Exhibit 10.5
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BUSINESS LOAN AGREEMENT (ASSET BASED)
Borrower: DYNATRONICS CORPORATION Lender: ZIONS FIRST NATIONAL BANK
7030 PARK CENTRE DRIVE SALT LAKE COMMERCIAL BANKING
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THIS BUSINESS LOAN AGREEMENT (ASSET BASED) dated December 5, 2003, is made and
executed between DYNATRONICS CORPORATION ("Borrower") and ZIONS FIRST NATIONAL
BANK ("Lender") on the following terms and conditions. Borrower has received
prior commercial loans from Lender or has applied to Lender for a commercial
loan or loans or other financial accommodations, including those which may be
described on any exhibit or schedule attached to this Agreement ("Loan").
Borrower understands and agrees that: (A) in granting, renewing, or extending
any Loan, Lender is relying upon Borrower's representations, warranties, and
agreements as set forth in this Agreement; (B) the granting, renewing, or
extending of any Loan by Lender at all times shall be subject to Lender's sole
judgment and discretion; and (C) all such Loans shall be and remain subject to
the terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of December 5, 2003, and shall
continue in full force and effect until such time as all of Borrower's Loans in
favor of Lender have been paid in full, including principal, interest, costs,
expenses, attorneys' fees, and other fees and charges, or until such time as the
parties may agree in writing to terminate this Agreement.
ADVANCE AUTHORITY. The following person currently is authorized to request
advances and authorize payments under the line of credit until Lender receives
from Borrower, at Lender's address shown above, written notice of revocation of
his or her authority: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇., President/CEO of DYNATRONICS
CORPORATION.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows:
Conditions Precedent to Each Advance. Lender's obligation to make any
Advance to or for the account of Borrower under this Agreement is
subject to the following conditions precedent, with all documents,
instruments, opinions, reports, and other items required under this
Agreement to be in form and substance satisfactory to Lender:
(1) Lender shall have received evidence that this Agreement and
all Related Documents have been duly authorized, executed,
and delivered by Borrower to Lender.
(2) Lender shall have received such opinions of counsel,
supplemental opinions, and documents as Lender may request.
(3) The security interests in the Collateral shall have been
duly authorized, created, and perfected with first lien
priority and shall be in full force and effect.
(4) All guaranties required by Lender for the credit
facility(ies) shall have been executed by each Guarantor,
delivered to Lender, and be in full force and effect.
(5) Lender, at its option and for its sole benefit, shall have
conducted an audit of Borrower's Accounts, Inventory,
books, records, and operations, and Lender shall be
satisfied as to their condition.
(6) Borrower shall have paid to Lender all fees, costs, and
expenses specified in this Agreement and the Related
Documents as are then due and payable.
(7) There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under
this Agreement, and Borrower shall have delivered to Lender
the compliance certificate called for in the paragraph
below titled "Compliance Certificates."
Lender acknowledges that these conditions have been satisfactorily met
as of the date this Agreement and the Related Documents are executed.
Making Loan Advances. Advances under this credit facility, as well as
directions for payment from Borrower's accounts, may be requested
orally or in writing by authorized persons. Lender may, but need not,
require that all oral requests be confirmed in writing. Each Advance
shall be conclusively deemed to have been made at the request of and
for the benefit of Borrower (1) when credited to any deposit account of
Borrower maintained with Lender or (2) when advanced in accordance with
the instructions of an authorized person. Lender, at its option, may
set a cutoff time, after which all requests for Advances will be
treated as having been requested on the next succeeding Business Day.
Mandatory Loan Repayments. If at any time the aggregate principal
amount of the outstanding Advances shall exceed the applicable
Borrowing Base, Borrower, immediately upon written or oral notice from
Lender, shall pay to Lender an amount equal to the difference between
the outstanding principal balance of the Advances and the Borrowing
Base. On the Expiration Date, Borrower shall pay to Lender in full the
aggregate unpaid principal amount of all Advances then outstanding and
all accrued unpaid interest, together with all other applicable fees,
costs and charges, if any, not yet paid.
Loan Account. Lender shall maintain on its books a record of account in
which Lender shall make entries for each Advance and such other debits
and credits as shall be appropriate in connection with the credit
facility. Lender shall provide Borrower with periodic statements of
Borrower's account, which statements shall be considered to be correct
and conclusively binding on Borrower unless Borrower notifies Lender to
the contrary within thirty (30) days after Borrower's receipt of any
such statement which Borrower deems to be incorrect.
COLLATERAL. To secure payment of the Primary Credit Facility and performance of
all other Loan, obligations and duties owed by Borrower to Lender, Borrower (and
others, if required) shall grant to Lender Security Interests in such property
and assets as Lender may require. Lender's Security Interests in the Collateral
shall be continuing liens and shall include the proceeds and products of the
Collateral, including without limitation the proceeds of any insurance. With
respect to the Collateral, Borrower agrees and represents and warrants to
Lender:
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Perfection of Security Interests. Borrower agrees to execute financing
statements and all documents perfecting Lender's Security Interest and to take
whatever other actions are requested by Lender to perfect and continue Lender's
Security Interests in the Collateral. Upon request of Lender, Borrower will
deliver to Lender any and all of the documents evidencing or constituting the
Collateral, and Borrower will note Lender's interest upon any and all chattel
paper and instruments if not delivered to Lender for possession by Lender.
Contemporaneous with the execution of this Agreement, Borrower will execute one
or more UCC financing statements and any similar statements as may be required
by applicable law, and Lender will file such financing statements and all such
similar statements in the appropriate location or locations. Borrower hereby
appoints Lender as its irrevocable attorney-in-fact for the purpose of executing
any documents necessary to perfect or to continue any Security Interest. Lender
may at any time, and without further authorization from Borrower, file a carbon,
photograph, facsimile, or other reproduction of any financing statement for use
as a financing statement. Borrower will reimburse Lender for all expenses for
the perfection, termination, and the continuation of the perfection of Lender's
security interest in the Collateral. Borrower promptly will notify Lender before
any change in Borrower's name including any change to the assumed business names
of Borrower. Borrower also promptly will notify Lender before any change in
Borrower's Social Security Number or Employer Identification Number. Borrower
further agrees to notify Lender in writing prior to any change in address or
location of Borrower's principal governance office or should Borrower merge or
consolidate with any other entity.
Collateral Records. Borrower does now, and at all times hereafter shall, keep
correct and accurate records of the Collateral, all of which records shall be
available to Lender or Lender's representative upon demand for inspection and
copying at any reasonable time. With respect to the Accounts, Borrower agrees to
keep and maintain such records as Lender may require, including without
limitation information concerning Eligible Accounts and Account balances and
agings. Records related to Accounts (Receivables) are or will be located at ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇. With respect to the Inventory,
Borrower agrees to keep and maintain such records as Lender may require,
including without limitation information concerning Eligible Inventory and
records itemizing and describing the kind, type, quality, and quantity of
Inventory, Borrower's Inventory costs and selling prices, and the daily
withdrawals and additions to Inventory. Records related to Inventory are or will
be located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇. The above is an
accurate and complete list of all locations at which Borrower keeps or maintains
business records concerning Borrower's collateral.
Collateral Schedules. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender schedules of Accounts
and Inventory and schedules of Eligible Accounts and Eligible Inventory in form
and substance satisfactory to the Lender. Thereafter supplemental schedules
shall be delivered according to the following schedule: With respect to Eligible
Accounts, schedules shall be delivered every 30 days. With respect to Eligible
Inventory, schedules shall be delivered every 30 days.
Representations and Warranties Concerning Accounts. With respect to the
Accounts, Borrower represents and warrants to Lender: (1) Each Account
represented by Borrower to be an Eligible Account for purposes of this Agreement
conforms to the requirements of the definition of an Eligible Account; (2) All
Account information listed on schedules delivered to Lender will be true and
correct, subject to immaterial variance; and (3) Lender, its assigns, or agents
shall have the right at any time and at Borrower's expense to inspect, examine,
and audit Borrower's records and to confirm with Account Debtors the accuracy of
such Accounts.
Representations and Warranties Concerning Inventory. With respect to the
Inventory, Borrower represents and warrants to Lender: (1) All Inventory
represented by Borrower to be Eligible Inventory for purposes of this Agreement
conforms to the requirements of the definition of Eligible Inventory; (2) All
Inventory values listed on schedules delivered to Lender will be true and
correct, subject to immaterial variance; (3) The value of the Inventory will be
determined on a consistent accounting basis; (4) Except as agreed to the
contrary by Lender in writing, all Eligible Inventory is now and at all times
hereafter will be in Borrower's physical possession and shall not be held by
others on consignment, sale on approval, or sale or return; (5) Except as
reflected in the Inventory schedules delivered to Lender, all Eligible Inventory
is now and at all times hereafter will be of good and merchantable quality, free
from defects; (6) Eligible Inventory is not now and will not at any time
hereafter be stored with a bailee, warehouseman, or similar party without
Lender's prior written consent, and, in such event, Borrower will concurrently
at the time of bailment cause any such bailee, warehouseman, or similar party to
issue and deliver to Lender, in form acceptable to Lender, warehouse receipts in
Lender name evidencing the storage of Inventory; and (7) Lender, its assigns, or
agents shall have the right at any time and at Borrower's expense to inspect and
examine the Inventory and to check and test the same as to quality, quantity,
value, and condition.
Remittance Account. Borrower agrees that Lender may at any time require Borrower
to institute procedures whereby the payments and other proceeds of the Accounts
shall be paid by the Account Debtors under a remittance account or lock box
arrangement with Lender, or Lender's agent, or with one or more financial
institutions designated by Lender. Borrower further agrees that, if no Event of
Default exists under this Agreement, any and all of such funds received under
such a remittance account or lock box arrangement shall, at Lender's sole
election and discretion, either be (1) paid or turned over to Borrower; (2)
deposited into one or more accounts for the benefit of Borrower (which deposit
accounts shall be subject to a security assignment in favor of Lender); (3)
deposited into one or more accounts for the joint benefit of Borrower and Lender
(which deposit accounts shall likewise be subject to a security assignment in
favor of Lender); (4) paid or turned over to Lender to be applied to the
Indebtedness in such order and priority as Lender may determine within its sole
discretion; or (5) any combination of the foregoing as Lender shall determine
from time to time. Borrower further agrees that, should one or more Events of
Default exist, any and all funds received under such a remittance account or
lock box arrangement shall be paid or turned over to Lender to be applied to the
Indebtedness, again in such order and priority as Lender may determine within
its sole discretion. Lender agrees not to exercise this right until thirty (30)
days after Lender's notification to Borrower.
ADDITIONAL CREDIT FACILITIES. In addition to the Primary Credit Facility, the
following credit accommodations are either in place or will be made available to
Borrower:
Letter of Credit Facility. Subject to the terms of this Agreement,
Lender will issue letters of credit (each a "Letter of Credit") on
behalf of Borrower. At no time, however, shall the total face amount of
all Letters of Credit outstanding, less any partial draws paid under
the Letters of Credit, plus Advances outstanding, exceed the Borrowing
Base.
(1) Upon Lender's request, Borrower promptly shall pay to
Lender issuance fees and such other fees, commissions,
costs, and any out-of-pocket expenses charged or incurred
by Lender with respect to any Letter of Credit.
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(2) The commitment by Lender to issue Letters of Credit shall,
unless earlier terminated in accordance with the terms of
this Agreement, automatically terminate on the Expiration
Date and no Letter of Credit shall expire on a date which
is more than three hundred sixty-five (365) days after the
Expiration Date.
