of the Controlled Group to provide security
under Section 401(a)(29) of the Code, or (iii) any failure to
make payments required by Section 412(m) of the Code.
"Security Documents" means all security agreements, pledge
agreements, collateral assignments, mortgages, deeds of trust and
other documents executed in connection with the Original
Agreement and this Agreement and granting to the Lender first
priority liens and security interests in the Collateral, all
renewals, modifications or extensions of such documents, and any
such documents hereafter executed in favor of the Lender to
secure payment of all or any part of the Senior Obligations,
together with all
RESTATED LOAN AGREEMENT - Page 30
financing statements and other documents necessary to record or perfect the
Liens granted by any of the foregoing.
"Senior Note" means that certain promissory note issued to the
Lender pursuant to this the Original Agreement, together with all
renewals, modifications, extensions, substitutions and
replacements thereof.
"Senior Obligations" means and includes any and all Indebtedness
and/or liabilities of the Company to the Lender of every kind,
nature and description, direct or indirect, secured or unsecured,
joint, several, joint and several, absolute or contingent, due or
to become due, now existing or hereafter arising, under this
Agreement or any Other Agreement (regardless of how such
Indebtedness or liabilities arise or by what agreement or
instrument they may be evidenced or whether evidenced by any
agreement or instrument) and all obligations of the Company to
the Lender to perform acts or refrain from taking any action
under any of the aforementioned documents, together with all
renewals, modifications, extensions, increases, substitutions or
replacements of any of such Indebtedness.
"Shareholder Subordinated Debt" means that certain subordinated
indebtedness outstanding of approximately $160,000 owing to
various of the Company's shareholders by the Company.
"Shareholder Subscription Agreement" is defined in Section 4.7.
"Subsidiary" means any Person of which or in which the Company
and its other Subsidiaries own directly or indirectly 50% or more
of (a) the combined voting power of all classes having general
voting power under ordinary circumstances to elect a majority of
the board of directors or equivalent body of such Persons, if it
is a corporation, (b) the capital interest or profits interest of
such Person, if it is a partnership, joint venture or similar
entity, or (c) the beneficial interest of such Person if it is a
trust, association or other unincorporated organization.
"Tangible Net Worth" means Total Assets minus Total Liabilities
minus Prepaid Assets minus Intangible Assets minus Deferred Loan
Costs minus Organizational Costs.
"Termination Event" means (a) a Reportable Event, (b) the
termination of a Pension Plan which has unfunded benefit
liabilities (including an involuntary termination under
Section 4042 of ERISA), (c) the filing of a Notice of
Intent to Terminate a Pension Plan, (d) the initiation of
proceedings to terminate a Pension Plan under Section 4042
of ERISA or (e) the appointment of a trustee to administer
a Pension Plan under Section 4042 of ERISA.
"Total Assets" means all assets of the Company.
"Total Debt Service" for any period means the aggregate amount
of all payments (principal, interest and other) with respect to
outstanding indebtedness for such period.
"Total Liabilities" means all liabilities of the Company that
would be classified as a liability on the balance sheet.
"Transfer" is defined in Section 11.5 hereof.
"Transferee" means any Person to whom a Transfer is made.
"Warrant" mean the warrants to purchase up to 510,000 shares of
the Company's common stock (on a fully diluted basis), as the
same may be amended from time to time.
"Warrant Documents" means, collectively, (a) the Warrant and, (b)
the Warrant Purchase Agreements dated as of June 2, 1995 executed
by and between the Company and the Lender, with respect to the
issuance to the Lender of the Warrant, as each of the foregoing
may be amended from time to time.
RESTATED LOAN AGREEMENT - Page 31
Terms which are defined in other Sections of this Agreement shall have
the meanings specified therein. All other terms contained in this
Agreement shall have, when the context so indicates, the meanings
provided for by the Uniform Commercial Code as adopted and in force in
the State of Texas, as from time to time in effect.
10.2 Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is
required to be made for the purposes of this Agreement, the same shall
be done, unless specified otherwise, in accordance GAAP, except where
such principles are inconsistent with the requirements of this
Agreement.
10.3 Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be applicable
whether the action in question is taken directly or indirectly by such
Person.
XI. MISCELLANEOUS
11.1 Expenses. The Company agrees to pay (a) all reasonable
out-of-pocket expenses of the Lender (including reasonable fees,
expenses and disbursements of the Lender's counsel and the allocated
costs of staff counsel) in connection with the preparation,
negotiation, enforcement, operation and administration of this
Agreement, the Senior Note, the Other Agreements, or any documents
executed in connection therewith, or any waiver, modification or
amendment of any provision hereof or thereof; and (b) if an Event of
Default occurs, all reasonable court costs and costs of collection,
including, without limitation, reasonable fees, expenses and
disbursements of counsel employed in connection with any and all
collection efforts. The attorneys' fees arising from such services,
including those of any appellate proceedings, and all expenses, costs,
charges and other fees incurred by such counsel or the Lender in any
way or respect arising in connection with or relating to any of the
events or actions described in this Article IX shall be payable by the
Company to the Lender, on demand, and shall be additional Senior
Obligations secured under this Agreement. Without limiting the
generality of the foregoing, such expenses, costs, charges and fees
may include: reasonable recording costs, appraisal costs, paralegal
fees, costs and expenses; reasonable fees, costs and expenses of
accountants, consultants, and other professionals; reasonable court
costs and expenses; reasonable photocopying and duplicating expenses;
reasonable court reporter fees, costs and expenses; reasonable long
distance telephone charges; reasonable air express charges, telegram
charges, facsimile charges, and secretarial overtime charges; and
reasonable expenses for travel, lodging and food paid or incurred in
connection with the performance of such legal, accounting, consulting
or other professional services. The costs, fees and expenses
described in and referred to in this Section 11.1 are defined as
"Miscellaneous Expenses." The Company agrees to indemnify the Lender
from and hold it harmless against any documentary taxes, assessments
or charges made by any governmental authority by reason of the
execution and delivery by the Company or any other Person of this
Agreement, the Other Agreements, and any documents executed in
connection therewith.
11.2 Indemnification. In addition to and not in limitation of
the other indemnities provided for herein or in any Other Agreements,
the Company hereby indemnifies and holds harmless the Lender and any
other Holders, and every Affiliate of any of the foregoing, and their
respective officers, directors, employees and agents, from any claims,
actions, damages, costs, attorneys' fees and expenses (including any
of the same arising out of the sole or contributory negligence of the
Person to be indemnified) to which any of them may become subject,
insofar as such losses, liabilities, claims, actions, damages, costs
and expenses arise from or relate to this Agreement or the Other
Agreements, or any of the transactions contemplated thereby, or from
any investigation, litigation, or other proceeding, including, without
limitation, any threatened investigation, litigation or other
proceeding relating to any of the foregoing, or from any violation or
claim of violation of any applicable environmental laws with respect
to any real or personal property, or from any governmental or judicial
claim, order or judgment with respect to any real or personal property
of the Company, or from any applicable state or federal securities
laws, or from any breach of the warranties, representations or
covenants contained in this Agreement or the Other Agreements. THE
FOREGOING INDEMNIFICATION INCLUDES ANY SUCH CLAIMS, ACTIONS, DAMAGES,
COSTS, AND EXPENSES INCURRED BY REASON OF THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF THE PERSON
RESTATED LOAN AGREEMENT - Page 32
TO BE INDEMNIFIED, BUT EXCLUDES ANY OF THE SAME INCURRED BY REASON OF SUCH
PERSON'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
11.3 Notices. Except as otherwise expressly provided herein, all
communications provided for hereunder shall be in writing and
delivered or mailed by the United States mails, certified mail, return
receipt requested, (a) if to the Lender, on behalf of Lender and all
Holders, addressed to the Lender at the address specified on Annex I
hereto or to such other address as the Lender may in writing
designate, and (b) if to the Company, addressed to the Company at the
address set forth next to its name on the signature pages hereto or to
such other address as the Company may in writing designate. Except as
otherwise provided in Section 1.5(a)(ii), notices shall be deemed to
have been validly served, given or delivered (and "the date of such
notice" or words of similar effect shall mean the date) five (5) days
after deposit in the United States mails, certified mail, return
receipt requested, with proper postage prepaid, or upon actual receipt
thereof (whether by non-certified mail, telecopy, telegram, facsimile,
express delivery or otherwise), whichever is earlier.
