AMENDED AND RESTATED LOAN AGREEMENT

 

 

TABLE   OF   CONTENTS

 

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DEFINITIONS AND CONSTRUCTION			1
	1.1	Definitions	1
	1.2	Accounting Terms	10
	1.3	Code	10
	1.4	Construction	10
	1.5	Schedules and Exhibits	11
2. LOAN AND TERMS OF PAYMENT			11
	2.1	Revolving Advances	11
	2.2	Interest Rates, Payments, and Calculations	11
	2.3	Crediting Payments; Application of Collections	13
	2.4	Designated Account	14
	2.5	Maintenance of Loan Accounts; Statements of Obligations	14
	2.6	Fees, Costs, and Charges	14
3.	CONDITIONS; TERM OF AGREEMENT		15
	3.1	Conditions Precedent to the Initial Advance	15
	3.2	Conditions Precedent to all Advances	16
	3.3	[Intentionally Omitted.]	17
	3.4	Term	17
	3.5	Early Termination by Borrower	17
4.	RIGHT OF INSPECTION		17
5.	REPRESENTATIONS AND WARRANTIES		17
	5.1	No Encumbrances	17
	5.2	Equipment	17
	5.3	Intentionally Omitted	18
	5.4	Schedule of Indebtedness	18
	5.5	Location of Chief Executive Office; FEIN	18
	5.6	Due Organization and Qualification; Subsidiaries	18
	5.7	Due Authorization; No Conflict	18
	5.8	Litigation	19
	5.9	No Material Adverse Change	19
	5.10	Solvency	19
	5.11	Employee Benefits	19
	5.12	Maximum Balance Sheet Leverage	20
	5.13	Minimum Rent Adjusted Fixed Charge Coverage Ratio	20
6.	AFFIRMATIVE COVENANTS		20
	6.1	Accounting System	20
	6.2	Financial Covenants	20
	6.3	Financial Statements, Reports, Certificates	20

 

 

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	6.4	Chairman; CEO	22
	6.5	Title to Equipment	22
	6.6	Maintenance of Equipment	22
	6.7	Taxes	22
	6.8	Insurance	22
	6.9	No Setoffs or Counterclaims	23
	6.10	Dispositions at Fair Market Consideration	23
	6.11	CompliancewithLaws	23
	6.12	Employee Benefits	23
	6.13	Compliance with Leases	24
7. NEGATIVE COVENANTS			24
	7.1	Indebtedness	24
	7.2	Liens	25
	7.3	Restrictions on Fundamental Changes	25
	7.4	Disposal of Assets	25
	7.5	Change Name	25
	7.6	Guaranty	25
	7.7	Nature of Business	25
	7.8	Prepayments and Amendments	25
	7.9	Change of Control	26
	7.10	Intentionally Omitted	26
	7.11	Accounting Methods	26
	7.12	Investments	26
	7.13	Transactions with Affiliates	26
	7.14	Suspension	26
	7.15	Intentionally Omitted	26
	7.16	Use of Proceeds	27
	7.17	Change in Location of Chief Executive Office Equipment with Bailees	27
	7.18	Intentionally Omitted	27
	7.19	Intentionally Omitted	27
	7.20	Downstreaming of Funds	27
	7.21	Excessive Acquisitions	27
	7.22	Intentionally Omitted	27
	7,23	Dividends	27
	7.24	Stock Repurchases	27
8.	EVENTS OF DEFAULT		27
	8.1	Failure to Make Payment	28
	8.2	Failure to Perform	28
	8.3	Material Adverse Change	28
	8.4	Attachment or Other Process	28

 

 

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	8.5	Insolvency Proceeding by Borrower	28
	8.6	Insolvency Proceeding Against Borrower	28
	8.7	Injunction or Other Process	28
	8.8	Lien or Other Process	28
	8.9	Judgment or Claim, Lien	28
	8.10	Defaults in Material Agreement	28
	8.11	Payment on Subordinated Indebtedness	29
	8.12	Misstatements and Misrepresentations	29
	8.13	Other Events of Default	29
	8.14	Cure Period, Notice to Cure	29
9.	BANKS RIGHTS AND REMEDIES		30
	9.1	Rights and Remedies	30
	9.2	Remedies Cumulative	31
	10.	TAXES AND EXPENSES	31
	11.	WAIVERS; INDEMNIFICATION	31
	11.1	Demand; Protest; etc	31
	11.2	Intentionally Omitted	31
	11.3	Jndeninification	31
12.	NOTICES		32
13.	CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER		33
14.	DESTRUCTION OF BOflOWERS DOCUMENTS		34
15.	AGENCY AND GOVERNANCE PROVISIONS		34
	15.1	Actions	34
	15.2	Exculpation	34
	15.3	Successors	35
	15.4	Other Transactions by U.S. Bank	35
	15.5	Independent Credit Decision	35
	15.6	Copies	35
	15.7	Payments to be Made to Agent	36
	15.8	Reimbursement by Lenders	36
	15.9	Collateral and Guarantees Held by Agent	36
	15.10	Lenders’ Commitments Independent	36
	15.11	Borrower to deal with Agent	37
	15.12	Loans to be Funded Through Agent	37
16.	ASSIGNMENTS AND PARTICIPATIONS		38
	16.1	Assignments	38
	16.2	Participations	39
17.	GENERAL PROVISIONS		39