(3) Each Letter of Credit shall be in form and substance
satisfactory to Lender and in favor of beneficiaries
satisfactory to Lender, provided that Lender may refuse to
issue a Letter of Credit due to the nature of the
transaction or its terms or in connection with any
transaction where Lender, due to the beneficiary or the
nationality or residence of the beneficiary, would be
prohibited by any applicable law, regulation, or order from
issuing such Letter of Credit. Under no circumstances,
however, will a Letter of Credit exceed three hundred
sixty-five (365) days from the issue date.
(4) Prior to the issuance of each Letter of Credit, and in all
events prior to any daily cutoff time Lender may have
established for purposes thereof, Borrower shall deliver to
Lender a duly executed form of Lender's standard form of
application for issuance of letter of credit with proper
insertions.
LENDER'S RIGHTS UPON DEFAULT. Upon the occurrence of any Event of Default,
Lender may, at its sole and absolute discretion and in addition to any other
remedies available to it under this Agreement or otherwise, require Borrower to
pay immediately to Lender, for application against drawings under any
outstanding Letters of Credit, the outstanding principal amount of any such
Letters of Credit which have not expired. Any portion of the amount so paid to
Lender which is not applied to satisfy draws under any such Letters of Credit or
any other obligations of Borrower to the Lender shall be repaid to Borrower
without interest.
LENDER'S COSTS AND EXPENSES. Borrower shall, upon Lender's request, promptly pay
to and reimburse Lender for all costs incurred and payments made by Lender by
reason of any future assessment, reserve, deposit, or similar requirement or any
surcharge, tax, or fee imposed upon Lender or as a result of Lender's compliance
with any directive or requirement of any regulatory authority pertaining or
relating to any Letter of Credit.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender the following
documents for the Loan: (1) the Note; (2) Security Agreements granting
to Lender security interests in the Collateral; (3) financing
statements and all other documents perfecting Lender's Security
Interests; (4) evidence of insurance as required below; (5) together
with all such Related Documents as Lender may require for the Loan; all
in form and substance satisfactory to Lender and Lender's counsel.
Borrower's Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
the Related Documents. In addition, Borrower shall have provided such
other resolutions, authorizations, documents and instruments as Lender
or its counsel, may require.
Fees and Expenses Under This Agreement. Borrower shall have paid to
Lender all fees, costs, and expenses specified in this Agreement and
the Related Documents as are then due and payable.
Representations and Warranties. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document
or certificate delivered to Lender under this Agreement are true and
correct.
No Event of Default. There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this
Agreement or under any Related Document.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation for profit which is, and at all
times shall be, duly organized, validly existing, and in good standing
under and by virtue of the laws of the State of Utah. Borrower is duly
authorized to transact business in all other states in which Borrower
is doing business, having obtained all necessary filings, governmental
licenses and approvals for each state in which Borrower is doing
business. Specifically, Borrower is, and at all times shall be, duly
qualified as a foreign corporation in all states in which the failure
to so qualify would have a material adverse effect on its business or
financial condition. Borrower has the full power and authority to own
its properties and to transact the business in which it is presently
engaged or presently proposes to engage. Borrower maintains an office
at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇. Unless Borrower
has designated otherwise in writing, the principal office is the office
at which Borrower keeps its books and records including its records
concerning the Collateral. Borrower will notify Lender prior to any
change in the location of Borrower's state of organization or any
change in Borrower's name. Borrower shall do all things necessary to
preserve and to keep in full force and effect its existence, rights and
privileges, and shall comply with all regulations, rules, ordinances,
statutes, orders and decrees of any governmental or quasi-governmental
authority or court applicable to Borrower and Borrower's business
activities.
Assumed Business Names. Borrower has filed or recorded all documents or
filings required by law relating to all assumed business names used by
Borrower. Excluding the name of Borrower, the following is a complete
list of all assumed business names under which Borrower does business:
None.
Authorization. Borrower's execution, delivery, and performance of this
Agreement and all the Related Documents have been duly authorized by
all necessary action by Borrower and do not conflict with, result in a
violation of, or constitute a default under (1) any provision of
Borrower's articles of incorporation or organization, or bylaws, or any
agreement or other instrument binding upon Borrower or (2) any law,
governmental regulation, court decree, or order applicable to Borrower
or to Borrower's properties.
Financial Information. Each of Borrower's financial statements supplied
to Lender truly and completely disclosed Borrower's financial condition
as of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
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Legal Effect. This Agreement constitutes, and any instrument or
agreement Borrower is required to give under this Agreement when
delivered will constitute legal, valid, and binding obligations of
Borrower enforceable against Borrower in accordance with their
respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has good title to all
of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled in
Borrower's legal name, and Borrower has not used or filed a financing
statement under any other name for at least the last five (5) years.
Hazardous Substances. Except as disclosed to and acknowledged by Lender
in writing, Borrower represents and warrants that: (1) During the
period of Borrower's ownership of Borrower's Collateral, there has been
no use, generation, manufacture, storage, treatment, disposal, release
or threatened release of any Hazardous Substance by any person on,
under, about or from any of the Collateral. (2) Borrower has no
knowledge of, or reason to believe that there has been (a) any breach
or violation of any Environmental Laws; (b) any use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substance on, under, about or from the
Collateral by any prior owners or occupants of any of the Collateral;
or (c) any actual or threatened litigation or claims of any kind by any
person relating to such matters. (3) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the Collateral
shall use, generate, manufacture, store, treat, dispose of or release
any Hazardous Substance on, under, about or from any of the Collateral;
and any such activity shall be conducted in compliance with all
applicable federal, state, and local laws, regulations, and ordinances,
including without limitation all Environmental Laws. Borrower
authorizes Lender and its agents to enter upon the Collateral to make
such inspections and tests as Lender may deem appropriate to determine
compliance of the Collateral with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and
for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any
other person. The representations and warranties contained herein are
based on Borrower's due diligence in investigating the Collateral for
hazardous waste and Hazardous Substances. Borrower hereby (1) releases
and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other
costs under any such laws, and (2) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of
the Agreement or as a consequence of any use, generation, manufacture,
storage, disposal, release or threatened release of a hazardous waste
or substance on the Collateral. The provisions of this section of the
Agreement, including the obligation to indemnify, shall survive the
payment of the Indebtedness and the termination, expiration or
satisfaction of this Agreement and shall not be affected by Lender's
acquisition of any interest in any of the Collateral, whether by
foreclosure or otherwise.
Litigation and Claims. Except for matters being handled or covered by
Borrower's insurance provider, no litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event
has occurred which may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims, or other
events, if any, that have been disclosed to and acknowledged by Lender
in writing.
Taxes. To the best of Borrower's knowledge, all of Borrower's tax
returns and reports that are or were required to be filed, have been
filed, and all taxes, assessments and other governmental charges have
been paid in full, except those presently being or to be contested by
Borrower in good faith in the ordinary course of business and for which
adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements (if
any), and all Related Documents are binding upon the signers thereof,
as well as upon their successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:
Notices of Claims and Litigation. Promptly inform Lender in writing of
(1) all material adverse changes in Borrower's financial condition, and
(2) all existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or any
Guarantor which could materially affect the financial condition of
Borrower or the financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
GAAP, applied on a consistent basis, and permit Lender to examine and
audit Borrower's books and records at all reasonable times.
Financial Statements. Furnish Lender with the following:
Annual Statements. As soon as available, but in no event later
than 100 days after the end of each fiscal year, Borrower's 10K
balance sheet and income statement for the year ended, audited by
a certified public accountant satisfactory to Lender.
Interim Statements. As soon as available, but in no event later
than sixty (60) days after the end of each fiscal quarter,
Borrower's 10Q balance sheet and profit and loss statement for the
period ended, prepared by Borrower.
All financial reports required to be provided under this Agreement
shall be prepared in accordance with GAAP, applied on a consistent
basis, and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and
statements, as Lender may request from time to time.
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Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect
to Borrower's properties and operations, in form, amounts, coverages
and with insurance companies acceptable to Lender. Borrower, upon
request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be cancelled or
diminished without at least ten (10) days prior written notice to
Lender. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or
is offered a security interest for the Loans, Borrower will provide
Lender with such lender's loss payable or other endorsements as Lender
may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following: (1)
the name of the insurer; (2) the risks insured; (3) the amount of the
policy; (4) the properties insured; (5) the then current property
values on the basis of which insurance has been obtained, and the
manner of determining those values; and (6) the expiration date of the
policy. In addition, upon request of Lender (however not more often
than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value
or replacement cost of any Collateral. The cost of such appraisal shall
be paid by Borrower.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income, or profits.
Performance. Perform and comply, in a timely manner, with all terms,
conditions, and provisions set forth in this Agreement and in the
Related Documents. Borrower shall notify Lender immediately in writing
of any default in connection with any agreement.
Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender of
any change in executive and management personnel; conduct its business
affairs in a reasonable and prudent manner.
Environmental Studies. Promptly conduct and complete, at Borrower's
expense, all such investigations, studies, samplings and testings as
may be requested by Lender or any governmental authority relative to
any substance, or any waste or by-product of any substance defined as
toxic or a hazardous substance under applicable federal, state, or
local law, rule, regulation, order or directive, at or affecting any
property or any facility owned, leased or used by Borrower.
Compliance with Governmental Requirements. Comply with all laws,
ordinances, and regulations, now or hereafter in effect, of all
governmental authorities applicable to the conduct of Borrower's
properties, businesses and operations, and to the use or occupancy of
the Collateral, including without limitation, the Americans With
Disabilities Act. Borrower may contest in good faith any such law,
ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Borrower has notified Lender
in writing prior to doing so and so long as, in Lender's sole opinion,
Lender's interests in the Collateral are not jeopardized. Lender may
require Borrower to post adequate security or a surety bond, reasonably
satisfactory to Lender, to protect Lender's interest.
Inspection. Permit employees or agents of Lender at any reasonable time
to inspect any and all Collateral for the Loan or Loans and Borrower's
other properties and to examine or audit Borrower's books, accounts,
and records and to make copies and memoranda of Borrower's books,
accounts, and records. If Borrower now or at any time hereafter
maintains any records (including without limitation computer generated
records and computer software programs for the generation of such
records) in the possession of a third party, Borrower, upon request of
Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of
any records it may request, all at Borrower's expense.
Compliance Certificates. Unless waived in writing by Lender, provide
Lender within sixty (60) days after the end of each fiscal quarter,
with a certificate executed by Borrower's chief financial officer, or
other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and
correct as of the date of the certificate and further certifying that,
as of the date of the certificate, no Event of Default exists under
this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with any and all Environmental Laws; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on Borrower's part or on the part of any third party, on
property owned and/or occupied by Borrower, any environmental activity
where damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with
any environmental activity whether or not there is damage to the
environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
assignments, financing statements, instruments, documents and other
agreements as Lender or its attorneys may reasonably request to
evidence and secure the Loans and to perfect all Security Interests.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower's failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
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other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower. All such expenses will become a
part of the Indebtedness and, at Lender's option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity. When delay of expenditure will not materially affect Lender's interest
in the Collateral, Lender agrees to provide Borrower fifteen (15) days notice of
its intent to incur costs for which Borrower will be responsible under the terms
of this Agreement.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender, which consent shall not be unreasonably denied.
Indebtedness and Liens. (1) Sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's
assets, which are pledged to Lender, (except as allowed as Permitted
Liens), or (2) sell with recourse any of Borrower's accounts, except to
Lender.
