SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)*
National Insurance Group
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(Name of Issuer)
Common Stock, no par value
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(Title of Class of Securities)
636525107
--------------------------------
(CUSIP Number)
Scorpion Acquisition, LLC
505 Park Avenue, 12th Floor
New York, NY 10022
(212) 207-9020
c/o Kevin R. McCarthy
with a copy to:
John E. Lowe
Altheimer & Gray
10 South Wacker Drive
Chicago, Illinois 60606
(312) 715-4020
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 3, 1997
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(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>
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1. Name of Reporting Person:
Scorpion Acquisition, LLC
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2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) /X/
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3. SEC Use Only
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4. Source of Funds: WC
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5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f):
/ /
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6. Citizenship or Place of Organization: Delaware
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Number of 7. Sole Voting Power: 300,000(1)
Shares ------------------------------------------
Beneficially 8. Shared Voting Power: 0
Owned By ------------------------------------------
Each 9. Sole Dispositive Power: 300,000(1)
Reporting ------------------------------------------
Person 10. Shared Dispositive Power: 0
With
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11. Aggregate Amount Beneficially Owned by Each
Reporting Person:
300,000(1)
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12. Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares:
/ /
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13. Percent of Class Represented by Amount in
Row (11): 7.4%
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14. Type of Reporting Person: CO
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(1) Power is exercised through its members. Mr. Paul
Caland is an 80% member of Scorpion Acquisition,
LLC. <PAGE>
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1. Name of Reporting Person:
Paul Caland
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2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) /X/
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3. SEC Use Only
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4. Source of Funds: Not Applicable
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5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f):
/ /
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6. Citizenship or Place of Organization: Lebanon
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Number of 7. Sole Voting Power: 0
Shares ------------------------------------------
Beneficially 8. Shared Voting Power: 300,000(1)
Owned By ------------------------------------------
Each 9. Sole Dispositive Power: 0
Reporting ------------------------------------------
Person 10. Shared Dispositive Power: 300,000(1)
With
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11. Aggregate Amount Beneficially Owned by Each
Reporting Person:
300,000(1)
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12. Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares:
/ /
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13. Percent of Class Represented by Amount in
Row (11): 7.4%
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14. Type of Reporting Person: IN
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(1) Solely in his capacity as an 80% member of Scorpion
Acquisition, LLC. <PAGE>
Item 1. Security and Issuer.
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This statement relates to the shares of common
stock, no par value per share (the "Shares") of National
Insurance Group (the "Issuer"). The principal executive
offices of the Issuer are located at 395 Oyster Point
Blvd., Suite 500, South San Francisco, California 94080.
Item 2. Identity and Background.
-----------------------
(a) his Schedule 13D is filed by Scorpion
Acquisition, LLC, a Delaware limited liability company
("Scorpion") and Paul Caland ("Caland", and, together
with Scorpion, the "Reporting Persons"). The Reporting
Persons are making this single, joint filing because they
may be deemed to constitute a "group" within the meaning
of Section 13(d)(3) of the Act, although neither the fact
of this filing nor anything contained herein shall be
deemed to be an admission by the Reporting Persons that a
group exists.
(b)-(c)
Scorpion is a Delaware limited liability company,
the principal business of which is the purchase, sale,
exchange, acquisition and holding of investment
securities. The principal business address of Scorpion,
which also serves as its principal office, is 505 Park
Avenue, 12th Floor, New York, NY 10022.
Mr. Caland's principal business address is 1 Avenue
Montaigne, Paris, France 75008.
Scorpion is managed by its members. Mr. Caland owns
an 80% membership interest in Scorpion. Two other members
of Scorpion own in excess of a 5% membership interest in
Scorpion. Without implication that such information is
required to be set forth herein, pursuant to Instruction
C to Schedule 13D, certain information with respect to
such members is set forth below.
Mr. Nuno Brandolini owns an 8.4% membership interest
in Scorpion. Mr. Brandolini's principal business address
is c/o Scorpion Holdings, Inc., 505 Park Avenue, 12th
Floor, New York, NY 10022.
