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EXHIBIT
10.10
C
REDIT AND LOAN AGREEMENT
This
Credit and Loan Agreement, dated as of April 7, 2008 (the
“effective date”), is among Secured Financial
Network, Inc., a Nevada corporation (“SFNL”) and
Commercial Holding,
AG (“Lender”). The parties
hereto agree as follows:
ARTICLE I - DEFINITIONS
As
used in this Agreement:
“Acquisition”
means the anticipated acquisition by SFNL or its Subsidiary of
AmeriNet, LLC pursuant to that certain Letter of Intent dated
as of October 30, 2007, by and among SFNL and ACS and David
Kerlin.
“Agreement”
means this Credit and Loan Agreement, as it may be amended or
modified and in effect from time to time.
“GAAP”
means generally accepted accounting principles as in effect
from time to time, applied in a manner consistent with that
used in preparing the financial statements referred to in
Section 5.4.
“Article”
means an article of this Agreement unless another document is
specifically referenced.
“Authorized
Officer” means any of the Chief Executive Officer,
President, Vice President or Chief Financial Officers of SFNL,
acting singly.
“Business
Day” means a day (other than a Saturday or Sunday) on
which banks generally are open in Dallas, Texas for the
conduct of substantially all of their commercial lending
activities.
“Capital
Expenditures” means, without duplication, any
expenditures for any purchase or other acquisition of any
asset which would be classified as a fixed or capital asset on
a consolidated balance sheet of SFNL and its Subsidiaries
prepared in accordance with GAAP.
“Capitalized
Lease” of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet
of such Person prepared in accordance with GAAP.
“Capitalized
Lease Obligations” of a Person means the amount of the
obligations of such Person under Capitalized Leases which
would be shown as a liability on a balance sheet of such
Person prepared in accordance with GAAP.
“Cash
Equivalent Investments” means (a) short-term obligations
of, or fully guaranteed by, the United States of America, (b)
commercial paper rated A-1 or better by S&P or P-1 or
better by Moody ' s, (c) demand deposit
accounts maintained in the ordinary course of business, and
(iv) certificates of deposit issued by and time deposits with
commercial banks (whether domestic or foreign) having capital
and surplus in excess of $100,000,000; provided in each
case that the same provides for payment of both principal and
interest (and not principal alone or interest alone) and is
not subject to any contingency regarding the payment of
principal or interest.
“Change
in Control” means (a) the acquisition by any Person, or
two or more Persons acting in concert, of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934)
of 40% or more of the outstanding shares of voting stock of
SFNL; or (b) the sale of all or substantially all of the
assets of SFNL.
“Code”
means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.
“Commitment”
means the obligation of Lender to make Loans to SFNL up to an
aggregate of $500,000, as such amount may be modified from
time to time pursuant to the terms hereof.
“Consolidated
Indebtedness” means at any time the Indebtedness of SFNL
and its Subsidiaries calculated on a consolidated basis as of
such time.
“Contingent
Obligation” of a Person means any agreement, undertaking
or arrangement by which such Person assumes, guarantees,
endorses, contingently agrees to purchase or provide funds for
the payment of, or otherwise becomes or is contingently liable
upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other
financial condition of any other Person, or otherwise assures
any creditor of such other Person against loss, including,
without limitation, any comfort letter, operating agreement,
take-or-pay contract or the obligations of any such Person as
general partner of a partnership with respect to the
liabilities of the partnership.
“Controlled
Group” means all members of a controlled group of
corporations or other business entities and all trades or
businesses (whether or not incorporated) under common control
which, together with SFNL or any of its Subsidiaries, are
treated as a single employer under Section 414 of the
Code.
“Default”
means an event described in Article VIII.
“Environmental
Laws” means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations,
ordinances, rules, judgments, orders, decrees, plans,
injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions
relating to (a) the protection of the environment, (b) the
effect of the environment on human health, (c) emissions,
discharges or releases of pollutants, contaminants, hazardous
substances or wastes into surface water, ground water or land,
or (d) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
pollutants, contaminants, hazardous substances or wastes or
the clean-up or other remediation thereof.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued
thereunder.
“Excluded
Taxes” means, in the case of Lender, taxes imposed on
its overall net income, and franchise taxes imposed on it, by
(a the jurisdiction under the laws of which such Lender is
incorporated or organized or resides or (b) the jurisdiction
in which the such Lender's principal executive office is
located.
“Exhibit”
refers to an exhibit to this Agreement, unless another
document is specifically referenced.