Continuity of Operations. (1) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (2) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, or
(3) pay any dividends on Borrower's stock (other than dividends payable
in its stock), provided, however that notwithstanding the foregoing,
but only so long as no Event of Default has occurred and is continuing
or would result from the payment of dividends, if Borrower is a
"Subchapter S Corporation" (as defined in the Internal Revenue Code of
1986, as amended), Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the
shareholders to pay income taxes and make estimated income tax payments
to satisfy their liabilities under federal and state law which arise
solely from their status as shareholders of a Subchapter S Corporation
because of their ownership of shares of Borrower's stock, or purchase
or retire any of Borrower's outstanding shares or alter or amend
Borrower's capital structure.
Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance
money or assets to any other person, enterprise or entity, (2)
purchase, create or acquire any interest in any other enterprise or
entity, or (3) incur any obligation as surety or guarantor other than
in the ordinary course of business.
Agreements. Borrower will not enter into any agreement containing any
provisions which would be violated or breached by the performance of
Borrower's obligations under this Agreement or in connection herewith.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower under this Agreement, Lender shall have no obligation to make Loan
Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in
default under the terms of this Agreement or any of the Related Documents; (B)
Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files
a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C)
there occurs a material adverse change in Borrower's financial condition, in the
financial condition of any Guarantor, or in the value of any Collateral securing
any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such Guarantor's guaranty of the Loan or any other loan with
Lender.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any ▇▇▇ or ▇▇▇▇▇ accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph. Lender agrees not to
exercise its right of setoff unless an event of default continues to exist
fifteen (15) days after Lender's notification to Borrower of such default.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
Payment Default. Borrower fails to make any payment when due under the
Loan.
Other Defaults. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or
in any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this
Agreement or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished or
becomes false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any collateral document to create a valid and perfected security
interest or lien) at any time and for any reason.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the Loan. This
includes a garnishment of any of Borrower's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies
or a surety bond for the creditor or forfeiture proceeding, in an
amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
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Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness. In the event of a
death, Lender, at its option, may, but shall not be required to, permit
the Guarantor's estate to assume unconditionally the obligations
arising under the guaranty in a manner satisfactory to Lender, and, in
doing so, cure any Event of Default.
Change in Ownership. Any change in ownership by a single person or
entity of twenty-five percent (25%) or more of the common stock of
Borrower.
Adverse Change and Insecurity. A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of
payment or performance of the Loan is impaired or Lender in good faith
believes itself insecure. Lender agrees to provide Borrower notice of
any default under this provision describing the conditions of the
default and the terms under which the default may be cured, if any.
Right to Cure. If any default, other than a default on Indebtedness, is
curable, it may be cured (and no Event of Default will have occurred)
if Borrower or Grantor, as the case may be, after receiving written
notice from Lender demanding cure of such default: (1) cure the default
within fifteen (15) days; or (2) if the cure requires more than fifteen
(15) days, immediately initiate steps which Lender deems in Lender's
sole discretion to be sufficient to cure the default and thereafter
continue and complete all reasonable and necessary steps sufficient to
produce compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.
WAIVER OF CLAIMS. BORROWER (i) REPRESENTS THAT IT HAS NO DEFENSES TO OR SETOFFS
AGAINST ANY INDEBTEDNESS OR OTHER OBLIGATIONS OWING TO LENDER OR ITS AFFILIATES
(THE "OBLIGATIONS"), NOR CLAIMS AGAINST LENDER OR ITS AFFILIATES FOR ANY MATTER
WHATSOEVER, RELATED OR UNRELATED TO THE OBLIGATIONS, AND (ii) RELEASES LENDER
AND ITS AFFILIATES FROM ALL CLAIMS, CAUSES OF ACTION, AND COSTS, IN LAW OR
EQUITY, EXISTING AS OF THE DATE OF THIS AGREEMENT WHICH BORROWER HAS OR MAY HAVE
BY REASON OF ANY MATTER OF ANY CONCEIVABLE KIND OR CHARACTER WHATSOEVER, RELATED
OR UNRELATED TO THE OBLIGATIONS, INCLUDING THE SUBJECT MATTER OF THIS AGREEMENT.
THIS PROVISION SHALL NOT APPLY TO CLAIMS FOR PERFORMANCE OF EXPRESS CONTRACTUAL
OBLIGATIONS OWING TO BORROWER BY LENDER OR ITS AFFILIATES.
ACCOUNTS RECEIVABLE AGING. Borrower shall furnish to Lender a monthly accounts
receivable aging report within 20 days of the end of each month in a form
acceptable to Lender.
CUSTOMER LIST. Borrower shall furnish to Lender a semi-annual list of Borrower's
account receivable customers and their addresses in a form acceptable to Lender
within 20 days of the end of each half-year period.
INVENTORY REPORTS. Borrower shall furnish Lender with a monthly Inventory totals
report within 20 days of the end of each period in form and content acceptable
to Lender.
ACCOUNTS PAYABLE AGING. Borrower shall furnish to Lender a quarterly Accounts
Payable Aging report within 20 days of the end of each quarter in a form
acceptable to Lender.
AUTHORIZATION TO VERIFY ACCOUNTS RECEIVABLE. Borrower hereby authorizes Lender
to verify its accounts receivable through written and/or verbal verification
methods at the discretion of the Lender.
BORROWING BASE CERTIFICATE. When the Indebtedness is greater than $200,000.00,
Borrower shall furnish to Lender a monthly Borrowing Base Certificate, certified
by an authorized officer/employee of Borrower, within 20 days of the end of each
month, in a form acceptable to Lender unless Lender specifically requests
otherwise in writing to Borrower.
LETTERS OF CREDIT. The amount available under the Line of Credit shall be
automatically reduced by the amount of any letters of credit issued by Lender
for or on account of Borrower. Any draws paid by Lender in accordance with any
such letters of credit shall be repaid by Borrower to Lender by advances under
the Line of Credit.
PROFITABILITY. Borrower shall maintain a profit calculated prior to allowances
for taxes, measured quarterly, based on the current quarter and the immediately
preceding three (3) quarters.
TOTAL LIABILITY TO TANGIBLE NET WORTH. Borrower shall maintain a ratio of total
liabilities to Tangible Net Worth of not greater than 1.5 to 1.0, measured
quarterly.
FIELD EXAM. A field examination will be performed annually on Borrower's
accounting records to verify reliability of collateral information.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
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Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
Arbitration Disclosures.
1. ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO
ONLY VERY LIMITED REVIEW BY A COURT.
2. IN ARBITRATION THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN
COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
3. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
4. ARBITRATORS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING IN THEIR AWARDS. THE RIGHT TO APPEAL OR SEEK
MODIFICATION OF ARBITRATORS' RULINGS IS VERY LIMITED.
5. A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO IS OR WAS
AFFILIATED WITH THE BANKING INDUSTRY.
6. ARBITRATION WILL APPLY TO ALL DISPUTES BETWEEN THE PARTIES, NOT
JUST THOSE CONCERNING THE AGREEMENT.
7. IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR ATTORNEY OR
THE AMERICAN ARBITRATION ASSOCIATION.
(a) Any claim or controversy ("Dispute") between or among the parties
and their employees, agents, affiliates, and assigns, including, but
not limited to, Disputes arising out of or relating to this agreement,
this arbitration provision ("arbitration clause"), or any related
agreements or instruments relating hereto or delivered in connection
herewith ("Related Agreements"), and including, but not limited to, a
Dispute based on or arising from an alleged tort, shall at the request
of any party be resolved by binding arbitration in accordance with the
applicable arbitration rules of the American Arbitration Association
(the "Administrator"). The provisions of this arbitration clause shall
survive any termination, amendment, or expiration of this agreement or
Related Agreements. The provisions of this arbitration clause shall
supersede any prior arbitration agreement between or among the parties.
(b) The arbitration proceedings shall be conducted in a city mutually
agreed by the parties. Absent such an agreement, arbitration will be
conducted in Salt Lake City, Utah or such other place as may be
determined by the Administrator. The Administrator and the
arbitrator(s) shall have the authority to the extent practicable to
take any action to require the arbitration proceeding to be completed
and the arbitrator(s)' award issued within 150 days of the filing of
the Dispute with the Administrator. The arbitrator(s) shall have the
authority to impose sanctions on any party that fails to comply with
time periods imposed by the Administrator or the arbitrator(s),
including the sanction of summarily dismissing any Dispute or defense
with prejudice. The arbitrator(s) shall have the authority to resolve
any Dispute regarding the terms of this agreement, this arbitration
clause, or Related Agreements, including any claim or controversy
regarding the arbitrability of any Dispute. All limitations periods
applicable to any Dispute or defense, whether by statute or agreement,
shall apply to any arbitration proceeding hereunder and the
arbitrator(s) shall have the authority to decide whether any Dispute or
defense is barred by a limitations period and, if so, to summarily
enter an award dismissing any Dispute or defense on that basis. The
doctrines of compulsory counterclaim, res judicata, and collateral
estoppel shall apply to any arbitration proceeding hereunder so that a
party must state as a counterclaim in the arbitration proceeding any
claim or controversy which arises out of the transaction or occurrence
that is the subject matter of the Dispute. The arbitrator(s) may in the
arbitrator(s)' discretion and at the request of any party: (1)
consolidate in a single arbitration proceeding any other claim arising
out of the same transaction involving another party to that transaction
that is bound by an arbitration clause with Lender, such as borrowers,
guarantors, sureties, and owners of collateral; and (2) consolidate or
administer multiple arbitration claims or controversies as a class
action in accordance with Rule 23 of the Federal Rules of Civil
Procedure.
(c) The arbitrator(s) shall be selected in accordance with the rules of
the Administrator from panels maintained by the Administrator. A single
arbitrator shall have expertise in the subject matter of the Dispute.
Where three arbitrators conduct an arbitration proceeding, the Dispute
shall be decided by a majority vote of the three arbitrators, at least
one of whom must have expertise in the subject matter of the Dispute
and at least one of whom must be a practicing attorney. The
arbitrator(s) shall award to the prevailing party recovery of all costs
and fees (including attorneys' fees and costs, arbitration
administration fees and costs, and arbitrator(s)' fees). The
arbitrator(s), either during the pendency of the arbitration proceeding
or as part of the arbitration award, also may grant provisional or
ancillary remedies including but not limited to an award of injunctive
relief, foreclosure, sequestration, attachment, replevin, garnishment,
or the appointment of a receiver.
(d) Judgement upon an arbitration award may be entered in any court
having jurisdiction, subject to the following limitation: the
arbitration award is binding upon the parties only if the amount does
not exceed Four Million Dollars ($4,000,000.00); if the award exceeds
that limit, either party may demand the right to a court trial. Such a
demand must be filed with the Administrator within thirty (30) days
following the date of the arbitration award; if such a demand is not
made with that time period, the amount of the arbitration award shall
be binding. The computation of the total amount of an arbitration award
shall include amounts awarded for attorneys' fees and costs,
arbitration administration fees and costs, and arbitrator(s)' fees.