11.4 Reproduction of Documents. This Agreement and all documents
relating hereto, including, without limitation (a) consents, waivers
and modifications which may hereafter be executed, (b) documents
received by the Lender at the closing of the purchase of the Senior
Note, and (c) financial statements, certificates and other information
previously or hereafter furnished to the Lender, may be reproduced by
the Lender by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and the Lender may
destroy any original document so reproduced. The Company agrees and
stipulates that any such reproduction which is legible shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence
and whether or not such reproduction was made by you in the regular
course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in
evidence; provided that nothing herein contained shall preclude the
Company from objecting to the admission of any reproduction on the
basis that such reproduction is not accurate, has been altered, is
otherwise incomplete or is otherwise inadmissible.
11.5 Assignment, Sale of Interest. The Company may not sell,
assign or transfer this Agreement, or the Other Agreements or any
portion thereof, including, without limitation, the Company's rights,
title, interests, remedies, powers and/or duties hereunder or
thereunder. The Company hereby consents to the Lender's
participation, sale, assignment, transfer or other disposition
(collectively "Transfer"), at any time or times hereafter, of this
Agreement, or the Other Agreements to which the Company is a party, or
of any portion hereof or thereof, including, without limitation, the
Lender's rights, title, interests, remedies, powers and/or duties
hereunder or thereunder; provided, however, immediately following such
transfer, the Lender and/or its Affiliates, remain the beneficial
owner of not less than 51% of this Agreement and the Other Agreements,
and provided further, that the Company retains the ability to deal
directly solely with the Lender with respect to this Agreement and the
Other Agreements.
11.6 Successors and Assigns. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns.
11.7 Headings. The headings of the sections and subsections of
this Agreement are inserted for convenience only and do not constitute
a part of this Agreement.
11.8 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart or
reproduction thereof permitted by Section 11.4.
11.9 Reliance on and Survival Provisions. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection
with a closing, (a) shall be deemed to be material and to have been
relied upon by the Lender, notwithstanding any investigation
heretofore or hereafter made by the Lender or on the Lender's behalf,
and (b) shall survive the delivery of this Agreement and the Senior
Note until all obligations of the Company under this Agreement shall
have been satisfied.
RESTATED LOAN AGREEMENT - Page 33
11.10 Integration and Severability. This Agreement embodies
the entire agreement and understanding between the Lender and the
Company, and supersedes all prior agreements and understandings
relating to the subject matter hereof. In case any one or more of the
provisions contained in this Agreement or in any Senior Notes, or any
application thereof, shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein, and any other application
thereof, shall not in any way be affected or impaired thereby.
11.11 Law Governing. THIS AGREEMENT HAS BEEN SUBSTANTIALLY
NEGOTIATED AND IS BEING EXECUTED, DELIVERED, AND ACCEPTED, AND IS
INTENDED TO BE PERFORMED, IN PART IN THE STATE OF TEXAS. ALL
OBLIGATIONS, RIGHTS AND REMEDIES HEREUNDER, SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS. THE SENIOR NOTE SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE SPECIFIED
THEREIN. LENDER RETAINS ALL RIGHTS UNDER THE LAWS OF THE UNITED
STATES OF AMERICA, INCLUDING THOSE RELATING TO THE CHARGING OF
INTEREST.
11.12 Waivers; Modification. NO PROVISION OF THIS AGREEMENT
MAY BE WAIVED, CHANGED OR MODIFIED, OR THE DISCHARGE THEREOF
ACKNOWLEDGED, ORALLY, BUT ONLY BY AN AGREEMENT IN WRITING SIGNED BY
THE PARTY AGAINST WHOM THE ENFORCEMENT OF ANY WAIVER, CHANGE,
MODIFICATION OR DISCHARGE IS SOUGHT.
11.13 Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, THE COMPANY AND LENDER HEREBY IRREVOCABLY AND
EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE SENIOR NOTE OR ANY
DOCUMENTS ENTERED INTO IN CONNECTION THEREWITH OR THE TRANSACTIONS
CONTEMPLATED THEREBY OR THE ACTIONS OF LENDER IN THE NEGOTIATION,
ADMINISTRATION, OR ENFORCEMENT THEREOF.
11.14 Agreement for Binding Arbitration. The parties agree
to be bound by the terms and provisions of the Arbitration Program,
which is attached hereto as Exhibit F and incorporated by reference
herein, pursuant to which any and all disputes shall be resolved by
mandatory binding arbitration upon the request of any party.
11.15 Amendment and Restatement. This Agreement is given in
amendment, modification, supplementation, restatement and renewal (and
not in extinguishment or satisfaction) of the Original Agreement. All
rights, titles, liens, security interests and priorities under the
Original Agreement are preserved, maintained and carried forward under
this Agreement, subject, however, to the terms of this Agreement.
RESTATED LOAN AGREEMENT - Page 34
IN WITNESS WHEREOF, the Company and the Lender have caused this
Agreement to be executed and delivered by their respective officers
thereunto duly authorized.
Company:
IRATA, INC.
By: _____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., President
Company's Address for Notices:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Attorney at Law
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER:
PETRUS FUND, L.P.
By: ▇▇▇▇▇ Investments, Inc., its general partner
By: _______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
RESTATED LOAN AGREEMENT - Page 35
ANNEX I
TO
LOAN AGREEMENT
Information Concerning the Lender
Lender: PETRUS FUND, L.P.
Principal Amount of
Senior Note: $3,500,000.00
Denomination of Warrant: 510,000 shares of the common stock of the Company
on a fully diluted basis
Address for notices: PETRUS FUND, L.P.
c/o Perot Investments, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (214-788-3097)
and with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇, ▇.▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Payments to be made
by wire transfer to: BK of NYC / CTR / BBK
ABA # ▇▇▇▇▇▇▇▇▇
Account: IOC 565, Inst'l Custody
Favor PETRUS FUND, L.P.
Account # 286632
Annex I - Page 1 of 1
SCHEDULE 1.2(B)
TO
LOAN AGREEMENT
Fees and Expenses Paid
1. Facility fee due on June 2, 1996: $ 35,000.00
2. Legal expenses and other
consulting expenses: $ 76,188.63
3. ▇▇▇▇▇ ▇▇▇▇▇, Consultant: $ 21,450.00
-----------
Total: $132,638.63
Schedule 1.2(b) - Page 1 of 1
SCHEDULE 1.5(B)
TO
LOAN AGREEMENT
Authorized Persons
1. Prior to consummation of the Private Placement:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., President
2. On or before November 4, 1996:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman, President and Chief Executive Officer
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Executive Vice President
Schedule 1.5(b) - Page 1 of 1
SCHEDULE 3.2
TO
LOAN AGREEMENT
Operating Plan
[See attached.]
