SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
National Insurance Group
(Name of Issuer)
Common Stock
(Title of Class of Securities)
636525107
(CUSIP Number)
Mark A. Speizer
395 Oyster Point Blvd., Suite 500
South San Francisco, CA 94080-1933
(415) 872-6772
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
April 14, 1997
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 5
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SCHEDULE 13D
CUSIP No. 636525107 Page 2 of 5 Pages
1 Name Of Reporting Person
S.S. Or I.R.S. Identification No. Of Above Person
Mark A. Speizer
2 Check The Appropriate Box If A Member Of A Group
(a) [ ]
(b) [X]
_________________________________________________________________
3 SEC USE ONLY
_________________________________________________________________
4 Source Of Funds
00
5 Check Box If Disclosure Of Legal Proceedings Is Required Pursuant To
Items 2(d) Or 2(e)
[ ]
6 Citizenship Or Place Of Organization
United States
7 Number Of Shares Beneficially Owned By Each Reporting Person With
Sole Voting Power
1,945,968
8 Number Of Shares Beneficially Owned By Each Reporting Person With
Shared Voting Power
7,200
9 Number Of Shares Beneficially Owned By Each Reporting Person With
Sole Dispositive Power
1,945,968
10 Number Of Shares Beneficially Owned By Each Reporting Person With
Shared Dispositive Power
7,200
11 Aggregate Amount Beneficially Owned By Each Reporting Person
1,953,168
12 Check Box If The Aggregate Amount In Row (11) Excludes Certain
Shares
[ ]
13 Percent Of Class Represented By Amount In Row (11)
49.2%
14 Type Of Reporting Person
IN
<PAGE>
Items 2, 3, 4, 6 and 7 of the Statement on Schedule 13D, as amended (the
"Schedule 13D") filed pursuant to Rule 13d-1 of the Rules and Regulations
under the Securities Exchange Act of 1934, as amended, by Mark A. Speizer
relating to the Common Stock ("Common Stock") of National Insurance Group, a
California corporation (the "Company"), are hereby amended by adding to such
items the information set forth below. Item 5 of the Schedule 13D is hereby
amended in full to read as set forth below. Capitalized terms not otherwise
defined herein shall have the meaning given to them in the Schedule 13D. This
filing is made promptly after April 14, 1997, the date upon which it was
determined that no further regulatory approvals were required for the
transactions disclosed in this filing.
ITEM 2. IDENTITY AND BACKGROUND
Mr. Speizer's principal business address is 395 Oyster Point Boulevard, Suite
500, South San Francisco, California 94080-1933. Mr. Speizer is the Chairman
of the Board of Directors and Chief Executive Officer of the Company.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Mr. Speizer and Arabella have agreed that Arabella will accept as payment in
full of the obligations owing by Mr. Speizer to Arabella under the Arabella
Note on the payment date thereof, which shall be not later than June 30, 1997,
the sum of $2,000,000 in cash and 300,000 shares of Common Stock. Such number
of shares may be adjusted for any stock splits, stock dividends or other
adjustments with respect to the Common Stock prior to such payment date. Mr.
Speizer and Arabella have agreed that the value of such payment by Mr. Speizer
is equal to the amount of such obligations owing under the Arabella Note. On
April 14, 1997, it was determined that no further regulatory approvals were
required for such transaction.
ITEM 4. PURPOSE OF TRANSACTION
On April 14, 1997, it was determined that no further regulatory approvals were
required for the transactions described below. Pursuant to the Purchase and
Sale Agreement between Mr. Speizer and Scorpion Acquisition LLC, a Delaware
limited liability company ("Scorpion LLC") dated February 27, 1997 (the
"Purchase Agreement"), Scorpion LLC has agreed to sell, and Mr. Speizer has
agreed to purchase, all of the rights and interests conveyed by Mr. Speizer to
Scorpion, LLC under the Term Sheet (the "Rights"). The closing of such
transaction is scheduled to take place not later than June 30, 1997. In
consideration for Scorpion LLC's sale of the Rights to Mr. Speizer, Mr.
Speizer will pay to Scorpion LLC an amount equal to the greater of $4,000,000
or 50% of the notional profits that would have been earned on a notional
924,000 shares of Common Stock with a notional cost of $7.75 per share, each
subject to certain defined adjustments. Profits are determined by reference
to the average closing price of Common Stock (and the average closing price of
securities other than Common Stock paid by dividend, spin-off or otherwise on
Common Stock ["Distributed Stock"]) during the fifteen business days preceding
and the fifteen business days following June 30, 2002, or if Scorpion LLC has
made an election permitted under the Purchase Agreement, that date between
January 1, 2000 and June 30, 2002 that is so elected. Mr. Speizer may pay the
purchase price in cash or in shares of Common Stock or Distributed Stock,
subject to having received any necessary approvals or exemptions from the
California Insurance Commissioner as may be required by statute or regulation.
Page 3 of 5
<PAGE>
The transactions under the Purchase Agreement are specifically conditioned
upon the parties having received the necessary approvals or exceptions from
the California Insurance Commissioner as may be required by statute or
regulation. Mr. Speizer has advised the Commissioner of the transactions.
It was determined on April 14, 1997, that no further regulatory approvals were
required for the transactions.
See Item 3 above for a description of the proposed transfer by Mr. Speizer of
shares of Common Stock to Arabella in partial payment of the Arabella Note.
Mr. Speizer has been advised that two existing members of the Board of
Directors of the Company will not stand for re-election at the next annual
meeting of shareholders, and is considering plans to propose other candidates
to fill their vacancies.
Subject to the foregoing, Mr. Speizer intends to review on a continuing basis
his investment in the Common Stock of the Company and may, subject to the
continuing evaluation of the factors discussed herein, acquire or dispose from
time to time additional shares in the open market or in privately negotiated
transactions. Depending on the factors discussed herein, Mr. Speizer may,
from time to time, retain or sell all or a portion of his holdings of the
shares in the open market or in privately negotiated transactions. Any action
that he might undertake with respect to the shares will be dependent upon his
individual review of numerous factors, including, among other things, the
availability of shares for purchase and the price levels of such shares,
general market and economic conditions, ongoing evaluation of the Company's
business, financial condition, operations and prospects, the relative
attractiveness of alternative business and investment opportunities, the
actions of the management and the Board of Directors of the Company, and other
future developments.
Although the foregoing reflects activities currently contemplated
by Mr. Speizer with respect to the Company, the foregoing is subject to change
by Mr. Speizer at any time, and there can be no assurance that he will
purchase or dispose of additional shares or take any of the other actions
referred to above. Except as set forth above, Mr. Speizer has no present
plans or intentions that would result in or relate to any of the transactions
described in subparagraphs (a) through (j) in Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Mr. Speizer is the beneficial owner of 1,953,168 shares (49.2%) of the
Company's outstanding Common Stock (the "Speizer Shares"), which includes the
300,000 shares of Common Stock which Mr. Speizer has agreed to transfer to
Arabella, as described in item 2 above. Of the foregoing, 71,459 are shares
Mr. Speizer may acquire by exercise of certain options, which are fully vested
and may be exercised at any time. 2,400 of the Speizer Shares are owned by
Mr. Speizer's wife, Linda Speizer, and 2,400 of the Speizer Shares are owned
by each of Mr. Speizer's two daughters (Stacey M. Speizer and Stephanie L.
Speizer), for a total of 7,200 shares. Mr. Speizer disclaims any beneficial
ownership of those 7,200 shares. Mr. Speizer has sole dispositive and voting
power as to 1,945,968 of the Speizer Shares and may be considered to have
shared dispositive and voting power with his wife and daughters, as
applicable, as to 7,200 of the Speizer Shares.
Page 4 of 5
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Of the Speizer Shares, the following amounts have been pledged; (i) 436,614 to
the Pacific Bank, (ii) 200,000 to The Commercial Bank of San Francisco, and
(iii) 1,224,295 to the Sellers in connection with the Stock Purchase
Agreement.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
See Items 3 and 4 above for a description of the proposed transfer
by Mr. Speizer of shares of Common Stock to Arabella in partial payment of the
Arabella Note, and the Purchase and Sale Agreement.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
1. Purchase and Sale Agreement
2. Letter Agreement between Arabella and Mr. Speizer
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: April 17, 1997
/s/ Mark A. Speizer
Mark A. Speizer
Page 5 of 5
EXHIBIT 1
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (hereinafter referred to as the "Agreement")
is made as of the 27th day of February, 1997, by and between MARK A. SPEIZER
("Speizer"), and SCORPION ACQUISITION, LLC, a Delaware limited liability
company ("Scorpion").
RECITALS
WHEREAS, for good and valuable consideration, Speizer and Scorpion
entered into that certain Term Sheet for Option Agreement dated May 31, 1996
pursuant to which Speizer conveyed, and Scorpion acquired, the rights and
interests set forth therein (the "Rights").
WHEREAS, Scorpion and Speizer have agreed that it would be in their
mutual best interests for Speizer to purchase from Scorpion, and for Scorpion
to sell to Speizer, the Rights.
WHEREAS, Scorpion desires to sell, and Speizer desires to purchase, the
Rights for the consideration set forth in this Agreement, which Speizer and
Scorpion acknowledge and agree is fair and reasonable, and on the other terms
and conditions set forth in this Agreement.
WHEREAS, Scorpion and Speizer desire to enter into the agreements and
promissory notes in the form attached to this Agreement as Exhibits B and C.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations, and warranties contained in this Agreement, the parties
hereto do hereby agree as follows:
ARTICLE 1.
DEFINITIONS
For convenience, certain terms used in more than one part of this
Agreement are listed in alphabetical order and defined or referred to in
Exhibit A attached hereto and made a part hereof (such terms as well as any
other terms defined elsewhere in this Agreement shall be equally applicable to
both the singular and plural forms of the terms defined).
ARTICLE 2.
PURCHASE AND SALE OF RIGHTS
2.1 Purchase and Sale of Rights. At the Closing (as hereinafter defined in
Section 2.4), and subject to the terms and conditions set forth in this
Agreement, Scorpion shall sell, transfer, convey, and assign, and Speizer
shall purchase, all right, title and interest in and to the Rights.
2.2 Purchase Price. In consideration for Scorpion's sale of the Rights to
Speizer, Speizer shall pay to Scorpion an amount equal to: (a) the greater of
(i) the amount equal to 50% of the Index Profits, or (ii) the amount equal to
$4,000,000, less (b) a pro rata share of any legal, accounting, or transfer
costs and expenses actually incurred by the shareholders of National Insurance
Group ("NAIG") and/or holders of Distributed Stock with respect to shares of
NAIG common stock and/or Distributed Stock during that period because of a
dividend, distribution or spin-off of such stock, plus (c) if (a)(i) is
greater than (a)(ii), the Index Dividends. Speizer shall make such payment to
Scorpion LLC within thirty (30) days after June 30, 2002 or within one hundred
eighty (180) days after the Elected Payment Date, as the case may be.
Speizer, in his sole discretion, may pay such amount in cash and/or NAIG
common stock (but only if such securities are listed on a national securities
exchange or eligible for quotation on NASDAQ NMS or Small Cap) and/or
Distributed Stock (but only if such securities are listed on a national
securities exchange or eligible for quotation on NASDAQ NMS or Small Cap);
provided, however, that if any Distributed Stock exists that is so listed or
eligible for quotation and Speizer delivers to Scorpion any shares of NAIG
common stock or Distributed Stock that are subject to the resale limitations
of Rule 144 promulgated by the Securities and Exchange Commission (or any
successor rule thereto) without registration rights from the issuer of such
stock, Speizer shall deliver to Scorpion such number of shares of NAIG common
stock and each such Distributed Stock so that the value, as determined in
accordance with the following sentence, of the NAIG common stock and each such
Distributed Stock shall be equal (but if Speizer does not have sufficient
shares of NAIG common stock or Distributed Stock to provide stock of equal
value, Speizer may pay the remaining non-cash amount in the form of the stock
that he has). Any part of such payment made in NAIG common stock or
Distributed Stock shall be valued at the average closing price of such stock
during the fifteen business days preceding and fifteen business days following
June 30, 2002; or, if Scorpion has made the election, during the fifteen
business days preceding and fifteen business days following the Elected
Payment Date. Any part of such payment made in cash shall be made by Speizer
by cashiers check or by wire transfer to an institution located in the United
States designated by Scorpion, provided such designation shall have been made
at least ten (10) days before the date that the payment is made.
2.3 Closing. Unless this Agreement shall have been terminated pursuant to
Section 6.1, and subject to satisfaction or waiver of the conditions to the
transactions set forth in Article 5, the closing of the purchase and sale of
the Rights (the "Closing") will be held at the offices of Morgan, Lewis &
Bockius LLP in Los Angeles, California at 10:00 a.m. local time on June 30,
1997.
2.4 Deliveries at Closing. Each of Speizer and Scorpion shall deliver to the
other at the Closing such documents as the other party shall reasonably
require in connection with the consummation of the transactions contemplated
hereby.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Scorpion. Scorpion hereby represents
and warrants as follows:
3.1.1 Organization; Good Standing; Authorization. Scorpion is a
limited liability company duly organized, validly existing and in good
standing under the laws of Delaware, with full power and authority to conduct
its business as now conducted; and is in good standing in each jurisdiction
wherein it conducts its business or owns assets or properties. Scorpion has
the right, power and authority to enter into this Agreement and to perform its
obligations under this Agreement. The execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated hereby
have been duly authorized and approved by all requisite company action. This
Agreement is a valid and binding obligation of Scorpion, enforceable in
accordance with its terms.
3.1.2 Title to, and Status of, Rights. Scorpion owns all right,
title and interest in and to, and has good, marketable and transferable title
to, the Rights. The Rights are free and clear of liens, security interests,
conditional sales contracts, pledges, charges, encumbrances, equities, claims,
covenants, conditions or restrictions of any kind or nature whatsoever. The
Rights represent all of Scorpion's rights with respect to the NAIG common
stock owned by Speizer.
3.1.3 No Violation. Neither the execution, delivery or performance
of this Agreement nor the consummation of any of the transactions provided for
in or otherwise contemplated by this Agreement (i) will result in any breach
of or default under any provision of any contract or agreement to which
Scorpion is a party or by which Scorpion is bound or to which the Rights are
subject, (ii) except as set forth on Schedule 3.1.3, is prohibited by or
requires Scorpion to obtain or make any consent, authorization, approval,
registration or filing under any statute, law, ordinance, regulation, rule,
judgment, decree or order of any court or governmental or professional entity,
agency, board, bureau, body, department or authority, or to obtain the consent
of any other person, or (iii) will result in the creation or imposition of any
lien, claim, charge, restriction, equity or encumbrance of any kind whatsoever
upon, or give to any other person any interest or right in or with respect to,
the Rights.
3.1.4 Inquiries. Scorpion represents and warrants that it has and
can be reasonably assumed to have the capacity to evaluate the merits and
risks of this Agreement and to protect its own interests in connection with
this transaction, and that it has made whatever inquiry is necessary or
appropriate under the circumstances in making the decision to enter into this
Agreement, and perform its obligations hereunder.
3.2 Representations and Warranties of Speizer. Speizer hereby represents and
warrants as follows:
3.2.1 Right, Power and Capacity. Speizer has the right, power and
legal capacity to enter into this Agreement and to perform his obligations
under this Agreement. This Agreement is a valid and binding obligation of
Speizer, enforceable in accordance with its terms.
3.2.2 No Violation. Neither the execution, delivery or performance
of this Agreement nor the consummation of any of the transactions provided for
in or otherwise contemplated by this Agreement (i) will result in any breach
of or default under any provision of any contract or agreement to which
Speizer is a party or by which Speizer is bound, or (ii) except as set forth
in Schedule 3.2.2, is prohibited by or requires Speizer to obtain or make any
consent, authorization, approval, registration or filing under any statute,
law, ordinance, regulation, rule, judgment, decree or order of any court or
governmental or professional entity, agency, board, bureau, body, department
or authority, or to obtain the consent of any other person.
ARTICLE 4.
COVENANTS AND OTHER AGREEMENTS
4.1 Fulfillment of Conditions. Each of Speizer and Scorpion shall use
commercially reasonable efforts to fulfill the conditions specified in
Sections 5.1 and 5.3, with respect to Speizer, and 5.1 and 5.2, with respect
to Scorpion, to the extent that the fulfillment of such conditions is within
its control. The foregoing obligation includes taking or refraining from such
actions as may be necessary to fulfill such conditions.
4.2 No Interest in NAIG Shares Owned by Speizer. Speizer and Scorpion
acknowledge and agree that nothing in this Agreement shall be deemed to convey
or otherwise provide to Scorpion any right or interest, beneficial or
otherwise, in any shares of NAIG common stock or Distributed Stock now or
hereafter owned of record or beneficially by Speizer including, without
limitation, any right to vote, acquire, sell or hold any such shares, or any
right to any dividends or Index Dividends. The parties further acknowledge
and agree that nothing herein requires or shall be construed to require
Speizer to own, acquire, dispose of, hold or otherwise take any action with
respect to any shares of NAIG common stock or any Distributed Stock.
4.3 Lines of Credit. Scorpion shall perform its obligations, including, but
not limited to, the obligation to make advances to Speizer, pursuant to the
terms of the Revolving Credit Agreements in the form attached hereto as
Exhibit C.
ARTICLE 5.
CONDITIONS TO CLOSING
5.1 Conditions Precedent to Obligations of Both Parties. The respective
obligations of each party to consummate the purchase and sale of the Rights
shall be subject to the satisfaction or waiver, at or prior to the Closing, of
each of the following conditions:
5.1.1 Regulatory Approval. No party hereto shall be subject to any
order, injunction, or other legal restraint of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the transaction
contemplated by this Agreement. The parties shall have received any necessary
approvals or exemptions from the California Department of Insurance or the
Insurance Commissioner as may be required by statute or regulation.
5.2 Conditions Precedent to Obligations of Speizer. The obligations of
Speizer to consummate the purchase and sale of the Rights shall be subject to
the satisfaction or waiver, at or prior to the Closing, of each of the
following conditions:
5.2.1 Term Loan. Speizer shall have received from Scorpion the term
loan in the form of the Term Loan Agreement and Promissory Note attached
hereto as Exhibit B.
5.2.2 Lines of Credit. Speizer shall have received from Scorpion the
Lines of Credit in the form of the Revolving Credit Agreements and Promissory
Notes attached hereto as Exhibit C.
5.2.3 Financing. Speizer shall have obtained financing sufficient to
repay in full on June 30, 1997 the obligations owed by Speizer to Arabella
S.A. under that certain Credit Agreement dated as of May 31, 1996 by and
between Mark A. Speizer and Arabella S.A., and that certain Promissory Note
dated May 31, 1996, and shall have repaid those obligations in full and
received from Arabella S.A. a countersigned copy of that letter agreement
dated on or before the date of this Agreement in the form attached as Exhibit
D.
5.2.4 Representations and Warranties. All of Scorpion's
representations and warranties herein shall be true in all material respects
as though made on and as of the Closing, and Scorpion shall have performed and
complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by
Scorpion on or prior to the Closing. Speizer shall have received a
certificate from Scorpion to such effect dated as of the date of the Closing.
5.3 Conditions Precedent to Obligations of Scorpion. The obligations of
Scorpion to consummate the purchase and sale of the Rights shall be subject to
the satisfaction or waiver, at or prior to the Closing, of the following
condition:
5.3.1 Representations and Warranties. All of Speizer's
representations and warranties herein shall be true in all material respects
as though made on and as of the Closing, and Speizer shall have performed and
complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by
Speizer on or prior to the Closing. Scorpion shall have received a
certificate from Speizer to such effect dated as of the date of the Closing.
ARTICLE 6.
MISCELLANEOUS
6.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
6.1.1 by mutual written consent of Scorpion and Speizer;
6.1.2 by either Scorpion or Speizer, upon notice to the other, if the
Closing has not occurred by June 30, 1997 (or such date, as it may be extended
from time to time by the written agreement of the Scorpion and Speizer);
provided, however, that the right to terminate this Agreement under this
paragraph 6.1.2 shall not be available to any party that has breached in any
material respect any of its covenants, representations or warranties in this
Agreement; or
6.1.3 by either Scorpion or Speizer, upon notice to the other, if any
of the other party's representations or warranties shall fail to be true in
any material respect or if such other party shall have breached or failed to
timely perform any of its covenants hereunder required to be performed by such
date; provided, however, that the right to terminate this Agreement under this
paragraph 6.1.3. shall not be available to any party that has breached in any
material respect any of its covenants, representations or warranties in this
Agreement.