“Indebtedness”
of a Person means such Person’s (a) obligations for
borrowed money, (b) obligations representing the deferred
purchase price of Property or services (other than accounts
payable arising in the ordinary course of such Person’s
business payable on terms customary in the trade), (c)
obligations, whether or not assumed, secured by Liens or
payable out of the proceeds or production from Property now or
hereafter owned or acquired by such Person, (d) obligations
which are evidenced by notes, acceptances, or other
instruments, (e) obligations of such Person to purchase
securities or other Property arising out of or in connection
with the sale of the same or substantially similar securities
or Property, (f) Capitalized Lease Obligations and (g) any
other obligation for borrowed money or other financial
accommodation which in accordance with GAAP would be shown as
a liability on the consolidated balance sheet of such
Person.
“Investment”
of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in
the ordinary course of business), extension of credit (other
than accounts receivable arising in the ordinary course of
business on terms customary in the trade) or contribution of
capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities
owned by such Person; any deposit accounts and certificate of
deposit owned by such Person; and structured notes, derivative
financial instruments and other similar instruments or
contracts owned by such Person.
“Lender”
means is defined in the Preamble to this Agreement, and its
successors and assigns.
“Lien”
means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or
preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
(including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other
title retention agreement).
“Loan”
means the loans made pursuant to Article II (or any
continuation thereof).
“Loan
Documents” means this Agreement, any Notes issued
pursuant to Section 2.4 and the Security
Agreement.
“Material
Adverse Effect” means a material adverse effect on (a)
the business, Property, condition (financial or otherwise),
results of operations, or prospects of SFNL and its
Subsidiaries taken as a whole, (b) the ability of SFNL to
perform its obligations under the Loan Documents, or (c) the
validity or enforceability of any of the Loan Documents or the
rights or remedies of the Lender or Lender
thereunder.
“Material
Indebtedness” any Indebtedness in excess of
100,000.
“Maturity”
means the date that is (a) the one year anniversary of the
consummation of the Acquisition, or (b) if the Acquisition is
not consummated before December 31, 2008, then on December 31,
2008.
“Multiemployer
Plan” means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which SFNL or
any member of the Controlled Group is a party to which more
than one employer is obligated to make
contributions.
“Note”
means any promissory note issued pursuant to Section 2.4 in
the form of Exhibit A.
“Obligations”
means all unpaid principal of and accrued and unpaid interest
on the Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of SFNL to
Lender or any indemnified party arising under the Loan
Documents.
“Operating
Lease” of a Person means any lease of Property (other
than a Capitalized Lease) by such Person as lessee which has
an original term (including any required renewals and any
renewals effective at the option of the lessor) of one year or
more.
“Operating
Lease Obligations” means, as at any date of
determination, the amount obtained by aggregating the present
values, determined in the case of each particular Operating
Lease by applying a discount rate (which discount rate shall
equal the discount rate which would be applied under GAAP if
such Operating Lease were a Capitalized Lease) from the date
on which each fixed lease payment is due under such Operating
Lease to such date of determination, of all fixed lease
payments due under all Operating Leases of SFNL and its
Subsidiaries.
“Other
Taxes” is defined in Section 3.5.
“PBGC”
means the Pension Benefit Guaranty Corporation, or any
successor thereto.
“Person”
means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association,
enterprise, trust or other entity or organization, or any
government or political subdivision or any agency, department
or instrumentality thereof.
“Plan”
means an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code as to which SFNL or any member
of the Controlled Group may have any liability.
“Property”
of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or
other assets owned, leased or operated by such
Person.
“Reportable
Event” means a reportable event as defined in Section
4043 of ERISA and the regulations issued under such section,
with respect to a Plan, excluding, however, such events as to
which the PBGC has by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided,
however, that a failure to meet the minimum funding
standard of Section 412 of the Code and of Section 302 of
ERISA shall be a Reportable Event regardless of the issuance
of any such waiver of the notice requirement in accordance
with either Section 4043(a) of ERISA or Section 412(d) of the
Code.
“Schedule”
refers to a specific schedule to this Agreement, unless
another document is specifically referenced.
“Section”
means a numbered section of this Agreement, unless another
document is specifically referenced.
“Secured
Obligations” means, collectively, the Obligations owing
to Lender.
“Securities”
means SFNL Common Stock and Warrants.
“Single
Employer Plan” means a Plan maintained by SFNL or any
member of the Controlled Group for employees of SFNL or any
member of the Controlled Group.
“SFNL”
is defined in the preamble to this Agreement.
“SFNL
Common Stock” means the common stock, $.001 par value
per share, of SFNL.
“Subsidiary”
of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which
shall at the time be owned or controlled, directly or
indirectly, by such Person or by one or more of its
Subsidiaries or by such Person and one or more of its
Subsidiaries, or (b) any partnership, limited liability
company, association, joint venture or similar business
organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned
or controlled. Unless otherwise expressly provided,
all references herein to a “Subsidiary” shall mean
a Subsidiary of SFNL.