(e) No provision of this arbitration clause, nor the exercise of any
rights hereunder, shall limit the right of any party to: (1) judicially
or non-judicially foreclose against any real or personal property
collateral or other security; (2) exercise self-help remedies,
including but not limited to repossession and setoff rights; or (3)
obtain from a court having jurisdiction thereover any provisional or
ancillary remedies including but not limited to injunctive relief,
foreclosure, sequestration, attachment, replevin, garnishment, or the
appointment of a receiver. Such rights can be exercised at any time,
before or after initiation of an arbitration proceeding, except to the
extent such action is contrary to the arbitration award. The exercise
of such rights shall not constitute a waiver of the right to submit any
Dispute to arbitration, and any claim or controversy related to the
exercise of such rights shall be a Dispute to be resolved under the
provisions of this arbitration clause. Any party may initiate
arbitration with the Administrator. If any party desires to arbitrate a
Dispute asserted against such party in a complaint, counterclaim,
cross-claim, or third-party complaint thereto, or in an answer or other
reply to any such pleading, such party must make an appropriate motion
to the trial court seeking to compel arbitration, which motion must be
filed with the court within 45 days of service of the pleading, or
amendment thereto, setting forth such Dispute. If arbitration is
compelled after commencement of litigation of a Dispute, the party
obtaining an order compelling arbitration shall commence arbitration
and pay the Administrator's filing fees and costs within 45 days of
entry of such order. Failure to do so shall constitute an agreement to
proceed with litigation and waiver of the right to arbitrate. In any
arbitration commenced by a consumer regarding a consumer Dispute,
Lender shall pay one half of the Administrator's filing fee, up to
$250.
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(f) Notwithstanding the applicability of any other law to this
agreement, the arbitration clause, or Related Agreements between or
among the parties, the Federal Arbitration Act, 9 U.S.C. Section 1 et
seq., shall apply to the construction and interpretation of this
arbitration clause. If any provision of this arbitration clause should
be determined to be unenforceable, all other provisions of this
arbitration clause shall remain in full force and effect.
Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of
Lender's costs and expenses, including Lender's reasonable attorneys'
fees and Lender's legal expenses, incurred in connection with the
enforcement of this Agreement. Lender may hire or pay someone else to
help enforce this Agreement, and Borrower shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's
reasonable attorneys' fees and legal expenses whether or not Lender's
salaried employee and whether or not there is a lawsuit, including
reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also shall pay all court costs and such additional
fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loan to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any
rights to privacy Borrower may have with respect to such matters.
Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of
such participation interests. Borrower also agrees that the purchasers
of any such participation interests will be considered as the absolute
owners of such interests in the Loan and will have all the rights
granted under the participation agreement or agreements governing the
sale of such participation interests. Borrower further waives all
rights of offset or counterclaim that it may have now or later against
Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loan irrespective of the failure or
insolvency of any holder of any interest in the Loan. Borrower further
agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses
that Borrower may have against Lender.
Governing Law. This Agreement will be governed by, construed and
enforced in accordance with federal law and the laws of the State of
Utah. This Agreement has been accepted by Lender in the State of Utah.
Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender's
request to submit to the jurisdiction of the courts of SALT LAKE
County, State of Utah.
No Waiver by Lender. Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any
other right. A waiver by Lender of a provision of this Agreement shall
not prejudice or constitute a waiver of Lender's right otherwise to
demand strict compliance with that provision or any other provision of
this Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any of Borrower's
or any Grantor's obligations as to any future transactions. Whenever
the consent of Lender is required under this Agreement, the granting of
such consent by Lender in any instance shall not constitute continuing
consent to subsequent instances where such consent is required and in
all cases such consent may be granted or withheld in the sole
discretion of Lender.
Notices. Unless otherwise provided by applicable law, any notice
required to be given under this Agreement or required by law shall be
given in writing, and shall be effective when actually delivered in
accordance with the law or with this Agreement, when actually received
by telefacsimile (unless otherwise required by law), when deposited
with a nationally recognized overnight courier, or, if mailed, when
deposited in the United States mail, as first class, certified or
registered mail postage prepaid, directed to the addresses shown near
the beginning of this Agreement. Any party may change its address for
notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change
the party's address. For notice purposes, Borrower agrees to keep
Lender informed at all times of Borrower's current address. Unless
otherwise provided by applicable law, if there is more than one
Borrower, any notice given by Lender to any Borrower is deemed to be
notice given to all Borrowers.
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be illegal, invalid, or unenforceable as to any
circumstance, that finding shall not make the offending provision
illegal, invalid, or unenforceable as to any other circumstance. If
feasible, the offending provision shall be considered modified so that
it becomes legal, valid and enforceable. If the offending provision
cannot be so modified, it shall be considered deleted from this
Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement
shall not affect the legality, validity or enforceability of any other
provision of this Agreement.
Subsidiaries and Affiliates of Borrower. To the extent the context of
any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word
"Borrower" as used in this Agreement shall include all of Borrower's
subsidiaries and affiliates. Notwithstanding the foregoing however,
under no circumstances shall this Agreement be construed to require
Lender to make any Loan or other financial accommodation to any of
Borrower's subsidiaries or affiliates.
Successors and Assigns. All covenants and agreements by or on behalf of
Borrower contained in this Agreement or any Related Documents shall
bind Borrower's successors and assigns and shall inure to the benefit
of Lender and its successors and assigns. Borrower shall not, however,
have the right to assign Borrower's rights under this Agreement or any
interest therein, without the prior written consent of Lender.
Survival of Representations and Warranties. Borrower understands and
agrees that in extending Loan Advances, Lender is relying on all
representations, warranties, and covenants made by Borrower in this
Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement or the Related Documents.
Borrower further agrees that regardless of any investigation made by
Lender, all such representations, warranties and covenants will survive
the extension of Loan Advances and delivery to Lender of the Related
Documents, shall be continuing in nature, shall be deemed made and
redated by Borrower at the time each Loan Advance is made, and shall
remain in full force and effect until such time as Borrower's
Indebtedness shall be paid in full, or until this Agreement shall be
terminated in the manner provided above, whichever is the last to
occur.
(continued) BUSINESS LOAN AGREEMENT (ASSET BASED) Page 10
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Time is of the Essence. Time is of the essence in the performance of
this Agreement.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:
Account. The word "Account" means a trade account, account receivable,
other receivable, or other right to payment for goods sold or services
rendered owing to Borrower (or to a third party grantor acceptable to
Lender).
Account Debtor. The words "Account Debtor" mean the person or entity
obligated upon an Account.
Advance. The word "Advance" means a disbursement of Loan funds made, or
to be made, to Borrower or on Borrower's behalf under the terms and
conditions of this Agreement.
Agreement. The word "Agreement" means this Business Loan Agreement
(Asset Based), as this Business Loan Agreement (Asset Based) may be
amended or modified from time to time, together with all exhibits and
schedules attached to this Business Loan Agreement (Asset Based) from
time to time.
Borrower. The word "Borrower" means DYNATRONICS CORPORATION and
includes all co-signers and co-makers signing the Note.
Borrowing Base. The words "Borrowing Base" mean as determined by Lender
from time to time, the lesser of (a) $4,500,000.00 or (b) the sum of
(i) 80.000% of the aggregate amount of Eligible Accounts, plus (ii)
30.000% of the aggregate amount of Eligible Inventory.
Business Day. The words "Business Day" mean a day on which commercial
banks are open in the State of Utah.
Collateral. The word "Collateral" means all property and assets granted
as collateral security for a Loan, whether real or personal property,
whether granted directly or indirectly, whether granted now or in the
future, and whether granted in the form of a security interest,
mortgage, collateral mortgage, deed of trust, assignment, pledge, crop
pledge, chattel mortgage, collateral chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien,
charge, lien or title retention contract, lease or consignment intended
as a security device, or any other security or lien interest
whatsoever, whether created by law, contract, or otherwise. The word
Collateral also includes without limitation all collateral described in
the Collateral section of this Agreement.
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
Eligible Accounts. The words "Eligible Accounts" mean at any time, all of
Borrower's Accounts which contain selling terms and conditions acceptable
to Lender. The net amount of any Eligible Account against which Borrower
may borrow shall exclude all returns, discounts, credits, and offsets of
any nature. Unless otherwise agreed to by Lender in writing, Eligible
Accounts do not include:
(1) Accounts with respect to which the Account Debtor is employee or
agent of Borrower.
(2) Accounts with respect to which the Account Debtor is a subsidiary
of, or affiliated with Borrower or its shareholders, officers, or
directors.
(3) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by
the Account Debtor may be conditional.
(4) Accounts with respect to which Borrower is or may become liable to
the Account Debtor for goods sold or services rendered by the
Account Debtor to Borrower.
(5) Accounts which are subject to dispute, counterclaim, or setoff.
(6) Accounts which have not been paid in full within 120 days from the
invoice date.
(7) Accounts with respect to which Lender, in its sole discretion,
deems the creditworthiness or financial condition of the Account
Debtor to be unsatisfactory.
(8) Accounts of any Account Debtor who has filed or has had filed
against it a petition in bankruptcy or an application for relief
under any provision of any state or federal bankruptcy,
insolvency, or debtor-in-relief acts; or who has had appointed a
trustee, custodian, or receiver for the assets of such Account
Debtor; or who has made an assignment for the benefit of creditors
or has become insolvent or fails generally to pay its debts
(including its payrolls) as such debts become due.
(9) That portion of the Accounts of any single Account Debtor which
exceeds 10.00% of all of Borrower's Accounts.
Eligible Inventory. The words "Eligible Inventory" mean at any time,
all of Borrower's Inventory as defined below except:
(1) Inventory which is not owned by Borrower free and clear of all
security interests, liens, encumbrances, and claims of third
parties.
(2) Inventory which Lender, in its sole discretion, deems to be
obsolete, unsalable, damaged, defective, or unfit for further
processing.
(3) Work in progress.
Environmental Laws. The words "Environmental Laws" mean any and all
state, federal and local statutes, regulations and ordinances relating
to the protection of human health or the environment, including without
limitation the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986,
Pub. L. No. 99-499 ("▇▇▇▇"), the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable
state or federal laws, rules, or regulations adopted pursuant thereto.
(continued) BUSINESS LOAN AGREEMENT (ASSET BASED) Page 11
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Event of Default. The words "Event of Default" mean any of the events
of default set forth in this Agreement in the default section of this
Agreement.
Expiration Date. The words "Expiration Date" mean the date of
termination of Lender's commitment to lend under this Agreement.
GAAP. The word "GAAP" means generally accepted accounting principles.
Grantor. The word "Grantor" means each and all of the persons or
entities granting a Security Interest in any Collateral for the Loan,
including without limitation all Borrowers granting such a Security
Interest.
Guarantor. The word "Guarantor" means any guarantor, surety, or
accommodation party of any or all of the Loan.
Guaranty. The word "Guaranty" means the guaranty from Guarantor to
Lender, including without limitation a guaranty of all or part of the
Note.
Hazardous Substances. The words "Hazardous Substances" mean materials
that, because of their quantity, concentration or physical, chemical or
infectious characteristics, may cause or pose a present or potential
hazard to human health or the environment when improperly used,
treated, stored, disposed of, generated, manufactured, transported or
otherwise handled. The words "Hazardous Substances" are used in their
very broadest sense and include without limitation any and all
hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term "Hazardous Substances"
also includes, without limitation, petroleum and petroleum by-products
or any fraction thereof and asbestos.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Advances made under this Agreement, as well as all
claims by Lender against Borrower under this Agreement,; whether now or
hereafter existing, voluntary or involuntary, due or not due, absolute
or contingent, liquidated or unliquidated; whether Borrower may be
liable individually or jointly with others; whether recovery upon such
indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter may
become otherwise unenforceable.