6.2 Other Matters.
6.2.1 Headings and Interpretation. Headings are inserted for the
convenience of reference only and are not intended to be a part of or affect
the meaning or interpretation of this Agreement. Clerical and stenographic
errors in the construction of this document are subject to correction. The
parties acknowledge that the interpretation of any ambiguity in language in
this Agreement shall not be construed against either party.
6.2.2 Entire Agreement. The terms of this Agreement are intended by
the parties as a final expression of their agreement with respect to such
terms as are included in this Agreement and may not be contradicted by
evidence of any prior or contemporaneous agreement. The parties further
intend that this Agreement constitutes the complete and exclusive statement of
its terms and that no extrinsic evidence whatsoever may be introduced in any
proceeding, if any, involving terms of this Agreement.
6.2.3 Modifications and Amendments. This Agreement may not be
modified, amended, changed or supplemented except in a writing signed by an
authorized representative of each party. There shall be no oral agreements
between the parties.
6.2.4 Waivers. No waiver of any breach of any agreement or provision
herein contained shall be deemed a waiver of any preceding or succeeding
breach thereof or of any other agreement or provision herein contained. No
waiver may be made except by written instrument signed by an authorized
representative of the party which is the beneficiary of the provision being
waived.
6.2.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but which together
constitute one and the same instrument.
6.2.6 Parties.
i. Parties in Interest. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any
persons other than the parties to it and their
respective successors and assigns. This Agreement shall
be binding on and shall inure to the benefit of the
parties to it and their respective heirs, legal
representatives, successors, and assigns.
ii. Assignment. This Agreement and any and all of the
rights and obligations of any party hereunder shall not
be assigned, delegated, sold, transferred or otherwise
disposed of, by operation of law or otherwise. Any
attempted assignment, delegation, sale, transfer or
other disposition in violation hereof shall be void.
If, nevertheless, the rights to any payment due
hereunder by Speizer to Scorpion shall be transferred by
operation of law, by order of a court of competent
jurisdiction or any other circumstance with respect to
which it is determined that such transfer is not void,
then such transfer may be effected only by delivery of a
signed original of this Agreement to Speizer, who shall
re-deliver such signed original to the transferee duly
indorsed by Speizer to indicate the name and address of
such transferee. Under no circumstances prior to
maturity of all payment obligations due by Speizer to
Scorpion hereunder may any such obligations ever be
transferred to or held by any person by virtue of such
person being the bearer of any document or instrument,
including this Agreement, evidencing such obligations.
Scorpion hereby covenants and any subsequent transferee
upon transfer of the said payment obligations and as a
condition to such transfer shall covenant with Speizer
to provide to Speizer a completed United States Internal
Revenue Service Form W-8 or W-9, as appropriate, (a) on
or before the first payment made to Scorpion or any such
transferee, (b) on or before the first payment in the
third calendar year following the calendar year in which
such a form was last provided by Scorpion or any such
transferee, or more frequently if required by law as a
condition to exemption from any form of withholding of
tax, and (c) within 30 days of any change in the
information contained in an applicable form provided to
Speizer hereunder.
6.2.7 Attorneys' Fees and Costs. Should any party institute any
action or proceeding to enforce this Agreement or any provision hereof, or for
a declaration of rights hereunder, the prevailing party in any such action or
proceeding shall be entitled to receive from the other party all costs and
expenses, including reasonable attorneys' fees, incurred by the prevailing
party in connection with such action or proceeding.
6.2.8 Nature and Survival of Representations and Warranties. All
representations, warranties, covenants, and agreements of the parties
contained in this Agreement, or in any instrument, certificate, schedule or
other writing provided for in it, shall survive the Closing.
6.2.9 Notices.
i. Any notice under this Agreement given to Scorpion shall
be personally delivered or sent by certified mail or reputable overnight
express courier to the following address:
599 Lexington
27th Floor
New York, New York 10022
With a copy to:
Robert Tucker, Esq.
61 Purchase St.
Suite 2
Rye, New York 01580
ii. Any notice under this Agreement given to Speizer shall
be personally delivered or sent by certified mail or reputable overnight
express courier to the following address:
514 Roehampton Road
Hillsborough, California 94080
With a copy to:
Munger, Tolles & Olson
355 S. Grand Avenue
Los Angeles, California 90071
Attn: Jay Fujitani
iii. Any notice sent by certified mail shall be effective
when mailed and any notice personally delivered or sent by reputable overnight
express courier shall be effective when received. Any party may change its
address for purposes of this Section by giving the other parties written
notice of the new address in the manner set forth above.
6.2.10 Governing Law. This Agreement shall be governed by and
interpreted and enforced in accordance with the substantive laws of the State
of California without reference to the principles governing the conflicts of
laws applicable in that or any other jurisdiction.
6.2.11 Invalidity. If any provision of this Agreement is held to be
void and unenforceable by a court of competent jurisdiction, the remaining
provisions shall continue in full force and effect, unless continuing such
remaining provisions would materially change the economic benefit of the
Agreement to either party. The parties agree that Speizer's agreement to pay
for the Rights as set forth in Section 2.2, and Scorpion's agreement to
provide line of credit facilities pursuant to Section 4.3 are material
economic terms of this Agreement.
6.2.12 Expenses. Each of the parties hereto shall pay all of the
legal, accounting and other expenses incurred by it in connection with the
negotiation, documentation and closing of the transactions under this
Agreement.
6.2.13 Arbitration.
i. Any dispute, controversy or claim arising out of the
terms of this Agreement or the breach hereof, including, without limitation,
interpretation, performance or termination, or any claim against any of the
officers or directors of any party hereto, shall be finally resolved by
arbitration as set forth in Section 6.2.13(ii).
ii. Arbitration shall be conducted by the American
Arbitration Association, which shall administer the arbitration under its
commercial rules. Arbitration under this Section shall be initiated by a
written demand for arbitration specifying the controversy or claim on which
arbitration is sought, as well as the relief requested. Service of the
arbitration demand shall be effective if made pursuant to the notification
provisions contained in Section 6.2.9 of this Agreement. Each of Speizer and
Scorpion shall appoint one arbitrator within 15 business days after receipt by
the respondent of the demand to arbitrate. The two arbitrators appointed by
the parties shall, within 15 business days after their appointment, appoint a
third, presiding arbitrator, who shall not be affiliated with either of the
arbitrators appointed by the parties or the parties themselves. The two
arbitrators shall endeavor to appoint a third arbitrator with sufficient
technical expertise and experience to understand, evaluate, and decide the
issue in dispute, but the selection of such third arbitrator shall be in any
event final and binding upon all parties. If either party fails to nominate
an arbitrator, or the two arbitrators appointed by the parties are unable to
appoint a presiding arbitrator, within the relevant stated period, the
presiding arbitrator shall be appointed by the American Arbitration
Association in accordance with its rules. The arbitration, including the
rendering of the award, shall take place in San Francisco, California and
shall be the exclusive forum for resolving such dispute, controversy or claim.
For the purposes of this arbitration, this Agreement shall be governed by the
governing law described in Section 6.2.10 and the arbitrators shall apply such
governing law to any dispute, controversy or claim arising out of the terms of
this Agreement or the breach thereof. This arbitration agreement is intended
by the parties to be self-executing. The arbitrators shall have sole
jurisdiction to determine whether (i) a claim is subject to arbitration, (ii)
the arbitration may proceed even if one of the parties refuses to attend or
participate, and (iii) an award against that party may be ordered pursuant to
default or otherwise by the arbitrators. The parties agree that they will
arbitrate all claims agreed to be arbitrated herein regardless of the
existence of any related dispute, action, or special proceeding between any or
all of the parties hereto and/or any third party. The arbitrators shall
conduct the arbitration with all reasonable dispatch. The decision of the
arbitrators shall be final and binding upon the parties hereto, and judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The prevailing party(s) shall be entitled to recover
its reasonable attorneys' fees and its share of the costs, as the arbitrators
determine.
iii. Notwithstanding anything contained in this Section
6.2.13, each party shall have the right to institute judicial proceedings
against the other parties or anyone acting by, through or under such other
parties in order to enforce the instituting party's rights hereunder through
specific performance, injunction or similar equitable relief. Each party
submits to the exclusive jurisdiction of the courts of the State of California
and the U.S. federal courts for northern district of California for the
purposes thereof. Each party waives objections to venue in San Francisco,
California.
<PAGE>
[signature page]
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it
on the day and year first above written.
/s/Mark A. Speizer
MARK A. SPEIZER
SCORPION ACQUISITION, LLC,
a Delaware limited liability company
By: /s/Nuno Brandolini
Name: Nuno Brandolini
Its:
<PAGE>
EXHIBIT A
DEFINITIONS
"Agreement" means this Purchase and Sale Agreement and the schedules thereto.
"Closing" is defined in Section 2.4.
"Distributed Index Shares" means that number of theoretical shares of
Distributed Stock that would have been paid by dividend, spin-off or otherwise
on the number of the Index Shares theoretically existing on the record date
for such payment, as such number of shares of Distributed Index Shares may be
adjusted for any additions to or reductions from such shares occurring through
June 30, 2002 or the Elected Payment Date, as the case may be, because of a
dividend on outstanding Distributed Stock payable in shares of Distributed
Stock or a subdivision of outstanding Distributed Stock or a combination of
outstanding Distributed Stock into a smaller or larger number of shares.
"Distributed Stock" means securities other than NAIG common stock paid by
dividend, spin-off or otherwise on NAIG common stock. Any securities other
than NAIG common stock or Distributed Stock paid by dividend, spin-off or
otherwise on Distributed Stock shall themselves become Distributed Stock.
"Elected Payment Date" means that date between January 1, 2000 and June 30,
2002 that is elected by Scorpion, by written notice to Speizer two (2) days in
advance of such date.
"Index Dividends" means the aggregate amount equal to 50% of the positive
difference, if any, of (a) the sum of (i) the product of the actual cash
dividends paid in a Year on a share of NAIG common stock, multiplied by the
number of Index Shares theoretically existing on the record date for such
payment, plus (ii) the product of the actual cash dividends paid during a Year
on a share of Distributed Stock, multiplied by the number of Distributed Index
Shares theoretically existing on the record date for such payment, less (b)
$679,188 for each Year.
"Index Profits" means the positive difference, if any, of (a) the sum of (i)
the product of the average closing price of the NAIG common stock during the
fifteen business days preceding and fifteen business days following June 30,
2002 or, if Scorpion has made the election, during the fifteen business days
preceding and fifteen business days following the Elected Payment Date,
multiplied by the number of Index Shares on June 30, 2002 or the Elected
Payment Date, as the case may be, plus (ii) the product of the average closing
price of the Distributed Stock during the fifteen business days preceding and
fifteen business days following June 30, 2002 or, if Scorpion has made the
election, during the fifteen business days preceding and fifteen business days
following the Elected Payment Date, multiplied by the number of Distributed
Index Shares on June 30, 2002 or the Elected Payment Date, as the case may be,
less (b) $7,161,000. If the NAIG common stock and/or the Distributed Stock is
not listed on a national securities exchange or eligible for quotation on
Nasdaq NMS or Small Cap, the price per share shall be determined by an
appraiser chosen by Speizer and Scorpion and, if they cannot agree on an
appraiser, by a third appraiser chosen by two appraisers one of whom is
selected by each of them.
"Index Shares" means a theoretical 924,000 shares of NAIG common stock
existing on February 28, 1997, as such number may be adjusted for any
additions to or reductions from such shares occurring through June 30, 2002 or
the Elected Payment Date, as the case may be, because of a dividend on
outstanding NAIG common stock paid in shares of NAIG common stock or a
subdivision of outstanding NAIG common stock or a combination of outstanding
NAIG common stock into a smaller or larger number of shares.
"NAIG" is defined in Section 2.2.
"Rights" is defined in Recital A.
"Scorpion" is defined in the Preamble to this Agreement.
"Speizer" is defined in the Preamble to this Agreement.
"Year" means the period beginning on July 1, 1997 and ending June 30, 1998,
and each twelve month period thereafter; provided that no Year shall extend
beyond June 30, 2002 or, if Scorpion has made the election, the Elected
Payment Date, and in such case a Year shall be the period of less than twelve
months ending on such date.
<PAGE>
EXHIBIT B
TERM LOAN AGREEMENT
Dated as of __________ ___, 1997
THIS TERM LOAN AGREEMENT ("Agreement") is made and entered into
by and between SCORPION ACQUISITION, LLC, a Delaware limited liability company
("Lender"), and MARK A. SPEIZER, an individual ("Borrower"), with reference to
the following agreed upon facts:
RECITALS
A. Borrower has requested that Lender provide Borrower with an
unsecured term loan for the purpose of, among other things, enabling Borrower
to retire certain indebtedness owing by Borrower to one or more third parties.
B. Borrower and Lender have each independently determined that
it is in each of their best interests to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable
consideration, the receipt of which is hereby acknowledged, Borrower and
Lender hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings, unless the context otherwise
requires:
"Business Day" means any day other than a Saturday, Sunday or a day
on which banking institutions in the State of California are authorized or
obligated by law or executive order to be closed.
"Closing Date" means the date that all of the conditions precedent
set forth in this Agreement have been satisfied and the Term Loan is funded.
If the Closing Date does not occur on or before ________, 1997, Lender shall
have no obligations under this Agreement or otherwise.
"Default" means any event that, with the giving of notice or the
passage of time or both, as applicable, would be an Event of Default.
"Execution Date" means the date on which this Agreement is executed
by Borrower.
"Event of Default" has the meaning given to such term in Section
8.1.
"Governmental Agency" means: (a) any government, municipality or
political subdivision thereof; (b) any governmental or quasi-governmental
agency, authority, board, bureau, commission, department, instrumentality or
public body (including but not limited to the California Department of
Insurance); (c) any court, administrative tribunal or public utility; or (d)
any central bank or comparable authority.
"Indebtedness" means: (a) all obligations of Borrower for borrowed
money; (b) all obligations of Borrower evidenced by bonds, debentures, notes,
or other similar instruments and all reimbursement or other obligations of
Borrower in respect of letters of credit, letter of credit guaranties, bankers
acceptances, interest rate swaps, controlled disbursement accounts, or other
financial products; (c) all obligations under capital leases; (d) all
obligations or liabilities of others secured by a lien or security interest on
any property or asset of Borrower, irrespective of whether such obligation or
liability is assumed; and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other Person.
"Laws" means, collectively, all federal, state and local laws,
rules, regulations, ordinances and codes, and all laws, rules, regulations,
ordinances and codes of any other jurisdiction.
"Loan Documents" means this Agreement, the Term Note, and all other
written agreements, instruments, and documents executed by Borrower, now or
hereafter evidencing or otherwise relating to the Obligations or any other
aspect of the transactions contemplated by this Agreement, as the same are
amended, modified, or supplemented from to time to time.
"Maturity Date" has the meaning given to such term in Section 4.1.
"Obligations" means all present and future loans (including, but
not limited to, the Term Loan), advances, liabilities, and obligations owing
by Borrower to Lender arising under this Agreement and/or the other Loan
Documents, whether arising from an extension of credit, loan, guaranty,
indemnification or otherwise, absolute or contingent, due or to become due,
primary or secondary, as principal or guarantor, and including, without
limitation, all interest, charges, expenses, fees, attorneys' fees, and any
other sums chargeable to Borrower hereunder or under another Loan Document.
"Person" means any entity, whether an individual, trustee,
corporation, partnership, limited liability company, joint stock company,
trust, unincorporated organization, bank, savings and loan association,
business association or firm, joint venture, Governmental Agency or otherwise.
"Term Loan" has the meaning specified in Section 2.
"Term Note" has the meaning specified in Section 2.
1.2 Use of Defined Terms. Any defined term used in the plural
shall refer to all members of the relevant class, and any defined term used in
the singular shall refer to any number of the members of the relevant class.
1.3 Exhibits. All exhibits to this Agreement, if any, as
existing at the time of execution of this Agreement or as supplemented,
modified or amended from time to time, are incorporated into this Agreement by
this reference as though fully set forth herein.
1.4 Cross-References. All references to specific Sections,
Articles, Paragraphs, Recitals, and Exhibits shall be deemed references to the
Sections, Articles, Paragraphs, Recitals, and Exhibits of this Agreement,
unless such reference specifically or by context refers to a different
document.
2. TERM LOAN. Subject to the terms and conditions of this Agreement,
Lender agrees to make a term loan to Borrower ("Term Loan") in the principal
amount of up to Three Hundred Fifty Thousand Dollars ($350,000), to be
evidenced by and repayable in accordance with the terms and conditions of a
promissory note (the "Term Note"), dated as of even date herewith, executed by
Borrower in favor of Lender. The Term Loan: (i) shall be made by Lender at
such time and in such amount as Borrower may request in writing (no later than
two Business Days prior to the Closing Date), and shall be advanced directly
to Borrower or such other Person as directed by Borrower, (ii) shall be made
as one advance (i.e., multiple advances shall not be permitted), and (iii)
once borrowed may be repaid or prepaid, subject to the terms and conditions of
this Agreement, but not reborrowed. All amounts evidenced by the Term Note
shall constitute Obligations. The proceeds of the Term Loan shall be used
only for the purpose of retiring indebtedness owing by Borrower that is
secured by National Insurance Group stock.
3. INTEREST AND OTHER CHARGES.
3.1 Interest Rate. Interest shall accrue on the unpaid
principal balance of the Term Loan, beginning on the Closing Date and
continuing until such principal balance is paid in full at a fixed rate equal
to 5.81% per annum. Interest charges shall be computed on the basis of a year
of three hundred sixty five (365) days and actual days elapsed. Borrower
shall pay such interest to Lender on the Maturity Date.
3.2 Maximum Interest Rate. In no event shall the interest rate
and other charges hereunder exceed the highest rate permissible under any law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that a court determines that Lender has
received interest and other charges hereunder in excess of the highest rate
applicable hereto, such excess shall be deemed received on account of, and
automatically shall be applied to reduce, the Obligations, other than
interest, and the provisions hereof shall be deemed amended to provide for the
highest permissible rate. If there are no Obligations outstanding, Lender
shall refund to Borrower such excess interest paid.
4. PAYMENTS AND PREPAYMENTS.
4.1 Repayment Of Term Loan. Borrower shall repay the principal
balance of the Term Loan and all other Obligations on or before the date that
is one hundred twenty (120) days after the Closing Date (the "Maturity Date").
4.2 Prepayments Of Term Loan.
(a) Borrower may prepay the principal of the Term Loan
and/or any other Obligations in whole or in part, without premium or penalty,
at any time and from time to time.
(b) All prepayments of the principal of the Term Loan or
other Obligations shall be accompanied by the payment of all accrued but
unpaid interest on the Term Loan or such other Obligations to the date of
prepayment.
4.3 Manner and Treatment of Payments.
a. The amount of each payment under this Agreement or on
the Term Note shall be made to Lender in lawful money of the United States of
America by wire transfer as follows:
FOR ACCOUNT OF: _________________________
A/C#:
All payments received by Lender from Borrower after 12:00 noon, Los Angeles
time, on a Business Day, or on a day which is not a Business Day, shall be
deemed received on the next succeeding Business Day.
b. Whenever any payment to be made pursuant to this
Agreement or on the Term Note is due on a day that is not a Business Day,
payment shall be made on the next succeeding Business Day, and such extension
of time shall be included in the computation of interest.
c. Lender shall keep a record of the principal amount of
the Term Loan advanced to Borrower by Lender and payments of principal with
respect to the Term Note, and such record shall be presumptive evidence of the
principal amount owing under this Agreement and the Term Note.
d. Each payment of principal and interest and all other
amounts payable by Borrower under this Agreement and the other Loan Documents
shall be made free and clear of, and without reduction by reason of, any
taxes, assessments or other charges imposed by any Governmental Agency (except
as provided in Section 9.8).
e. Borrower shall make all payments required under the
Loan Documents regardless of any defense, setoff or counterclaim, including,
without limitation, any defense, setoff or counterclaim based on any law, rule
or policy which is now or hereafter promulgated by any Governmental Agency and
which may adversely affect Borrower's obligation to make, or the right of the
holder of the Term Note or the obligee under any other Loan Document to
receive, such payments.
f. All sums paid by Borrower in connection with the Loan
Documents shall be applied first to sums, other than principal and interest,
due pursuant to the Loan Documents, next to accrued but unpaid interest on the
Obligations, and the balance, if any, to principal of the Obligations.