 

 

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	17.1	Effectiveness	39
	17.2	Successors and Assigns	39
	17.3	SectionHeadings	39
	17.4	Interpretation	40
	17.5	Severability of Provisions	40
	17.6	Amendments in Writing	40
	17.7	Counterparts; Telefacsimile Execution	40
	17.8	Revival and Reinstatement of Obligations	40
	17.9	Integration	40
	17.10	Attomeys’ Fees	40

 

 

“ Affiliate ” means, as applied to any Person, any other Person who directly or indirectly controls, is controlled by, is under common control with or is a director or officer of such Person. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to vote 10% or more of the securities having ordinary voting power for the election of directors or the direct or indirect power to direct the management and policies of a Person.

 

“ Agent ” has the meaning set forth in Section 15.1.

 

“ Agreement ” has the meaning set forth in the preamble hereto.

 

“ Asset Access Agreement ” means a landlord waiver, mortgagee waiver, acknowledgment agreement of any Person in possession of, having a Lien upon, or having rights or interests in any asset of Borrower, in each case, in form and substance satisfactory to Agent.

 

“ Authorized Person ” means any officer or other employee of Borrower listed on Schedule A-1 , as amended from time to time. Borrower shall furnish, from time to time, a resolution of its Board of Directors, in a form acceptable to Lenders, confirming its initial appointment of, and any change in, such Authorized Persons.

 

“ Bank ” and “ Banks ” have the meaning set forth in the preamble to this Agreement.

 

“ Bankruptcy Code ” means the United States Bankruptcy Code (11 U.S.C. § 101, et seq.), as amended, and any successor statute.

 

“ Bank Expenses ” means, without limitation, all: reasonable costs or expenses required to be paid by Borrower under any of the Loan Documents that are paid or incurred by Banks or by Agent; fees, charges, taxes, and insurance premiums paid or incurred by Banks or by Agent in connection with Banks’ transactions with Borrower, including, fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, litigation, and UCC searches and including searches with any Governmental Agencies, filing, recording, publication, appraisals, costs and expenses incurred by Banks or by Agent in the disbursement of funds to Borrower (by wire transfer or otherwise); charges paid or incurred by Banks or by Agent resulting from the dishonor of checks; costs and expenses paid orincurred by Banks or by Agent to correct any default or enforce any provision of the Loan Documents; costs and expenses paid or incurred by Banks or by Agent in examining Borrower’s Books; costs and expenses of third party claims or any other suit paid or incurred by Banks or by Agent in enforcing or defending the Loan Documents or in connection with the transactions contemplated by the Loan Documents or Banks’ relationship with Borrower and its Affiliates or Subsidiaries, and Banks’ or Agent’s reasonable attorneys’ fees and expenses incurred in advising, structuring, drafting, reviewing, administering, amending, terminating, enforcing, defending, or concerning the Loan Documents (including attorneys’ fees and expenses incurred in connection with a “workout,” a “restructuring,” or an Insolvency Proceeding concerning Borrower or any guarantor of the Obligations), irrespective of whether suit is brought. All Bank Expenses charged by Banks shall be deemed reasonable in the absence of compelling circumstances to the contrary.

 

“ Benefit Plan ” means a “defined benefit plan” (as defined in Section 3(35) of ERISA) for

 

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which Borrower, any Subsidiary of Borrower, or any ERISA Affiliate has been an “employer” (as defined in Section 3(5) of ERISA) within the past six (6) years.

 

“ Borrower ” has the meaning set forth in the preamble to this Agreement.

 

“ Borrower’s Books ” means all of Borrower’s books and records including: ledgers; records indicating, summarizing, or evidencing Borrower’s properties or assets or liabilities; all information relating to Borrower’s business operations or financial condition; and all computer programs, disk, tape, or other media files, printouts, runs, or other computer- prepared information.

 

“ Business Day ” means any day that is not a Saturday, Sunday, or other day on which national banks are authorized or required to close in New York City or San Francisco, California, and if the Business Day relates to a determination of the LIBOR Rate applicable to an Advance under the credit facilities under this Agreement, it also means a day on which dealings are carried on in the London interbank market.

 

“ Change of Control ” shall be deemed to have occurred at such time as there is (a) any change in the Chief Executive Officer (currently William McMorrow) of the Borrower, or (b) change of ownership (whether by transfer of existing shares, issuance of new shares, or a combination, or otherwise) of more than 50% in the aggregate of the common stock of the Borrower.