Inventory. The word "Inventory" means all of Borrower's raw materials,
work in process, finished goods, merchandise, parts and supplies, of
every kind and description, and goods held for sale or lease or
furnished under contracts of service in which Borrower now has or
hereafter acquires any right, whether held by Borrower or others, and
all documents of title, warehouse receipts, bills of lading, and all
other documents of every type covering all or any part of the
foregoing. Inventory includes inventory temporarily out of Borrower's
custody or possession and all returns on Accounts.
Lender. The word "Lender" means ZIONS FIRST NATIONAL BANK, its
successors and assigns.
Letter of Credit. The words "Letter of Credit" mean a letter of credit
issued by Lender on behalf of Borrower as described in the Letter of
Credit Facility section of this Agreement.
Loan. The word "Loan" means any and all loans and financial
accommodations from Lender to Borrower made pursuant to this Agreement,
whether now or hereafter existing, and however evidenced, including
without limitation those loans and financial accommodations described
herein or described on any exhibit or schedule attached to this
Agreement from time to time.
Note. The word "Note" means the Note executed by DYNATRONICS
CORPORATION in the principal amount of $4,500,000.00 dated December 5,
2003, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the note or
credit agreement.
Permitted Liens. The words "Permitted Liens" mean (1) liens and
security interests securing Indebtedness owed by Borrower to Lender;
(2) liens for taxes, assessments, or similar charges either not yet due
or being contested in good faith; (3) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet
delinquent; (4) purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the
date of this Agreement or permitted to be incurred under the paragraph
of this Agreement titled "Indebtedness and Liens"; (5) liens and
security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (6) those liens
and security interests which in the aggregate constitute an immaterial
and insignificant monetary amount with respect to the net value of
Borrower's assets.
Primary Credit Facility. The words "Primary Credit Facility" mean the
credit facility described in the Line of Credit section of this
Agreement.
Related Documents. The words "Related Documents" mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security
deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Loan.
Security Agreement. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.
Security Interest. The words "Security Interest" mean, without
limitation, any and all types of collateral security, present and
future, whether in the form of a lien, charge, encumbrance, mortgage,
deed of trust, security deed, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt, lien or title
retention contract, lease or consignment intended as a security device,
or any other security or lien interest whatsoever whether created by
law, contract, or otherwise.
Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written
agreement to indebtedness owed by Borrower to Lender in form and
substance acceptable to Lender.
(continued) BUSINESS LOAN AGREEMENT (ASSET BASED) Page 12
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Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's
total assets excluding all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organizational expenses, and similar
intangible items, but including leaseholds and leasehold improvements)
less total Debt.
FINAL AGREEMENT. Borrower understands that this Agreement and the related loan
documents are the final expression of the agreement between Lender and Borrower
and may not be contradicted by evidence of any alleged oral agreement.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN
AGREEMENT (ASSET BASED) IS DATED DECEMBER 5, 2003.
BORROWER:
DYNATRONICS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇., President/CEO of DYNATRONICS CORPORATION
LENDER:
ZIONS FIRST NATIONAL BANK
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Authorized Signer
Loan agmt-dynatronics/gsmith/legalservices
PROMISSORY NOTE
Borrower: DYNATRONICS CORPORATION Lender: ZIONS FIRST NATIONAL BANK
7030 PARK CENTRE DRIVE SALT LAKE COMMERCIAL BANKING
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ DIVISION
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
================================================================================
Principal Amount:$4,500,000.00 Initial Rate:4.000% Date of Note:December 5, 2003
PROMISE TO PAY. DYNATRONICS CORPORATION ("Borrower") promises to pay to ZIONS
FIRST NATIONAL BANK ("Lender"), or order, in lawful money of the United States
of America, the principal amount of Four Million Five Hundred Thousand & 00/100
Dollars ($4,500,000.00) or so much as may be outstanding, together with interest
on the unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on December 5, 2004. In addition, Borrower will
pay regular monthly payments of all accrued unpaid interest due as of each
payment date, beginning January 2, 2004, with all subsequent interest payments
to be due on the same day of each month after that. Unless otherwise agreed or
required by applicable law, payments will be applied first to any accrued unpaid
interest; then to principal; and then to any unpaid collection costs. The annual
interest rate for this Note is computed on a 365/360 basis; that is, by applying
the ratio of the annual interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's address
shown above or at such other place as Lender may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent index which is the Prime Rate.
Prime Rate is to be strictly interpreted and is not intended to serve any
purpose other than providing an index to determine the variable interest rate
used herein. It is not the lowest rate at which Zions First National Bank may
make loans to any of its customers, either now or in the future. Prime Rate
means an index which is determined daily by the published commercial loan
variable rate index held by any two of the following banks: ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇ &
Co., ▇▇▇▇▇ Fargo Bank N.A., and Bank of America N.A. In the event no two of the
above banks have the same published rate, the bank having the median rate will
establish the Prime Rate (the "Index"). The Index is not necessarily the lowest
rate charged by Lender on its loans. If the Index becomes unavailable during the
term of this loan, Lender may designate a substitute index after notice to
Borrower. Lender will tell Borrower the current Index rate upon Borrower's
request. The interest rate change will not occur more often than each Day.
Borrower understands that Lender may make loans based on other rates as well.
The Index currently is 4.000% per annum. The interest rate to be applied to the
unpaid principal balance of this Note will be at a rate equal to the Index,
resulting in an initial rate of 4.000% per annum. NOTICE: Under no circumstances
will the interest rate on this Note be more than the maximum rate allowed by
applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, early payments will reduce the principal balance due. Borrower agrees
not to send Lender payments marked "paid in full", "without recourse", or
similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender's rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender. All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: Zions First National Bank,
▇.▇. ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the variable interest rate on this Note to 3.000 percentage points over
the Index. The interest rate will not exceed the maximum rate permitted by
applicable law.
DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:
Payment Default. Borrower fails to make any payment when due under this
Note.
Other Defaults. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Note or in
any of the related documents.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This
includes a garnishment of any of Borrower's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies
or a surety bond for the creditor or forfeiture proceeding, in an
amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any guarantor, endorser, surety, or accommodation party of
any of the indebtedness or any guarantor, endorser, surety, or
accommodation party dies or becomes incompetent, or revokes or disputes
the validity of, or liability under, any guaranty of the indebtedness
evidenced by this Note. In the event of a death, Lender, at its option,
may, but shall not be required to, permit the guarantor's estate to
assume unconditionally the obligations arising under the guaranty in a
manner satisfactory to Lender, and, in doing so, cure any Event of
Default.
(continued) PROMISSORY NOTE Page 2
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Change In Ownership. Any change in ownership by a single person or
entity of twenty-five percent (25%) or more of the common stock of
Borrower.
Adverse Change and Insecurity. A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of
payment or performance of the Loan is impaired or Lender in good faith
believes itself insecure. Lender agrees to provide Borrower notice of
any default under this provision describing the conditions of the
default and the terms under which the default may be cured, if any.
Cure Provisions. If any default, other than a default in payment is
curable, it may be cured (and no event of default will have occurred)
if Borrower, after receiving written notice from Lender demanding cure
of such default: (1) cures the default within fifteen (15) days; or (2)
if the cure requires more than fifteen (15) days, immediately initiates
steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon
as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's reasonable
attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit,
including without limitation all reasonable attorneys' fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), and appeals. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided by law.
GOVERNING LAW. This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of Utah. This Note has
been accepted by Lender in the State of Utah.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of SALT LAKE County, State of Utah.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any ▇▇▇ or ▇▇▇▇▇ accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph. Lender agrees not to
exercise its right of setoff unless an Event of Default continues to exist
fifteen (15) days after Lender's notification to Borrower of such default.
COLLATERAL. Borrower acknowledges this Note is secured by A COMMERCIAL SECURITY
AGREEMENT DATED DECEMBER 5, 2003.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or as provided in this paragraph.
All oral requests shall be confirmed in writing on the day of the request. All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. The following person
currently is authorized to request advances and authorize payments under the
line of credit until Lender receives from Borrower, at Lender's address shown
above, written notice of revocation of his or her authority: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇., President/CEO of DYNATRONICS CORPORATION. Borrower agrees to be liable for
all sums either: (A) advanced in accordance with the instructions of an
authorized person or (B) credited to any of Borrower's accounts with Lender. The
unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (A) Borrower or any guarantor is in default under the terms of this
Note that Borrower or any guarantor has with Lender, including any agreement
made in connection with the signing of this Note; (B) Borrower or any guarantor
ceases doing business or is insolvent; (C) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of this
Note or any other loan with Lender; (D) Borrower has applied funds provided
pursuant to this Note for purposes other than those authorized by Lender; or (E)
Lender in good faith believes itself insecure.
ARBITRATION DISCLOSURES.
1. ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO ONLY VERY
LIMITED REVIEW BY A COURT.
2. IN ARBITRATION THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN COURT,
INCLUDING THEIR RIGHT TO A JURY TRIAL.
3. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
4. ARBITRATORS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING IN THEIR AWARDS. THE RIGHT TO APPEAL OR SEEK MODIFICATION OF
ARBITRATORS' RULINGS IS VERY LIMITED.
5. A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO IS OR WAS
AFFILIATED WITH THE BANKING INDUSTRY.
6. ARBITRATION WILL APPLY TO ALL DISPUTES BETWEEN THE PARTIES, NOT JUST THOSE
CONCERNING THE AGREEMENT.
7. IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR ATTORNEY OR THE
AMERICAN ARBITRATION ASSOCIATION.
(a) Any claim or controversy ("Dispute") between or among the parties and their
employees, agents, affiliates, and assigns, including, but not limited to
Disputes arising out of or relating to this agreement, this arbitration
provision ("arbitration clause"), or any related agreements or instruments
relating hereto or delivered in connection herewith ("Related Agreements"), and
including, but not limited to, a Dispute based on or arising from an alleged
tort, shall at the request of any party be resolved by binding arbitration in
accordance with the applicable arbitration rules of the American Arbitration
Association (the "Administrator"). The provisions of this arbitration clause
shall survive any termination, amendment, or expiration of this agreement or
Related Agreements. The provisions of this arbitration clause shall supersede
any prior arbitration agreement between or among the parties.
(continued) PROMISSORY NOTE Page 3
================================================================================
(b) The arbitration proceedings shall be conducted in a city mutually agreed by
the parties. Absent such an agreement, arbitration will be conducted in Salt
Lake City, Utah or such other place as may be determined by the Administrator.
The Administrator and the arbitrator(s) shall have the authority to the extent
practicable to take any action to require the arbitration proceeding to be
completed and the arbitrator(s)' award issued within 150 days of the filing of
the Dispute with the Administrator. The arbitrator(s) shall have the authority
to impose sanctions on any party that fails to comply with time periods imposed
by the Administrator or the arbitrator(s), including the sanction of summarily
dismissing any Dispute or defense with prejudice. The arbitrator(s) shall have
the authority to resolve any Dispute regarding the terms of this agreement, this
arbitration clause, or Related Agreements, including any claim or controversy
regarding the arbitrability of any Dispute. All limitations periods applicable
to any Dispute or defense, whether by statute or agreement, shall apply to any
arbitration proceeding hereunder and the arbitrator(s) shall have the authority
to decide whether any Dispute or defense is barred by a limitations period and,
if so, to summarily enter an award dismissing any Dispute or defense on that
basis. The doctrines of compulsory counterclaim, res judicata, and collateral
estoppel shall apply to any arbitration proceeding hereunder so that a party
must state as a counterclaim in the arbitration proceeding any claim or
controversy which arises out of the transaction or occurrence that is the
subject matter of the Dispute. The arbitrator(s) may in the arbitrator(s)'
discretion and at the request of any party: (1) consolidate in a single
arbitration proceeding any other claim arising out of the same transaction
involving another party to that transaction that is bound by an arbitration
clause with Lender, such as borrowers, guarantors, sureties, and owners of
collateral; and (2) consolidate or administer multiple arbitration claims or
controversies as a class action in accordance with Rule 23 of the Federal Rules
of Civil Procedure.