5. CLOSING; CONDITIONS TO CLOSING.
Lender shall not be obligated to make the Term Loan as contemplated
by this Agreement unless the following conditions precedent have been
satisfied as determined by Lender (in Lender's reasonable discretion; such
conditions precedent are for Lender's benefit only):
5.1 Representations And Warranties; Covenants; Events of
Default. Borrower's representations and warranties contained in this
Agreement and the other Loan Documents shall be correct and complete in all
material respects as of the Closing Date; Borrower shall have performed and
complied with all covenants, agreements and conditions contained herein and in
the other Loan Documents which are required to have been performed or complied
with on or before the Closing Date; and there shall exist no Default or Event
of Default on the Closing Date.
5.2 Delivery Of Documents. Borrower shall have delivered or
caused to be delivered to Lender this Agreement, the Term Note, and such other
documents, instruments and agreements as Lender shall reasonably request in
connection herewith, duly executed by all appropriate parties thereto other
than Lender.
5.3 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement, and all documents
contemplated in connection herewith, shall be satisfactory in form and
substance to Lender.
6. WARRANTIES AND REPRESENTATIONS.
As of the Closing Date, Borrower warrants and represents the
following to Lender (which warranties and representations shall survive after
the Closing Date until such time as all Obligations are paid or performed in
full):
Borrower represents and warrants to Lender that:
6.1 Execution, Delivery and Performance of Loan Documents.
a. Borrower has all requisite power and authority to
execute and deliver, and to perform all of his obligations under, the Loan
Documents.
b. The execution and delivery by Borrower of, and the
performance by Borrower of each of his obligations under, each Loan Document
will not:
(i) require any consent or approval not heretofore
obtained of any Person;
(ii) violate any provision of any order, writ,
judgment, injunction, decree, determination or award presently in effect
having applicability to Borrower; or
(iii) result in a breach of or constitute a default
under, or cause or permit the acceleration of any obligation owed under, any
indenture or loan or credit agreement or any other material agreement, lease
or instrument to which Borrower is a party or by which Borrower or any
property of Borrower is bound or affected.
c. Borrower is not in default under any order, writ,
judgment, injunction, decree, determination, award, indenture, agreement,
lease or instrument described in subparagraphs (ii) or (iii) of Paragraph b of
this Section 6.1 in any respect that is materially adverse to the interests of
Lender, or that could materially impair the ability of Borrower to perform
obligations under the Loan Documents, or that has a material adverse effect on
the business or financial condition of Borrower.
d. Other than approvals (or exemptions therefrom) already
obtained by Borrower, to Borrower's knowledge, no authorization, consent,
approval, order, license, permit or exemption from, or filing, registration or
qualification with, any Governmental Agency is or will be required under
applicable Law to authorize or permit the execution and delivery by Borrower
of, and the performance by Borrower of all of his obligations under, each Loan
Document.
e. Each of the Loan Documents, when executed and
delivered, will constitute the legal, valid and binding obligations of
Borrower enforceable against him in accordance with its terms.
6.2 Compliance with Laws and Other Requirements. To Borrower's
knowledge, Borrower is in compliance with all Laws and other requirements
applicable to his businesses and has obtained all authorizations, consents,
approvals, orders, licenses, permits and exemptions from, and have
accomplished all filings, registrations or qualifications with, any
Governmental Agency that are necessary for the transaction of his businesses,
except where the failure to be in such compliance, obtain such authorizations,
consents, approvals, orders, licenses, permits or exemptions, or accomplish
such filings, registrations or qualifications is not materially adverse to the
interests of Lender, and does not materially impair the ability of Borrower to
perform his obligations, under the Loan Documents, and does not have a
material adverse effect on the business or financial condition of Borrower.
6.3 No Default. No Event of Default has occurred, and no event
has occurred and is continuing that is a Default.
7. COVENANTS.
Borrower covenants that, so long as any of the Obligations remain
outstanding:
7.1 Compliance with Laws and Other Requirements. Borrower shall
comply with the requirements of all applicable Laws and orders of any
Governmental Agency, noncompliance with which might materially adversely
affect the business or financial condition of Borrower.
7.2 Reporting Requirements. Borrower shall cause to be
delivered to Lender, in form and detail reasonably satisfactory to Lender, as
soon as practicable and in any event within fifteen (15) days after the
occurrence of a Default or Event of Default becomes known to Borrower, a
written statement setting forth the nature of the Default or Event of Default
and the action that Borrower proposes to take with respect thereto;
7.3 Notice of Defaults under other Indebtedness. Borrower shall
notify Lender within five (5) Business Days of any "default" or "event of
default" that occurs with respect to any Indebtedness.
8. DEFAULT; REMEDIES.
8.1 Events Of Default. It shall constitute an event of default
("Event of Default") if any one or more of the following shall occur for any
reason:
a. A failure by Borrower to pay the principal of or
interest on the Term Note or any portion thereof when due; or
b. A failure by Borrower to pay any other amount payable
by Borrower under the Loan Documents, within three (3) days after the date
when due as provided herein or therein; or
c. A failure by Borrower to perform or observe any term,
covenant or agreement contained in any Loan Document on his part to be
performed or observed and such failure shall continue for more than thirty
(30) calendar days after notice of such failure is given by Lender to
Borrower, unless such failure is of such a nature that it cannot be cured
within such thirty (30) day period and Borrower commences action to cure such
failure within such thirty (30) day period and thereafter diligently and
continuously prosecutes such action to completion within sixty (60) calendar
days after notice of such failure is given by Lender to Borrower; or
d. Any representation or warranty in any Loan Document or
in any certificate, agreement, instrument or other document made or delivered
by Borrower to Lender pursuant to any Loan Document proves to have been
incorrect when made; or
e. Any Loan Document, at any time after its execution and
delivery and for any reason other than the agreement of Lender or satisfaction
in full of all Obligations, ceases to be in full force and effect or is
declared to be null and void by a court of competent jurisdiction; or the
validity or enforceability thereof is contested in a judicial proceeding by
Borrower; or Borrower denies that he has any or continuing liability or
obligation under any Loan Document, unless all Obligations of Borrower
thereunder have been fully paid and performed; or
f. Borrower shall fail to pay when due (or within any
stated grace period), whether at the stated maturity, upon acceleration, by
reason of required prepayment or otherwise, the principal or any principal
installment of, or any interest on, any present or future Indebtedness; or
g. Borrower is the subject of an order for relief by a
bankruptcy court, or is unable or admits in writing his inability to pay his
debts as they mature or makes an assignment for the benefit of creditors; or
applies for or consents to the appointment of any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer for him
or for all or any part of his business or property; or any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer is
appointed without the application or consent of Borrower and the appointment
continues undischarged or unstayed for forty-five (45) calendar days;
provided, however, that, during the pendency of such period, Lender shall be
relieved of its obligation to make the Term Loan; or institutes or consents to
any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, custodianship, conservatorship, liquidation, rehabilitation or
similar proceeding relating to him or to all or any part of his business or
property under the laws of any jurisdiction; or any similar proceeding is
instituted without the consent of Borrower (including, but not limited, any
action is taken by any Governmental Agency that has a material adverse effect
on the business, operations or property of Borrower) and continues undismissed
or unstayed for forty-five (45) calendar days; provided, however, that, during
the pendency of such period, Lender shall be relieved of its obligation to
make the Term Loan; or
h. Any judgment, writ, warrant of attachment or execution
or similar process is issued or levied against all or any part of the property
of Borrower and is not released, vacated or fully bonded within forty-five
(45) calendar days after its issue or levy; provided, however, that, during
the pendency of such period, Lender shall be relieved of its obligation to
make the Term Loan.
8.2 Remedies.
a. Upon the occurrence of any Event of Default, the
obligation to make the Term Loan (if not previously funded) and all other
obligations of Lender and all rights of Borrower under the Loan Documents will
terminate without notice to or demand upon Borrower, which are expressly
waived by Borrower.
b. Upon the occurrence of any Event of Default, Lender,
without notice to or demand upon Borrower, which are expressly waived by
Borrower, may proceed to protect, exercise and enforce its rights and remedies
under the Loan Documents against Borrower and such other rights and remedies
as are provided by law or equity. Without limiting the generality of the
foregoing, upon the occurrence of any Event of Default Lender shall be
entitled to accelerate and declare immediately due and payable the principal
balance of the Obligations, any accrued and unpaid interest thereon, and all
other Obligations, all without notice to or demand upon Borrower.
c. The order and manner in which Lender's rights and
remedies are to be exercised shall be determined by Lender in its sole
discretion. Regardless of how Lender may treat payments received by it for
the purpose of its own accounting, for the purpose of computing Borrower's
obligations under this Agreement and under the Term Note, all moneys collected
or received by Lender on account of the Obligations, directly or indirectly,
shall be applied in the following order of priority:
(i) to the payment of all proper and reasonable
costs and expenses of Lender incurred in the exercise of Lender's rights and
remedies (including attorneys' fees and disbursements and the allocated costs
and expenses of in-house legal and other professional services) and all other
Obligations (other than interest and principal) owing by Borrower to Lender;
(ii) next, to accrued and unpaid interest on the
Obligations; and
(iii) the balance, if any, to the principal of the
Obligations.
No application of the payments will cure any Event of Default or prevent the
exercise, or continued exercise, of rights or remedies of Lender under this
Agreement or under Law.
d. Upon the occurrence of any event that would be an Event
of Default under Paragraph "g" of Section 8.1 with the passage of time, the
principal balance of the Obligations, all accrued and unpaid interest thereon,
and any other sums owing in connection with the Loan Documents shall be
automatically accelerated without notice to or demand on Borrower, and Lender
may take such other actions as it deems necessary to protect the interests of
Lender under the Loan Documents and to collect the Obligations.
9. MISCELLANEOUS.
9.1 Amendments; Consents. No amendment, modification,
supplement, termination or waiver of any provision of this Agreement or any
other Loan Document, no approval or consent thereunder, and no consent to any
departure by Borrower therefrom, may in any event be effective unless in
writing signed by Lender (and, in the case of amendments, modifications or
supplements, the approval in writing of Borrower and Lender), and then only in
the specific instance and for the specific purpose given.
9.2 Cumulative Remedies; No Waiver. Except as expressly
provided in this Agreement to the contrary, the rights, powers and remedies of
Lender provided in this Agreement or in the Term Note or any other Loan
Document are cumulative and not exclusive of any right, power or remedy
provided by law or equity. No failure or delay on the part of Lender in
exercising any right, power or remedy may be, or may be deemed to be, a waiver
thereof; nor may any single or partial exercise of any right, power or remedy
preclude any other or further exercise of the same or any other right, power
or remedy.
9.3 No Partnership or Joint Venture. The execution of this
Agreement and the other Loan Documents shall not be construed, deemed or
alleged to be the formation of a partnership or joint venture between Lender
and Borrower, and Lender shall not be liable to any other person or entity
arising in connection with the Obligations or any transaction connected
herewith nor shall Lender have any fiduciary obligations to Borrower. Lender
shall have and may exercise such powers as are specifically delegated to
Lender under this Agreement, at law, or in equity.
9.4 Costs, Expenses and Taxes. Borrower shall pay on the
Maturity Date, the reasonable costs and expenses of Lender in connection with
the negotiation, preparation, execution, delivery, administration (exclusive
of general overhead expenses), amendment, waiver and enforcement of this
Agreement and any other Loan Document and any matter related thereto, and any
litigation or dispute with respect thereto (including any bankruptcy or
similar proceedings), including without limitation the reasonable fees and
out-of-pocket expenses of any legal counsel, independent public accountants
and other outside experts. Notwithstanding Borrower's obligation to pay the
foregoing costs and expenses on the Maturity Date, such costs and expenses
shall accrue interest at the rate set forth in the Term Note from the date
that such costs and expenses were incurred by Lender (and such interest shall
also be due and payable on the Maturity Date). With respect to any
litigation, arbitration or reference between the parties hereto in connection
with any Loan Document, the losing party shall pay to the prevailing party the
reasonable fees and out-of-pocket expenses of legal counsel to the prevailing
party in connection therewith. Borrower shall pay any and all docu mentary
and other taxes (other than income or gross receipts taxes) and all costs,
expenses, fees and charges payable or determined to be payable in connection
with the execution, delivery, filing or recording of this Agreement, any other
Loan Document or any other instru ment or writing to be delivered hereunder or
thereunder, or in connection with any transaction pursuant hereto or thereto,
and shall (except as provided in Section 9.8) reimburse, hold harmless and
indemnify Lender from and against any and all loss, liability or legal or
other expense with respect to or resulting from any delay in paying or failure
to pay any tax, cost, expense, fee or charge or that any of them may suffer or
incur by reason of the failure of Borrower to perform any of his obligations
under this Agreement or any other Loan Docu ment. Any amount payable to
Lender under this Section 9.4 shall, from the date of demand for payment, and
any other amount payable to Lender under the Loan Documents which is not paid
when due or within any applicable grace period shall, thereafter, bear
interest at the rate set forth in the Term Note and be payable on demand.
9.5 Survival of Representations and Warranties. All
representations and warranties of Borrower contained in this Agreement or in
any other Loan Document, or in any certificate or other writing delivered by
or on behalf of Borrower pursuant to any Loan Document, will survive the
making and repayment of the Term Loan under this Agreement and the execution
and delivery of the Term Note, and have been or will be relied upon by Lender,
notwithstanding any investigation made by or on behalf of Lender.
9.6 Notices. Except as otherwise expressly provided for herein:
(a) all notices, requests, demands, directions and other communications
provided for under this Agreement and under any other Loan Document must be in
writing and must be mailed, telegraphed, delivered or sent by telex, cable, or
telecopier to the appropriate party at the address set forth in the signature
pages of this Agreement or, as to any party, at any other address as may be
designated by it in a written notice sent to all other parties in accordance
with this Section 9.6; and (b) any notice, request, demand, direction or other
communication given by telex or telecopier must be confirmed within forty-
eight (48) hours by letter mailed or delivered to the appropriate party at its
respective address. Except as otherwise expressly provided for herein, if any
notice, request, demand, direction or other communication is given by mail it
will be effective on the earlier of receipt or the fourth calendar day after
deposit in the United States postal service with first class or airmail
postage prepaid; if given by telex, when sent; if given by telecopier, when
received; or if given by personal delivery, when delivered.
9.7 Counterparts; Execution and Acceptance. This Agreement and
any other Loan Document may be executed in any number of identical
counterparts and any party hereto or thereto may execute any counterpart, each
of which when executed and delivered will be deemed to be an original and all
of which counterparts of this Agreement or any other Loan Document, as the
case may be, taken together will be deemed to be but one and the same
instrument. The execution of this Agreement or any other Loan Document by any
party hereto or thereto will not become effective until counterparts hereof or
thereof, as the case may be, have been executed by all the parties hereto or
thereto.
9.8 Binding Effect; Assignment; Tax Withholding. This Agreement
and the other Loan Documents will be binding upon and inure to the benefit of
Borrower and Lender, and their successors and assigns. Notwithstanding the
foregoing, this Agreement and any and all of the rights and obligations of any
party hereunder shall not be assigned, delegated, sold, transferred or
otherwise disposed of, by operation of law or otherwise. Any attempted
assignment, delegation, sale, transfer or other disposition in violation
hereof shall be void. If, nevertheless, the rights to any payment due
hereunder by Borrower to Lender shall be transferred by operation of law, by
order of a court of competent jurisdiction or any other circumstances with
respect to which it is determined that such transfer is not void, then such
transfer may be effected only by delivery of a signed original of this
Agreement to Borrower, who shall re-deliver such signed original to the
transferee duly indorsed by Borrower to indicate the name and address of such
transferee. Under no circumstances prior to maturity of all payment
obligations due by Borrower to Lender hereunder may any such obligations ever
be transferred to or held by any person by virtue of such person being the
bearer of any document or instrument, including this Agreement, evidencing
such obligations. Lender hereby covenants, and any subsequent transferee upon
transfer of said payment obligation and as a condition to such transfer shall
covenant, with Borrower to provide Borrower a completed United States Internal
Revenue Service Form W-8 or W-9, as appropriate, (i) on or before the first
payment made to Lender or any such transferee; (ii) on or before the first
payment in the third calendar year following the calendar year in which such
form was last provided by Lender or any such transferee, or more frequently if
required by law as a condition to exemption from any form of withholding of
tax; and (iii) within 30 days of any change in the information contained in an
applicable form provided to Borrower hereunder. Lender (and any such
transferee) agrees to indemnify Borrower for any tax, interest, or penalty
loss imposed on Borrower in the event that any taxing authority determines
that Borrower is or was required to withhold with respect to any payment made
hereunder. However, the previous sentence shall not apply to any tax,
interest or penalty imposed after Borrower has either been notified by any
taxing authority that withholding is required, or after Lender (or such
transferee) has informed Borrower that Lender (or such transferee) is no
longer exempt from withholding. In that event, Lender (or such transferee)
shall not be liable for interest and penalties imposed by any taxing authority
that arise out of Borrower's failure to withhold. If Borrower fails to
withhold the necessary amount from any subsequent payment, Borrower's only
remedy shall be to withhold tax on any subsequent payments, or to obtain
reimbursement for the tax only.
9.9 Indemnity by Borrower.
a. Borrower agrees to indemnify, save, protect, and hold
harmless Lender and its directors, officers, agents, attorneys and employees
(collectively, "indemnitees") from and against: (i) any and all claims,
demands, actions or causes of action that are asserted against any indemnitee
by any Person if the claim, demand, action or cause of action relates solely
to a claim, demand, action or cause of action that the Person has or asserts
against Borrower and arises out of or relates to the relationship between
Borrower and Lender under this Agreement or the Term Note; and (ii) any and
all liabilities, losses, costs or expenses (including attorneys' fees and
disbursements and reasonably estimated allocated costs and expenses of in-
house legal counsel and legal staff and other professional services) that any
indemnitee suffers or incurs as a result of the assertion of any foregoing
claim, demand, action or cause of action; provided that no indemnitee shall be
entitled to indemnification for any claims, demands, action, causes of action,
liabilities, losses, costs, or expenses caused by its own gross negligence or
misconduct.
b. If any proceeding shall be brought or asserted against
any indemnitee in respect of which indemnity may be sought from Borrower
hereunder, such indemnitee promptly shall notify Borrower in writing, and
Borrower shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the indemnitee and the payment of all fees and
expenses incurred in connection with the defense thereof; provided, that the
failure of any indemnitee to give such notice shall not relieve Borrower of
his obligations pursuant to this Agreement except to the extent that it shall
be determined by a court of competent jurisdiction that such failure shall
have materially and adversely prejudiced Borrower.
Any such indemnitee shall have the right to employ separate counsel
in any such action, claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such indemnitee unless: (1) Borrower has agreed to pay such fees and
expenses; or (2) Borrower shall have failed promptly to assume the defense of
such action, claim or proceeding and to employ counsel reasonably satisfactory
to such indemnitee in any such action, claim or proceeding; or (3) the named
parties to any such action, claim or proceeding (including any impleaded
parties) include both such indemnitee and Borrower, and such indemnitee shall
have been advised in writing by counsel that a conflict of interest may exist
if such counsel represents such indemnitee and Borrower (and in the case of
any of (1), (2) or (3), if such indemnitee notifies Borrower in writing that
it elects to employ separate counsel at the expense of Borrower, Borrower
shall not have the right to assume the defense thereof and such counsel shall
be at the expense of Borrower). No indemnitee will be subject to any
liability for any settlement made without its consent. Borrower shall not
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnitee of a release, in form and substance reasonably
satisfactory to the indemnitee, from all liability in respect of such action,
claim or proceeding for which such indemnitee would be entitled to
indemnification hereunder (whether or not any indemnitee is a party thereto).