Schedule 3.2 - Page 1 of 1
SCHEDULE 3.3
TO
LOAN AGREEMENT
Defaults under Existing Agreements
1. Events of Default described in letter dated February 15, 1996 from the
Lender to the Company, a copy of which is attached to this Schedule 3.3.
2. Failure to pay Facility Fee due June 2, 1996, as required by Section 1.4 of
the Original Agreement.
3. Failure to provide quarterly audits, as required by Section 5.24 of the
Original Agreement.
4. Defaults under the royalty agreement with Handmade Software, Inc., which
defaults will be fully cured and resolved under the terms of the Settlement
Agreement and Release between the Company and Handmade Software, Inc.,
dated effective as of August 28, 1996.
5. Failure to keep the Company's registration statement current, as required
by Underwriting Agreement with Royce Investment Group, Inc.
Schedule 3.3 - Page 1 of 1
SCHEDULE 3.4
TO
LOAN AGREEMENT
Authorizations, Approvals, Consents and Filings
None.
Schedule 3.4 - Page 1 of 1
SCHEDULE 3.5
TO
LOAN AGREEMENT
Environmental Condition of the Photo Booths
The Company is not aware of any breach of the representations and warranties set
forth in Section 3.5.
Schedule 3.5 - Page 1 of 1
SCHEDULE 3.6
TO
LOAN AGREEMENT
Litigation and Judgments
Restructuring Arrangements. In August 1996, the Company successfully
concluded a restructuring of certain trade payables totaling $727,000. The trade
creditors holding these payables agreed to exchange the amounts owed for a
combination of 15% cash, 18 1/3 % cash payment in 15 equal monthly installments
and 66 2/3% stock. The restructuring is subject to completion of the Private
Placement, and the price of the stock to be issued to the trade creditors is to
be the greater of $2.25 per share or the lower of: (a) 80% of the average
closing price at which the Class A Common Stock of the Company trades during the
30 calendar day period following the date of closing of the Private Placement or
(b) the lowest closing price at which the Class A Common Stock trades during the
30-day period. Among the trade creditors accepting the restructuring
arrangements is ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III, a director of the Company who agreed to
exchange his claim for $55,585.52 for $8,337.83 in cash, the right to receive
$697.38 cash payments for 15 months and stock determined as set forth above
valued at $37,057.00. Two of the trade creditors holding a combined total of
$130,000 of the Company's payables filed law suits for collection of their
indebtedness in April and May 1996, respectively. The suits are described as
follows:
1. Collection suit styled All Points Moving & Storage Company, Inc. v.
Irata, Inc., filed in ▇▇▇▇▇▇ County, Texas Civil Court of Law No. 3, under
Cause No. 644,355 for indebtedness in the Amount of $45,000.00, which will
be resolved by the Settlement Agreement and Release referenced in Schedule
7.1; and
2. Collection suit styled Fish Construction, Inc. v. Irata, Inc., filed in
the Fort Bend County, Texas Civil Court of Law No. 2, which will be
resolved by the Settlement Agreement and Release referenced in
Schedule 7.1.
The aforementioned restructuring arrangements signed by these two creditors also
released the Company from all claims alleged in the respective law suits.
Schedule 3.6 - Page 1 of 1
SCHEDULE 3.9
TO
LOAN AGREEMENT
Indebtedness to Affiliates
The Company has no debts to any affiliate other than ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
III, a director, in the amount of $55,586, for legal and professional services.
Schedule 3.9 - Page 1 of 1
SCHEDULE 3.10
TO
LOAN AGREEMENT
Tax Proceedings
During the third quarter of 1996, the Company became aware that its method of
accounting and reporting sales and use taxes may not have complied with
regulatory requirements. Specifically, the Company has no documentation to show
that certain third party operators, who collect cash from the Photo Booths, had
paid the appropriate sales tax or that they had obtained sales tax exemption
certificates from the appropriate state tax authority. The State of Texas has
issued a preliminary sales tax assessment for approximately $170,000. The
Company is pursuing collection of taxes or submission of certificates from third
party operators to mitigate the sales tax liability and reduce the final tax
assessment. Additionally, the Company may have use tax exposure on equipment
they purchased outside of the State of Texas to the extent that the Company is
unable to demonstrate the purchase equipment has been put into service outside
the State of Texas. The preliminary use tax estimate from the State of Texas is
approximately $200,000. The Company is reviewing individual booth records to
determine which booths and purchased equipment has been relocated out of the
State of Texas.
The Company is currently delinquent in sales tax payments in certain other
states. The Company intends to cure such delinquencies and does not believe
they could have a material adverse impact on the Company.
Schedule 3.10 - Page 1 of 1
SCHEDULE 3.14
TO
LOAN AGREEMENT
Capitalization
CAPITALIZATION: BEFORE PRIVATE PLACEMENT:
Class A Common Stock.............. 2,550,072 Shares/1/
Class B Common Stock.............. 1,500,000 Shares/2/
Preferred Stock................... None/3/
AFTER PRIVATE PLACEMENT:
MINIMUM:
Class A Common Stock.............. 5,895,072 Shares/4/
Class B Common Stock.............. 1,500,000 Shares/2/
Preferred Stock................... None/2/
MAXIMUM:
Class A Common Stock.............. 6,345,072 Shares/5/
Class B Common Stock.............. 1,500,000 Shares/2/
Preferred Stock................... None/3/
____________________________
(1) EXCLUDES
(i) 270,540 shares of Class A Common Stock issuable
under stock options exercisable at $5.00 per share granted under
the Company's Stock Option Plan;
(ii) 395,173 shares of the Company's Class A Common
Stock exercisable at $1.8979009 per share under bridge warrants
granted in connection with the Company's December 1994 financing
which expire December 2, 1996;
(iii) 1,666,315 shares of Class A Common Stock issuable
under redeemable warrants evidencing the right to purchase one
share of Class A Common Stock per warrant at an exercise price of
$5.3141226 per share at any time prior to the close of business on
May 11, 1997 issued as a part of the units offered in the Company's
initial public offering ("IPO");
(iv) 22,783 shares of Class A Common Stock issuable
pursuant to the exercise of warrants expiring March 31, 1997 that
were granted in connection with formation of the Company having an
exercise price of $1.3605721 per share;
(v) up to 289,794 additional shares of Class A Common
Stock that would be issued upon exercise of the unit purchase
option, exercisable at any time prior to the close of business on
May 11, 1999 at $5.5039128 per unit, granted to Royce in connection
with the IPO to purchase 144,897 units with each unit consisting of
one share of Class A Common Stock and one redeemable warrant
exercisable at $5.3141226 per share;
(vi) 54,424 shares of Class A Common Stock exercisable
under warrants granted to Hill Branscomb and Venlease Associates
exercisable at any time prior to June 1, 2000 at
Schedule 3.14 - Page 1 of 3
$1.9292956 per share issued pursuant to the placement of the
Company's senior indebtedness;
(vii) an aggregate of 510,000 shares of Class A Common
Stock issuable to the Company's senior lender at an exercise price
of $6.63 per share issued in connection with the Loan Agreement;
(viii) 38,745 shares of Class A Common Stock issuable
upon exercise of warrants granted to certain interim lenders who
provided bridge financing in December 1995, exercisable at any time
prior to the close of business on December 21, 2000 at $1.6518138
per share;
(ix) 64,791 shares of Class A Common Stock upon exercise
of warrants exercisable at any time prior to March 28, 2000 at
$1.9292951 per share issued to ▇. ▇. ▇▇▇▇▇▇▇ in consideration for
his guarantee of bank debt;
(x) 300,000 shares and 125,000 shares, respectively, of
Class A Common Stock issuable by the Company upon exercise of
options exercisable at $0.50 per share at any time prior to July 1,
2002 and to be granted to ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
respectively, upon their joining the Company's Board of Directors
upon completion of this private placement; and
(xi) up to 640,000 shares of Class A Common Stock,
320,000 of which are to be issued to the Estate of ▇. ▇. ▇▇▇▇▇,
▇▇., Dominion Investment Corporation and ▇▇▇▇▇▇ ▇. ▇▇▇▇
(collectively, the "Interim Lenders") upon closing of this private
placement by conversion of $160,000 of principal and the accrued
interest thereon of the Company (the "Interim Debt") now held by
the Interim Lenders and 320,000 of which may be issued to the
Interim Lenders upon exercise of warrants having substantially the
same terms as the Warrants and which may be issued to the Interim
Lenders as additional consideration for the conversion of the
Interim Debt.