(c) The arbitrator(s) shall be selected in accordance with the rules of the
Administrator from panels maintained by the Administrator. A single arbitrator
shall have expertise in the subject matter of the Dispute. Where three
arbitrators conduct an arbitration proceeding, the Dispute shall be decided by a
majority vote of the three arbitrators, at least one of whom must have expertise
in the subject matter of the Dispute and at least one of whom must be a
practicing attorney. The arbitrator(s) shall award to the prevailing party
recovery of all costs and fees (including attorneys' fees and costs, arbitration
administration fees and costs, and arbitrator(s)' fees). The arbitrator(s),
either during the pendency of the arbitration proceeding or as part of the
arbitration award, also may grant provisional or ancillary remedies including
but not limited to an award of injunctive relief, foreclosure, sequestration,
attachment, replevin, garnishment, or the appointment of a receiver.
(d) Judgement upon an arbitration award may be entered in any court having
jurisdiction, subject to the following limitation: the arbitration award is
binding upon the parties only if the amount does not exceed Four Million Dollars
($4,000,000.00); if the award exceeds that limit, either party may demand the
right to a court trial. Such a demand must be filed with the Administrator
within thirty (30) days following the date of the arbitration award; if such a
demand is not made with that time period, the amount of the arbitration award
shall be binding. The computation of the total amount of an arbitration award
shall include amounts awarded for attorneys' fees and costs, arbitration
administration fees and costs, and arbitrator(s)' fees.
(e) No provision of this arbitration clause, nor the exercise of any rights
hereunder, shall limit the right of any party to: (1) judicially or
non-judicially foreclose against any real or personal property collateral or
other security; (2) exercise self-help remedies, including but not limited to
repossession and setoff rights; or (3) obtain from a court having jurisdiction
thereover any provisional or ancillary remedies including but not limited to
injunctive relief, foreclosure, sequestration, attachment, replevin,
garnishment, or the appointment of a receiver. Such rights can be exercised at
any time, before or after initiation of an arbitration proceeding, except to the
extent such action is contrary to the arbitration award. The exercise of such
rights shall not constitute a waiver of the right to submit any Dispute to
arbitration, and any claim or controversy related to the exercise of such rights
shall be a Dispute to be resolved under the provisions of this arbitration
clause. Any party may initiate arbitration with the Administrator. If any party
desires to arbitrate a Dispute asserted against such party in a complaint,
counterclaim, cross-claim, or third-party complaint thereto, or in an answer or
other reply to any such pleading, such party must make an appropriate motion to
the trial court seeking to compel arbitration, which motion must be filed with
the court within 45 days of service of the pleading, or amendment thereto,
setting forth such Dispute. If arbitration is compelled after commencement of
litigation of a Dispute, the party obtaining an order compelling arbitration
shall commence arbitration and pay the Administrator's filing fees and costs
within 45 days of entry of such order. Failure to do so shall constitute an
agreement to proceed with litigation and waiver of the right to arbitrate. In
any arbitration commenced by a consumer regarding a consumer Dispute, Lender
shall pay one half of the Administrator's filing fee, up to $250.
(f) Notwithstanding the applicability of any other law to this agreement, the
arbitration clause, or Related Agreements between or among the parties, the
Federal Arbitration Act, 9 U.S.C. Section 1 et seq., shall apply to the
construction and interpretation of this arbitration clause. If any provision of
this arbitration clause should be determined to be unenforceable, all other
provisions of this arbitration clause shall remain in full force and effect.
WAIVER OF CLAIMS. BORROWER (I) REPRESENTS THAT IT HAS NO DEFENSES TO OR SETOFFS
AGAINST ANY INDEBTEDNESS OR OTHER OBLIGATIONS OWING TO LENDER OR ITS AFFILIATES
(THE "OBLIGATIONS"), NOR CLAIMS AGAINST LENDER OR ITS AFFILIATES FOR ANY MATTER
WHATSOEVER, RELATED OR UNRELATED TO THE OBLIGATIONS, AND (ii) RELEASES LENDER
AND ITS AFFILIATES FROM ALL CLAIMS, CAUSES OF ACTION, AND COSTS, IN LAW OR
EQUITY, EXISTING AS OF THE DATE OF THIS NOTE, WHICH BORROWER HAS OR MAY HAVE BY
REASON OF ANY MATTER OR ANY CONCEIVABLE KIND OR CHARACTER WHATSOEVER, RELATED OR
UNRELATED TO THE OBLIGATIONS, INCLUDING THE SUBJECT MATTER OF THIS NOTE. THIS
PROVISION SHALL NOT APPLY TO CLAIMS FOR PERFORMANCE OF EXPRESS CONTRACTUAL
OBLIGATIONS OWING TO BORROWER BY LENDER OR ITS AFFILIATES.
PRIOR NOTE. THIS IS A RENEWAL OF A PROMISSORY NOTE FROM BORROWER TO LENDER DATED
NOVEMBER 25, 2002, IN THE ORIGINAL PRINCIPAL AMOUNT OF $4,500,000.00.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The obligations
under this Note are joint and several.
(continued) PROMISSORY NOTE Page 4
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PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
DYNATRONICS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇., President/CEO of DYNATRONICS CORPORATION
Note-dynatronics.gsmith/legal servcies
COMMERCIAL SECURITY AGREEMENT
Grantor: DYNATRONICS CORPORATION Lender: ZIONS FIRST NATIONAL BANK
7030 PARK CENTRE DRIVE SALT LAKE COMMERCIAL BANKING
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ DIVISION
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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THIS COMMERCIAL SECURITY AGREEMENT dated December 5, 2003, is made and executed
between DYNATRONICS CORPORATION ("Grantor") and ZIONS FIRST NATIONAL BANK
("Lender").
GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender
a security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.
COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:
All Inventory, Chattel Paper, Accounts and General Intangibles
In addition, the word "Collateral" also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(A) All accessions, attachments, accessories, tools, parts, supplies,
replacements of and additions to any of the collateral described
herein, whether added now or later.
(B) All products and produce of any of the property described in this
Collateral section.
(C) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or
other disposition of any of the property described in this
Collateral section.
(D) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section, and sums due from a third
party who has damaged or destroyed the Collateral or from that
party's insurer, whether due to judgment, settlement or other
process.
(E) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing,
photograph, microfilm, microfiche, or electronic media, together
with all of Grantor's right, title, and interest in and to all
computer software required to utilize, create, maintain, and
process any such records or data on electronic media.
Despite any other provision of this Agreement, Lender is not granted, and will
not have, a nonpurchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law. In
addition, if because of the type of any Property, Lender is required to give a
notice of the right to cancel under Truth in Lending for the Indebtedness, then
Lender will not have a security interest in such Collateral unless and until
such a notice is given.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any ▇▇▇ or ▇▇▇▇▇ accounts, or any trust accounts
for which setoff would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph. Lender agrees not to
exercise this right of setoff unless an Event of Default continues to exist
fifteen (15) days after Lender's notification to Borrower of such default.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:
Perfection of Security Interest. Grantor agrees to execute financing
statements and to take whatever other actions are requested by Lender
to perfect and continue Lender's security interest in the Collateral.
Upon request of Lender, Grantor will deliver to Lender any and all of
the documents evidencing or constituting the Collateral, and Grantor
will note Lender's interest upon any and all chattel paper if not
delivered to Lender for possession by Lender. This is a continuing
Security Agreement and will continue in effect even though all or any
part of the Indebtedness is paid in full and even though for a period
of time Grantor may not be indebted to Lender.
Notices to Lender. Grantor will promptly notify Lender in writing at
Lender's address shown above (or such other addresses as Lender may
designate from time to time) prior to any (1) change in Grantor's name;
(2) change in Grantor's assumed business name(s); (3) change in the
management positions of the Corporation Grantor for Chairman of the
Board, CEO, CFO, or President; (4) change in the authorized signer(s);
(5) change in Grantor's principal office address; (6) change in
Grantor's state of organization; (7) conversion of Grantor to a new or
different type of business entity; or (8) change in any other aspect of
Grantor that directly or indirectly relates to any agreements between
Grantor and Lender. No change in Grantor's name or state of
organization will take effect until after Lender has received notice
(continued) COMMERCIAL SECURITY AGREEMENT Page 2
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No Violation. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a
party, and its certificate or articles of incorporation and bylaws do
not prohibit any term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, as defined by the
Uniform Commercial Code, the Collateral is enforceable in accordance
with its terms, is genuine, and fully complies with all applicable laws
and regulations concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral
have authority and capacity to contract and are in fact obligated as
they appear to be on the Collateral. At the time any Account becomes
subject to a security interest in favor of Lender, the Account shall be
a good and valid account representing an undisputed, bona fide
indebtedness incurred by the account debtor, for merchandise held
subject to delivery instructions or previously shipped or delivered
pursuant to a contract of sale, or for services previously performed by
Grantor with or for the account debtor.
Location of the Collateral. Except in the ordinary course of Grantor's
business, Grantor agrees to keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts or general
intangibles, the records concerning the Collateral) at Grantor's
address shown above or at such other locations as are acceptable to
Lender. Upon Lender's request, Grantor will deliver to Lender in form
satisfactory to Lender a schedule of real properties and Collateral
locations relating to Grantor's operations, including without
limitation the following: (1) all real property Grantor owns or is
purchasing; (2) all real property Grantor is renting or leasing; (3)
all storage facilities Grantor owns, rents, leases, or uses; and (4)
all other properties where Collateral is or may be located.
Removal of the Collateral. Except in the ordinary course of Grantor's
business, including the sales of inventory, Grantor shall not remove
the Collateral from its existing location without Lender's prior
written consent. To the extent that the Collateral consists of
vehicles, or other titled property, Grantor shall not take or permit
any action which would require application for certificates of title
for the vehicles outside the State of Utah, without Lender's prior
written consent. Grantor shall, whenever requested, advise Lender of
the exact location of the Collateral.
Transactions Involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business, or as
otherwise provided for in this Agreement, Grantor shall not sell, offer
to sell, or otherwise transfer or dispose of the Collateral. While
Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to
buyers who qualify as a buyer in the ordinary course of business. A
sale in the ordinary course of Grantor's business does not include a
transfer in partial or total satisfaction of a debt or any bulk sale.
Grantor shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest, encumbrance,
or charge, other than the security interest provided for in this
Agreement, without the prior written consent of Lender. This includes
security interests even if junior in right to the security interests
granted under this Agreement. Unless waived by Lender, all proceeds
from any disposition of the Collateral (for whatever reason) shall be
held in trust for Lender and shall not be commingled with any other
funds; provided however, this requirement shall not constitute consent
by Lender to any sale or other disposition. Upon receipt, Grantor shall
immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that Grantor holds
good and marketable title to the Collateral, free and clear of all
liens and encumbrances except for the lien of this Agreement. No
financing statement covering any of the Collateral is on file in any
public office other than those which reflect the security interest
created by this Agreement or to which Lender has specifically
consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
Repairs and Maintenance. Grantor agrees to keep and maintain, and to
cause others to keep and maintain, the Collateral in good order, repair
and condition at all times while this Agreement remains in effect.