All fees and expenses of the indemnitee (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing
to defend such action or proceeding in a manner not inconsistent with this
Section 9.9) shall be paid to the indemnitee, as incurred, upon written notice
thereof to Borrower (regardless of whether it is ultimately determined that an
indemnitee is not entitled to indemnification hereunder); provided, that
Borrower may require such indemnitee to undertake to reimburse all such fees
and expenses to the extent it is finally judicially determined by a court of
competent jurisdiction (which determination is not subject to appeal or
review) that such indemnitee is not entitled to indemnification hereunder.
Any obligation or liability of Borrower to any indemnitee under this Section
9.9 shall survive the expiration or termination of this Agreement and the
repayment of the Term Loan and all other Obligations owed to Lender.
9.10 Nonliability of Lender. Borrower acknowledges and agrees
that by accepting or approving anything required to be observed, performed,
fulfilled or given to Lender pursuant to the Loan Documents, including any
certificate or financial statement, Lender shall not be deemed to have
warranted or represented the legality, sufficiency, effec tiveness or legal
effect of the same, or of any term, provision or condition thereof, and such
acceptance or approval shall not constitute a warranty or representation to
anyone with respect thereto by Lender.
9.11 No Third Parties Benefited. This Agreement is made for the
purpose of defining and setting forth certain obligations, rights and duties
of Borrower and Lender, and is made for the sole protection of Borrower and
Lender, and Lender's successors and assigns. No other Person shall have any
rights of any nature hereunder or by reason hereof.
9.12 Confidentiality. Lender shall hold any confidential
information which it may receive from Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to legal counsel, accountants and other
professional advisors to Lender, (ii) to regulatory officials having
jurisdiction over Lender, and (iii) as required by Law or legal process or in
connection with any legal proceeding to which Lender is a party.
9.13 Further Assurances. Subject to Section 9.4, Borrower shall,
at his expense and without expense to Lender, execute and deliver such further
acts and documents as Lender from time to time reasonably requires for the
assuring and confirming unto Lender the rights hereby created or intended now
or hereafter so to be, or for carrying out the intention or facilitating the
performance of the terms of any Loan Document.
9.14 Integration. This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on
the subject matter hereof and supersedes all prior agreements, written or
oral, on the subject matter hereof.
9.15 Governing Law. The Loan Documents shall be governed by, and
construed and enforced in accordance with, the internal laws of California
(without reference to conflicts of law rules or principles).
9.16 Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable or invalid as to any
party or in any jurisdiction shall, as to that party or jurisdiction, be
inoperative, unenforceable or invalid without affecting the remaining
provisions or the operation, enforceability or validity of that provision as
to any other party or in any other jurisdiction, and to this end the
provisions of all Loan Documents are declared to be severable.
9.17 Headings. Article, Section, and Paragraph headings set
forth in this Agreement and the other Loan Documents, and titles or headings
of any Loan Documents or exhibits thereto, are included for convenience of
reference only and are not part of this Agreement or the other Loan Documents
for any other purpose.
9.18 Time of the Essence. Time is of the essence of the Loan
Documents.
9.19 Other Credit Facilities. Borrower and Lender acknowledge
and agree that the credit facility provided for herein is in addition to the
credit facilities provided for (i) in that certain Revolving Credit Agreement
No. 1, of even date herewith, between Borrower and Lender, which provides for
a $250,000 revolving line of credit, and (ii) in that certain Revolving Credit
Agreement No. 2, of even date herewith, between Borrower and Lender, which
provides for an additional $250,000 revolving line of credit.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed as of the Execution Date.
Date Signed: _________ ____, 1997 _____________________________
MARK A. SPEIZER, individually
Address: 514 Roehampton Road
Hillsborough, California
94010
Telephone: (415) 342-8779
Telecopier: ( )
SCORPION ACQUISITION, LLC, a Delaware
limited liability company
By:______________________________
Print Name:
Title:
Address:
Telephone:
Telecopier:
<PAGE>
PROMISSORY NOTE
(Term Loan)
$350,000.00 Los Angeles, California
__________ ___, 1997
FOR VALUE RECEIVED, the undersigned hereby promises to pay to
SCORPION ACQUISITION, LLC, a Delaware limited liability company ("Lender"), or
order, at _____________________________________________ or at such other
address as the holder of this Promissory Note ("Note") may specify in writing,
the principal sum of THREE HUNDRED FIFTY THOUSAND DOLLARS ($350,000.00) or, if
less, the then outstanding principal amount of the Term Loan made to the
undersigned by Lender pursuant to that certain Term Loan Agreement, dated as
of even date herewith, between the undersigned and Lender (as hereafter
amended, restated, supplemented, or modified from time to time, the
"Agreement," the provisions of which are incorporated herein by reference),
plus interest in the manner and upon the terms and conditions set forth below.
This Note is made pursuant to the Agreement. All references to "Lender" in
this Note shall mean Lender and its successors and assigns. All reference to
the "undersigned" in this Note shall mean the undersigned and his successors
and assigns. Capitalized terms not defined herein shall have the meanings set
forth in the Agreement.
1. Rate of Interest
The principal balance of this Note shall bear interest from the
date hereof at a fixed rate per annum equal to 5.81%. Interest charged on
this Note shall be computed on the basis of a three hundred sixty five (365)
day year for actual days elapsed.
In no event shall the interest rate or rates payable under this
Note, plus any other amounts paid in connection herewith, exceed the highest
rate permissible under any law that a court of competent jurisdiction shall,
in a final determination, deem applicable. The undersigned and Lender intend
legally to agree upon the rate or rates of interest (and the other amounts
paid in connection herewith) and manner of payment stated within this Note;
provided, however, that anything contained herein to the contrary
notwithstanding, if said interest rate or rates of interest (or other amounts
paid in connection herewith) or the manner of payment exceeds the maximum
allowable under applicable law, then, ipso facto as of the date of this Note,
the undersigned is and shall be liable only for the payment of such maximum as
allowed by law, and payment received from the undersigned in excess of such
legal maximum, whenever received, shall be applied to reduce the principal
balance of this Note to the extent of such excess.
2. Schedule of Payments
Principal and interest under this Note, together with all other
sums owing in connection with this Note, shall be due and payable one hundred
twenty (120) days after the Closing Date (as defined in the Agreement).
3. Prepayment
Voluntary prepayments of the principal balance of this Note, or
interest accruing thereon, shall be permitted at any time.
4. General Provisions
a. If this Note is not paid when due, the undersigned
further promises to pay all costs of collection (including, but not limited
to, reasonable attorneys' fees incurred by the holder), whether or not suit is
filed hereon.
b. Presentment for payment, demand, notice of dishonor,
protest, and notice of protest are hereby expressly waived.
c. Any waiver of any rights under this Note, the
Agreement, or under any other agreement, instrument, or paper signed by the
undersigned is neither valid nor effective unless made in writing and signed
by the holder of this Note.
d. No delay or omission on the part of the holder of this
Note in exercising any right shall operate as a waiver thereof or of any other
right.
e. A waiver by the holder of this Note upon any one
occasion shall not be construed as a bar or waiver of any right or remedy on
any future occasion.
f. Should any one or more of the provisions of this Note
be determined illegal or unenforceable, all other provisions shall
nevertheless remain effective.
g. This Note cannot be changed, modified, amended, or
terminated orally.
h. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, without
reference to the principles of conflicts of laws thereof.
5. Binding Effect; Assignment; Tax Withholding
This Note and the other Loan Documents will be binding upon and
inure to the benefit of the undersigned and Lender, and their successors and
assigns. Notwithstanding the foregoing, this Note and any and all of the
rights and obligations of any party hereunder shall not be assigned,
delegated, sold, transferred or otherwise disposed of, by operation of law or
otherwise. Any attempted assignment, delegation, sale, transfer or other
disposition in violation hereof shall be void. If, nevertheless, the rights
to any payment due hereunder by the undersigned to Lender shall be transferred
by operation of law, by order of a court of competent jurisdiction or any
other circumstances with respect to which it is determined that such transfer
is not void, then such transfer may be effected only by delivery of a signed
original of this Note to the undersigned, who shall re-deliver such signed
original to the transferee duly indorsed by the undersigned to indicate the
name and address of such transferee. Under no circumstances prior to maturity
of all payment obligations due by the undersigned to Lender hereunder may any
such obligations ever be transferred to or held by any person by virtue of
such person being the bearer of any document or instrument, including this
Note, evidencing such obligations. Lender hereby covenants, and any
subsequent transferee upon transfer of said payment obligation and as a
condition to such transfer shall covenant, with the undersigned to provide the
undersigned a completed United States Internal Revenue Service Form W-8 or W-
9, as appropriate, (i) on or before the first payment made to Lender or any
such transferee; (ii) on or before the first payment in the third calendar
year following the calendar year in which such form was last provided by
Lender or any such transferee, or more frequently if required by law as a
condition to exemption from any form of withholding of tax; and (iii) within
30 days of any change in the information contained in an applicable form
provided to the undersigned hereunder. Lender (and any such transferee)
agrees to indemnify the undersigned for any tax, interest, or penalty loss
imposed on the undersigned in the event that any taxing authority determines
that the undersigned is or was required to withhold with respect to any
payment made hereunder. However, the previous sentence shall not apply to any
tax, interest or penalty imposed after the undersigned has either been
notified by any taxing authority that withholding is required, or after Lender
(or such transferee) has informed the undersigned that Lender (or such
transferee) is no longer exempt from withholding. In that event, Lender (or
such transferee) shall not be liable for interest and penalties imposed by any
taxing authority that arise out of the undersigned's failure to withhold. If
the undersigned fails to withhold the necessary amount from any subsequent
payment, the undersigned's only remedy shall be to withhold tax on any
subsequent payments, or to obtain reimbursement for the tax only.
IN WITNESS WHEREOF, this Note has been executed and delivered on
the date first set forth above.
MARK A. SPEIZER, individually
<PAGE>
EXHIBIT C
REVOLVING CREDIT AGREEMENTS
<PAGE>
REVOLVING CREDIT AGREEMENT NO. 1
Dated as of ______ __, 1997
THIS REVOLVING CREDIT AGREEMENT NO. 1 ("Agreement") is made and
entered into by and between MARK A. SPEIZER, individually ("Borrower"), and
SCORPION ACQUISITION, LLC, a Delaware limited liability company ("Lender"),
with reference to the following agreed upon facts:
RECITALS
A. Borrower has requested that Lender provide Borrower with an
unsecured credit facility for the purpose of providing Borrower with funds to
service the Herman Debt (defined below).
B. Borrower and Lender have each independently determined that
it is in each of their best interests to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing factual Recitals
(which are hereby incorporated into this Agreement) and of the mutual
covenants and conditions set forth below, the parties hereto hereby agree and
covenant with each other as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
capitalized terms shall have the following respective defined meanings:
"Actual Payment Date" means 180 days after the "Elected Payment
Date" (as such term is defined in that certain Purchase and Sale Agreement,
executed by Borrower and Lender, dated February ____, 1997).
"Advance" means each of the advances to be made by Lender to
Borrower pursuant to (i) Section 2.1 and (ii) the other terms and conditions
of this Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of California are authorized
or obligated by law or executive order to be closed.
"Code" means the Internal Revenue Code of 1986, as amended through
the date of this Agreement, and the Regulations of the United States Treasury
Department thereunder.
"Default" means any event that, with the giving of notice or the
passage of time or both, as applicable, would be an Event of Default.
"Draw Down Termination Date" means the earlier of (i) the Maturity
Date, or (ii) the Actual Payment Date.
"Event of Default" means any of the events described in
Section 7.1.
"Execution Date" means the date on which this Agreement is executed
by Borrower.
"Governmental Agency" means: (a) any government, municipality or
political subdivision thereof; (b) any governmental or quasi-governmental
agency, authority, board, bureau, commission, department, instrumentality or
public body (including but not limited to the California Department of
Insurance); (c) any court, administrative tribunal or public utility; or
(d) any central bank or comparable authority.
"Herman Debt" means the indebtedness incurred by the Borrower as
represented by the Herman Notes.
"Herman Family" means, collectively, Howard L. Herman, Marcia E.
Herman, Bradley Herman, Barbara Herman, and the Joel Franklin Herman Trust.
"Herman Notes" means the promissory notes executed by Borrower in
favor of members of the Herman Family, each dated May 31, 1996, and in the
aggregate original principal amount of $5,580,292.
"Indebtedness" means: (a) all obligations of Borrower for borrowed
money; (b) all obligations of Borrower evidenced by bonds, debentures, notes,
or other similar instruments and all reimbursement or other obligations of
Borrower in respect of letters of credit, letter of credit guaranties, bankers
acceptances, interest rate swaps, controlled disbursement accounts, or other
financial products; (c) all obligations under capital leases; (d) all
obligations or liabilities of others secured by a lien or security interest on
any property or asset of Borrower, irrespective of whether such obligation or
liability is assumed; and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other Person.
"Initial Lender Commitment" shall mean $250,000.00.
"Laws" means, collectively, all federal, state and local laws,
rules, regulations, ordinances and codes, and all laws, rules, regulations,
ordinances and codes of any other jurisdiction.
"Lender Commitment" means the commitment of Lender to make Advances
pursuant to Section 2.1; provided that (i) each Advance shall reduce the
amount of the Lender Commitment by a like amount (to the extent such Advance
has not been repaid by Borrower), and (ii) at no time shall the aggregate
outstanding principal amount of funded Advances exceed the Initial Lender
Commitment.
"Loan Documents" means this Agreement, the Note, and all other
written agreements, instruments, and documents executed by Borrower, now or
hereafter evidencing or otherwise relating to the Obligations or any other
aspect of the transactions contemplated by this Agreement, as the same are
amended, modified, or supplemented from to time to time.
"Maturity Date" means June 30, 2002.
"Note" means that certain Promissory Note No. 1 (and any promissory
note that may be issued in substitution or exchange therefor), executed as of
even date herewith by Borrower in favor of Lender, in the original principal
amount of the Initial Lender Commitment, as originally executed or as
supplemented, modified or amended from time to time.
"Obligations" means all present and future loans (including, but
not limited to, all Advances), advances, liabilities, and obligations owing by
Borrower to Lender arising under this Agreement and/or the other Loan
Documents, whether arising from an extension of credit, loan, guaranty,
indemnification or otherwise, absolute or contingent, due or to become due,
primary or secondary, as principal or guarantor, and including, without
limitation, all interest, charges, expenses, fees, attorneys' fees, and any
other sums chargeable to Borrower hereunder or under another Loan Document.
"Person" means any entity, whether an individual, trustee,
corporation, partnership, limited liability company, joint stock company,
trust, unincorporated organization, bank, savings and loan association,
business association or firm, joint venture, Governmental Agency or otherwise.
"Request for Advance" means a written request for an Advance signed
by Borrower, specifying the date (which must be a Business Day) of the
requested Advance, the amount of the requested Advance, that the Borrower is
requesting an Advance under this Agreement (as opposed to the Revolving Credit
Agreement No. 2, referred to in Section 8.19 below) and certifying as to the
matters set forth in Sections 4.2(a) and 4.2(b) of this Agreement.
"to the best knowledge of" means, when modifying a representation,
warranty or other statement of any Person, that the fact or situation
described therein is known by the Person making the representation, warranty
or other statement, or with the exercise of reasonable due diligence under the
circumstances (in accordance with the standard of what a reasonable man in
similar circumstances would have done) should have been known by the Person.
1.2 Use of Defined Terms. Any defined term used in the plural
shall refer to all members of the relevant class, and any defined term used in
the singular shall refer to any number of the members of the relevant class.
1.3 Exhibits. All exhibits to this Agreement, if any, as
existing at the time of execution of this Agreement or as supplemented,
modified or amended from time to time, are incorporated into this Agreement by
this reference as though fully set forth herein.
1.4 Cross-References. All references to specific Sections,
Articles, Paragraphs, Recitals, and Exhibits shall be deemed references to the
Sections, Articles, Paragraphs, Recitals, and Exhibits of this Agreement,
unless such reference specifically or by context refers to a different
document.
ARTICLE 2
ADVANCES
2.1 Advances and Borrowing Procedures.
a. Subject to the terms and conditions set forth in this
Agreement, at any time from the Execution Date through the date which is one
day prior to the Draw Down Termination Date, Lender shall make Advances to
Borrower in such principal amounts as Borrower may request that do not exceed
in the aggregate (together with the aggregate outstanding principal balance of
all previously funded Advances) the Initial Lender Commitment. Any Advances
repaid by Borrower may be reborrowed and repaid, subject to the Initial Lender
Commitment and other terms and conditions of this Agreement.
b. The following procedure shall apply to all Advances:
Not later than 12:00 noon, Los Angeles time, five (5) days prior to the
Business Day on which a proposed Advance is to be made pursuant to this
Section 2.1, Lender must have received, at Lender's office (at the address set
forth on the signature page of this Agreement), a completed Request for
Advance).
c. Upon fulfillment of each of the applicable conditions
set forth in Article 4, each Advance shall be remitted to Borrower in
accordance with instructions provided by Borrower to Lender in writing.
d. The principal amount of each Advance may not be more
than the then current Lender Commitment.
e. Each Advance funded by Lender in the manner provided in
Section 2.1 shall be evidenced by the Note.
f. Each Advance shall be used only for the following
purposes:
(i) For servicing the Herman Debt; and
(ii) To cover the costs and expenses of Lender and
Borrower described in Section 8.4.
2.2 No Advances After Draw Down Termination Date. Lender shall
not be obligated to make any Advances after the Draw Down Termination Date.
ARTICLE 3
INTEREST; PAYMENTS
3.1 Interest. Interest shall accrue on the unpaid principal
balance of the Obligations at the rate set forth in, and be due and payable in
accordance with the terms of, the Note.
3.2 Principal.
a. Subject to Lender's right of acceleration upon the
occurrence of an Event of Default, the principal balance of the Note shall be
payable on the Maturity Date in accordance with the terms of the Note;
provided, however, that whenever the aggregate outstanding principal balance
of the Advances (to the extent not repaid by Borrower) exceeds the Initial
Lender Commitment, Borrower shall immediately pay to Lender the excess of the
outstanding principal balance of the Advances which exceeds the Initial Lender
Commitment.
b. Borrower may repay or prepay the principal balance of
the Note at any time and reborrow such repaid or prepaid amounts, subject to
the other terms and conditions of this Agreement.
3.3 Manner and Treatment of Payments.
a. The amount of each payment under this Agreement or on
the Note shall be made to Lender in lawful money of the United States of
America by wire transfer as follows:
FOR ACCOUNT OF: _________________________
A/C#:
All payments received by Lender from Borrower after 12:00 noon, Los Angeles
time, on a Business Day, or on a day which is not a Business Day, shall be
deemed received on the next succeeding Business Day.
b. Whenever any payment to be made pursuant to this
Agreement or on the Note is due on a day that is not a Business Day, payment
shall be made on the next succeeding Business Day, and such extension of time
shall be included in the computation of interest.
c. Lender shall keep a record of Advances made by Lender
and payments of principal with respect to the Note, and such record shall be
presumptive evidence of the principal amount owing under this Agreement and
the Note.
d. Each payment of principal and interest and all other
amounts payable by Borrower under this Agreement and the other Loan Documents
shall be made free and clear of, and without reduction by reason of, any
taxes, assessments or other charges imposed by any Governmental Agency (except
as provided in Section 8.8).
e. Borrower shall make all payments required under the
Loan Documents regardless of any defense, setoff or counterclaim, including,
without limitation, any defense, setoff or counterclaim based on any law, rule
or policy which is now or hereafter promulgated by any Governmental Agency and
which may adversely affect Borrower's obligation to make, or the right of the
holder of the Note or the obligee under any other Loan Document to receive,
such payments.
f. All sums paid by Borrower in connection with the Loan
Documents shall be applied first to sums, other than principal and interest,
due pursuant to the Loan Documents, next to accrued but unpaid interest on the
Obligations, and the balance, if any, to principal of the Obligations.
ARTICLE 4
CONDITIONS
4.1 Conditions for Effectiveness of This Agreement. The
effectiveness of this Agreement is subject to satisfaction of the following
conditions precedent (which are for Lender's benefit only):
a. That Lender shall have received all of the following
documents, each dated as of the Execution Date (unless otherwise specified),
and all in form and substance satisfactory to Lender:
(i) This Agreement;
(ii) The Note;
(iii) Such additional agreements, certificates,
reports, approvals, instruments, documents and consents as Lender may
reasonably request.