The number of shares of Class A Common Stock and the
exercise price as set forth above have been adjusted in accordance
with the anti-dilution provisions of the underlying instruments
assuming the issuance of 60 Units in this private placement and
that the current market price of the Company's Common Stock is
$1.125 on the date of determination.
(2) The Class B Common Stock is non-convertible, non-voting and does
not participate with the Class A Common Stock in dividends and
distributions until the Company has achieved $1,000,000 in earned
surplus, after which it is limited in the amount of dividends and
distributions it may receive to an amount that cannot exceed
$1,000,000.
(3) The Company's Articles of Incorporation authorize the issuance of
up to 100,000 shares of Preferred Stock, $1.00 par value per share,
which may be issued in series and shares of each series shall have
such rights and preferences as may be fixed by the Board of
Directors in a resolution or resolutions authorizing the issuance
of that particular series.
(4) Excludes the shares of Class A Common Stock issuable as set forth
in footnote (1) above, except for the 320,000 shares to be issued
upon closing in conversion of the Interim Debt, and excludes
3,000,000 shares of Class A Common Stock issuable upon exercise of
the warrants to be issued pursuant to this offering and 320,000
shares of Class A Common Stock issuable upon exercise of the
warrants to be issued pursuant to conversion of the Interim Debt.
Schedule 3.14 - Page 2 of 3
(5) Excludes the shares of Class A Common Stock issuable as set forth
in footnote (1) above, except for the 320,000 shares to be issued
upon closing in conversion of the Interim Debt, and excludes
3,450,000 shares of Class A Common Stock issuable upon exercise of
the warrants to be issued pursuant to this offering and 320,000
shares of Class A Common Stock issuable upon exercise of the
warrants to be issued pursuant to conversion of the Interim Debt.
Schedule 3.14 - Page 3 of 3
SCHEDULE 3.15
TO
LOAN AGREEMENT
Current Locations
1. Corporate Office - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ (leased from R.W. Management)
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2. Assembly Facility - ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ (leased from R.W. Management)
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3. List of Booth Locations - (Attached)
Schedule 3.15 - Page 1 of 1
SCHEDULE 3.22
TO
LOAN AGREEMENT
Conduct of Business
The operation of Photo Booths throughout the United States.
Schedule 3.22 - Page 1 of 1
SCHEDULE 6.25
TO
LOAN AGREEMENT
Procedures
FORM OF REPORT OF INDEPENDENT ACCOUNTS
This draft is furnished solely for the purpose of indicating the form of report
that the Company's independent accountants would be expected to be able to
furnish pursuant to the request by the Company for performance of limited
procedures relating to Photo Booths in operation. The text of the definitive
report will depend on the results of the procedures.
Board of Directors
IRATA, Inc.
Houston, Texas
At your request, we have applied certain agreed-upon procedures, described
below, to the listing of Photo Booths of IRATA, Inc. (the list) as of (period
ended), as set forth in the accompanying schedule. We were informed by
officials of the Company and other personnel of the Company who have
responsibility for accounting and financial matters that the list is a complete
and accurate list of Photo Booths owned by the Company and in service as of
___________.
Our procedures and findings were as follows:
. We obtained the list prepared by the Company of all Photo Booths owned and
operated by the Company as of _________________. The list indicated both the
location of each booth and the date it was placed in service. We mailed
confirmations to a third party representative (identified by the Company) of
each location for each of the Photo Booths on the list placed in service
during the quarter ended _______________. The confirmation requested a
response from that representative that a Photo Booth was on the premises and
operating as of the date specified on the confirmation. A total of
__________ confirmations were sent and __________ confirmations were
received with no exceptions noted.
Because we performed limited procedures, which were not intended and did not
constitute an audit in accordance with generally accepted auditing standards, we
are unable to express, and do not express, any opinion on the list provided the
Company or on information presented in the above description of procedures and
findings and related schedules. Our report relates only to items referred to in
the accompanying section and does not extend to any financial statements of
IRATA, Inc. taken as a whole.
This report is provided solely for the information of the Board of Directors,
management of the Company, and Petrus Fund, L.P. for use in connection with the
financing provided by Petrus Fund, L.P. and should not be used for any other
purpose.
Schedule 6.25 - Page 1 of 1
SCHEDULE 7.1
TO
LOAN AGREEMENT
Indebtedness
1. Settlement Agreement and Release, dated effective as of August 28, 1996,
executed by Irata, Inc. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III.
2. Settlement Agreement and Release, dated effective as of August 28, 1996,
executed by Irata, Inc. and ALL POINTS MOVING & STORAGE COMPANY, INC.
3. Settlement Agreement and Release, dated effective as of August 28, 1996
executed by Irata, Inc. and ALLSTAR SYSTEMS, INC.
4. Settlement Agreement and Release, dated effective as of August 28, 1996
executed by Irata, Inc. and CHALLENGE CONSTRUCTION.
5. Settlement Agreement and Release, dated effective as of August 28, 1996
executed by Irata, Inc. and CNC INDUSTRIES.
6. Settlement Agreement and Release, dated effective as of August 28, 1996
executed by Irata, Inc. and DELL COMPUTER.
7. Settlement Agreement and Release, dated effective as of August 28, 1996
executed by Irata, Inc. and ▇▇▇▇▇▇▇ & ASSOCIATES.
8. Settlement Agreement and Release, dated effective as of August 28, 1996
executed by Irata, Inc. and TECHNICAL CABLES, INC.
9. Settlement Agreement and Release, dated effective as of August 28, 1996
executed by Irata, Inc. and FISH CONSTRUCTION, INC.
10. Settlement Agreement and Release, dated effective as of August 28, 1996
executed by Irata, Inc. and HANDMADE SOFTWARE, INC.
11. Settlement Agreement and Release, dated effective as of August 28, 1996
executed by Irata, Inc. and MICROAGE INC.
12. Settlement Agreement and Release, dated effective as of August 28, 1996
executed by Irata, Inc. and TEKBILT INC.
13. Settlement Agreement and Release, dated effective as of August 28, 1996
executed by Irata, Inc. and TWIN INDUSTRIES INC.