 

“ Closing Date ” means the date all conditions precedent set forth in Section 3.1 of this Agreement have been satisfied in Agent’s sole determination.

 

“ Code ” means the California Uniform Commercial Code as it may be amended from time to time.

 

“ Collections ” means all cash, checks, notes, instruments, and other items of payment (including, insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds).

 

“ Commitment ” means the agreement of each of the Lenders to extend its Pro-Rata Share of the credit facilities called for under the terms and conditions of this Agreement and, depending upon the context, all or specified rights of such Lender in such credit facilities.

 

“ Compliance Certificate ” means a certificate substantially in the form of Schedule 6.3 and delivered by the Chief Financial Officer of Borrower to Agent.

 

“ Daily Balance ” means, with respect to each day during the term of this Agreement, the amount of an Obligation owed at the end of such day.

 

“ deems itself insecure ” means that the Person deems itself insecure in accordance with the provisions of Section 1208 of the Code.

 

“ Default ” means an event, condition, or default that, with the giving of notice, the

 

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passage of time, or both, would be an Event of Default, except and then solely to the extent provided in Section 8.14.

 

“ Advance Request Form and Disbursement Letter ” means an instructional letter in the form of Schedule 1.1-1 executed and delivered by Borrower to Agent for each Advance, the form and substance of which shall be satisfactory to Agent.

 

“ Dollars or $ ” means dollars of the United States of America.

 

“ EBITDA ” means the net income of Borrower (excluding extraordinary items), for the applicable period, plus all interest expense, income tax expense, depreciation and amortization (including amortization of any goodwill or other intangibles) for the period.

 

“ Effective Tangible Net Worth ” means stockholders’ equity, less Intangible Assets.

 

“ Equipment ” means all of Borrower’s present and hereafter acquired machinery, office and other equipment, furniture, furnishings, fixtures, vehicles (including motor vehicles and trailers), and tools, and goods, wherever located, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1000, et seq., amendments thereto, successor statutes, and regulations or guidance promulgated thereunder.

 

“ ERISA Affiliate ” means (a) any corporation subject to ERISA whose employees are treated as employed by the same employer as the employees of Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the same employer as the employees of Borrower under IRC Section 4 14(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service group of which Borrower is a member under IRC Section 4 14(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any party subject to ERISA that is a party to an arrangement with Borrower and whose employees are aggregated with the employees of Borrower under IRC Section 4 14(o).

 

“ ERISA Event ” means (a) a Reportable Event with respect to any Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which it was a “substantial employer” (as defined in Section 4001 (a)(2) of ERISA), (c) the providing of notice of intent to terminate a Benefit Plan in a distress termination (as described in Section 404 1(c) of ERISA), (d) the institution by the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e) any event or condition (i) that provides a basis under Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing any security to any Plan under Section 40l(a)(29) of the IRC by Borrower or its

 

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Subsidiaries or any of their ERISA Affiliates.

 

“ Equity Infusion ” shall mean and refer to Bank-funded investment capital to be used by Borrower for investments and! or acquisitions.

 

“ Event of   Default ” has the meaning set forth in Section 8.

 

“ Facility A ” means a credit facility in the maximum amount of Twenty Five Million Dollars ($25,000,000), to be furnished to Borrower by Banks under the terms of this Agreement for purposes of financing Borrower’s acquisition of real property. In no event shall U.S. Bank be required to make Advances totaling more than Twelve Million Five Hundred Thousand Dollars ($12,500,000) of such facility. In no event shall East-West Bank be required to make Advances totaling more than Twelve Million Five Hundred Thousand Dollars ($12,500,0000) of such facility.

 

“ Facility B ” means a credit facility in the maximum amount of Five Million Dollars ($5,000,000), to be furnished to Borrower by Banks under the terms of this Agreement for purposes of providing working capital to Borrower. In no event shall U.S. Bank be required to make Advances totaling more than Two Million Five Hundred Thousand Dollars ($2,500,000) of such facility. In no event shall East-West Bank be required to make Advances totaling more than Two Million Five Hundred Thousand Dollars ($2,500,0000) of such facility.

 

“ FEIN ” means Federal Employer Identification Number.

 

“ GAAP ” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

 

“ General Intangibles ” means all of Borrower’s present and future general intangibles (as that term is defined from time to time in the Code), payment intangibles and other personal property (including without limitation contract rights, rights arising under common law, statutes, or regulations, choses or things in action, goodwill, patents, trade names, trademarks, service marks, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, rights to payment and other rights under any royalty or licensing agreements, infringement claims, software, computer programs, information contained on computer disks, tapes, or other media, literature, reports, catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax refund claims), other than goods, Accounts, and Negotiable Collateral as applicable.

 

“ Governing Documents ” means the certificate or articles of incorporation, by-laws, operating agreement, partnership agreement, or other organizational or governing documents of any Person.