4.2 Conditions for Any Advance. The obligation of Lender to
make any Advance is subject to the following conditions precedent:
a. The representations and warranties contained in herein
shall be correct on and as of the date of the Advance as though made on and as
of that date, no Event of Default shall have occurred (other than Events of
Default that have been waived by Lender in its sole and absolute discretion),
and no Default shall have occurred and remain uncured;
b. The Advance shall be in conformity with all borrowing
procedures set forth in Section 2.1 and elsewhere in this Agreement;
c. Borrower shall, at his sole expense, deliver or cause
to be delivered to Lender, in form and substance reasonably satisfactory to
Lender, a Request for Advance, as required by Section 2.1; and
d. Borrower shall have used reasonable efforts to obtain
financing from a regulated financial institution in order to service the
Herman Debt; provided, that Borrower may demonstrate such reasonable efforts
by making application in good faith to three such regulated financial
institutions (including compliance with all documentary and information
requests of such regulated financial institutions) during the twelve months
preceding the date of the requested Advance, and having each such application
denied or not approved by the thirtieth day following the submission of the
last document or other information requested by such regulated financial
institution.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents and warrants to Lender that:
5.1 Execution, Delivery and Performance of Loan Documents.
a. Borrower has all requisite power and authority to
execute and deliver, and to perform all of his obligations under, the Loan
Documents.
b. The execution and delivery by Borrower of, and the
performance by Borrower of each of his obligations under, each Loan Document
will not:
(i) require any consent or approval not heretofore
obtained of any Person;
(ii) violate any provision of any order, writ,
judgment, injunction, decree, determination or award presently in effect
having applicability to Borrower; or
(iii) result in a breach of or constitute a default
under, or cause or permit the acceleration of any obligation owed under, any
indenture or loan or credit agreement or any other material agreement, lease
or instrument to which Borrower is a party or by which Borrower or any
property of Borrower is bound or affected.
c. Borrower is not in default under any order, writ,
judgment, injunction, decree, determination, award, indenture, agreement,
lease or instrument described in subparagraphs (ii) or (iii) of Paragraph b of
this Section 5.1 in any respect that is materially adverse to the interests of
Lender, or that could materially impair the ability of Borrower to perform
obligations under the Loan Documents, or that has a material adverse effect on
the business or financial condition of Borrower.
d. Other than approvals (or exemptions therefrom) already
obtained by Borrower, to Borrower's knowledge, no authorization, consent,
approval, order, license, permit or exemption from, or filing, registration or
qualification with, any Governmental Agency is or will be required under
applicable Law to authorize or permit the execution and delivery by Borrower
of, and the performance by Borrower of all of his obligations under, each Loan
Document.
e. Each of the Loan Documents, when executed and
delivered, will constitute the legal, valid and binding obligations of
Borrower enforceable against him in accordance with its terms.
5.2 Compliance with Laws and Other Requirements. To Borrower's
knowledge, Borrower is in compliance with all Laws and other requirements
applicable to his businesses and has obtained all authorizations, consents,
approvals, orders, licenses, permits and exemptions from, and have
accomplished all filings, registrations or qualifications with, any
Governmental Agency that are necessary for the transaction of his businesses,
except where the failure to be in such compliance, obtain such authorizations,
consents, approvals, orders, licenses, permits or exemptions, or accomplish
such filings, registrations or qualifications is not materially adverse to the
interests of Lender, and does not materially impair the ability of Borrower to
perform his obligations, under the Loan Documents, and does not have a
material adverse effect on the business or financial condition of Borrower.
5.3 No Default. No Event of Default has occurred, and no event
has occurred and is continuing that is a Default.
ARTICLE 6
COVENANTS OF BORROWER
As long as the Note remains unpaid or any Obligation remains owing
or the Lender Commitment remains in effect:
6.1 Compliance with Laws and Other Requirements. Borrower shall
comply with the requirements of all applicable Laws and orders of any
Governmental Agency, noncompliance with which might materially adversely
affect the business or financial condition of Borrower.
6.2 Reporting Requirements. Borrower shall cause to be
delivered to Lender, in form and detail reasonably satisfactory to Lender, as
soon as practicable and in any event within fifteen (15) days after the
occurrence of a Default or Event of Default becomes known to Borrower, a
written statement setting forth the nature of the Default or Event of Default
and the action that Borrower proposes to take with respect thereto.
6.3 Notice of Defaults under other Indebtedness. Borrower shall
notify Lender within five (5) Business Days of any "default" or "event of
default" that occurs with respect to any Indebtedness.
ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES UPON DEFAULT
7.1 Events of Default. The occurrence of any one or more of the
following events, whatever the reason therefor, shall constitute an Event of
Default under this Agreement:
a. A failure by Borrower to pay the principal of or
interest on the Note or any portion thereof when due; or
b. A failure by Borrower to pay any other amount payable
by Borrower under the Loan Documents, within three (3) days after the date
when due as provided herein or therein; or
c. A failure by Borrower to perform or observe any term,
covenant or agreement contained in any Loan Document on his part to be
performed or observed and such failure shall continue for more than thirty
(30) calendar days after notice of such failure is given by Lender to
Borrower, unless such failure is of such a nature that it cannot be cured
within such thirty (30) day period and Borrower commences action to cure such
failure within such thirty (30) day period and thereafter diligently and
continuously prosecutes such action to completion within sixty (60) calendar
days after notice of such failure is given by Lender to Borrower; or
d. Any representation or warranty in any Loan Document or
in any certificate, agreement, instrument or other document made or delivered
by Borrower to Lender pursuant to any Loan Document proves to have been
incorrect when made; or
e. Any Loan Document, at any time after its execution and
delivery and for any reason other than the agreement of Lender or satisfaction
in full of all Obligations, ceases to be in full force and effect or is
declared to be null and void by a court of competent jurisdiction; or the
validity or enforceability thereof is contested in a judicial proceeding by
Borrower; or Borrower denies that he has any or continuing liability or
obligation under any Loan Document, unless all Obligations of Borrower
thereunder have been fully paid and performed; or
f. Borrower shall fail to pay when due (or within any
stated grace period), whether at the stated maturity, upon acceleration, by
reason of required prepayment or otherwise, the principal or any principal
installment of, or any interest on, any present or future Indebtedness
outstanding pursuant to the credit facilities described in Section 8.19; or
g. Borrower is the subject of an order for relief by a
bankruptcy court, or is unable or admits in writing his inability to pay his
debts as they mature or makes an assignment for the benefit of creditors; or
applies for or consents to the appointment of any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer for him
or for all or any part of his business or property; or any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer is
appointed without the application or consent of Borrower and the appointment
continues undischarged or unstayed for forty-five (45) calendar days;
provided, however, that, during the pendency of such period, Lender shall be
relieved of its obligation to make any additional Advances; or institutes or
consents to any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, custodianship, conservatorship,
liquidation, rehabilitation or similar proceeding relating to him or to all or
any part of his business or property under the laws of any jurisdiction; or
any similar proceeding is instituted without the consent of Borrower
(including, but not limited, any action is taken by any Governmental Agency
that has a material adverse effect on the business, operations or property of
Borrower) and continues undismissed or unstayed for forty-five (45) calendar
days; provided, however, that, during the pendency of such period, Lender
shall be relieved of its obligation to make any additional Advances; or
h. Any judgment, writ, warrant of attachment or execution
or similar process is issued or levied against all or any part of the property
of Borrower and is not released, vacated or fully bonded within forty-five
(45) calendar days after its issue or levy; provided, however, that, during
the pendency of such period, Lender shall be relieved of its obligation to
make any additional Advances.
7.2 Remedies Upon Event of Default.
a. Upon the occurrence of any Event of Default, all
commitments to make Advances and all other obligations of Lender and all
rights of Borrower under the Loan Documents will terminate without notice to
or demand upon Borrower, which are expressly waived by Borrower.
b. Upon the occurrence of any Event of Default, Lender,
without notice to or demand upon Borrower, which are expressly waived by
Borrower, may proceed to protect, exercise and enforce its rights and remedies
under the Loan Documents against Borrower and such other rights and remedies
as are provided by law or equity. Without limiting the generality of the
foregoing, upon the occurrence of any Event of Default Lender shall be
entitled to accelerate and declare immediately due and payable the principal
balance of the Obligations, any accrued and unpaid interest thereon, and all
other Obligations, all without notice to or demand upon Borrower.
c. The order and manner in which Lender's rights and
remedies are to be exercised shall be determined by Lender in its sole
discretion. Regardless of how Lender may treat payments received by it for
the purpose of its own accounting, for the purpose of computing Borrower's
obligations under this Agreement and under the Note, all moneys collected or
received by Lender on account of the Obligations, directly or indirectly,
shall be applied in the following order of priority:
(i) to the payment of all proper and reasonable
costs and expenses of Lender incurred in the exercise of Lender's rights and
remedies (including attorneys' fees and disbursements and the allocated costs
and expenses of in-house legal and other professional services) and all other
Obligations (other than interest and principal) owing by Borrower to Lender;
(ii) next, to accrued and unpaid interest on the
Obligations; and
(iii) the balance, if any, to the principal of the
Obligations.
No application of the payments will cure any Event of Default or prevent the
exercise, or continued exercise, of rights or remedies of Lender under this
Agreement or under Law.
d. Upon the occurrence of any event that would be an Event
of Default under Paragraph "g" of Section 7.1 with the passage of time, the
principal balance of the Obligations, all accrued and unpaid interest thereon,
and any other sums owing in connection with the Loan Documents shall be
automatically accelerated without notice to or demand on Borrower, and Lender
may take such other actions as it deems necessary to protect the interests of
Lender under the Loan Documents and to collect the Obligations.
ARTICLE 8
MISCELLANEOUS
8.1 Amendments; Consents. No amendment, modification,
supplement, termination or waiver of any provision of this Agreement or any
other Loan Document, no approval or consent thereunder, and no consent to any
departure by Borrower therefrom, may in any event be effective unless in
writing signed by Lender (and, in the case of amendments, modifications or
supplements, the approval in writing of Borrower and Lender), and then only in
the specific instance and for the specific purpose given.
8.2 Cumulative Remedies; No Waiver. Except as expressly
provided in this Agreement to the contrary, the rights, powers and remedies of
Lender provided in this Agreement or in the Note or any other Loan Document
are cumulative and not exclusive of any right, power or remedy provided by law
or equity. No failure or delay on the part of Lender in exercising any right,
power or remedy may be, or may be deemed to be, a waiver thereof; nor may any
single or partial exercise of any right, power or remedy preclude any other or
further exercise of the same or any other right, power or remedy.
8.3 No Partnership or Joint Venture. The execution of this
Agreement and the other Loan Documents shall not be construed, deemed or
alleged to be the formation of a partnership or joint venture between Lender
and Borrower, and Lender shall not be liable to any other person or entity
arising in connection with the Obligations or any transaction connected
herewith nor shall Lender have any fiduciary obligations to Borrower. Lender
shall have and may exercise such powers as are specifically delegated to
Lender under this Agreement, at law, or in equity.
8.4 Costs, Expenses and Taxes. Borrower shall pay on the
Maturity Date, the reasonable costs and expenses of Lender in connection with
the negotiation, preparation, execution, delivery, administration (exclusive
of general overhead expenses), amendment, waiver and enforcement of this
Agreement and any other Loan Document and any matter related thereto, and any
litigation or dispute with respect thereto (including any bankruptcy or
similar proceedings), including without limitation the reasonable fees and
out-of-pocket expenses of any legal counsel, independent public accountants
and other outside experts. Notwithstanding Borrower's obligation to pay the
foregoing costs and expenses on the Maturity Date, such costs and expenses
shall accrue interest at the rate set forth in the Note from the date that
such costs and expenses were incurred by Lender (and such interest shall also
be due and payable on the Maturity Date). With respect to costs and expenses
incurred by Borrower and/or Lender in connection with the negotiation,
preparation, execution, delivery and amendment of this Agreement and any other
Loan Document and the transactions contemplated thereunder, Borrower may
request an Advance to pay such costs and expenses (provided that the other
terms and conditions set forth in this Agreement are satisfied). With respect
to any litigation, arbitration or reference between the parties hereto in
connection with any Loan Document, the losing party shall pay to the
prevailing party the reasonable fees and out-of-pocket expenses of legal
counsel to the prevailing party in connection therewith. Borrower shall pay
any and all documentary and other taxes (other than income or gross receipts
taxes) and all costs, expenses, fees and charges payable or determined to be
payable in connection with the execution, delivery, filing or recording of
this Agreement, any other Loan Document or any other instrument or writing to
be delivered hereunder or thereunder, or in connection with any transaction
pursuant hereto or thereto, and shall (except as provided in Section 8.8)
reimburse, hold harmless and indemnify Lender from and against any and all
loss, liability or legal or other expense with respect to or resulting from
any delay in paying or failure to pay any tax, cost, expense, fee or charge or
that any of them may suffer or incur by reason of the failure of Borrower to
perform any of his obligations under this Agreement or any other Loan
Document. Any amount payable to Lender under this Section 8.4 shall, from the
date of demand for payment, and any other amount payable to Lender under the
Loan Documents which is not paid when due or within any applicable grace
period shall, thereafter, bear interest at the rate set forth in the Note and
be payable on demand.
8.5 Survival of Representations and Warranties. All
representations and warranties of Borrower contained in this Agreement or in
any other Loan Document, or in any certificate or other writing delivered by
or on behalf of Borrower pursuant to any Loan Document, will survive the
making and repayment of the loans under this Agreement and the execution and
delivery of the Note, and have been or will be relied upon by Lender,
notwithstanding any investigation made by or on behalf of Lender.
8.6 Notices. Except as otherwise expressly provided for herein:
(a) all notices, requests, demands, directions and other communications
provided for under this Agreement and under any other Loan Document must be in
writing and must be mailed, telegraphed, delivered or sent by telex, cable, or
telecopier to the appropriate party at the address set forth in the signature
pages of this Agreement or, as to any party, at any other address as may be
designated by it in a written notice sent to all other parties in accordance
with this Section 8.6; and (b) any notice, request, demand, direction or other
communication given by telex or telecopier must be confirmed within forty-
eight (48) hours by letter mailed or delivered to the appropriate party at its
respective address. Except as otherwise expressly provided for herein, if any
notice, request, demand, direction or other communication is given by mail it
will be effective on the earlier of receipt or the fourth calendar day after
deposit in the United States postal system with first class or airmail postage
prepaid; if given by telex, when sent; if given by telecopier, when received;
or if given by personal delivery, when delivered.
8.7 Counterparts; Execution and Acceptance. This Agreement and
any other Loan Document may be executed in any number of identical
counterparts and any party hereto or thereto may execute any counterpart, each
of which when executed and delivered will be deemed to be an original and all
of which counterparts of this Agreement or any other Loan Document, as the
case may be, taken together will be deemed to be but one and the same
instrument. The execution of this Agreement or any other Loan Document by any
party hereto or thereto will not become effective until counterparts hereof or
thereof, as the case may be, have been executed by all the parties hereto or
thereto.
8.8 Binding Effect; Assignment; Tax Withholding. This Agreement
and the other Loan Documents will be binding upon and inure to the benefit of
Borrower and Lender, and their successors and assigns. Notwithstanding the
foregoing, this Agreement and any and all of the rights and obligations of any
party hereunder shall not be assigned, delegated, sold, transferred or
otherwise disposed of, by operation of law or otherwise. Any attempted
assignment, delegation, sale, transfer or other disposition in violation
hereof shall be void. If, nevertheless, the rights to any payment due
hereunder by Borrower to Lender shall be transferred by operation of law, by
order of a court of competent jurisdiction or any other circumstances with
respect to which it is determined that such transfer is not void, then such
transfer may be effected only by delivery of a signed original of this
Agreement to Borrower, who shall re-deliver such signed original to the
transferee duly indorsed by Borrower to indicate the name and address of such
transferee. Under no circumstances prior to maturity of all payment
obligations due by Borrower to Lender hereunder may any such obligations ever
be transferred to or held by any person by virtue of such person being the
bearer of any document or instrument, including this Agreement, evidencing
such obligations. Lender hereby covenants, and any subsequent transferee upon
transfer of said payment obligation and as a condition to such transfer shall
covenant, with Borrower to provide Borrower a completed United States Internal
Revenue Service Form W-8 or W-9, as appropriate, (i) on or before the first
payment made to Lender or any such transferee; (ii) on or before the first
payment in the third calendar year following the calendar year in which such
form was last provided by Lender or any such transferee, or more frequently if
required by law as a condition to exemption from any form of withholding of
tax; and (iii) within 30 days of any change in the information contained in an
applicable form provided to Borrower hereunder. Lender (and any such
transferee) agrees to indemnify Borrower for any tax, interest, or penalty
loss imposed on Borrower in the event that any taxing authority determines
that Borrower is or was required to withhold with respect to any payment made
hereunder. However, the previous sentence shall not apply to any tax,
interest or penalty imposed after Borrower has either been notified by any
taxing authority that withholding is required, or after Lender (or such
transferee) has informed Borrower that Lender (or such transferee) is no
longer exempt from withholding. In that event, Lender (or such transferee)
shall not be liable for interest and penalties imposed by any taxing authority
that arise out of Borrower's failure to withhold. If Borrower fails to
withhold the necessary amount from any subsequent payment, Borrower's only
remedy shall be to withhold tax on any subsequent payments, or to obtain
reimbursement for the tax only.
8.9 Indemnity by Borrower.
a. Borrower agrees to indemnify, save, protect, and hold
harmless Lender and its directors, officers, agents, attorneys and employees
(collectively, "indemnitees") from and against: (i) any and all claims,
demands, actions or causes of action that are asserted against any indemnitee
by any Person if the claim, demand, action or cause of action relates solely
to a claim, demand, action or cause of action that the Person has or asserts
against Borrower and arises out of or relates to the relationship between
Borrower and Lender under this Agreement or the Note; and (ii) any and all
liabilities, losses, costs or expenses (including attorneys' fees and
disbursements and reasonably estimated allocated costs and expenses of in-
house legal counsel and legal staff and other professional services) that any
indemnitee suffers or incurs as a result of the assertion of any foregoing
claim, demand, action or cause of action; provided that no indemnitee shall be
entitled to indemnification for any claims, demands, action, causes of action,
liabilities, losses, costs, or expenses caused by its own gross negligence or
misconduct.
b. If any proceeding shall be brought or asserted against
any indemnitee in respect of which indemnity may be sought from Borrower
hereunder, such indemnitee promptly shall notify Borrower in writing, and
Borrower shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the indemnitee and the payment of all fees and
expenses incurred in connection with the defense thereof; provided, that the
failure of any indemnitee to give such notice shall not relieve Borrower of
his obligations pursuant to this Agreement except to the extent that it shall
be determined by a court of competent jurisdiction that such failure shall
have materially and adversely prejudiced Borrower.
Any such indemnitee shall have the right to employ separate counsel
in any such action, claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such indemnitee unless: (1) Borrower has agreed to pay such fees and
expenses; or (2) Borrower shall have failed promptly to assume the defense of
such action, claim or proceeding and to employ counsel reasonably satisfactory
to such indemnitee in any such action, claim or proceeding; or (3) the named
parties to any such action, claim or proceeding (including any impleaded
parties) include both such indemnitee and Borrower, and such indemnitee shall
have been advised in writing by counsel that a conflict of interest may exist
if such counsel represents such indemnitee and Borrower (and in the case of
any of (1), (2) or (3), if such indemnitee notifies Borrower in writing that
it elects to employ separate counsel at the expense of Borrower, Borrower
shall not have the right to assume the defense thereof and such counsel shall
be at the expense of Borrower). No indemnitee will be subject to any
liability for any settlement made without its consent. Borrower shall not
consent to entry of any judgment or enter into any settlement that does not
include by the claimant or plaintiff to such indemnitee of a release, in form
and substance reasonably satisfactory to the indemnitee, from all liability in
respect of such action, claim or proceeding for which such indemnitee would be
entitled to indemnification hereunder (whether or not any indemnitee is a
party thereto). All fees and expenses of the indemnitee (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such action or proceeding in a manner not inconsistent
with this Section 8.9) shall be paid to the indemnitee, as incurred, upon
written notice thereof to Borrower (regardless of whether it is ultimately
determined that an indemnitee is not entitled to indemnification hereunder);
provided, that Borrower may require such indemnitee to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
by a court of competent jurisdiction (which determination is not subject to
appeal or review) that such indemnitee is not entitled to indemnification
hereunder.