14. Lease Agreements as referenced on Schedule 3.15.
Schedule 7.1 - Page 1 of 1
SCHEDULE 7.11
TO
LOAN AGREEMENT
Remuneration
IRATA, INC.
SCHEDULE OF OFFICER'S AND DIRECTOR'S REMUNERATION
(FOR PURPOSES OF LOAN AGREEMENT, AS DESCRIBED IN SCHEDULE 7.11)
-------------------------------------------------------------------------------
NAME TITLE ANNUAL SALARY
---- ----- -------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. Executive Vice President $125,000
and Director
▇▇▇ ▇▇▇▇ Secretary 35,000
▇▇▇▇ ▇▇▇▇▇▇▇ Director 10,000
--------
$170,000
--------------------------------------------------------------------------------
Total remuneration for the officers and directors listed above will be no more
than $200,000 without approval of the Lender.
In August 1996, the Board of Directors approved resolutions authorizing (i) the
Company to enter into an agreement with ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Managing Director,
▇▇▇▇▇▇ Associates, Inc. providing for ▇▇. ▇▇▇▇▇▇ to become Chairman, President,
and Chief Executive Officer of the Company, and (ii) the Company to enter into a
consulting agreement with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, a founder of the Company, for ▇▇.
▇▇▇▇▇▇▇ to become a consultant to the Company and a member of its Board of
Directors. The agreements with each of ▇▇. ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇ provide for
them to assume their duties as members of the board only upon completion of the
Private Placement. At such time, ▇▇. ▇▇▇▇▇▇▇, currently President of the
Company, will become Executive Vice President. The agreements provide for
annual compensation to Messrs. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ of $135,000 and $18,000,
respectively, with ▇▇. ▇▇▇▇▇▇ being entitled to earn bonus compensation of up to
$40,000 based on the achievement of plan projections and with additional bonus
potential for exceeding plan projections. The agreements provide for Messrs.
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ to receive options, exercisable for six years at $0.50 per
share for 300,000 and 125,000 shares, respectively.
Suhedule 7.11 - Page 1 of 1
EXHIBIT A
TO
LOAN AGREEMENT
Form of Senior Note
[Attached.]
Exhibit A - Page 1 of 1
EXHIBIT B
TO
LOAN AGREEMENT
Form of Legal Opinion
October ___, 1996
Petrus Fund, L.P.
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▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Re: Reinstatement of 12.0% Senior Note
Ladies and Gentlemen:
We have represented Irata, Inc., a Texas corporation ("the Company"),
in connection with the above-captioned transactions.
In rendering the opinions set forth herein, we have examined copies
of:
A. the following documents (sometimes hereinafter collectively called
the "Loan Documents"):
1. Amended and Restated Loan Agreement of even date (the
"Restated Loan Agreement"), by and between the Company and Petrus
Fund, L.P. ("Petrus");
2. 12.0% Senior Note dated June 2, 1995 (the "Note"), in the
original principal amount of $3,500,000.00 executed by the Company and
payable to order of Petrus; and
3. The Restated Pledge of Accounts Agreement of even date
herewith (the "Restated Pledge Agreement"), by and between the Company and
Petrus.
B. the following documents (sometimes hereinafter collectively called
the "Warrant Documents"):
1. Warrant Purchase Agreement dated June 2, 1995 (the "Warrant -
Agreement"), by and between the Company and Petrus; and
2. Warrants to purchase 510,000 shares of Class A Common Stock of
the Company dated June 2, 1995 (the "Warrant"), executed by the
Company in favor of Petrus.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Restated Loan Agreement. References herein to the
"Transaction Documents" shall mean only such documents to which the Company is a
signatory and references herein to "Transaction Documents" shall explicitly
exclude the Loan Documents and the Warrant Documents.
As counsel for the Company, we have also examined copies of its
Articles of Incorporation and all amendments thereto which have been duly filed,
and its Bylaws as amended to date. We are familiar with the proceedings of the
Company with respect to its authorization, execution and delivery of the Loan
Documents and the Warrant Documents, and the transactions contemplated thereby.
In addition to the foregoing, we have examined and relied upon such other
matters of law, such documents, certificates and statements of public officials,
and such certificates and representations of
Exhibit B - Page 1 of 5
officers of the Company as we have deemed relevant to rendering the opinions we
express herein. In all of our examinations, we have assumed the accuracy of all
information furnished to us, the genuineness of all documents submitted to us as
original or certified documents, the conformity to original or certified
documents of all copies submitted to us as conformed or photostatic copies, and
the genuineness of all signatures on all documents.
On the basis of the foregoing, we are of the opinion that:
(a) The Company is a corporation duly organized and validly
existing under the laws of the State of Texas, and is presently in good
standing in that state. The Company has the corporate power and authority
to own, lease and operate its property and to carry on its business as now
conducted.
(b) The Company is duly qualified and licensed as a foreign
corporation in each state where the nature of its business or properties
requires such qualification and where failure to so qualify would have a
Material Adverse Effect (as defined in the Loan Agreement).
(c) The Company has full power and authority to execute, deliver
and perform its obligations under the Loan Documents.
(d) The transactions contemplated by the Loan Documents, the
Warrant Documents and the Transaction Documents, and the execution,
delivery and performance by the Company of its obligations under all such
documents, have been duly authorized by all requisite corporate action on
the part of the Company. The officers executing the Loan Documents, the
Warrant Documents and the Transaction Documents on behalf of the Company
have been authorized to execute and deliver the same to Petrus, as well as
any other documents required to consummate the transactions contemplated by
the Loan Documents, the Warrant Documents and the Transaction Documents.
(e) The Company has duly executed and delivered the Loan
Documents, the Warrant Documents and the Transaction Documents; such
documents constitute legal, valid and binding obligations of the Company,
and such documents may be enforced in accordance with their respective
terms except as may be limited by bankruptcy, insolvency or other laws of
general application relating to the enforcement of creditors' rights and by
equitable principles and the availability of equitable remedies.
(f) To our knowledge, after due investigation, there is no action
or proceeding pending or threatened against the Company before any court,
administrative agency or governmental authority with respect to the Loan
Documents, the Warrant Documents or any of the transactions contemplated
thereby, which would, if adversely determined, result in a Material Adverse
Effect (as defined in the Loan Agreement).
(g) To our knowledge, after due investigation, the Company is not
in default under the provisions of any instruments evidencing any
obligation for borrowed money or of any agreement relating thereto, or in
default under or in violation of any order, writ, injunction or decree of
any court, or any order, regulation or demand of any administrative or
governmental instrumentality, any of which defaults or violations,
individually or in the aggregate, would have a Material Adverse Effect.
(h) The execution and delivery by the Company of the Loan
Documents, the consummation of the transactions respectively therein
contemplated, and the fulfillment of and compliance with the respective
terms, conditions and provisions thereof or of any instruments required
thereby, will not conflict with or result in a breach of any of the terms,
conditions or provisions of any material (i) law or regulation of any
administrative or governmental instrumentality applicable to the Company,
(ii) writ, injunction or decree of any court, or (iii) agreement or
instrument to which the Company is a party, by which it is bound, or to
which it is subject.