 

“ Governmental Authority ” means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government.

 

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“ 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, bankers acceptances, interest rate swaps, or other financial products, (e) all obligations of Borrower under capital leases, (d) all obligations or liabilities of others secured by a Lien 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.

 

“ Indenmified Liabilities ” has the meaning set forth in Section 11.3.

 

“ Indemnified Person ” has the meaning set forth in Section 11.3.

 

“ Insolvency Proceeding ” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code, Title 11, United States Code, or under any other bankruptcy or insolvency law of any jurisdiction, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

 

“ Intangible Assets ” means, with respect to any Person, that portion of the book value of all of such Person’s assets, net of amortization, that would be treated as intangibles under GAAP, including, without limitation, property management contracts, capitalized loan fees, and Affiliate or stockholder loans.

 

“ Investment Property ” means all of Borrower’s presently existing and hereafter acquired or arising investment property (as that term is defined form time to time in the Code).

 

“IRC” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

 

“ Lender ” and “ Lenders ” have the meaning set forth in the preamble to this Agreement.

 

“ LIBOR Notice ” means the written notice from Borrower to Agent indentifying the Advances that are to bear interest at the LIBOR Rate for the Loan Period selected in the form set forth on Schedule 2.2 hereto, the terms and conditions of which supplement and are made a part of this agreement.

 

“ LIBOR Rate ” means, with respect to the Loan Period applicable to any Advance hereunder, the LIBOR rate for such period quoted by Agent from Reuters Screen LIBOROI Page or any successor thereto, adjusted for any reserve requirement and any subsequent costs to Lenders arising from any change in government requirements. The LIBOR Rate for the Loan Period for each such Advance shall be determined by Agent prior to the first day of such Loan Period.

 

“ LIBOR Rate Loan ” has the meaning set forth in the Notes. No more than five (5) 

 

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LIBOR Rate Loans may be outstanding at any one time.

 

“Lien” means any interest in property securing an obligation owed to, or a claim by, any Person other than the owner of the property, whether such interest shall be based on the common law, statute, or contract, whether such interest shall be recorded or perfected, and whether such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, including the Lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, adverse claim or charge, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes.

 

“ Loan Accounts ” has the meaning set forth in Section 2.5.

 

“ Loan Documents ” means this Agreement, the Advance Request Form and Disbursement Letter, any Note or Notes executed by Borrower and payable to Banks, and any other agreement entered into, now or in the future, in connection with this Agreement.

 

“ Loan Period ” means the period commencing on the Advance date of the applicable LIBOR Rate Loan and ending on the numerically corresponding day 1, 2, 3, 6, or 12 months thereafter matching the interest rate term selected by the Borrower; provided, however, (a) if any Loan Period would otherwise end on a day which is not a New York Banking Day, then the Loan Period shall end on the next succeeding New York Banking Day unless the next succeeding New York Banking Day falls in another calendar month, in which case the Loan Period shall end on the immediately preceding New York Banking Day; or (b) if any Loan Period begins on the last New York Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of the Loan Period), then the Loan Period shall end on the last New York Banking Day of the calendar month at the end of such Loan Period.

 

“ Loans ” means the credit facilities to be extended by Lenders to Borrower subject to the terms and conditions of this Agreement.

 

“ Material Adverse Change ” means (a) a material adverse change in the business, prospects, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Borrower, or (b) the material impairment of Borrower’s ability to perform its obligations under the Loan Documents to which it is a party or of Banks to enforce the Obligations.

 

“ Maturity Date ” means July 1, 2011, unless extended in writing by Banks in their sole discretion. The Maturity Date is the date on or before which all obligations of Borrower under the credit facilities to be furnished under this Agreement shall be paid in full, subject to the terms and conditions of this Agreement.

 

“ Maximum Balance Sheet Leverage ” means total debt divided by Effective Tangible Net Worth.

 

“ Maximum Revolving Amount ” means, in the case of Facility A, Twenty Five Million

 

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Dollars ($25,000,000), and in the case of Facility B, Five Million Dollars ($5,000,000).

 

“ Minimum Rent Adjusted Fixed Charge Coverage Ratio ” means, as of the end of the most recently concluded fiscal quarter of Borrower, and/or as of any other date specified in this Agreement, as applicable, (i) EBITDA for that portion of the fiscal year of Borrower then concluded, minus cash taxes, cash dividends, cash used to repurchase corporate stock, and the higher of un-financed capital expenditures or maintenance capital expenditures plus rental/lease expense, divided by (ii) interest expense plus current portion of long term debt (“CPLTD”) secured by any property held by Borrower in excess of three (3) years (excluding those properties listed in Schedule 1.1-2 ) plus rental lease expense. CPLTD shall exclude balloon payments due on real estate indebtedness of Borrower and lump sum principal payments required by Facility A. (Borrower shall include in its financial statements, or a side letter thereto, provided to Banks hereunder, in addition to all other information required under this Agreement, information sufficiently detailed to enable Banks to verify the financial elements described in this paragraph.)