Any obligation or liability of Borrower to any indemnitee under this
Section 8.9 shall survive the expiration or termination of this Agreement and
the repayment of all Advances and all other Obligations owed to Lender.
8.10 Nonliability of Lender. Borrower acknowledges and agrees
that by accepting or approving anything required to be observed, performed,
fulfilled or given to Lender pursuant to the Loan Documents, including any
certificate or financial statement, Lender shall not be deemed to have
warranted or represented the legality, sufficiency, effectiveness or legal
effect of the same, or of any term, provision or condition thereof, and such
acceptance or approval shall not constitute a warranty or representation to
anyone with respect thereto by Lender.
8.11 No Third Parties Benefited. This Agreement is made for the
purpose of defining and setting forth certain obligations, rights and duties
of Borrower and Lender, and is made for the sole protection of Borrower and
Lender, and Lender's successors and assigns. No other Person shall have any
rights of any nature hereunder or by reason hereof.
8.12 Confidentiality. Lender shall hold any confidential
information which it may receive from Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to legal counsel, accountants and other
professional advisors to Lender, (ii) to regulatory officials having
jurisdiction over Lender, and (iii) as required by Law or legal process or in
connection with any legal proceeding to which Lender is a party.
8.13 Further Assurances. Subject to Section 8.4, Borrower shall,
at his expense and without expense to Lender, execute and deliver such further
acts and documents as Lender from time to time reasonably requires for the
assuring and confirming unto Lender the rights hereby created or intended now
or hereafter so to be, or for carrying out the intention or facilitating the
performance of the terms of any Loan Document.
8.14 Integration. This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on
the subject matter hereof and supersedes all prior agreements, written or
oral, on the subject matter hereof.
8.15 Governing Law. The Loan Documents shall be governed by, and
construed and enforced in accordance with, the internal laws of California
(without reference to conflicts of law rules or principles).
8.16 Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable or invalid as to any
party or in any jurisdiction shall, as to that party or jurisdiction, be
inoperative, unenforceable or invalid without affecting the remaining
provisions or the operation, enforceability or validity of that provision as
to any other party or in any other jurisdiction, and to this end the
provisions of all Loan Documents are declared to be severable.
8.17 Headings. Article, Section, and Paragraph headings set
forth in this Agreement and the other Loan Documents, and titles or headings
of any Loan Documents or exhibits thereto, are included for convenience of
reference only and are not part of this Agreement or the other Loan Documents
for any other purpose.
8.18 Time of the Essence. Time is of the essence of the Loan
Documents.
8.19 Other Credit Facilities. Borrower and Lender acknowledge
and agree that the credit facility provided for herein is in addition to the
credit facilities provided for (i) in that certain Revolving Credit Agreement
No. 2, of even date herewith, between Borrower and Lender, which provides for
an additional $250,000 revolving line of credit, and (ii) in that certain Term
Loan Agreement, of even date herewith, between Borrower and Lender, which
provides for a term loan of up to $350,000.
8.20 Purchase Agreement. Borrower and Lender acknowledge and
agree that this Agreement and the Note are being executed in connection with,
and are expressly subject to, that certain Purchase and Sale Agreement by and
between Borrower and Lender dated as of February 27, 1997.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed as of the Execution Date.
Date Signed: ________ ___, 1997 _____________________________
MARK A. SPEIZER, individually
Address: 514 Roehampton Road
Hillsborough, California
94010
Telephone: (415) 342-8779
Telecopier: ( )
SCORPION ACQUISITION, LLC, a Delaware
limited liability company
By:______________________________
Print Name:
Title:
Address:
Telephone:
Telecopier:
<PAGE>
PROMISSORY NOTE NO. 1
$250,000.00 Los Angeles, California
____________, 1997
FOR VALUE RECEIVED, the undersigned hereby promises to pay to
SCORPION ACQUISITION, LLC, a Delaware limited liability company ("Lender"), or
order, at _____________________________________________ or at such other
address as the holder of this Promissory Note ("Note") may specify in writing,
the principal sum of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) or, if
less, the then outstanding principal amount of the Advances made to the
undersigned by Lender pursuant to that certain Revolving Credit Agreement No.
1, dated as of even date herewith, between the undersigned and Lender (as
hereafter amended, restated, supplemented, or modified from time to time, the
"Agreement," the provisions of which are incorporated herein by reference),
plus interest in the manner and upon the terms and conditions set forth below.
This Note is made pursuant to the Agreement. All references to "Lender" in
this Note shall mean Lender and its successors and assigns. All reference to
the "undersigned" in this Note shall mean the undersigned and his successors
and assigns.
1. Rate of Interest
The principal balance of this Note shall bear interest from the
date hereof at a fixed rate per annum equal to eight percent (8%). Interest
charged on this Note shall be computed on the basis of a three hundred sixty
five (365) day year for actual days elapsed.
In no event shall the interest rate or rates payable under this
Note, plus any other amounts paid in connection herewith, exceed the highest
rate permissible under any law that a court of competent jurisdiction shall,
in a final determination, deem applicable. The undersigned and Lender intend
legally to agree upon the rate or rates of interest (and the other amounts
paid in connection herewith) and manner of payment stated within this Note;
provided, however, that anything contained herein to the contrary
notwithstanding, if said interest rate or rates of interest (or other amounts
paid in connection herewith) or the manner of payment exceeds the maximum
allowable under applicable law, then, ipso facto as of the date of this Note,
the undersigned is and shall be liable only for the payment of such maximum as
allowed by law, and payment received from the undersigned in excess of such
legal maximum, whenever received, shall be applied to reduce the principal
balance of this Note to the extent of such excess.
2. Schedule of Payments
Principal and interest under this Note, together with all other
sums owing in connection with this Note, shall be due and payable on June 30,
2002.
3. Prepayment
Voluntary prepayments of the principal balance of this Note, or
interest accruing thereon, shall be permitted at any time.
4. General Provisions
a. If this Note is not paid when due, the undersigned
further promises to pay all costs of collection (including, but not limited
to, reasonable attorneys' fees incurred by the holder), whether or not suit is
filed hereon.
b. Presentment for payment, demand, notice of dishonor,
protest, and notice of protest are hereby expressly waived.
c. Any waiver of any rights under this Note, the
Agreement, or under any other agreement, instrument, or paper signed by the
undersigned is neither valid nor effective unless made in writing and signed
by the holder of this Note.
d. No delay or omission on the part of the holder of this
Note in exercising any right shall operate as a waiver thereof or of any other
right.
e. A waiver by the holder of this Note upon any one
occasion shall not be construed as a bar or waiver of any right or remedy on
any future occasion.
f. Should any one or more of the provisions of this Note
be determined illegal or unenforceable, all other provisions shall
nevertheless remain effective.
g. This Note cannot be changed, modified, amended, or
terminated orally.
h. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, without
reference to the principles of conflicts of laws thereof.
5. Binding Effect; Assignment; Tax Withholding; Tax Withholding
This Note and the other Loan Documents will be binding upon and
inure to the benefit of the undersigned and Lender, and their successors and
assigns. Notwithstanding the foregoing, this Note and any and all of the
rights and obligations of any party hereunder shall not be assigned,
delegated, sold, transferred or otherwise disposed of, by operation of law or
otherwise. Any attempted assignment, delegation, sale, transfer or other
disposition in violation hereof shall be void. If, nevertheless, the rights
to any payment due hereunder by the undersigned to Lender shall be transferred
by operation of law, by order of a court of competent jurisdiction or any
other circumstances with respect to which it is determined that such transfer
is not void, then such transfer may be effected only by delivery of a signed
original of this Note to the undersigned, who shall re-deliver such signed
original to the transferee duly indorsed by the undersigned to indicate the
name and address of such transferee. Under no circumstances prior to maturity
of all payment obligations due by the undersigned to Lender hereunder may any
such obligations ever be transferred to or held by any person by virtue of
such person being the bearer of any document or instrument, including this
Note, evidencing such obligations. Lender hereby covenants, and any
subsequent transferee upon transfer of said payment obligation and as a
condition to such transfer shall covenant, with the undersigned to provide the
undersigned a completed United States Internal Revenue Service Form W-8 or W-
9, as appropriate, (i) on or before the first payment made to Lender or any
such transferee; (ii) on or before the first payment in the third calendar
year following the calendar year in which such form was last provided by
Lender or any such transferee, or more frequently if required by law as a
condition to exemption from any form of withholding of tax; and (iii) within
30 days of any change in the information contained in an applicable form
provided to the undersigned hereunder. Lender (and any such transferee)
agrees to indemnify the undersigned for any tax, interest, or penalty loss
imposed on the undersigned in the event that any taxing authority determines
that the undersigned is or was required to withhold with respect to any
payment made hereunder. However, the previous sentence shall not apply to any
tax, interest or penalty imposed after the undersigned has either been
notified by any taxing authority that withholding is required, or after Lender
(or such transferee) has informed the undersigned that Lender (or such
transferee) is no longer exempt from withholding. In that event, Lender (or
such transferee) shall not be liable for interest and penalties imposed by any
taxing authority that arise out of the undersigned's failure to withhold. If
the undersigned fails to withhold the necessary amount from any subsequent
payment, the undersigned's only remedy shall be to withhold tax on any
subsequent payments, or to obtain reimbursement for the tax only.
IN WITNESS WHEREOF, this Note has been executed and delivered on
the date first set forth above.
_____________________________
MARK A. SPEIZER, individually
<PAGE>
REVOLVING CREDIT AGREEMENT NO. 2
Dated as of _________ ___, 1997
THIS REVOLVING CREDIT AGREEMENT NO. 2 ("Agreement") is made and
entered into by and between MARK A. SPEIZER, individually ("Borrower"), and
SCORPION ACQUISITION, LLC, a Delaware limited liability company ("Lender"),
with reference to the following agreed upon facts:
RECITALS
A. Borrower has requested that Lender provide Borrower with an
unsecured credit facility for the purpose of providing Borrower with funds to
service the Herman Debt (defined below).
B. Borrower and Lender have each independently determined that
it is in each of their best interests to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing factual Recitals
(which are hereby incorporated into this Agreement) and of the mutual
covenants and conditions set forth below, the parties hereto hereby agree and
covenant with each other as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
capitalized terms shall have the following respective defined meanings:
"Actual Payment Date" means 180 days after the "Elected Payment
Date" (as such term is defined in that certain Purchase and Sale Agreement,
executed by Borrower and Lender, dated February ____, 1997).
"Advance" means each of the advances to be made by Lender to
Borrower pursuant to (i) Section 2.1 and (ii) the other terms and conditions
of this Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of California are authorized
or obligated by law or executive order to be closed.
"Code" means the Internal Revenue Code of 1986, as amended through
the date of this Agreement, and the Regulations of the United States Treasury
Department thereunder.
"Default" means any event that, with the giving of notice or the
passage of time or both, as applicable, would be an Event of Default.
"Draw Down Termination Date" means the earlier of (i) the Maturity
Date, or (ii) the Actual Payment Date.
"Event of Default" means any of the events described in
Section 7.1.
"Execution Date" means the date on which this Agreement is executed
by Borrower.
"Governmental Agency" means: (a) any government, municipality or
political subdivision thereof; (b) any governmental or quasi-governmental
agency, authority, board, bureau, commission, department, instrumentality or
public body (including but not limited to the California Department of
Insurance); (c) any court, administrative tribunal or public utility; or
(d) any central bank or comparable authority.
"Herman Debt" means the indebtedness incurred by the Borrower as
represented by the Herman Notes.
"Herman Family" means, collectively, Howard L. Herman, Marcia E.
Herman, Bradley Herman, Barbara Herman, and the Joel Franklin Herman Trust.
"Herman Notes" means the promissory notes executed by Borrower in
favor of members of the Herman Family, each dated May 31, 1996, and in the
aggregate original principal amount of $5,580,292.
"Indebtedness" means: (a) all obligations of Borrower for borrowed
money; (b) all obligations of Borrower evidenced by bonds, debentures, notes,
or other similar instruments and all reimbursement or other obligations of
Borrower in respect of letters of credit, letter of credit guaranties, bankers
acceptances, interest rate swaps, controlled disbursement accounts, or other
financial products; (c) all obligations under capital leases; (d) all
obligations or liabilities of others secured by a lien or security interest on
any property or asset of Borrower, irrespective of whether such obligation or
liability is assumed; and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other Person.
"Initial Lender Commitment" shall mean $250,000.00.
"Laws" means, collectively, all federal, state and local laws,
rules, regulations, ordinances and codes, and all laws, rules, regulations,
ordinances and codes of any other jurisdiction.
"Lender Commitment" means the commitment of Lender to make Advances
pursuant to Section 2.1; provided that (i) each Advance shall reduce the
amount of the Lender Commitment by a like amount (to the extent such Advance
has not been repaid by Borrower), and (ii) at no time shall the aggregate
outstanding principal amount of funded Advances exceed the Initial Lender
Commitment.
"Loan Documents" means this Agreement, the Note, and all other
written agreements, instruments, and documents executed by Borrower, now or
hereafter evidencing or otherwise relating to the Obligations or any other
aspect of the transactions contemplated by this Agreement, as the same are
amended, modified, or supplemented from to time to time.
"Maturity Date" means the earlier of (i) June 30, 2002, or (ii) the
365th day after the date that the first Advance is made hereunder.
"Note" means that certain Promissory Note No. 2 (and any promissory
note that may be issued in substitution or exchange therefor), executed as of
even date herewith by Borrower in favor of Lender, in the original principal
amount of the Initial Lender Commitment, as originally executed or as
supplemented, modified or amended from time to time.
"Obligations" means all present and future loans (including, but
not limited to, all Advances), advances, liabilities, and obligations owing by
Borrower to Lender arising under this Agreement and/or the other Loan
Documents, whether arising from an extension of credit, loan, guaranty,
indemnification or otherwise, absolute or contingent, due or to become due,
primary or secondary, as principal or guarantor, and including, without
limitation, all interest, charges, expenses, fees, attorneys' fees, and any
other sums chargeable to Borrower hereunder or under another Loan Document.
"Person" means any entity, whether an individual, trustee,
corporation, partnership, limited liability company, joint stock company,
trust, unincorporated organization, bank, savings and loan association,
business association or firm, joint venture, Governmental Agency or otherwise.
"Request for Advance" means a written request for an Advance signed
by Borrower specifying the date (which must be a Business Day) of the
requested Advance, the amount of the requested Advance, and that the Borrower
is requesting an Advance under this Agreement (as opposed to the Revolving
Credit Agreement No. 1, referred to in Section 8.19 below) and certifying as
to the matters set forth in Section 4.2(a) and 4.2(b) of this Agreement.
"to the best knowledge of" means, when modifying a representation,
warranty or other statement of any Person, that the fact or situation
described therein is known by the Person making the representation, warranty
or other statement, or with the exercise of reasonable due diligence under the
circumstances (in accordance with the standard of what a reasonable man in
similar circumstances would have done) should have been known by the Person.
1.2 Use of Defined Terms. Any defined term used in the plural
shall refer to all members of the relevant class, and any defined term used in
the singular shall refer to any number of the members of the relevant class.
1.3 Exhibits. All exhibits to this Agreement, if any, as
existing at the time of execution of this Agreement or as supplemented,
modified or amended from time to time, are incorporated into this Agreement by
this reference as though fully set forth herein.
1.4 Cross-References. All references to specific Sections,
Articles, Paragraphs, Recitals, and Exhibits shall be deemed references to the
Sections, Articles, Paragraphs, Recitals, and Exhibits of this Agreement,
unless such reference specifically or by context refers to a different
document.
ARTICLE 2
ADVANCES
2.1 Advances and Borrowing Procedures.
a. Subject to the terms and conditions set forth in this
Agreement, at any time from the Execution Date through the date which is one
day prior to the Draw Down Termination Date, Lender shall make Advances to
Borrower in such principal amounts as Borrower may request that do not exceed
in the aggregate (together with the aggregate outstanding principal balance of
all previously funded Advances) the Initial Lender Commitment. Any Advances
repaid by Borrower may be reborrowed and repaid, subject to the Initial Lender
Commitment and other terms and conditions of this Agreement.
b. The following procedure shall apply to all Advances:
Not later than 12:00 noon, Los Angeles time, five (5) days prior to the
Business Day on which a proposed Advance is to be made pursuant to this
Section 2.1, Lender must have received, at Lender's office (at the address set
forth on the signature page of this Agreement), a completed Request for
Advance).
c. Upon fulfillment of each of the applicable conditions
set forth in Article 4, each Advance shall be remitted to Borrower in
accordance with instructions provided by Borrower to Lender in writing.
d. The principal amount of each Advance may not be more
than the then current Lender Commitment.
e. Each Advance funded by Lender in the manner provided in
Section 2.1 shall be evidenced by the Note.
f. Each Advance shall be used only for the following
purposes:
(i) For servicing the Herman Debt; and
(ii) To cover the costs and expenses of Lender and
Borrower described in Section 8.4.
2.2 No Advances After Draw Down Termination Date. Lender shall
not be obligated to make any Advances after the Draw Down Termination Date.
ARTICLE 3
INTEREST; PAYMENTS
3.1 Interest. Interest shall accrue on the unpaid principal
balance of the Obligations at the rate set forth in, and be due and payable in
accordance with the terms of, the Note.
3.2 Principal.
a. Subject to Lender's right of acceleration upon the
occurrence of an Event of Default, the principal balance of the Note shall be
payable on the Maturity Date in accordance with the terms of the Note;
provided, however, that whenever the aggregate outstanding principal balance
of the Advances (to the extent not repaid by Borrower) exceeds the Initial
Lender Commitment, Borrower shall immediately pay to Lender the excess of the
outstanding principal balance of the Advances which exceeds the Initial Lender
Commitment.
b. Borrower may repay or prepay the principal balance of
the Note at any time and reborrow such repaid or prepaid amounts, subject to
the other terms and conditions of this Agreement.
3.3 Manner and Treatment of Payments.
a. The amount of each payment under this Agreement or on
the Note shall be made to Lender in lawful money of the United States of
America by wire transfer as follows:
FOR ACCOUNT OF: _________________________
A/C#:
All payments received by Lender from Borrower after 12:00 noon, Los Angeles
time, on a Business Day, or on a day which is not a Business Day, shall be
deemed received on the next succeeding Business Day.
b. Whenever any payment to be made pursuant to this
Agreement or on the Note is due on a day that is not a Business Day, payment
shall be made on the next succeeding Business Day, and such extension of time
shall be included in the computation of interest.
c. Lender shall keep a record of Advances made by Lender
and payments of principal with respect to the Note, and such record shall be
presumptive evidence of the principal amount owing under this Agreement and
the Note.
d. Each payment of principal and interest and all other
amounts payable by Borrower under this Agreement and the other Loan Documents
shall be made free and clear of, and without reduction by reason of, any
taxes, assessments or other charges imposed by any Governmental Agency (except
as provided in Section 8.8).
e. Borrower shall make all payments required under the
Loan Documents regardless of any defense, setoff or counterclaim, including,
without limitation, any defense, setoff or counterclaim based on any law, rule
or policy which is now or hereafter promulgated by any Governmental Agency and
which may adversely affect Borrower's obligation to make, or the right of the
holder of the Note or the obligee under any other Loan Document to receive,
such payments.
f. All sums paid by Borrower in connection with the Loan
Documents shall be applied first to sums, other than principal and interest,
due pursuant to the Loan Documents, next to accrued but unpaid interest on the
Obligations, and the balance, if any, to principal of the Obligations.
ARTICLE 4
CONDITIONS
4.1 Conditions for Effectiveness of This Agreement. The
effectiveness of this Agreement is subject to satisfaction of the following
conditions precedent (which are for Lender's benefit only):
a. That Lender shall have received all of the following
documents, each dated as of the Execution Date (unless otherwise specified),
and all in form and substance satisfactory to Lender:
(i) This Agreement;
(ii) The Note;
(iii) Such additional agreements, certificates,
reports, approvals, instruments, documents and consents as Lender may
reasonably request.