(i) The execution and delivery by the Company of the Loan
Documents, the consummation of the transactions respectively therein
contemplated, and the fulfillment of and compliance with the respective
terms, conditions, and provisions thereof or of any instruments required
thereby, will not result in (i) the creation or imposition of any Lien (as
defined in the Restated Loan Agreement) of any nature whatsoever on any of
the
Exhibit B - Page 2 of 5
property of the Company prohibited by its Articles of Incorporation or
Bylaws, or (ii) any violation of the Articles of Incorporation or Bylaws of
the Company.
(j) No registration with or authorization, consent, order or
approval of any federal, state or other governmental authority or
regulatory body, which has not already been obtained or done, is required
in connection with the execution and delivery by the Company of the Loan
Documents, or the performance by the Company of its obligations thereunder.
(k) The compensation contracted for or to be received by Petrus
in connection with the Loan Documents and the Warrant Documents constitutes
lawful interest and such documents and the compensation contracted for
therein do not violate any laws of the State of Texas relating to interest
or usury.
(l) The Loan Documents and Warrant Documents will be governed by
the internal laws, and not the law of conflicts, of the State of Texas,
including all such laws relating to interest and usury.
(m) The Company has no Subsidiaries (as defined in the Loan
Agreement).
(n) The Company has available and has taken all necessary
corporate action to reserve sufficient authorized but unissued shares of
its Class A Common Stock (as defined in the Warrant Agreement) and to
reserve sufficient authorized but unissued shares of its Class A Common
Stock (as defined in the Warrant Agreement) to permit the exercise in full
of the Warrant and exercise in full by Petrus of its rights under the
Warrant Agreement.
(o) All shares of the Company's Common Stock that may be issued
upon exercise of the Warrant are duly authorized, and, upon issuance in
accordance with the terms of the Warrant, respectively, will be validly
issued, fully paid and nonassessable and will not be issued in violation of
the preemptive or similar rights of any Person (as defined in the Warrant
Agreement).
(p) The Company's authorized capitalization consists of
20,000,000 shares of Class A Common Stock, $.10 par value per share, of
which 2,536,405 shares are issued and outstanding, 15,000,000 of Class B
Common Stock, $.01 par value, of which all shares are issued and
outstanding and 100,000 shares of preferred stock, $1.00 par value, of
which none are issued and outstanding and owned of record by the persons
designated in the SEC Filings (as defined in the Warrant Agreement).
(q) Except as specified in Schedule 3.14 to the Loan Agreement,
to our knowledge, after due investigation, the Company has no outstanding
subscription, option, warrant, call, commitment or other rights of any kind
for the purchase of, or securities convertible or exchangeable for, any
Capital Stock (as defined in the Warrant Agreement), other than the Warrant
and as disclosed in the SEC Filings.
(r) The exercise by Petrus of the Warrant will not be prohibited
by any applicable law or governmental regulation, and will not be subject
to any penalty or other onerous condition under or pursuant to any
applicable law or governmental regulation.
(s) To our knowledge, after due investigation, the Company is not
a party to, or otherwise bound by, any agreement affecting the voting of
any Capital Stock of the Company, other than the Warrant Agreement.
(t) To our knowledge, after due investigation, the Company is not
a party to, or otherwise bound by, any agreement obligating it to register
any of its Capital Stock, other than the Warrant Agreement.
Exhibit B - Page 3 of 5
The opinions expressed herein are for the exclusive benefit of, and
may be relied upon solely by, Petrus and its permitted successors and assigns.
Yours very truly,
[NAME OF COUNSEL]
Exhibit B - 4 of 5
EXHIBIT C
TO
LOAN AGREEMENT
FORM OF OFFICERS' COMPLIANCE CERTIFICATE
FOR THE [MONTHLY] [ANNUAL] PERIOD
FROM __________ , 199___
TO _________ , 199___
To: HOLDER OF 12.0% SENIOR NOTE, pursuant to Amended and Restated Loan
Agreement dated October ___, 1996 by and between Petrus Fund, L.P. and
Irata, Inc. (the "Loan Agreement").
Ladies and Gentlemen:
This Certificate is delivered to the Lender pursuant to Section 6.2(a)
of the Loan Agreement. Unless otherwise stated in this Certificate, capitalized
terms used in this Certificate are defined in the Loan Agreement.
The undersigned hereby certifies to the Lender as follows:
1. The undersigned is, and at all times mentioned herein has been,
the duly elected, qualified and acting officer of Irata, Inc. (the "Company") as
specified below.
2. The undersigned have reviewed the provisions of the Loan Agreement
and the Other Agreements (collectively, the "Documents"), and a review of the
activities of Company during the period from ________________ , 199__, to,
199__ (the "Subject Period") has been made under the supervision of the
undersigned with a view towards determining whether, during the Subject Period,
the Company has kept, observed, performed and fulfilled all its obligations
under the Documents.
3. The financial statements of the Company delivered to the Lender
concurrently herewith have been prepared in accordance with GAAP and fairly
present (subject to year-end adjustment) the financial condition of the Company
at the date and for the period indicated therein. [Delete parenthetical for
Annual Certificate.]
4. To the undersigned's knowledge, based upon the foregoing review,
the Company has kept, observed, performed and fulfilled each and every covenant
and condition contained in the Documents, and, as of the date of the financial
statements to which this Certificate relates and as of the date hereof, the
Company is not in default in the performance, observance or fulfillment of any
of the covenants and conditions of the Documents and no Event of Default or
Potential Default has occurred, except for such defaults, if any, described on
Schedule A attached hereto. (If any are described, state nature and status
thereof and actions proposed to be taken with respect thereto.)
5. The calculations shown on Schedule B attached hereto demonstrate
compliance with Sections 6.8 and 6.9 of the Loan Agreement.
6. Attached hereto as Schedule C are summaries of the Company's
accounts payable agings, accounts receivable agings and inventory, as of the
date of the financial statements to which this Certificate relates.
7. Attached hereto as Schedule D is (a narrative report of the business
and affairs of the Company and its Subsidiaries which includes, but is not
limited to,) a comparison of the actual results of the Company's operations
during the Subject Period (and during the portion of the fiscal year then ended)
to those budgeted for such period(s), along with a brief description and
explanation of any budget variances. [Delete first parenthetical reference for
Monthly Certificate. Delete second and third parenthetical references for Annual
Certificate.]
Exhibit C - Page 1 of 2
______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Executive Vice
President
Schedules:
A - Defaults
B - Calculations
C - Summaries of Agings and Inventory
D - Budget Variance Report
Exhibit C - Page 2 of 2
Schedule A
to
Officers' Compliance Certificate
Defaults
[List. If no Defaults exist, state "None."]
1.
2.
3.