“Substantial
Portion” means, with respect to the Property of SFNL and
its Subsidiaries, Property which (a) represents more than 10%
of the consolidated assets of SFNL and its Subsidiaries as
would be shown in the consolidated financial statements of
SFNL and its Subsidiaries as at the beginning of the
twelve-month period ending with the month in which such
determination is made, or (b) is responsible for more than 10%
of the consolidated net sales or of the consolidated net
income of SFNL and its Subsidiaries as reflected in the
financial statements referred to in clause (a)
above.
“Taxes”
means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all
liabilities with respect to the foregoing, but excluding
Excluded Taxes.
“Unfunded
Liabilities” means the amount (if any) by which the
present value of all vested and unvested accrued benefits
under all Single Employer Plans exceeds the fair market value
of all such Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer
plan terminations.
“Unmatured
Default” means an event which but for the lapse of time
or the giving of notice, or both, would constitute a
Default.
“Warrants”
means warrants to purchase shares of SFNL Common Stock in the
form attached hereto as Exhibit A.
“Wholly-Owned
Subsidiary” of a Person means (a) any Subsidiary all of
the outstanding voting securities of which shall at the time
be owned or controlled, directly or indirectly, by such Person
or one or more Wholly-Owned Subsidiaries of such Person, or by
such Person and one or more Wholly-Owned Subsidiaries of such
Person, or (b) any partnership, limited liability company,
association, joint venture or similar business organization
100% of the ownership interests having ordinary voting power
of which shall at the time be so owned or
controlled.
The
foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II – CREDIT COMMITTMENT
2.1
Credit
Commitment . From and including the date of
this Agreement and prior to the Maturity Date, Lender agrees,
on the terms and conditions set forth in this Agreement, to
make a Loans to SFNL in an amount not to exceed in the
aggregate Commitment. All Loans shall be evidenced
by a promissory note in the form attached hereto as Exhibit B
(each, a “Note”)
2.2
Method of
Payment . All payments of the Obligations
hereunder shall be made, without setoff, deduction, or
counterclaim, in immediately available funds to Lender at
Lender’ address specified pursuant to Section 9.10, by
noon (local time) on the date when due.
2.3
Prior
Notes . Lender has acquired, by assignment,
those certain promissory notes previously issued by SFNL to
third parties, copies of which are attached hereto as Exhibit
C (the “Previous Notes”). The parties
acknowledge and agree that the loans evidenced by the Previous
Notes shall be deemed to be Loans under this Agreement and the
Previous Notes shall be deemed Notes under this
Agreement.
2.4
Securities
. As additional consideration for this Agreement,
SFNL shall within ten days of the Effective Date, issue to
Lender, 2,000,000 shares of SFNL Common Stock, and Warrants to
purchase and additional 1,000,000 shares of SFNL Common
Stock.
ARTICLE III - REPAYMENT OF THE NOTES
3.1
Interest Rates
and Interest Payments . The Notes will bear
interest on the outstanding principal amount thereof at a per
annum rate equal to ten percent (10%). Interest on
the Notes will be computed on the basis of a year of 360 days,
composed of twelve 30-day months, and the actual number of
days elapsed.
3.2
Repayment of the
Notes . SFNL covenants and agrees to make
payments to Lender, of accrued interest on the Notes on the
first Business Day of each calendar quarter after the
Effective Date. All outstanding principle and
accrued interest on the Notes shall paid in full to Lender on
the Maturity Date.
3.3
Mandatory
Prepayment . The Notes shall be prepaid in
full, together with all interest, fees and expenses, in the
event of a Change of Control.
3.4
Home
Office Payment . SFNL will pay all sums
becoming due on such Note for principal,
premium, if any, and interest to Lender by the method and at
the address specified for such purpose Section 9.10, or by
such other method or at such other address as Lender shall
have from time to time specified to SFNL in writing for such
purpose, without the presentation or surrender of such Note or
the making of any notation thereon, except that upon written
request of SFNL made concurrently with or reasonably promptly
after payment or prepayment in full of any Note, Lender of a
Note shall surrender such Note for cancellation, reasonably
promptly after such request, to SFNL at their principal
executive office.