 

“ Multiemployer Plan ” means a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any ERISA Affiliate has contributed, or was obligated to contribute, within the past six (6) years.

 

“ New York Banking Day ” means any day (other than a Saturday or Sunday) on which commercial banks are open for business in New York, New York.

 

“Note” or “ Notes ” means the promissory note or notes to be executed by Borrower in favor of Lenders to evidence the indebtedness incurred pursuant to this Agreement.

 

“ Obligstions ” means all loans, Advances, debts, principal, interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), liabilities (including all amounts charged to Borrower’s Loan Accounts pursuant hereto), obligations, fees, charges, costs, or Bank Expenses (including any fees or expenses that, but for the provisions of the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants, and duties owing by Borrower to Banks of any kind and description (whether pursuant to or evidenced by the Loan Documents or pursuant to any other agreement between Banks and Borrower, and irrespective of whether for the payment of money), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including any debt, liability, or obligation owing from Borrower to others that Banks may have obtained by assignment or otherwise, and further including all interest not paid when due and all Bank Expenses that Borrower is required to pay or reimburse by the Loan Documents, by law, or otherwise.

 

“ Participant ” means any Person to which Banks or either of them have at any time sold a participation interest in their or either of their rights under the Loan Documents.

 

“ PBGC ” means the Pension Benefit Guaranty Corporation as defined in Title IV of ERISA, or any successor thereto.

 

“ Permitted Liens ” means (a) Liens held by Banks or either of them, (b) Liens for unpaid

 

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taxes that either (i) are not yet due and payable or (ii) are the subject of Permitted Protests, (c) Liens set forth on Schedule P-1 , (d) the interests of lessors under operating leases and purchase money security interests so long as the Lien only attaches to the asset purchased or acquired and only secures the purchase price of the asset, (e) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business of Borrower and not in connection with the borrowing of money, and which Liens either (i) are for sums not yet due and payable, or (ii) are the subject of Permitted Protests, (f) Liens arising from deposits made in connection with obtaining worker’s compensation or other unemployment insurance, (g) Liens or deposits to secure performance of bids, tenders, or leases (to the extent permitted under this Agreement), incurred in the ordinary course of business of Borrower and not in connection with the borrowing of money, (h) Liens arising by reason of security for surety or appeal bonds in the ordinary course of business of Borrower, and (i) Liens of or resulting from any judgment or award that would not cause a Material Adverse Change and as to which the time for the appeal or petition for rehearing of which has not yet expired, or in respect of which Borrower is in good faith prosecuting an appeal or proceeding for a review, and in respect of which a stay of execution pending such appeal or proceeding for review has been secured.

 

“ Permitted Protest ” means the right of Borrower to protest any Lien (other than any such Lien that secures the Obligations), tax (other than payroll taxes or taxes that are the subject of a United States federal tax Lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on the books of Borrower in an amount that is reasonably satisfactory to Agent, (b) any such protest is instituted and diligently prosecuted by Borrower in good faith, and (e) Agent is satisfied that, while any such protest is pending, there will be no impairment of the enforceability, validity, or priority of any of the Banks’ rights under or in connection with this Agreement.

 

“ Person ” means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and Governmental Authorities and agencies and political subdivisions thereof means any employee benefit plan, program, or arrangement maintained or contributed to by Borrower or with respect to which it may incur liability.

 

“ Prime Rate ” means the rate of interest announced from time to time by U.S. Bank National Association in New York, New York as its “prime rate.” In the event the Prime Rate is changed from time to time hereafter, the applicable rate of interest hereunder and under the Notes automatically and immediately shall be increased or decreased by an amount equal to such change in the Prime Rate.

 

“ Prime Rate Loan ” has the meaning given in the Notes.

 

“ Pro-Rata Share ” means each Lender’s percentage share of the total credit to be extended pursuant to the Loan Documents. Initially, U.S. Bank’s Pro-Rata Share is 50% and East-West Bank’s Pro-Rata Share is 50%.

 

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indicated, the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. An Event of Default shall “continue” or be “continuing” until such Event of Default has been waived in writing by Agent. Section, subsection, clause, schedule, and exhibit references are to this Agreement unless otherwise specified. Any reference in this Agreement or in the Loan Documents to this Agreement or any of the Loan Documents shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, and supplements, thereto and thereof, as applicable.