Schedule A - 1
Schedule B
to
Officers' Compliance Certificate
Calculations
1. Tangible Net Worth (Section 8.1).
The Tangible Net Worth of the Company, as of the date hereof, is:
Total Assets: $ __________
Less: Total Liabilities: $(__________)
Less: Prepaid Assets: $(__________)
Less: Intangible Assets: $(__________)
Less: Deferred Loan Costs: $(__________)
Less: Organizational Costs: $(__________)
Tangible Net Worth: $ ___________
Requirement of Loan Agreement. Not less than:
From October 31, 1996 through
December 30, 1996: $ 3,250,000
From December 31, 1996 through
March 30, 1997: $ 3,000,000
From March 31, 1997 through
June 29, 1997: $ 2,850,000
From June 30, 1997 through
September 29, 1997: $ 2,850,000
From September 30, 1997
December 30, 1997: $ 3,200,000
From December 31, 1997 through
March 30, 1998: $ 3,550,000
From March 31, 1998
and thereafter: $ 3,850,000
COVENANT SATISFIED: _____; COVENANT NOT SATISFIED: _____
Schedule B - 1
2. Ratio of Total Liabilities to Tangible Net Worth (Section 8.2)
Total Liabilities: $ __________
Tangible Net Worth (from Item 1 above): $ __________
The ratio of Total Liabilities to Tangible Net
Worth, as of the date hereof, is: ______ : 1.0
Requirement of Loan Agreement. Not greater than:
From October 31, 1996 through
June 30, 1997: 1.10 : 1.0
From July 1, 1997
and thereafter: 1.00 : 1.0
COVENANT SATISFIED: _____; COVENANT NOT SATISFIED: _____
Schedule B - 2
3. Working Capital (Section 8.3).
The working capital of the Company, as of the date hereof, is:
Current assets: $ __________
Less: Current liabilities: $(__________)
Working capital: $ __________
Requirement of Loan Agreement. Not less than:
From October 31, 1996 through
December 30, 1996: $ 400,000
From December 31, 1996 through
March 30, 1997: $ 250,000
From March 31, 1997 through
June 29, 1997: $ 150,000
From June 30, 1997 through
September 29, 1997: $ 200,000
From September 30, 1997
and thereafter: $ 500,000
COVENANT SATISFIED: _____; COVENANT NOT SATISFIED: _____
Schedule B - 3
4. Ratio of Gross Cash Flow to Total Debt Service (Section 8.4)
Gross Cash Flow, as calculated at the end of this month for the three
(3)-month period consisting of this month plus the two preceding months, is:
Month: __________ ___________ __________
Net Income: $ ________ $ _________ $ ________
Plus: Depreciation: $ ________ $ _________ $ ________
Plus: Amortization of Intangible
Assets: $ ________ $ _________ $ ________
Plus: Amortization of Deferred
Loan Costs: $ ________ $ _________ $ ________
Plus: Amortization of
Organizational Costs: $ ________ $ _________ $ ________
Gross Cash Flow: $ ________ $ _________ $ ________
Total Gross Cash Flow:
(Sum of Gross Cash Flow for 3 months): $ _________
Average Gross Cash Flow:
(Total Gross Cash Flow divided by 3) $ _________
Total Debt Service, as calculated at the end of this month for the three
(3)-month period consisting of this month plus the two preceding months, is:
Month: __________ __________ __________
Total Debt Service: $ ________ $ ________ $ ________
Total Debt Service
(Sum of Total Debt Service for 3 months): $ _________
Average Total Debt Service
(Sum of Total Debt Service divided by 3): $ _________
Schdule B - 4
The ratio of average Gross Cash Flow to average
Total Debt Service is: ______ : 1.0
Requirement of Loan Agreement. Not less than:
From October 31, 1996 through
December 30, 1996: Not calculated.
From December 31, 1996 through
March 30, 1997: Not calculated.
From March 31, 1997 through
June 29, 1997: 1.00 : 1.0
From June 30, 1997
and thereafter: 2.00 : 1.0
COVENANT SATISFIED: _____; COVENANT NOT SATISFIED: _____
Schedule B - 5
5. Gross Cash Flow (Section 8.5).
Gross Cash Flow, as calculated at the end of this month for the three
(3)-month period consisting of this month plus the two preceding months,
is:
Month: __________ __________ __________
Gross Cash Flow:
(See Item 4, above): $ ________ $ ________ $ ________
Total Gross Cash Flow:
(Sum of Gross Cash Flow for 3 months): $ _________
Average Gross Cash Flow:
(Total Gross Cash Flow divided by 3): $ _________
Requirement of Loan Agreement. Not less than:
From October 31, 1996 through
December 30, 1996: $ (50,000)
From December 31, 1996 through
March 30, 1997: $(50,000)
From March 31, 1997 through
June 29, 1997: $ 0
From June 30, 1997 through
September 29, 1997: $ 50,000
From September 30, 1997
and thereafter: $ 175,000
COVENANT SATISFIED: _____; COVENANT NOT SATISFIED: _____
Schedule B - 6
6. Net Income (Section 8.6).
Net Income, as calculated at the end of this month for the three (3)-month
period consisting of this month plus the two preceding months, is:
Month: __________ __________ __________
Net Income: $ ________ $ ________ $ ________
Total Net Income:
(Sum of Net Income for 3 months) $ __________
Average Net Income:
(Total Net Income divided by 3) $ __________
Requirement of Loan Agreement. Not less than:
From October 31, 1996 through
December 30, 1996: $ (200,000)
From December 31, 1996 through
March 30, 1997: $ (175,000)
From March 31, 1997 through
June 29, 1997: $ (125,000)
From June 30, 1997 through
September 29, 1997: $ (50,000)
From September 30, 1997 through
December 30, 1997: $ 0
From December 31, 1997
and thereafter: $ 25,000
COVENANT SATISFIED: _____; COVENANT NOT SATISFIED: _____
Schedule B - 7
7. Maximum Current Liabilities Plus Commitments (Section 8.7).
The sum of the Company's current liabilities plus Commitments, as of
the date hereof, is:
Current liabilities: $ __________
Commitments: $ __________
Sum of current liabilities plus Commitments: $ __________
Requirement of Loan Agreement. Not greater than:
From October 31, 1996 through
December 30, 1996: $ 1,200,000
From December 31, 1996 through
March 30, 1997: $ 1,100,000
From March 31, 1997 through
June 29, 1997: $ 1,000,000
From June 30, 1997 through
September 29, 1997: $ 1,000,000
From September 30, 1997 through
December 30, 1997: $ 850,000
From December 31, 1997
and thereafter: $ 800,000
COVENANT SATISFIED: _____; COVENANT NOT SATISFIED: _____
Schedule B - 8
8. Maximum Component Parts/WIP Inventory (Section 8.8).
The sum of the Company's parts inventory (including new and used parts) plus
work-in-process inventory, as of the date hereof, is:
New parts inventory: $ __________
Used parts inventory: $ __________
Work-in-process inventory: $ __________
Sum of new and used parts inventory plus
work-in-process inventory: $ __________
Requirement of Loan Agreement. Not greater than:
From October 31, 1996 through
December 30, 1996: $ 550,000
From December 31, 1996 through
March 30, 1997: $ 500,000
From March 31, 1997 through
June 29, 1997: $ 450,000
From June 30, 1997 through
September 29, 1997: $ 400,000
From September 30, 1997
and thereafter: $ 350,000
COVENANT SATISFIED: _____; COVENANT NOT SATISFIED: _____
Schedule B - 9
Schedule C
Summaries of Agings and Inventory
Schedule C - 1
Schedule D
to
Officers' Compliance Certificate
Budget Variance Report
Schedule D - 1
EXHIBIT D
TO
LOAN AGREEMENT
Permitted Liens
None.
Exhibit D - Page 1 of 1
EXHIBIT E
TO
LOAN AGREEMENT
COLLECTION ACCOUNTS
Account No. ▇▇▇▇▇▇▇ First Hawaiian Bank
▇▇-▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Account No. 200303433 ▇▇▇▇▇ Fargo Bank of California
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Account No. 470043431 ▇▇▇▇▇ Fargo Bank of Texas
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
INVESTMENT ACCOUNT
Account ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
CONCENTRATION ACCOUNT
Account No. 77771 Southwest Bank of Texas
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
OPERATING ACCOUNT
Account No. 77674 Southwest Bank of Texas
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
SALES TAX ACCOUNT
Account No. 117544 Southwest Bank of Texas
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
LOCK BOX ACCOUNT
Account No. 77100 Southwest Bank of Texas
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
PAYROLL ACCOUNT
Exhibit - Page 1 of 2
Account No. 77720 Southwest Bank of Texas
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
The Company agrees that all of the above accounts will be evidenced by
account agreements in form and substance similar to the Depository, Collection
and Investment Account Agreements within thirty (30) days of the date of this
Agreement.