Grantor further agrees to pay when due all claims for work done on, or
services rendered or material furnished in connection with the
Collateral so that no lien or encumbrance may ever attach to or be
filed against the Collateral.
Inspection of Collateral. Lender and Lender's designated
representatives and agents shall have the right at all reasonable times
to examine and inspect the Collateral wherever located.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon
this Agreement, upon any promissory note or notes evidencing the
Indebtedness, or upon any of the other Related Documents. Grantor may
withhold any such payment or may elect to contest any lien if Grantor
is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the Collateral is
not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs,
reasonable attorneys' fees or other charges that could accrue as a
result of foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender and shall satisfy any final adverse
judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in the
contest proceedings. Grantor further agrees to furnish Lender with
evidence that such taxes, assessments, and governmental and other
charges have been paid in full and in a timely manner. Grantor may
withhold any such payment or may elect to contest any lien if Grantor
is in good faith conducting an appropriate proceeding to contest the
obligation to pay and so long as Lender's interest in the Collateral is
not jeopardized.
Compliance with Governmental Requirements. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable to the
ownership, production, disposition, or use of the Collateral, including
all laws or regulations relating to the undue erosion of
highly-erodible land or relating to the conversion of wetlands for the
production of an agricultural product or commodity. Grantor may contest
in good faith any such law, ordinance or regulation and withhold
compliance during any proceeding, including appropriate appeals, so
long as Lender's interest in the Collateral, in Lender's opinion, is
not jeopardized.
Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement
remains a lien on the Collateral, used in violation of any
Environmental Laws or for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of
any Hazardous Substance. The representations and warranties contained
herein are based on Grantor's due diligence in investigating the
(continued) COMMERCIAL SECURITY AGREEMENT Page 3
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Collateral for Hazardous Substances. Grantor hereby (1) releases and
waives any future claims against Lender for indemnity or contribution
in the event Grantor becomes liable for cleanup or other costs under
any Environmental Laws, and (2) agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach of
this provision of this Agreement. This obligation to indemnify shall
survive the payment of the Indebtedness and the satisfaction of this
Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain
all risks insurance, including without limitation fire, theft and
liability coverage together with such other insurance as Lender may
require with respect to the Collateral, in form, amounts, coverages and
basis reasonably acceptable to Lender and issued by a company or
companies reasonably acceptable to Lender. Grantor, upon request of
Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without
at least ten (10) days' prior written notice to Lender and not
including any disclaimer of the insurer's liability for failure to give
such a notice. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default of Grantor or any other person. In
connection with all policies covering assets in which Lender holds or
is offered a security interest, Grantor will provide Lender with such
loss payable or other endorsements as Lender may require. If Grantor at
any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such
insurance as Lender deems appropriate, including if Lender so chooses
"single interest insurance," which will cover only Lender's interest in
the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender
of any loss or damage to the Collateral. Lender may make proof of loss
if Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed
Collateral, Lender shall, upon satisfactory proof of expenditure, pay
or reimburse Grantor from the proceeds for the reasonable cost of
repair or restoration. If Lender does not consent to repair or
replacement of the Collateral, Lender shall retain a sufficient amount
of the proceeds to pay all of the Indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been disbursed within
six (6) months after their receipt and which Grantor has not committed
to the repair or restoration of the Collateral shall be used to prepay
the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Grantor of a sum estimated by Lender
to be sufficient to produce, at least fifteen (15) days before the
premium due date, amounts at least equal to the insurance premiums to
be paid. If fifteen (15) days before payment is due, the reserve funds
are insufficient, Grantor shall upon demand pay any deficiency to
Lender. The reserve funds shall be held by Lender as a general deposit
and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by
Grantor as they become due. Lender does not hold the reserve funds in
trust for Grantor, and Lender is not the agent of Grantor for payment
of the insurance premiums required to be paid by Grantor. The
responsibility for the payment of premiums shall remain Grantor's sole
responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following:
(1) the name of the insurer; (2) the risks insured; (3) the amount of
the policy; (4) the property insured; (5) the then current value on the
basis of which insurance has been obtained and the manner of
determining that value; and (6) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to Lender
determine, as applicable, the cash value or replacement cost of the
Collateral.
Financing Statements. Grantor authorizes Lender to file a UCC-1
financing statement, or alternatively, a copy of this Agreement to
perfect Lender's security interest. At Lender's request, Grantor
additionally agrees to sign all other documents that are necessary to
perfect, protect, and continue Lender's security interest in the
Property. Grantor will pay all filing fees, title transfer fees, and
other fees and costs involved unless prohibited by law or unless Lender
is required by law to pay such fees and costs. Grantor irrevocably
appoints Lender to execute financing statements and documents of title
in Grantor's name and to execute all documents necessary to transfer
title if there is a default. Lender may file a copy of this Agreement
as a financing statement. If Grantor changes Grantor's name or address,
or the name or address of any person granting a security interest under
this Agreement changes, Grantor will promptly notify the Lender of such
change.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness. Lender agrees not to exercise this right until fifteen (15) days
after Lender's notification to Borrower.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses will become a part
of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B)
be added to the balance of the Note and be apportioned among and be payable with
any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity. The Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default. When delay of expenditure will not materially affect
Lender's interest in the Collateral, Lender agrees to provide Borrower fifteen
(15) days notice of its intent to incur costs for which Borrower will be
responsible under the terms of this Agreement.
(continued) COMMERCIAL SECURITY AGREEMENT Page 4
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DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
Payment Default. Grantor fails to make any payment when due under the
Indebtedness.
Other Defaults. Grantor fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or
in any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Grantor or on Grantor's behalf under this
Agreement or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished or
becomes false or misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any collateral document to create a valid and perfected security
interest or lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a
receiver for any part of Grantor's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against any collateral securing the Indebtedness.
This includes a garnishment of any of Grantor's accounts, including
deposit accounts, with Lender. However, this Event of Default shall not
apply if there is a good faith dispute by Grantor as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Grantor gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate
reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to guarantor, endorser, surety, or accommodation party of any
of the Indebtedness or guarantor, endorser, surety, or accommodation
party dies or becomes incompetent or revokes or disputes the validity
of, or liability under, any Guaranty of the Indebtedness.
Adverse Change and Insecurity. A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of
payment or performance of the Loan is impaired or Lender in good faith
believes itself insecure. Lender agrees to provide Borrower notice of
any default under this provision describing the conditions of the
default and the terms under which the default may be cured, if any.
Cure Provisions. If any default, other than a default in payment is
curable, it may be cured (and no event of default will have occurred)
if Grantor, after receiving written notice from Lender demanding cure
of such default: (1) cures the default within fifteen (15) days; or (2)
if the cure requires more than fifteen (15) days, immediately initiates
steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon
as reasonably practical.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Utah Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to
pay, immediately due and payable, without notice of any kind to
Grantor.
Assemble Collateral. Lender may require Grantor to deliver to Lender
all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral. Lender may
require Grantor to assemble the Collateral and make it available to
Lender at a place to be designated by Lender. Lender also shall have
full power to enter upon the property of Grantor to take possession of
and remove the Collateral. If the Collateral contains other goods not
covered by this Agreement at the time of repossession, Grantor agrees
Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in
Lender's own name or that of Grantor. Lender may sell the Collateral at
public auction or private sale. Unless the Collateral threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Lender will give Grantor, and other persons as
required by law, reasonable notice of the time and place of any public
sale, or the time after which any private sale or any other disposition
of the Collateral is to be made. However, no notice need be provided to
any person who, after Event of Default occurs, enters into and
authenticates an agreement waiving that person's right to notification
of sale. The requirements of reasonable notice shall be met if such
notice is given at least ten (10) days before the time of the sale or
disposition. All expenses relating to the disposition of the
Collateral, including without limitation the expenses of retaking,
holding, insuring, preparing for sale and selling the Collateral, shall
become a part of the Indebtedness secured by this Agreement and shall
be payable on demand, with interest at the Note rate from date of
expenditure until repaid.
Appoint Receiver. Lender shall have the right to have a receiver
appointed to take possession of all or any part of the Collateral, with
the power to protect and preserve the Collateral, to operate the
Collateral preceding foreclosure or sale, and to collect the Rents from
the Collateral and apply the proceeds, over and above the cost of the
receivership, against the Indebtedness.Grantor hereby waives any
requirement that the receiver be impartial and disinterested as to all
of the parties and agrees that employment by Lender shall not
disqualify a person from serving as a receiver.
(continued) COMMERCIAL SECURITY AGREEMENT Page 5
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Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from
the Collateral. Lender may at any time in Lender's discretion transfer
any Collateral into Lender's own name or that of Lender's nominee and
receive the payments, rents, income, and revenues therefrom and hold
the same as security for the Indebtedness or apply it to payment of the
Indebtedness in such order of preference as Lender may determine.
Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or
similar property, Lender may demand, collect, receipt for, settle,
compromise, adjust, ▇▇▇ for, foreclose, or realize on the Collateral as
Lender may determine, whether or not Indebtedness or Collateral is then
due. For these purposes, Lender may, on behalf of and in the name of
Grantor, receive, open and dispose of mail addressed to Grantor; change
any address to which mail and payments are to be sent; and endorse
notes, checks, drafts, money orders, documents of title, instruments
and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors
and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any
deficiency remaining on the Indebtedness due to Lender after
application of all amounts received from the exercise of the rights
provided in this Agreement. Grantor shall be liable for a deficiency
even if the transaction described in this subsection is a sale of
accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Uniform
Commercial Code, as may be amended from time to time. In addition,
Lender shall have and may exercise any or all other rights and remedies
it may have available at law, in equity, or otherwise.
Election of Remedies. Except as may be prohibited by applicable law,
all of Lender's rights and remedies, whether evidenced by this
Agreement, the Related Documents, or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to
perform an obligation of Grantor under this Agreement, after Grantor's
failure to perform, shall not affect Lender's right to declare a
default and exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
Arbitration Disclosures.
1. ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO ONLY
VERY LIMITED REVIEW BY A COURT.
2. IN ARBITRATION THE PARTIES ARE WAIVING THEIR RIGHT TO LITIGATE IN
COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
3. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
4. ARBITRATORS ARE NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING IN THEIR AWARDS. THE RIGHT TO APPEAL OR SEEK MODIFICATION OF
ARBITRATORS' RULINGS IS VERY LIMITED.
5. A PANEL OF ARBITRATORS MIGHT INCLUDE AN ARBITRATOR WHO IS OR WAS
AFFILIATED WITH THE BANKING INDUSTRY.
6. ARBITRATION WILL APPLY TO ALL DISPUTES BETWEEN THE PARTIES, NOT JUST
THOSE CONCERNING THE AGREEMENT.
7. IF YOU HAVE QUESTIONS ABOUT ARBITRATION, CONSULT YOUR ATTORNEY OR
THE AMERICAN ARBITRATION ASSOCIATION.
(a) Any claim or controversy ("Dispute") between or among the parties
and their employees, agents, affiliates, and assigns, including, but
not limited to, Disputes arising out of or relating to this agreement,
this arbitration provision ("arbitration clause"), or any related
agreements or instruments relating hereto or delivered in connection
herewith ("Related Agreements"), and including, but not limited to, a
Dispute based on or arising from an alleged tort, shall at the request
of any party be resolved by binding arbitration in accordance with the
applicable arbitration rules of the American Arbitration Association
(the "Administrator"). The provisions of this arbitration clause shall
survive any termination, amendment, or expiration of this agreement or
Related Agreements. The provisions of this arbitration clause shall
supersede any prior arbitration agreement between or among the parties.