 

1.5                               Schedules and Exhibits. All of the schedules and exhibits attached to

 

this Agreement shall be deemed incorporated herein by reference

 

2. LOAN AND TERMS OF PAYMENT.

 

2.1                                Revolving Advances.

 

(a)           From the Closing Date to the Maturity Date (unless extended in writing by Banks in their sole discretion), subject to the terms and conditions of this Agreement, Banks agree to make advances (“Advances”) to Borrower in an amount outstanding not to exceed at any one time (i) the Maximum Revolving Amount of Facility A, and (ii) the Maximum Revolving Amount of Facility B, determined separately for each such Facility A and B. No Advance, or combination of Advances under Facility A for one purpose or property, shall exceed Five Million Dollars ($5,000,000). Advances shall be made by the Borrower’s delivery to the Agent of an Advance Request Form and Disbursement Letter not later than 11:00 a.m. (Los Angeles time) on the Business Day before the date on which the Borrower requests the Advance.

 

(b)          Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement.

 

(c)           No Advance shall be made in an amount less than One Hundred Thousand Dollars ($100,000).

 

2.2                              Interest Rates, Payments, and Calculations.

 

(a)           Facility A Interest Rate. Except as provided in clause (c) below, Advances under Facility A shall bear interest on the Daily Balance at a per annum rate equal to Borrower’s choice of(A) the sum of 0.50% plus the Prime Rate, or (B) the sum of(a) 3.00% and (b) the one (1), two (2), three (3), six (6) or twelve (12) month LIBOR Rate. Borrower shall identify in writing, from time to time, which of such interest rates Borrower desires to apply with respect to all or any portion of the Facility A outstanding balance by completing and submitting to Agent a LIBOR Notice.

 

(b)          Facility B Interest Rate. Except as provided in clause (e) below,

 

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Advances under Facility B shall bear interest on the Daily Balance at a per annum rate equal to Borrower’s choice of (A) the Prime Rate, or (B) the sum of (a)  2.50% and (b) the one (1), two (2), three (3), six (6) or twelve (12) month LIBOR Rate. Borrower shall identify in writing, from time to time, which of such interest rates Borrower desires to apply with respect to all or any portion of the Facility B outstanding balance by completing and submitting to Agent a LIBOR Notice.

 

(c)                               Default Rate. Upon the occurrence and during the continuation of an Event of Default, all Obligations shall bear interest on the Daily Balance at a per annum rate equal to 5.00% above the Reference Rate.

 

(d)                              Payments.

 

(i)                                  Interest payable hereunder on each of Facility A and Facility B shall be due and payable, in arrears, on the fifth (5th) day of each calendar month during the term hereof Borrower hereby authorizes Banks, at their option, without prior notice to Borrower, to charge such interest, all Bank Expenses (as and when incurred), the fees and charges provided for in Section 2.6 and elsewhere in this Agreement (as and when accrued or incurred), and all other payments due under any Loan Document to Borrower as an Advance under this Agreement, which amounts thereafter shall accrue interest at the rate then applicable to Advances hereunder. Any interest not paid when due shall be compounded and shall thereafter accrue interest at the rate then applicable to Advances hereunder.

 

(ii)                               Advance Limits; Principal Repayment . No Advance or combinations of Advances under Facility A for one (1) purpose or property shall exceed the amount of Five Million Dollars ($5,000,000) and shall be conditioned on and subject to a repayment schedule (which includes the source and timing of such repayment) mutually agreed upon by Borrower and Agent (the “ Repayment Schedule” ) with respect to each Advance. Principal under the Facility A Note shall be repaid on the earlier of:

 

(A)          The date required by the applicable Repayment Schedule for each Advance;

 

(B)          Upon the closing of any sale, refinance or Equity Infusion with respect to any asset purchased with Facility A Advances in an amount equal to such Advances;

 

(C)          Twenty-four (24) months after the date of each Advance made by Banks; or

 

(D)          The Maturity Date.

 

(iii)                            Without notice, Borrower shall repay the entire principal balance of Facility B at least once each calendar year and shall maintain such Facility B at a zero balance for at least thirty (30) consecutive calendar days thereafter.

 

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(iv) Prepayment. If a LIBOR Rate Loan is prepaid prior to the end of the Loan Period for such loan, whether voluntarily or because prepayment is required due to the Note maturing or due to acceleration of the Note upon default or otherwise, the Borrower agrees to pay all of the Bank Costs, expenses and Interest Differential (as determined by the Agent) incurred as a result of such prepayment. The term “ Interest Differential ” shall mean that sum equal to the greater of zero or the financial loss incurred by the Banks resulting from prepayment, calculated as the difference between the amount of interest the Banks would have earned (from like investments in the money markets, as determined by Agent, as of the first day of the LIBOR Rate Loan) had prepayment not occurred and the interest the Banks will actually earn (from like investments in the money markets as of the date of prepayment) as a result of the redeployment of funds from the prepayment. Because of the short-term nature of this facility, the Borrower agrees that the Interest Differential shall not be discounted to its present value. Any prepayment of a LIBOR Rate Loan shall be in an amount equal to the remaining entire principal balance of such Loan.