4.2 Conditions for Any Advance. The obligation of Lender to
make any Advance is subject to the following conditions precedent:
a. The representations and warranties contained in herein
shall be correct on and as of the date of the Advance as though made on and as
of that date, no Event of Default shall have occurred (other than Events of
Default that have been waived by Lender in its sole and absolute discretion),
and no Default shall have occurred and remain uncured;
b. The Advance shall be in conformity with all borrowing
procedures set forth in Section 2.1 and elsewhere in this Agreement;
c. Borrower shall, at his sole expense, deliver or cause
to be delivered to Lender, in form and substance reasonably satisfactory to
Lender, a Request for Advance, as required by Section 2.1; and
d. Borrower shall have used reasonable efforts to obtain
financing from a regulated financial institution in order to service the
Herman Debt; provided, that Borrower may demonstrate such reasonable efforts
by making application in good faith to three such regulated financial
institutions (including compliance with all documentary and information
requests of such regulated financial institutions) during the twelve months
preceding the date of the requested Advance, and having each such application
denied or not approved by the thirtieth day following the submission of the
last document or other information requested by such regulated financial
institution.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents and warrants to Lender that:
5.1 Execution, Delivery and Performance of Loan Documents.
a. Borrower has all requisite power and authority to
execute and deliver, and to perform all of his obligations under, the Loan
Documents.
b. The execution and delivery by Borrower of, and the
performance by Borrower of each of his obligations under, each Loan Document
will not:
(i) require any consent or approval not heretofore
obtained of any Person;
(ii) violate any provision of any order, writ,
judgment, injunction, decree, determination or award presently in effect
having applicability to Borrower; or
(iii) result in a breach of or constitute a default
under, or cause or permit the acceleration of any obligation owed under, any
indenture or loan or credit agreement or any other material agreement, lease
or instrument to which Borrower is a party or by which Borrower or any
property of Borrower is bound or affected.
c. Borrower is not in default under any order, writ,
judgment, injunction, decree, determination, award, indenture, agreement,
lease or instrument described in subparagraphs (ii) or (iii) of Paragraph b of
this Section 5.1 in any respect that is materially adverse to the interests of
Lender, or that could materially impair the ability of Borrower to perform
obligations under the Loan Documents, or that has a material adverse effect on
the business or financial condition of Borrower.
d. Other than approvals (or exemptions therefrom) already
obtained by Borrower, to Borrower's knowledge, no authorization, consent,
approval, order, license, permit or exemption from, or filing, registration or
qualification with, any Governmental Agency is or will be required under
applicable Law to authorize or permit the execution and delivery by Borrower
of, and the performance by Borrower of all of his obligations under, each Loan
Document.
e. Each of the Loan Documents, when executed and
delivered, will constitute the legal, valid and binding obligations of
Borrower enforceable against him in accordance with its terms.
5.2 Compliance with Laws and Other Requirements. To Borrower's
knowledge, Borrower is in compliance with all Laws and other requirements
applicable to his businesses and has obtained all authorizations, consents,
approvals, orders, licenses, permits and exemptions from, and have
accomplished all filings, registrations or qualifications with, any
Governmental Agency that are necessary for the transaction of his businesses,
except where the failure to be in such compliance, obtain such authorizations,
consents, approvals, orders, licenses, permits or exemptions, or accomplish
such filings, registrations or qualifications is not materially adverse to the
interests of Lender, and does not materially impair the ability of Borrower to
perform his obligations, under the Loan Documents, and does not have a
material adverse effect on the business or financial condition of Borrower.
5.3 No Default. No Event of Default has occurred, and no event
has occurred and is continuing that is a Default.
ARTICLE 6
COVENANTS OF BORROWER
As long as the Note remains unpaid or any Obligation remains owing
or the Lender Commitment remains in effect:
6.1 Compliance with Laws and Other Requirements. Borrower shall
comply with the requirements of all applicable Laws and orders of any
Governmental Agency, noncompliance with which might materially adversely
affect the business or financial condition of Borrower.
6.2 Reporting Requirements. Borrower shall cause to be
delivered to Lender, in form and detail reasonably satisfactory to Lender, as
soon as practicable and in any event within fifteen (15) days after the
occurrence of a Default or Event of Default becomes known to Borrower, a
written statement setting forth the nature of the Default or Event of Default
and the action that Borrower proposes to take with respect thereto.
6.3 Notice of Defaults under other Indebtedness. Borrower shall
notify Lender within five (5) Business Days of any "default" or "event of
default" that occurs with respect to any Indebtedness.
ARTICLE 7
EVENTS OF DEFAULT AND REMEDIES UPON DEFAULT
7.1 Events of Default. The occurrence of any one or more of the
following events, whatever the reason therefor, shall constitute an Event of
Default under this Agreement:
a. A failure by Borrower to pay the principal of or
interest on the Note or any portion thereof when due; or
b. A failure by Borrower to pay any other amount payable
by Borrower under the Loan Documents, within three (3) days after the date
when due as provided herein or therein; or
c. A failure by Borrower to perform or observe any term,
covenant or agreement contained in any Loan Document on his part to be
performed or observed and such failure shall continue for more than thirty
(30) calendar days after notice of such failure is given by Lender to
Borrower, unless such failure is of such a nature that it cannot be cured
within such thirty (30) day period and Borrower commences action to cure such
failure within such thirty (30) day period and thereafter diligently and
continuously prosecutes such action to completion within sixty (60) calendar
days after notice of such failure is given by Lender to Borrower; or
d. Any representation or warranty in any Loan Document or
in any certificate, agreement, instrument or other document made or delivered
by Borrower to Lender pursuant to any Loan Document proves to have been
incorrect when made; or
e. Any Loan Document, at any time after its execution and
delivery and for any reason other than the agreement of Lender or satisfaction
in full of all Obligations, ceases to be in full force and effect or is
declared to be null and void by a court of competent jurisdiction; or the
validity or enforceability thereof is contested in a judicial proceeding by
Borrower; or Borrower denies that he has any or continuing liability or
obligation under any Loan Document, unless all Obligations of Borrower
thereunder have been fully paid and performed; or
f. Borrower shall fail to pay when due (or within any
stated grace period), whether at the stated maturity, upon acceleration, by
reason of required prepayment or otherwise, the principal or any principal
installment of, or any interest on, any present or future Indebtedness
outstanding pursuant to the credit facilities described in Section 8.19; or
g. Borrower is the subject of an order for relief by a
bankruptcy court, or is unable or admits in writing his inability to pay his
debts as they mature or makes an assignment for the benefit of creditors; or
applies for or consents to the appointment of any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer for him
or for all or any part of his business or property; or any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer is
appointed without the application or consent of Borrower and the appointment
continues undischarged or unstayed for forty-five (45) calendar days;
provided, however, that, during the pendency of such period, Lender shall be
relieved of its obligation to make any additional Advances; or institutes or
consents to any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, custodianship, conservatorship,
liquidation, rehabilitation or similar proceeding relating to him or to all or
any part of his business or property under the laws of any jurisdiction; or
any similar proceeding is instituted without the consent of Borrower
(including, but not limited, any action is taken by any Governmental Agency
that has a material adverse effect on the business, operations or property of
Borrower) and continues undismissed or unstayed for forty-five (45) calendar
days; provided, however, that, during the pendency of such period, Lender
shall be relieved of its obligation to make any additional Advances; or
h. Any judgment, writ, warrant of attachment or execution
or similar process is issued or levied against all or any part of the property
of Borrower and is not released, vacated or fully bonded within forty-five
(45) calendar days after its issue or levy; provided, however, that, during
the pendency of such period, Lender shall be relieved of its obligation to
make any additional Advances.
7.2 Remedies Upon Event of Default.
a. Upon the occurrence of any Event of Default, all
commitments to make Advances and all other obligations of Lender and all
rights of Borrower under the Loan Documents will terminate without notice to
or demand upon Borrower, which are expressly waived by Borrower.
b. Upon the occurrence of any Event of Default, Lender,
without notice to or demand upon Borrower, which are expressly waived by
Borrower, may proceed to protect, exercise and enforce its rights and remedies
under the Loan Documents against Borrower and such other rights and remedies
as are provided by law or equity. Without limiting the generality of the
foregoing, upon the occurrence of any Event of Default Lender shall be
entitled to accelerate and declare immediately due and payable the principal
balance of the Obligations, any accrued and unpaid interest thereon, and all
other Obligations, all without notice to or demand upon Borrower.
c. The order and manner in which Lender's rights and
remedies are to be exercised shall be determined by Lender in its sole
discretion. Regardless of how Lender may treat payments received by it for
the purpose of its own accounting, for the purpose of computing Borrower's
obligations under this Agreement and under the Note, all moneys collected or
received by Lender on account of the Obligations, directly or indirectly,
shall be applied in the following order of priority:
(i) to the payment of all proper and reasonable
costs and expenses of Lender incurred in the exercise of Lender's rights and
remedies (including attorneys' fees and disbursements and the allocated costs
and expenses of in-house legal and other professional services) and all other
Obligations (other than interest and principal) owing by Borrower to Lender;
(ii) next, to accrued and unpaid interest on the
Obligations; and
(iii) the balance, if any, to the principal of the
Obligations.
No application of the payments will cure any Event of Default or prevent the
exercise, or continued exercise, of rights or remedies of Lender under this
Agreement or under Law.
d. Upon the occurrence of any event that would be an Event
of Default under Paragraph "g" of Section 7.1 with the passage of time, the
principal balance of the Obligations, all accrued and unpaid interest thereon,
and any other sums owing in connection with the Loan Documents shall be
automatically accelerated without notice to or demand on Borrower, and Lender
may take such other actions as it deems necessary to protect the interests of
Lender under the Loan Documents and to collect the Obligations.
ARTICLE 8
MISCELLANEOUS
8.1 Amendments; Consents. No amendment, modification,
supplement, termination or waiver of any provision of this Agreement or any
other Loan Document, no approval or consent thereunder, and no consent to any
departure by Borrower therefrom, may in any event be effective unless in
writing signed by Lender (and, in the case of amendments, modifications or
supplements, the approval in writing of Borrower and Lender), and then only in
the specific instance and for the specific purpose given.
8.2 Cumulative Remedies; No Waiver. Except as expressly
provided in this Agreement to the contrary, the rights, powers and remedies of
Lender provided in this Agreement or in the Note or any other Loan Document
are cumulative and not exclusive of any right, power or remedy provided by law
or equity. No failure or delay on the part of Lender in exercising any right,
power or remedy may be, or may be deemed to be, a waiver thereof; nor may any
single or partial exercise of any right, power or remedy preclude any other or
further exercise of the same or any other right, power or remedy.
8.3 No Partnership or Joint Venture. The execution of this
Agreement and the other Loan Documents shall not be construed, deemed or
alleged to be the formation of a partnership or joint venture between Lender
and Borrower, and Lender shall not be liable to any other person or entity
arising in connection with the Obligations or any transaction connected
herewith nor shall Lender have any fiduciary obligations to Borrower. Lender
shall have and may exercise such powers as are specifically delegated to
Lender under this Agreement, at law, or in equity.
8.4 Costs, Expenses and Taxes. Borrower shall pay on the
Maturity Date, the reasonable costs and expenses of Lender in connection with
the negotiation, preparation, execution, delivery, administration (exclusive
of general overhead expenses), amendment, waiver and enforcement of this
Agreement and any other Loan Document and any matter related thereto, and any
litigation or dispute with respect thereto (including any bankruptcy or
similar proceedings), including without limitation the reasonable fees and
out-of-pocket expenses of any legal counsel, independent public accountants
and other outside experts. Notwithstanding Borrower's obligation to pay the
foregoing costs and expenses on the Maturity Date, such costs and expenses
shall accrue interest at the rate set forth in the Note from the date that
such costs and expenses were incurred by Lender (and such interest shall also
be due and payable on the Maturity Date). With respect to costs and expenses
incurred by Borrower and/or Lender in connection with the negotiation,
preparation, execution, delivery and amendment of this Agreement and any other
Loan Document and the transactions contemplated thereunder, Borrower may
request an Advance to pay such costs and expenses (provided that the other
terms and conditions set forth in this Agreement are satisfied). With respect
to any litigation, arbitration or reference between the parties hereto in
connection with any Loan Document, the losing party shall pay to the
prevailing party the reasonable fees and out-of-pocket expenses of legal
counsel to the prevailing party in connection therewith. Borrower shall pay
any and all documentary and other taxes (other than income or gross receipts
taxes) and all costs, expenses, fees and charges payable or determined to be
payable in connection with the execution, delivery, filing or recording of
this Agreement, any other Loan Document or any other instrument or writing to
be delivered hereunder or thereunder, or in connection with any transaction
pursuant hereto or thereto, and shall (except as provided in Section 8.8)
reimburse, hold harmless and indemnify Lender from and against any and all
loss, liability or legal or other expense with respect to or resulting from
any delay in paying or failure to pay any tax, cost, expense, fee or charge or
that any of them may suffer or incur by reason of the failure of Borrower to
perform any of his obligations under this Agreement or any other Loan
Document. Any amount payable to Lender under this Section 8.4 shall, from the
date of demand for payment, and any other amount payable to Lender under the
Loan Documents which is not paid when due or within any applicable grace
period shall, thereafter, bear interest at the rate set forth in the Note and
be payable on demand.
8.5 Survival of Representations and Warranties. All
representations and warranties of Borrower contained in this Agreement or in
any other Loan Document, or in any certificate or other writing delivered by
or on behalf of Borrower pursuant to any Loan Document, will survive the
making and repayment of the loans under this Agreement and the execution and
delivery of the Note, and have been or will be relied upon by Lender,
notwithstanding any investigation made by or on behalf of Lender.
8.6 Notices. Except as otherwise expressly provided for herein:
(a) all notices, requests, demands, directions and other communications
provided for under this Agreement and under any other Loan Document must be in
writing and must be mailed, telegraphed, delivered or sent by telex, cable, or
telecopier to the appropriate party at the address set forth in the signature
pages of this Agreement or, as to any party, at any other address as may be
designated by it in a written notice sent to all other parties in accordance
with this Section 8.6; and (b) any notice, request, demand, direction or other
communication given by telex or telecopier must be confirmed within forty-
eight (48) hours by letter mailed or delivered to the appropriate party at its
respective address. Except as otherwise expressly provided for herein, if any
notice, request, demand, direction or other communication is given by mail it
will be effective on the earlier of receipt or the fourth calendar day after
deposit in the United States postal system with first class or airmail postage
prepaid; if given by telex, when sent; if given by telecopier, when received;
or if given by personal delivery, when delivered.
8.7 Counterparts; Execution and Acceptance. This Agreement and
any other Loan Document may be executed in any number of identical
counterparts and any party hereto or thereto may execute any counterpart, each
of which when executed and delivered will be deemed to be an original and all
of which counterparts of this Agreement or any other Loan Document, as the
case may be, taken together will be deemed to be but one and the same
instrument. The execution of this Agreement or any other Loan Document by any
party hereto or thereto will not become effective until counterparts hereof or
thereof, as the case may be, have been executed by all the parties hereto or
thereto.
8.8 Binding Effect; Assignment; Tax Withholding. This Agreement
and the other Loan Documents will be binding upon and inure to the benefit of
Borrower and Lender, and their successors and assigns. Notwithstanding the
foregoing, this Agreement and any and all of the rights and obligations of any
party hereunder shall not be assigned, delegated, sold, transferred or
otherwise disposed of, by operation of law or otherwise. Any attempted
assignment, delegation, sale, transfer or other disposition in violation
hereof shall be void. If, nevertheless, the rights to any payment due
hereunder by Borrower to Lender shall be transferred by operation of law, by
order of a court of competent jurisdiction or any other circumstances with
respect to which it is determined that such transfer is not void, then such
transfer may be effected only by delivery of a signed original of this
Agreement to Borrower, who shall re-deliver such signed original to the
transferee duly indorsed by Borrower to indicate the name and address of such
transferee. Under no circumstances prior to maturity of all payment
obligations due by Borrower to Lender hereunder may any such obligations ever
be transferred to or held by any person by virtue of such person being the
bearer of any document or instrument, including this Agreement, evidencing
such obligations. Lender hereby covenants, and any subsequent transferee upon
transfer of said payment obligation and as a condition to such transfer shall
covenant, with Borrower to provide Borrower a completed United States Internal
Revenue Service Form W-8 or W-9, as appropriate, (i) on or before the first
payment made to Lender or any such transferee; (ii) on or before the first
payment in the third calendar year following the calendar year in which such
form was last provided by Lender or any such transferee, or more frequently if
required by law as a condition to exemption from any form of withholding of
tax; and (iii) within 30 days of any change in the information contained in an
applicable form provided to Borrower hereunder. Lender (and any such
transferee) agrees to indemnify Borrower for any tax, interest, or penalty
loss imposed on Borrower in the event that any taxing authority determines
that Borrower is or was required to withhold with respect to any payment made
hereunder. However, the previous sentence shall not apply to any tax,
interest or penalty imposed after Borrower has either been notified by any
taxing authority that withholding is required, or after Lender (or such
transferee) has informed Borrower that Lender (or such transferee) is no
longer exempt from withholding. In that event, Lender (or such transferee)
shall not be liable for interest and penalties imposed by any taxing authority
that arise out of Borrower's failure to withhold. If Borrower fails to
withhold the necessary amount from any subsequent payment, Borrower's only
remedy shall be to withhold tax on any subsequent payments, or to obtain
reimbursement for the tax only.
8.9 Indemnity by Borrower.
a. Borrower agrees to indemnify, save, protect, and hold
harmless Lender and its directors, officers, agents, attorneys and employees
(collectively, "indemnitees") from and against: (i) any and all claims,
demands, actions or causes of action that are asserted against any indemnitee
by any Person if the claim, demand, action or cause of action relates solely
to a claim, demand, action or cause of action that the Person has or asserts
against Borrower and arises out of or relates to the relationship between
Borrower and Lender under this Agreement or the Note; and (ii) any and all
liabilities, losses, costs or expenses (including attorneys' fees and
disbursements and reasonably estimated allocated costs and expenses of in-
house legal counsel and legal staff and other professional services) that any
indemnitee suffers or incurs as a result of the assertion of any foregoing
claim, demand, action or cause of action; provided that no indemnitee shall be
entitled to indemnification for any claims, demands, action, causes of action,
liabilities, losses, costs, or expenses caused by its own gross negligence or
misconduct.
b. If any proceeding shall be brought or asserted against
any indemnitee in respect of which indemnity may be sought from Borrower
hereunder, such indemnitee promptly shall notify Borrower in writing, and
Borrower shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the indemnitee and the payment of all fees and
expenses incurred in connection with the defense thereof; provided, that the
failure of any indemnitee to give such notice shall not relieve Borrower of
his obligations pursuant to this Agreement except to the extent that it shall
be determined by a court of competent jurisdiction that such failure shall
have materially and adversely prejudiced Borrower.
Any such indemnitee shall have the right to employ separate counsel
in any such action, claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such indemnitee unless: (1) Borrower has agreed to pay such fees and
expenses; or (2) Borrower shall have failed promptly to assume the defense of
such action, claim or proceeding and to employ counsel reasonably satisfactory
to such indemnitee in any such action, claim or proceeding; or (3) the named
parties to any such action, claim or proceeding (including any impleaded
parties) include both such indemnitee and Borrower, and such indemnitee shall
have been advised in writing by counsel that a conflict of interest may exist
if such counsel represents such indemnitee and Borrower (and in the case of
any of (1), (2) or (3), if such indemnitee notifies Borrower in writing that
it elects to employ separate counsel at the expense of Borrower, Borrower
shall not have the right to assume the defense thereof and such counsel shall
be at the expense of Borrower). No indemnitee will be subject to any
liability for any settlement made without its consent. Borrower shall not
consent to entry of any judgment or enter into any settlement that does not
include by the claimant or plaintiff to such indemnitee of a release, in form
and substance reasonably satisfactory to the indemnitee, from all liability in
respect of such action, claim or proceeding for which such indemnitee would be
entitled to indemnification hereunder (whether or not any indemnitee is a
party thereto). All fees and expenses of the indemnitee (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such action or proceeding in a manner not inconsistent
with this Section 8.9) shall be paid to the indemnitee, as incurred, upon
written notice thereof to Borrower (regardless of whether it is ultimately
determined that an indemnitee is not entitled to indemnification hereunder);
provided, that Borrower may require such indemnitee to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
by a court of competent jurisdiction (which determination is not subject to
appeal or review) that such indemnitee is not entitled to indemnification
hereunder.