Mr. Kevin McCarthy owns an 8.4% membership interest
in Scorpion. Mr. McCarthy's principal business address is
c/o Scorpion Holdings, Inc., 505 Park Avenue, 12th Floor,
New York, NY 10022. <PAGE>
(d) None of the entities or persons identified in
this Item 2 has, during the last five years, been
convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) None of the entities or persons identified in
this Item 2 has, during the last five years, been a party
to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with
respect to such laws.
(f) Mr. Caland is a citizen of Lebanon. Mr.
Brandolini is a citizen of Italy. Mr. McCarthy is a
citizen of the United States of America.
Item 3. Source and Amount of
Funds or Other Consideration.
----------------------------
The Shares reported herein were contributed to
Scorpion by Arabella S.A. ("Arabella") on November 3,
1997. Arabella received such Shares from Mr. Mark
Speizer, Chairman of the Board of the Issuer, as partial
consideration for the repayment of a loan made by
Arabella to Mr. Speizer. See Item 4.
Item 4. Purpose of Transaction.
----------------------
In May and June 1996, Mr. Speizer acquired 824,395
Shares in a private transaction. Mr. Speizer paid an
aggregate purchase price of $8,605,098 to acquire such
Shares, of which $3,024,806 was paid in cash and
$5,580,092 was represented by promissory notes. The
funding for the cash payment and for Mr. Speizer's
payments on such promissory notes was provided by a loan
made to Mr. Speizer by Arabella. In June 1997, Arabella
accepted payment of $2,000,000 and 300,000 Shares as
payment in full of such loan from Mr. Speizer.
On November 3, 1997, Arabella contributed the
300,000 Shares it had so received to Scorpion in exchange
for an 80% membership interest in Scorpion. On December
19, 1997, Mr. Caland acquired Arabella's interest in
Scorpion.
In connection with the foregoing transactions, Mr.
Speizer and Scorpion are parties to an agreement
(Purchase and Sale Agreement) whereby Scorpion will
receive a payment from Mr. Speizer equal to the greater <PAGE>
of $4,000,000 and 50% of the profits that would have been
earned on a notional 924,000 Shares with a notional cost
of $7.75 per Share, each subject to certain defined
adjustments. Such profits are determined by reference to
the average closing price of the Shares during the
fifteen business days following June 30, 2002 or, if
Scorpion has made an election permitted under such
agreement, that date between January 1, 2000 and June 30,
2002 that is so elected. Mr. Speizer may make such
payment in cash or in Shares, subject to receipt of any
necessary approvals or exemptions from the California
Commissioner of Insurance.
The Reporting Persons acquired the Shares reported
herein for investment purposes. Consistent with such
purposes, the Reporting Persons have had, and may have in
the future, discussions based on publicly available
information with management of the Issuer concerning the
Issuer's recent operating history as well as the Issuer's
general business outlook and prospects.
Depending on market conditions and other factors
that each may deem material to its investment decision,
each of the Reporting Persons may purchase additional
Shares in the open market or in private transactions or
may dispose of all or a portion of the Shares that such
Reporting Person now owns or hereafter may acquire.
Under the provisions of the California Insurance
Code, Scorpion and its affiliates are required to obtain
approval from the California Commissioner of Insurance
prior to obtaining more than 10% of the voting securities
of the Issuer.
Except as set forth in this Item 4, the Reporting
Persons have no present plans or proposals that relate to
or that would result in any of the actions specified in
clauses (a) through (j) of Item 4 of Schedule 13D of the
Act.
Item 5. Item 5. Interest in Securities of the Issuer.
---------------------------------------------
(a) The aggregate number of Shares that Scorpion
owns beneficially, pursuant to Rule 13d-3 of the Act, is
300,000, which constitutes approximately 7.4% of the
outstanding Shares, based on 4,032,132 Shares
outstanding, as reported by the Issuer in its Quarterly
Report on Form 10-Q for the quarter ended September 30,
1997. The foregoing does not include 25,000 Shares
subject to purchase by Messrs. Brandolini and McCarthy
pursuant to exercisable options. <PAGE>
Because of his position as the holder of an 80%
membership interest in Scorpion, Caland may, pursuant to
Rule 13d-3 of the Act, be deemed to be the beneficial
owner of the Shares owned directly by Scorpion.