 

(e)                                 LIBOR Rate Unavailable or Unascertainable. If for any reason (i) deposits are not available to the Lenders in the relevant market or, (ii) by reasons of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate, or (iii) it becomes unlawful or impracticable to make or maintain Advances accruing interest at the LIBOR Rate, or (iv) as a result of any change in law, the cost to any Lender of making or maintaining Advances accruing at the LIBOR Rate is increased, or (v) at any time that an Event of Default of exists, or (vi) an insufficient number of days remain from the date the Advance is requested to be made or continued until the Maturity Date to constitute a Loan Period, then in each such ease, upon the Borrower’s receipt of notice thereof from the Agent, the rate of interest thereafter applicable to outstanding Advances shall be, (x) with respect to Facility A, the sum of 0.30% plus the Prime Rate, or (y) with respect to Facility B, the Prime Rate.

 

(f)                              Computation. All interest and fees chargeable under the Loan Documents shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed.

 

(g)                           Intent to Limit Charges to Maximum Lawful Rate. In no event shall the interest rate or rates payable under this Agreement, 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. Borrower and Banks, in executing and delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided,   however , that, anything contained herein to the contrary notwithstanding, if said rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, ipso facto as of the date of this Agreement, Borrower is and shall be liable only for the payment of such maximum as allowed by law, and all payment received from Borrower in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess.

 

2.3          Crediting Payments; Application of Collections. The receipt of any payments by Banks from Borrower shall be applied provisionally to reduce the Obligations

 

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outstanding under Section 2.1 , but shall not be considered a payment on account unless such payment item is a wire transfer of immediately available federal funds and is made to Banks in accordance with wiring instructions issued by Banks to Borrower or unless and until such payment is honored when presented for payment. Should any payment to Banks not be honored when presented for payment, then Borrower shall be deemed not to have made such payment, and interest shall be recalculated accordingly. Anything to the contrary contained herein notwithstanding, any payment shall be deemed received by Banks only if it is received by Agent on a Business Day on or before (i) 11:00 a.m. (Los Angeles time) for regular payments or deposits and (ii) 9:30 a.m. California time for payments or deposits covering overdrafts. If any payment is received by Agent on a non-Business Day or after the time specified on a Business Day, it shall be deemed to have been received by Agent as of the opening of business on the immediately following Business Day.

 

2.4                                Designated Account. The Agent is authorized to make the Advances under this Agreement based upon faxed or other written instructions received from anyone purporting to be an Authorized Person, or without instructions if pursuant to Section 2.2(d) . Borrower agrees to establish and maintain an account with the Agent for the purpose of receiving the proceeds of the Advances requested by Borrower and made by the Agent hereunder. Unless otherwise agreed by the Agent and Borrower, any Advance requested by Borrower and made by Banks hereunder shall be credited to Borrower’s account with Agent.

 

2.5                                  Maintenance of Loan Accounts; Statements of Obligations. Banks shall maintain accounts on their books in the name of Borrower (the “ Loan Accounts” ) on which Borrower will be charged with all Advances made by Banks to Borrower or for Borrower’s account, including, accrued interest, Bank Expenses, and any other payment Obligations of Borrower. In accordance with Section 2.3 , the Loan Accounts will be credited with all payments received by Banks from Borrower or for Borrower’s account. Banks shall render statements regarding the Loan Accounts to Borrower, including principal, interest, and fees, and including an itemization of all charges and expenses constituting Bank Expenses owing, and such statements shall be conclusively presumed to be correct and accurate and constitute an account stated between Borrower and Banks absent manifest error and unless, within thirty (30) days after receipt thereof by Borrower, Borrower shall deliver to Banks written objection thereto describing the error or errors claimed to be contained in any such statements.

 

2.6                                Fees, Costs, and Charges. Borrower shall pay to the Agent the following fees:

 

(a)          Annual Fee. On the Closing Date, and, beginning July 1, 2009 and annually thereafter on July 1 of each succeeding year during the term of this Agreement, a fee equal to 0.50% of the Maximum Revolving Amount on each of Facility A and Facility B.

 

(b)          Financial Examination, and Documentation Fees. (i) Banks’ out of pocket expenses for each auditor or other personnel, whether employed by or an independent contractor to Banks or either of them, plus out-of-pocket expenses for each financial analysis and examination (i.e., audits or otherwise) of Borrower and its Subsidiaries or Affiliates in connection therewith.

 

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(c)          Other Costs and Charges. All Bank Expenses and other costs, fees, and charges of every description payable by Borrower to Banks or either of them under this Agreement.

 

3. CONDITIONS; TERM OF AGREEMENT.

 

3.1                                Conditions Precedent to the Initial Advance. The obligation of Banks under this Agreement is subject to the fulfillment, to the satisfaction of Banks and their counsel, of each of the following conditions on or before July 1, 2008:

 

(a)                               Banks shall have received each of the following documents, duly executed, and each such document shall be in full force and effect:

 

(i)           this Agreement duly executed by Borrower;

 

(ii)          the Advance Request Form and Disbursement Letter;

 

(iii) any Notes required or provided by Banks for execution by Borrower to document Facility A and/or Facility B; and

 

(iv) any other instruments required or provided by Banks for execution by Borrower to document Facility A and/or Facility B.