Any obligation or liability of Borrower to any indemnitee under this
Section 8.9 shall survive the expiration or termination of this Agreement and
the repayment of all Advances and all other Obligations owed to Lender.
8.10 Nonliability of Lender. Borrower acknowledges and agrees
that by accepting or approving anything required to be observed, performed,
fulfilled or given to Lender pursuant to the Loan Documents, including any
certificate or financial statement, Lender shall not be deemed to have
warranted or represented the legality, sufficiency, effectiveness or legal
effect of the same, or of any term, provision or condition thereof, and such
acceptance or approval shall not constitute a warranty or representation to
anyone with respect thereto by Lender.
8.11 No Third Parties Benefited. This Agreement is made for the
purpose of defining and setting forth certain obligations, rights and duties
of Borrower and Lender, and is made for the sole protection of Borrower and
Lender, and Lender's successors and assigns. No other Person shall have any
rights of any nature hereunder or by reason hereof.
8.12 Confidentiality. Lender shall hold any confidential
information which it may receive from Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to legal counsel, accountants and other
professional advisors to Lender, (ii) to regulatory officials having
jurisdiction over Lender, and (iii) as required by Law or legal process or in
connection with any legal proceeding to which Lender is a party.
8.13 Further Assurances. Subject to Section 8.4, Borrower shall,
at his expense and without expense to Lender, execute and deliver such further
acts and documents as Lender from time to time reasonably requires for the
assuring and confirming unto Lender the rights hereby created or intended now
or hereafter so to be, or for carrying out the intention or facilitating the
performance of the terms of any Loan Document.
8.14 Integration. This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on
the subject matter hereof and supersedes all prior agreements, written or
oral, on the subject matter hereof.
8.15 Governing Law. The Loan Documents shall be governed by, and
construed and enforced in accordance with, the internal laws of California
(without reference to conflicts of law rules or principles).
8.16 Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable or invalid as to any
party or in any jurisdiction shall, as to that party or jurisdiction, be
inoperative, unenforceable or invalid without affecting the remaining
provisions or the operation, enforceability or validity of that provision as
to any other party or in any other jurisdiction, and to this end the
provisions of all Loan Documents are declared to be severable.
8.17 Headings. Article, Section, and Paragraph headings set
forth in this Agreement and the other Loan Documents, and titles or headings
of any Loan Documents or exhibits thereto, are included for convenience of
reference only and are not part of this Agreement or the other Loan Documents
for any other purpose.
8.18 Time of the Essence. Time is of the essence of the Loan
Documents.
8.19 Other Credit Facilities. Borrower and Lender acknowledge
and agree that the credit facility provided for herein is in addition to the
credit facilities provided for (i) in that certain Revolving Credit Agreement
No. 1, of even date herewith, between Borrower and Lender, which provides for
an additional $250,000 revolving line of credit, and (ii) in that certain Term
Loan Agreement, of even date herewith, between Borrower and Lender, which
provides for a term loan of up to $350,000.
8.20 Purchase Agreement. Borrower and Lender acknowledge and
agree that this Agreement and the Note are being executed in connection with,
and are expressly subject to, that certain Purchase and Sale Agreement by and
between Borrower and Lender dated as of February 27, 1997.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed as of the Execution Date.
Date Signed: ________ ____, 1997 _____________________________
MARK A. SPEIZER, individually
Address: 514 Roehampton Road
Hillsborough, California
94010
Telephone: (415) 342-8779
Telecopier: ( )
SCORPION ACQUISITION, LLC, a Delaware
limited liability company
By:______________________________
Print Name:
Title:
Address:
Telephone:
Telecopier:
<PAGE>
PROMISSORY NOTE NO. 2
$250,000.00 Los Angeles, California
_________________, 1997
FOR VALUE RECEIVED, the undersigned hereby promises to pay to
SCORPION ACQUISITION, LLC, a Delaware limited liability company ("Lender"), or
order, at _____________________________________________ or at such other
address as the holder of this Promissory Note ("Note") may specify in writing,
the principal sum of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) or, if
less, the then outstanding principal amount of the Advances made to the
undersigned by Lender pursuant to that certain Revolving Credit Agreement No.
2, dated as of even date herewith, between the undersigned and Lender (as
hereafter amended, restated, supplemented, or modified from time to time, the
"Agreement," the provisions of which are incorporated herein by reference),
plus interest in the manner and upon the terms and conditions set forth below.
This Note is made pursuant to the Agreement. All references to "Lender" in
this Note shall mean Lender and its successors and assigns. All reference to
the "undersigned" in this Note shall mean the undersigned and his successors
and assigns.
1. Rate of Interest
The principal balance of this Note shall bear interest from the
date hereof at a fixed rate per annum equal to eight percent (8%). Interest
charged on this Note shall be computed on the basis of a three hundred sixty
five (365) day year for actual days elapsed.
In no event shall the interest rate or rates payable under this
Note, plus any other amounts paid in connection herewith, exceed the highest
rate permissible under any law that a court of competent jurisdiction shall,
in a final determination, deem applicable. The undersigned and Lender intend
legally to agree upon the rate or rates of interest (and the other amounts
paid in connection herewith) and manner of payment stated within this Note;
provided, however, that anything contained herein to the contrary
notwithstanding, if said interest rate or rates of interest (or other amounts
paid in connection herewith) or the manner of payment exceeds the maximum
allowable under applicable law, then, ipso facto as of the date of this Note,
the undersigned is and shall be liable only for the payment of such maximum as
allowed by law, and payment received from the undersigned in excess of such
legal maximum, whenever received, shall be applied to reduce the principal
balance of this Note to the extent of such excess.
2. Schedule of Payments
Principal and interest under this Note, together with all other
sums owing in connection with this Note, shall be due and payable upon the
earlier of (i) June 30, 2002, or (ii) the 365th day occurring after the date
that the first Advance is made under the Agreement.
3. Prepayment
Voluntary prepayments of the principal balance of this Note, or
interest accruing thereon, shall be permitted at any time.
4. General Provisions
a. If this Note is not paid when due, the undersigned
further promises to pay all costs of collection (including, but not limited
to, reasonable attorneys' fees incurred by the holder), whether or not suit is
filed hereon.
b. Presentment for payment, demand, notice of dishonor,
protest, and notice of protest are hereby expressly waived.
c. Any waiver of any rights under this Note, the
Agreement, or under any other agreement, instrument, or paper signed by the
undersigned is neither valid nor effective unless made in writing and signed
by the holder of this Note.
d. No delay or omission on the part of the holder of this
Note in exercising any right shall operate as a waiver thereof or of any other
right.
e. A waiver by the holder of this Note upon any one
occasion shall not be construed as a bar or waiver of any right or remedy on
any future occasion.
f. Should any one or more of the provisions of this Note
be determined illegal or unenforceable, all other provisions shall
nevertheless remain effective.
g. This Note cannot be changed, modified, amended, or
terminated orally.
h. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, without
reference to the principles of conflicts of laws thereof.
5. Binding Effect; Assignment; Tax Withholding
This Note and the other Loan Documents will be binding upon and
inure to the benefit of the undersigned and Lender, and their successors and
assigns. Notwithstanding the foregoing, this Note and any and all of the
rights and obligations of any party hereunder shall not be assigned,
delegated, sold, transferred or otherwise disposed of, by operation of law or
otherwise. Any attempted assignment, delegation, sale, transfer or other
disposition in violation hereof shall be void. If, nevertheless, the rights
to any payment due hereunder by the undersigned to Lender shall be transferred
by operation of law, by order of a court of competent jurisdiction or any
other circumstances with respect to which it is determined that such transfer
is not void, then such transfer may be effected only by delivery of a signed
original of this Note to the undersigned, who shall re-deliver such signed
original to the transferee duly indorsed by the undersigned to indicate the
name and address of such transferee. Under no circumstances prior to maturity
of all payment obligations due by the undersigned to Lender hereunder may any
such obligations ever be transferred to or held by any person by virtue of
such person being the bearer of any document or instrument, including this
Note, evidencing such obligations. Lender hereby covenants, and any
subsequent transferee upon transfer of said payment obligation and as a
condition to such transfer shall covenant, with the undersigned to provide the
undersigned a completed United States Internal Revenue Service Form W-8 or W-
9, as appropriate, (i) on or before the first payment made to Lender or any
such transferee; (ii) on or before the first payment in the third calendar
year following the calendar year in which such form was last provided by
Lender or any such transferee, or more frequently if required by law as a
condition to exemption from any form of withholding of tax; and (iii) within
30 days of any change in the information contained in an applicable form
provided to the undersigned hereunder. Lender (and any such transferee)
agrees to indemnify the undersigned for any tax, interest, or penalty loss
imposed on the undersigned in the event that any taxing authority determines
that the undersigned is or was required to withhold with respect to any
payment made hereunder. However, the previous sentence shall not apply to any
tax, interest or penalty imposed after the undersigned has either been
notified by any taxing authority that withholding is required, or after Lender
(or such transferee) has informed the undersigned that Lender (or such
transferee) is no longer exempt from withholding. In that event, Lender (or
such transferee) shall not be liable for interest and penalties imposed by any
taxing authority that arise out of the undersigned's failure to withhold. If
the undersigned fails to withhold the necessary amount from any subsequent
payment, the undersigned's only remedy shall be to withhold tax on any
subsequent payments, or to obtain reimbursement for the tax only.
IN WITNESS WHEREOF, this Note has been executed and delivered on
the date first set forth above.
_____________________________
MARK A. SPEIZER, individually
<PAGE>
EXHIBIT D
LETTER AGREEMENT WITH ARABELLA S.A.
February 27, 1997
Mr. Mark A. Speizer
514 Roehampton Road
Hillsborough, California 94010
Re: $4,200,000 Loan from Arabella S.A. to Mark A. Speizer
Dear Mr. Speizer:
Reference is made to that certain Credit Agreement dated as of May 31, 1996
(the "Credit Agreement"), by and between Mark A. Speizer, an individual (the
"Borrower"), and Arabella S.A., a company organized under the laws of
Luxembourg (the "Lender"), and that certain Promissory Note dated May 31, 1996
(the "Promissory Note" and together with the Credit Agreement, the "Credit
Documents"). As of the date hereof, the Borrower owes an aggregate principal
sum of $3,867,491.06 pursuant to the Credit Documents, which sum has accrued
interest which is due and not yet paid in the amount of $266,547.29. Borrower
may also borrow additional amounts pursuant to the Credit Documents, which
will accrue interest at the rate set forth in the Credit Documents. This
letter agreement (the "Agreement") confirms our agreement with respect to the
repayment of all obligations (including any additional amounts owing on the
date "Payment" as defined below is made) owed by the Borrower to the Lender
under the Credit Documents (the "Debt"). This Agreement modifies the Credit
Agreement and the Promissory Note to the extent set forth herein. The Lender
and the Borrower hereby agree as follows:
1. The Lender agrees to accept as payment in full of the Debt at maturity
the sum of Two Million Dollars ($2,000,000) in cash and Three Hundred Thousand
(300,000) shares of the common stock (the "Shares") of National Insurance
Group, a California corporation, as such number may be adjusted for any
additions to or reductions from such Shares occurring through the date the
payment is made because of a subdivision or combination of such Shares into a
smaller or larger number of shares plus any securities paid by dividend, spin-
off or otherwise on National Insurance Group common stock following the date
of this Agreement but prior to the date the Payment is made (collectively, the
"Payment").
2. Upon receipt of the Payment by the Lender, (i) the Debt shall be deemed
paid in full, (ii) the Lender shall promptly return the original Note marked
"PAID IN FULL" to the Borrower, and (iii) the Credit Agreement shall be deemed
terminated and the Borrower shall have no further obligations under the Credit
Documents.
3. The Lender and the Borrower agree that the value of the Payment is equal
to the amount of the Debt.
4. The maturity date of the Note shall be and hereby is extended to June 30,
1997.
5. The Lender hereby represents that it is acquiring the Shares solely for
the Lender's own account, for investment purposes only, and not with a view to
distribution, selling, or otherwise disposing of the Shares.
6. The Lender acknowledges that the Shares will be acquired in a private
transaction from an affiliate of National Insurance Group and acknowledges and
agrees that such Shares may not be resold without an effective registration
statement under the Securities Act of 1933, as amended and restated, or in
reliance on an exemption therefrom.
7. The Lender hereby acknowledges that it is a sophisticated investor and is
capable of evaluating the merits and risks of this Agreement and of protecting
its own interests in connection with this transaction, and that it has made
whatever inquiry is necessary or appropriate under the circumstances in
deciding to enter into this Agreement and to perform its obligations
hereunder.
8. The Borrower represents and warrants that, as of the date of delivery of
the Shares to Lender, Borrower owns all right, title and interest in and to,
and has good, marketable and transferable title to, the Shares, free of any
liens, claims or encumbrances. THE BORROWER MAKES NO OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SHARES.
9. Lender has been provided a copy of the Purchase and Sale Agreement
("Purchase Agreement") to be entered into between Borrower and Scorpion
Acquisition, LLC. Lender acknowledges and consents to the execution and
delivery of the Purchase Agreement and to the transactions contemplated by the
Purchase Agreement, and waives any rights it may have to with respect to the
Purchase Agreement or the transactions contemplated therein.
The Lender and the Borrower agree further that this Agreement (i) sets forth
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior and contemporaneous
written and oral discussions, negotiations and commitments with respect to
such subject matter, (ii) may not be modified, amended, changed or
supplemented, and no provision hereof may be waived, unless the same is in
writing and signed by the party (or parties) sought to be bound thereby, (iii)
may be executed in counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument, (iv) is
intended to be solely for the benefit of the parties hereto and no other
person or entity shall be entitled to rely on any term or provision hereof or
otherwise derive any right or benefit hereunder, (v) is binding on the parties
hereto, and their respective successors, permitted assigns and legal
representatives and (vi) shall be governed by California law without respect
to the conflicts of laws provisions thereof. Executed facsimiles of
correspondence, agreements or other instruments shall be legally effective and
binding on the applicable party (or parties).
If the foregoing correctly sets forth our agreement, please date and execute
both this Agreement and the enclosed copy in the appropriate spaces below and
return this Agreement to the Lender; the other copy is for your records.
Sincerely,
ARABELLA S.A.
________________________________
By: Robert Tucker
Its: Attorney-in-Fact
ACKNOWLEDGED AND AGREED TO:
__________________________________
Mark A. Speizer
Date: February 27, 1997
<PAGE>
SCHEDULE 3.1.3
Approval or exemption from approval from the California Department of
Insurance or Insurance Commissioner to the extent required by statute or
regulation promulgated thereunder.
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SCHEDULE 3.2.2
Approval or exemption from approval from the California Department of
Insurance or Insurance Commissioner to the extent required by statute or
regulation promulgated thereunder.
EXHIBIT 2
LETTER AGREEMENT WITH ARABELLA S.A.
February 27, 1997
Mr. Mark A. Speizer
514 Roehampton Road
Hillsborough, California 94010
Re: $4,200,000 Loan from Arabella S.A. to Mark A. Speizer
Dear Mr. Speizer:
Reference is made to that certain Credit Agreement dated as of May 31, 1996
(the "Credit Agreement"), by and between Mark A. Speizer, an individual (the
"Borrower"), and Arabella S.A., a company organized under the laws of
Luxembourg (the "Lender"), and that certain Promissory Note dated May 31, 1996
(the "Promissory Note" and together with the Credit Agreement, the "Credit
Documents"). As of the date hereof, the Borrower owes an aggregate principal
sum of $3,867,491.06 pursuant to the Credit Documents, which sum has accrued
interest which is due and not yet paid in the amount of $266,547.29. Borrower
may also borrow additional amounts pursuant to the Credit Documents, which
will accrue interest at the rate set forth in the Credit Documents. This
letter agreement (the "Agreement") confirms our agreement with respect to the
repayment of all obligations (including any additional amounts owing on the
date "Payment" as defined below is made) owed by the Borrower to the Lender
under the Credit Documents (the "Debt"). This Agreement modifies the Credit
Agreement and the Promissory Note to the extent set forth herein. The Lender
and the Borrower hereby agree as follows:
1. The Lender agrees to accept as payment in full of the Debt at maturity
the sum of Two Million Dollars ($2,000,000) in cash and Three Hundred Thousand
(300,000) shares of the common stock (the "Shares") of National Insurance
Group, a California corporation, as such number may be adjusted for any
additions to or reductions from such Shares occurring through the date the
payment is made because of a subdivision or combination of such Shares into a
smaller or larger number of shares plus any securities paid by dividend, spin-
off or otherwise on National Insurance Group common stock following the date
of this Agreement but prior to the date the Payment is made (collectively, the
"Payment").
2. Upon receipt of the Payment by the Lender, (i) the Debt shall be deemed
paid in full, (ii) the Lender shall promptly return the original Note marked
"PAID IN FULL" to the Borrower, and (iii) the Credit Agreement shall be deemed
terminated and the Borrower shall have no further obligations under the Credit
Documents.
3. The Lender and the Borrower agree that the value of the Payment is equal
to the amount of the Debt.
4. The maturity date of the Note shall be and hereby is extended to June 30,
1997.
5. The Lender hereby represents that it is acquiring the Shares solely for
the Lender's own account, for investment purposes only, and not with a view to
distribution, selling, or otherwise disposing of the Shares.
6. The Lender acknowledges that the Shares will be acquired in a private
transaction from an affiliate of National Insurance Group and acknowledges and
agrees that such Shares may not be resold without an effective registration
statement under the Securities Act of 1933, as amended and restated, or in
reliance on an exemption therefrom.
7. The Lender hereby acknowledges that it is a sophisticated investor and is
capable of evaluating the merits and risks of this Agreement and of protecting
its own interests in connection with this transaction, and that it has made
whatever inquiry is necessary or appropriate under the circumstances in
deciding to enter into this Agreement and to perform its obligations
hereunder.
8. The Borrower represents and warrants that, as of the date of delivery of
the Shares to Lender, Borrower owns all right, title and interest in and to,
and has good, marketable and transferable title to, the Shares, free of any
liens, claims or encumbrances. THE BORROWER MAKES NO OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SHARES.
9. Lender has been provided a copy of the Purchase and Sale Agreement
("Purchase Agreement") to be entered into between Borrower and Scorpion
Acquisition, LLC. Lender acknowledges and consents to the execution and
delivery of the Purchase Agreement and to the transactions contemplated by the
Purchase Agreement, and waives any rights it may have to with respect to the
Purchase Agreement or the transactions contemplated therein.
The Lender and the Borrower agree further that this Agreement (i) sets forth
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior and contemporaneous
written and oral discussions, negotiations and commitments with respect to
such subject matter, (ii) may not be modified, amended, changed or
supplemented, and no provision hereof may be waived, unless the same is in
writing and signed by the party (or parties) sought to be bound thereby, (iii)
may be executed in counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument, (iv) is
intended to be solely for the benefit of the parties hereto and no other
person or entity shall be entitled to rely on any term or provision hereof or
otherwise derive any right or benefit hereunder, (v) is binding on the parties
hereto, and their respective successors, permitted assigns and legal
representatives and (vi) shall be governed by California law without respect
to the conflicts of laws provisions thereof. Executed facsimiles of
correspondence, agreements or other instruments shall be legally effective and
binding on the applicable party (or parties).
If the foregoing correctly sets forth our agreement, please date and execute
both this Agreement and the enclosed copy in the appropriate spaces below and
return this Agreement to the Lender; the other copy is for your records.
Sincerely,
ARABELLA S.A.
/S/ROBERT TUCKER
By: Robert Tucker
Its: Attorney-in-Fact
ACKNOWLEDGED AND AGREED TO:
/S/MARK A. SPEIZER
Mark A. Speizer
Date: February 27, 1997