Exhibit E - Page 2 of 2
EXHIBIT F
TO
LOAN AGREEMENT
Arbitration Program
(a) Binding Arbitration. Upon the request of any party, whether made before or
after the institution of any legal proceeding, any action, dispute, claim,
or controversy of any kind (e.g., whether in contract or in tort, statutory
or common law, legal or equitable) now existing or hereafter arising
between the parties in any way arising out of, pertaining to or in
connection with (1) the agreement, document or instrument to which this
Arbitration Program is attached or in which it is referred to or any
related agreements, documents, or instruments (the "Documents"), (2) all
past and present loans, credits, accounts, safekeeping agreements,
guarantees, letters of credit, goods or services or other transactions,
contracts or agreements, (3) any incidents, omissions, acts, practices, or
occurrences causing injury to either party whereby the other party or its
agents, employees or representatives may be liable, in whole or in part, or
(4) any aspect of the past or present relationships of the parties, shall
be resolved by binding arbitration in accordance with the terms of this
Arbitration Program. The foregoing matters shall be referred to as a
"Dispute." Any party to this Arbitration Program may, by summary
proceedings (e.g., a plea in abatement or motion to stay further
proceedings), bring an action in court to compel arbitration of any
Disputes.
(b) Governing Rules. All disputes between the parties shall be resolved by
binding arbitration administered by the American Arbitration Association
(the "AAA") in accordance with the terms of this Arbitration Program, the
Commercial Arbitration Rules of the AAA, and to the maximum extent
applicable, the Federal Arbitration Act (Title 9 of the United States
Code). In the event of any inconsistency between this Arbitration Program
and such statute and rules, this Arbitration Program shall control.
Judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction.
(c) No Waiver: Preservation of Remedies. No provisions of, nor the exercise of
any rights under, this Arbitration Program shall limit the right of any
party to employ other remedies, including, without limitation, (1)
foreclosing against any real or personal property collateral or other
security by the exercise of a power of sale under a deed of trust,
mortgage, or other security agreement or instrument, or applicable law, (2)
exercising self-help remedies (including set-off rights) or (3) obtaining
provisional or ancillary remedies such as injunctive relief, sequestration,
attachment, garnishment, or the appointment of a receiver from a court
having jurisdiction before, during, or after the pendency of any
arbitration. The institution and maintenance of an action for judicial
relief or pursuit of provisional or ancillary remedies or exercise of self-
help remedies shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the Dispute to arbitration nor render
inapplicable the compulsory arbitration provisions hereof. Without
limitation of the foregoing, the parties shall be entitled to the benefits
of each and all of the remedies and assistance provided for by applicable
law.
In Disputes involving indebtedness or other monetary obligations, each party
agrees that the other party may proceed against all liable persons, jointly and
severally, or against one or more of them, less than all, without impairing
rights against other liable persons. Nor shall a party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A party may release or settle with
one or more liable persons as the party deems fit without releasing or impairing
rights to proceed against any persons not so released.
(d) Statute of Limitations: All statutes of limitation that would otherwise be
applicable shall apply to any arbitration proceeding.
(e) Scope of Award; Modification or Vacation of Award; Qualifications. Any
arbitrators shall resolve all Disputes in accordance with the applicable
substantive law. Any arbitrators shall be practicing attorneys licensed to
practice law in the State of Texas and shall be knowledgeable in the
subject matter of the Dispute. With respect to a Dispute in which the
claim or amount in controversy does not exceed $1,000,000, a single
arbitrator (who shall have authority to render a maximum award of
$1,000,000, including all damages of any kind and costs, fees and the like)
shall be chosen and shall decide the Dispute. With respect to a Dispute in
which the claim or amount in controversy exceeds
Exhibit F - Page 1 of 3
$1,000,000, the Dispute shall be decided by a majority vote of three
arbitrators. The arbitrators may grant any remedy or relief that the
arbitrators deem just and equitable and within the scope of this
Arbitration Program. The arbitrators may also grant such ancillary relief
as is necessary to make effective the award. In all arbitration proceedings
in which the amount in controversy exceeds $1,000,000, in the aggregate,
the parties shall have in addition to the limited statutory right to seek
vacation or modification of an award pursuant to applicable law, the right
to seek vacation or modification of any award that is based in whole, or in
part, on an incorrect ruling of law; provided, however, that any such
application for vacation or modification of an award based on an incorrect
ruling of law must be filed in a court having jurisdiction over the Dispute
within 15 days from the date the award is rendered. The arbitrators'
findings of fact shall be binding on all parties and shall not be subject
to further review except as otherwise allowed by applicable law.
(f) Other Matters and Miscellaneous. To the maximum extent practicable, an
arbitration proceeding hereunder shall be concluded within 180 days of the
filing of the Dispute with the AAA. Arbitration proceedings hereunder
shall be conducted at Dallas, Texas. Arbitrators shall be empowered to
impose sanctions and to take such other actions as the arbitrators deem
necessary to the same extent a judge could do pursuant to the Federal Rules
of Civil Procedure, the Texas Rules of Civil Procedure and applicable law.
This Arbitration Program constitutes the entire agreement of the parties
with respect to its subject matter and supersedes all prior discussions,
arrangements, negotiations, and other communications on dispute resolution.
The provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the parties otherwise
expressly agree in writing. To the extent permitted by applicable law, the
arbitrator shall have the power to award recovery of all costs and fees
(including attorneys' fees, administrative fees, and arbitrators' fees) to
the prevailing party. This Arbitration Program may be amended, changed, or
modified only by the express provisions of a writing which specifically
refers to this Arbitration Program and which is signed by all the parties
hereto. If any term covenant, condition or provisions of this Arbitration
Program is found to unlawful or invalid or unenforceable, such illegality
or invalidity or unenforceability shall not affect the legality, validity
or enforceability of the remaining parts of this Arbitration Program, and
all such remaining parts hereof shall be valid and enforceable and have
full force and effect as if the illegal, invalid or unenforceable part has
not been included. The captions or headings in this Arbitration Program
are for convenience of reference only and are not intended to constitute
any part of the body or text of this Arbitration Program. Each party
agrees to keep all Disputes and arbitration proceedings strictly
confidential, except for disclosures of information required in the
ordinary course of business or by applicable law or regulation.
Exhibit F - Page 2 of 3
EXHIBIT G
TO
LOAN AGREEMENT
Form of Other Reports
[Attached]
Attachments:
1. Statement of Operations
2. Balance Sheet
3. Statement of Cash Flow
4. Financial Statement Footnotes
5. Inventory Report
6. Booth Inventory
Exhibit G - Page 1 of 1
EXHIBIT H
TO
LOAN AGREEMENT
Form of Contribution Analysis Report
[Attached]
Attachments:
1. Contribution Analysis for Booths Installed After August 1, 1996, for the
Month of ______________, 199__.
2. Contribution Analysis for All Booths for the Month of ______________,
199__.
Exhibit H - Page 1 of 1