To the best of the knowledge of each of the
Reporting Persons, other than as set forth above, none of
the persons named in Item 2 hereof is the beneficial
owner of any Shares.
(b) Acting through its members, Scorpion has the sole
power to vote or to direct the vote and to dispose or to
direct the disposition of 300,000 Shares.
In his capacity as the holder of an 80% membership
interest in Scorpion, Caland may be deemed to share power
to vote or to direct the vote and to dispose or to direct
the disposition of the Shares owned directly by Scorpion.
(c) Except as set forth in Item 4 above, to the
best of the knowledge of each of the Reporting Persons,
none of the persons named in response to paragraph (a) of
this Item 5 has effected any other transactions in Shares
during the past sixty (60) days.
(d) Each of the Reporting Persons affirms that no
person other than such Reporting Person has the right to
receive or the power to direct the receipt of
distributions with respect to, or the proceeds from the
sale of, the Shares owned by such Reporting Person.
(e) It is inapplicable for the purposes herein to
state the date on which the Reporting Persons ceased to
be the owners of more than five percent (5%) of the
outstanding Shares.
Item 6. Contracts, Arrangements, Understandings
or Relationships with Respect to
Securities of the Issuer.
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Except as set forth herein or in the Exhibits filed
herewith, there are no other contracts, arrangements,
understandings or relationships of the type required to
be disclosed in response to Item 6 of Schedule 13D of the
Act with respect to the Shares owned by the Reporting
Persons. <PAGE>
Item 7. Item 7. Materials to be Filed as Exhibits.
------------------------------------------
Exhibit A Agreement pursuant to Rule
13d-1(f)(1)(iii)
Exhibit B Purchase and Sale Agreement between
Mark A. Speizer and Scorpion
Acquisition, LLC.<PAGE>
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.
Dated: February 20, 1998
SCORPION ACQUISITION, LLC
By: /s/ Nuno Brandolini
--------------------
Nuno Brandolini
one of its members
/s/ Paul Caland
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Paul Caland<PAGE>
EXHIBIT A
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Pursuant to Rule 13d-1(f)(1)(iii) of Regulation
13D-G of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, the
undersigned agree that the statement to which this
Exhibit is attached is filed on behalf of each of them in
the capacities set forth below.
Dated: February 20, 1998
SCORPION ACQUISITION, LLC
By: /s/ Nuno Brandolini
-------------------
Nuno Brandolini,
one of its members
/s/ Paul Caland
------------------------
Paul Caland<PAGE>
EXHIBIT B
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). <PAGE>
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 <PAGE>
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 <PAGE>
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, <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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 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 <PAGE>
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. <PAGE>
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 <PAGE>
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 <PAGE>
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, <PAGE>
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. <PAGE>
"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, <PAGE>
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 <PAGE>
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. <PAGE>
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. <PAGE>
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: <PAGE>
(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, an
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 <PAGE>
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 <PAGE>
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 <PAGE>
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: <PAGE>
(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. <PAGE>
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 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 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
Document. 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 <PAGE>
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 <PAGE>
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. <PAGE>
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 <PAGE>
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, 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.
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. <PAGE>
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 <PAGE>
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 <PAGE>
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. <PAGE>
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 <PAGE>
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
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. <PAGE>
"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 <PAGE>
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. <PAGE>
"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. <PAGE>
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. <PAGE>
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 <PAGE>
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 <PAGE>
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, <PAGE>
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. <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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. <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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. <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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. <PAGE>
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. <PAGE>
"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 <PAGE>
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 <PAGE>
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, <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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. <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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 <PAGE>
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. <PAGE>
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 <PAGE>
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. <PAGE>
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 <PAGE>
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"). <PAGE>
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. <PAGE>
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. <PAGE>
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.<PAGE>