 

(b)                              Banks shall have received a certificate from an Authorized Person attesting to the corporate authorization of Borrower authorizing the execution, delivery, and performance of this Agreement and the other Loan Documents to which Borrower is a party and authorizing specific individuals associated with and authorized by Borrower to execute the same.

 

(c)                               Banks shall have received copies of Borrower’s Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by an Authorized Person.

 

(d)                              Banks shall have received a certificate of insurance, together with the endorsements thereto, as are required by Section 6.8 , the form and substance of which shall be satisfactory to Banks and their counsel;

 

(e)                               Banks shall have received satisfactory evidence that all tax returns required to be filed by Borrower have been timely filed and all taxes upon Borrower or its properties, assets, income, and franchises (including real property taxes and payroll taxes) have been paid prior to delinquency, except such taxes that are the subject of a Permitted Protest; such satisfactory evidence shall be provided in the form of written certification by Borrower’s Chief Financial Officer to the effect that the foregoing matters in this paragraph have been fully satisfied, unless Banks in their discretion shall request further evidence thereof

 

(f)                                   Borrower shall have paid (i) the fees payable on the Closing Date

 

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and (ii) all expenses of Banks incurred in connection with the transactions contemplated by this Agreement, including without limitation asset searches, credit reports, and the fees and expenses of its outside counsel, as of the Closing Date;

 

(g)          all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Banks and their counsel;

 

(h)          Banks shall have given, in their sole discretion, final credit approval of the credit facilities set forth in this Agreement;

 

(i)            Banks shall have been satisfied, in their sole discretion, with the results of a review of Borrower’s most recent interim financial statement;

 

(i)            No adverse changes in Borrower’s most recent interim financial statement, or in Borrower’s profits, property, business prospects, or financial condition, shall have occurred since the Banks’ review of Borrower’s most recent financial statement for the period ending March 31, 2008;

 

(k)           Banks shall have completed and been satisfied, in Banks’ sole discretion, with Borrower’s trade, credit, and background cheeks, conducted by or for Banks, utilizing resources and data bases selected by Banks;

 

(1)           Banks shall have received the written opinion of counsel for Borrower, in form and substance satisfactory to Banks; and

 

3.2                              Conditions Precedent to all Advances. The following shall be conditions precedent to all Advances hereunder:

 

(a)           the representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all respects on and as of the date of each such Advance, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date);

 

(b)          no Default or Event of Default shall have occurred and be continuing on the date of such Advance, nor shall either result from the making thereof;

 

(e)          no injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the extending of such credit shall have been issued and remain in force by any governmental authority against Borrower, Banks, or any of their Affiliates;

 

(d)          no Change of Control shall have occurred after the date of this Agreement; and

 

(e)          With respect to Advances under Facility A, Borrower shall have furnished to Banks, as and when required, such documentation as may be specified by Banks, by

 

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notice given to Borrower, to be furnished in connection with Advances, including without limitation the items set forth in Schedule 3.2 .

 

3.3          Intentionally Omitted.]

 

3.4          Term. This Agreement shall become effective upon the execution and delivery hereof by Borrower and Banks and shall continue in full force and effect for a term ending on the Maturity Date, unless sooner terminated or extended in writing pursuant to the terms hereof. The foregoing notwithstanding, Banks shall have the right to terminate their obligations under this Agreement immediately and without notice upon the occurrence and during the continuation of an Event of Default.

 

3.5          Early Termination by Borrower. Borrower has the option, at any time, upon thirty (30) days’ prior written notice to Banks, to terminate this Agreement by paying to Banks, in cash, the Obligations in full.

 

4.                                   RIGHT OF INSPECTION.

 

Banks (through any of their respective officers, employees, or agents) shall have the right, at any time and from time to time, during of the term of the transactions contemplated by this Agreement and/or at any time there is any balance owed to Banks under or in connection with such transactions, upon not less than 24 hours’ advance written notice, to inspect Borrower’s Books and to check, test, and evaluate Borrower’s assets in order to verify Borrower’s financial condition or the amount, quality, value, condition of, or any other matter relating to, Borrower’s assets of every description.

 

5. REPRESENTATIONS AND WARRANTIES.

 

In order to induce Banks to enter into this Agreement, Borrower makes the following representations and warranties which shall be true, correct, and complete in all respects as of the date hereof, and as of the Closing Date, and as of the date of the making of each Advance, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement:

 

5.1          No Encumbrances. Borrower has good and indefeasible title to or leasehold interest in, as the case may be, its assets, free and clear of Liens except for Permitted Liens.

 

5.2          Equipment. All of the Equipment is used or held for use in Borrower’s business and is fit for such purposes.

 

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