(b) The arbitration proceedings shall be conducted in a city mutually
agreed by the parties. Absent such an agreement, arbitration will be
conducted in Salt Lake City, Utah or such other place as may be
determined by the Administrator. The Administrator and the
arbitrator(s) shall have the authority to the extent practicable to
take any action to require the arbitration proceeding to be completed
and the arbitrator(s)' award issued within 150 days of the filing of
the Dispute with the Administrator. The arbitrator(s) shall have the
authority to impose sanctions on any party that fails to comply with
time periods imposed by the Administrator or the arbitrator(s),
including the sanction of summarily dismissing any Dispute or defense
with prejudice. The arbitrator(s) shall have the authority to resolve
any Dispute regarding the terms of this agreement, this arbitration
clause, or Related Agreements, including any claim or controversy
regarding the arbitrability of any Dispute. All limitations periods
applicable to any Dispute or defense, whether by statute or agreement,
shall apply to any arbitration proceeding hereunder and the
arbitrator(s) shall have the authority to decide whether any Dispute or
defense is barred by a limitations period and, if so, to summarily
enter an award dismissing any Dispute or defense on that basis. The
doctrines of compulsory counterclaim, res judicata, and collateral
estoppel shall apply to any arbitration proceeding hereunder so that a
party must state as a counterclaim in the arbitration proceeding any
claim or controversy which arises out of the transaction or occurrence
that is the subject matter of the Dispute. The arbitrator(s) may in the
arbitrator(s)' discretion and at the request of any party: (1)
consolidate in a single arbitration proceeding any other claim arising
out of the same transaction involving another party to that transaction
that is bound by an arbitration clause with Lender, such as borrowers,
guarantors, sureties, and owners of collateral; and (2) consolidate or
administer multiple arbitration claims or controversies as a class
action in accordance with Rule 23 of the Federal Rules of Civil
Procedure.
(c) The arbitrator(s) shall be selected in accordance with the rules of
the Administrator from panels maintained by the Administrator. A single
arbitrator shall have expertise in the subject matter of the Dispute.
Where three arbitrators conduct an arbitration proceeding, the Dispute
shall be decided by a majority vote of the three arbitrators, at least
one of whom must have expertise in the subject matter of the Dispute
and at least one of whom must be a practicing attorney. The
arbitrator(s) shall award to the prevailing party recovery of all costs
and fees (including attorneys' fees and costs, arbitration
administration fees and costs, and arbitrator(s)' fees). The
arbitrator(s), either during the pendency of the arbitration proceeding
or as part of the arbitration award, also may grant provisional or
ancillary remedies including but not limited to an award of injunctive
relief, foreclosure, sequestration, attachment, replevin, garnishment,
or the appointment of a receiver.
(continued) COMMERCIAL SECURITY AGREEMENT Page 6
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(d) Judgement upon an arbitration award may be entered in any court
having jurisdiction, subject to the following limitation: the
arbitration award is binding upon the parties only if the amount does
not exceed Four Million Dollars ($4,000,000.00); if the award exceeds
that limit, either party may demand the right to a court trial. Such a
demand must be filed with the Administrator within thirty (30) days
following the date of the arbitration award; if such a demand is not
made with that time period, the amount of the arbitration award shall
be binding. The computation of the total amount of an arbitration award
shall include amounts awarded for attorneys' fees and costs,
arbitration administration fees and costs, and arbitrator(s)' fees.
(e) No provision of this arbitration clause, nor the exercise of any
rights hereunder, shall limit the right of any party to: (1) judicially
or non-judicially foreclose against any real or personal property
collateral or other security; (2) exercise self-help remedies,
including but not limited to repossession and setoff rights; or (3)
obtain from a court having jurisdiction thereover any provisional or
ancillary remedies including but not limited to injunctive relief,
foreclosure, sequestration, attachment, replevin, garnishment, or the
appointment of a receiver. Such rights can be exercised at any time,
before or after initiation of an arbitration proceeding, except to the
extent such action is contrary to the arbitration award. The exercise
of such rights shall not constitute a waiver of the right to submit any
Dispute to arbitration, and any claim or controversy related to the
exercise of such rights shall be a Dispute to be resolved under the
provisions of this arbitration clause. Any party may initiate
arbitration with the Administrator. If any party desires to arbitrate a
Dispute asserted against such party in a complaint, counterclaim,
cross-claim, or third-party complaint thereto, or in an answer or other
reply to any such pleading, such party must make an appropriate motion
to the trial court seeking to compel arbitration, which motion must be
filed with the court within 45 days of service of the pleading, or
amendment thereto, setting forth such Dispute. If arbitration is
compelled after commencement of litigation of a Dispute, the party
obtaining an order compelling arbitration shall commence arbitration
and pay the Administrator's filing fees and costs within 45 days of
entry of such order. Failure to do so shall constitute an agreement to
proceed with litigation and waiver of the right to arbitrate. In any
arbitration commenced by a consumer regarding a consumer Dispute,
Lender shall pay one half of the Administrator's filing fee, up to
$250.
(f) Notwithstanding the applicability of any other law to this
agreement, the arbitration clause, or Related Agreements between or
among the parties, the Federal Arbitration Act, 9 U.S.C. Section 1 et
seq., shall apply to the construction and interpretation of this
arbitration clause. If any provision of this arbitration clause should
be determined to be unenforceable, all other provisions of this
arbitration clause shall remain in full force and effect.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including Lender's reasonable attorneys'
fees and Lender's legal expenses, incurred in connection with the
enforcement of this Agreement. Lender may hire or pay someone else to
help enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's
reasonable attorneys' fees and legal expenses whether or not Lender's
salaried employee and whether or not there is a lawsuit, including
reasonable attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Grantor also shall pay all court costs and such additional
fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
Governing Law. This Agreement will be governed by, construed and
enforced in accordance with federal law and the laws of the State of
Utah. This Agreement has been accepted by Lender in the State of Utah.
Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender's
request to submit to the jurisdiction of the courts of SALT LAKE
County, State of Utah.
No Waiver by Lender. Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any
other right. A waiver by Lender of a provision of this Agreement shall
not prejudice or constitute a waiver of Lender's right otherwise to
demand strict compliance with that provision or any other provision of
this Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Grantor, shall constitute a waiver of any of
Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall
not constitute continuing consent to subsequent instances where such
consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
Notices. Unless otherwise provided by applicable law, any notice
required to be given under this Agreement or required by law shall be
given in writing, and shall be effective when actually delivered in
accordance with the law or with this Agreement, when actually received
by telefacsimile (unless otherwise required by law), when deposited
with a nationally recognized overnight courier, or, if mailed, when
deposited in the United States mail, as first class, certified or
registered mail postage prepaid, directed to the addresses shown near
the beginning of this Agreement. Any party may change its address for
notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change
the party's address. For notice purposes, Grantor agrees to keep Lender
informed at all times of Grantor's current address. Unless otherwise
provided by applicable law, if there is more than one Grantor, any
notice given by Lender to any Grantor is deemed to be notice given to
all Grantors.
Power of Attorney. Grantor hereby appoints Lender as Grantor's
irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect, amend, or to continue the security interest
granted in this Agreement or to demand termination of filings of other
secured parties. Lender may at any time, and without further
authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as
a financing statement. Grantor will reimburse Lender for all expenses
for the perfection and the continuation of the perfection of Lender's
security interest in the Collateral.
(continued) COMMERCIAL SECURITY AGREEMENT Page 7
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Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be illegal, invalid, or unenforceable as to any
circumstance, that finding shall not make the offending provision
illegal, invalid, or unenforceable as to any other circumstance. If
feasible, the offending provision shall be considered modified so that
it becomes legal, valid and enforceable. If the offending provision
cannot be so modified, it shall be considered deleted from this
Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement
shall not affect the legality, validity or enforceability of any other
provision of this Agreement.
Successors and Assigns. Subject to any limitations stated in this
Agreement on transfer of Grantor's interest, this Agreement shall be
binding upon and inure to the benefit of the parties, their successors
and assigns. If ownership of the Collateral becomes vested in a person
other than Grantor, Lender, without notice to Grantor, may deal with
Grantor's successors with reference to this Agreement and the
Indebtedness by way of forbearance or extension without releasing
Grantor from the obligations of this Agreement or liability under the
Indebtedness.
Survival of Representations and Warranties. All representations,
warranties, and agreements made by Grantor in this Agreement shall
survive the execution and delivery of this Agreement, shall be
continuing in nature, and shall remain in full force and effect until
such time as Grantor's Indebtedness shall be paid in full.
Time is of the Essence. Time is of the essence in the performance of
this Agreement.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code:
Account. The word "Account" means a trade account, account receivable,
other receivable, or other right to payment for goods sold or services
rendered owing to Grantor (or to a third party grantor acceptable to
Lender).
Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Commercial Security Agreement from time to time.
Borrower. The word "Borrower" means DYNATRONICS CORPORATION and
includes all co-signers and co-makers signing the Note.
Collateral. The word "Collateral" means all of Grantor's right, title
and interest in and to all the Collateral as described in the
Collateral Description section of this Agreement.
Default. The word "Default" means the Default set forth in this
Agreement in the section titled "Default".
Environmental Laws. The words "Environmental Laws" mean any and all
state, federal and local statutes, regulations and ordinances relating
to the protection of human health or the environment, including without
limitation the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986,
Pub. L. No. 99-499 ("▇▇▇▇"), the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable
state or federal laws, rules, or regulations adopted pursuant thereto.
Event of Default. The words "Event of Default" mean any of the events
of default set forth in this Agreement in the default section of this
Agreement.
Grantor. The word "Grantor" means DYNATRONICS CORPORATION.
Guaranty. The word "Guaranty" means the guaranty from guarantor,
endorser, surety, or accommodation party to Lender, including without
limitation a guaranty of all or part of the Note.
Hazardous Substances. The words "Hazardous Substances" mean materials
that, because of their quantity, concentration or physical, chemical or
infectious characteristics, may cause or pose a present or potential
hazard to human health or the environment when improperly used,
treated, stored, disposed of, generated, manufactured, transported or
otherwise handled. The words "Hazardous Substances" are used in their
very broadest sense and include without limitation any and all
hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws. The term "Hazardous Substances"
also includes, without limitation, petroleum and petroleum by-products
or any fraction thereof and asbestos.
Indebtedness. The word "Indebtedness" means and includes without
limitation all Advances made under this Agreement, as well as all
claims by Lender against Borrower under this Agreement,; whether now or
hereafter existing, voluntary or involuntary, due or not due, absolute
or contingent, liquidated or unliquidated; whether Borrower may be
liable individually or jointly with others; whether recovery upon such
indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such indebtedness may be or hereafter may
become otherwise unenforceable.
Lender. The word "Lender" means ZIONS FIRST NATIONAL BANK, its
successors and assigns.
Note. The word "Note" means the Note executed by DYNATRONICS
CORPORATION in the principal amount of $4,500,000.00 dated December 5,
2003, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the note or
credit agreement.
Property. The word "Property" means all of Grantor's right, title and
interest in and to all the Property as described in the "Collateral
Description" section of this Agreement.
Related Documents. The words "Related Documents" mean all promissory
notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security
deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
(continued) COMMERCIAL SECURITY AGREEMENT Page 8
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GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED DECEMBER 5, 2003.
GRANTOR:
DYNATRONICS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇., President/CEO of DYNATRONICS CORPORATION
Sec agmt-dynatronics/gsmith/legalservices