3.5
Taxes
. Any and all payments by SFNL hereunder or under
the Notes or other Loan Documents that are made to or for the
benefit of Lender shall be made free and clear of and without
deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings and penalties,
interests and all other liabilities with respect thereto
(collectively, “Taxes”), excluding taxes imposed
on Lender’s or Purchasers’ net income or capital
and franchise taxes imposed on any of them by the jurisdiction
under the laws of which any of them is organized or any
political subdivision thereof (all such nonexcluded Taxes
being hereinafter referred to as “Covered
Taxes”). If any of SFNL shall be required by
law to deduct any Covered Taxes from or in respect of any sum
payable hereunder or under any Notes or other Purchase
Documents to Lender for the benefit of Purchasers, or to
Purchasers, the sum payable shall be increased as may be
necessary so that after making all required deductions of
Covered Taxes (including deductions of Covered Taxes
applicable to additional sums payable under this paragraph),
each Purchaser receives an amount equal to the sum it would
have received had no such deductions been
made. SFNL shall make such deductions and SFNL
shall pay the full amount so deducted to the relevant taxation
authority or other authority in accordance with applicable
law. In addition, SFNL agree to pay any present or
future stamp, documentary, excise, privilege, intangible or
similar levies that arise at any time or from time to time
from any payment made under any and all Purchase Documents or
from the execution or delivery by SFNL or from the filing or
recording or maintenance of, or otherwise with respect to the
exercise by Lender or Purchasers of their respective rights
under any and all Purchase Documents (collectively,
“Other Taxes”). SFNL will indemnify
Lender and Purchasers for the full amount of Covered Taxes
imposed on or with respect to amounts payable hereunder and
Other Taxes, and any liability (including penalties, interest
and expenses) arising therefrom or with respect
thereto. Payment of this indemnification shall be
made within thirty (30) days from the date Lender or
Purchasers provide SFNL with a certificate certifying and
setting forth in reasonable detail the calculation thereof as
to the amount and type of such Taxes. Any such
certificates submitted by Lender or Purchasers in good faith
to SFNL shall, absent manifest error, be final, conclusive and
binding on all parties. The obligation of SFNL
under this Section 3.5 shall survive the payment of the Notes
and the termination of this Agreement. Within
thirty (30) days after SFNL having received a receipt for
payment of Covered Taxes and/or Other Taxes, SFNL shall
furnish to Lender, the original or certified copy of a receipt
evidencing payment thereof.
3.6
Maximum Lawful
Rate . This Agreement, the Notes and the
other Purchase Documents are hereby limited by this Section
3.6. In no event, whether by reason of acceleration
of the maturity of the amounts due hereunder or otherwise,
shall interest and fees contracted for, charged, received,
paid or agreed to be paid to Purchasers exceed the maximum
amount permissible under such applicable law. If,
from any circumstance whatsoever, interest and fees would
otherwise be payable to Lender or Purchasers in excess of the
maximum amount permissible under applicable law, the interest
and fees shall be reduced to the maximum amount permitted
under applicable law. If from
any circumstance, Lender or Purchasers shall have received
anything of value deemed interest by applicable law in excess
of the maximum lawful amount, an amount equal to any excess of
interest shall be applied to the reduction of the principal
amount of the Notes, in such manner as may be determined by
Purchasers, and not to the payment of fees or interest, or if
such excessive interest exceeds the unpaid balance of the
principal amount of the Notes, such excess shall be refunded
to SFNL.
3.7
Certain
Waivers . SFNL unconditionally waive (a) any
rights to presentment, demand, protest or (except as expressly
required hereby) notice of any kind, and (b) any rights of
recission, setoff, counterclaim or defense to payment under
the Notes or otherwise that SFNL may have or claim against any
Purchaser, the Lender or any prior Purchaser or
Lender.
ARTICLE IV – CONDITIONS
4.1
Conditions to
Commitment . The obligation of Lender to
make Loans is subject to the satisfaction of the following
conditions on and as of the date of each such
Loan:
(a)
Representations
and Warranties True . The representations
and warranties contained in Article 5 hereof shall be true and
correct in all material respects at and as of the date of such
Loan, except to the extent of changes caused by the
transactions expressly contemplated herein.
(b)
Material Adverse
Effect . There will have been no Material
Adverse Effect in the business or financial condition of the
Loan Parties since September 30, 2007, except as noted
in Schedule 5.1.
(c)
Security
Agreement . SFNL and Lender, shall have
entered into a security agreement, in form and substance as
set forth in Exhibit D attached hereto (as the same may be
amended, modified or supplemented from time to time in
accordance with the terms thereof, the “Security
Agreement”). SFNL shall have executed and
delivered to Lender, such financing statements and other
instruments (collectively, “Financing Statements”)
as Lender shall require in order to perfect and maintain the
continued perfection of the security interest created by the
Security Agreement. The Lender shall have received reports of
filings with appropriate government agencies showing that
there are no Liens on the assets of the Loan Parties other
than Permitted Liens.
(d)
Closing
Documents . SFNL will have delivered or
caused to be delivered to Lender all of the following
documents in form and substance satisfactory to
Lender:
(i) copies
of the resolutions duly adopted by SFNL’s board of
directors authorizing the execution, delivery and performance
by SFNL of this Agreement and each of the other agreements,
instruments and documents contemplated hereby to which the
respective SFNL is a party, and the consummation of all of the
other Transactions, certified as of the Closing Date by the
secretary or assistant secretary of the respective
SFNL;
(ii) a
certificate dated as of the Closing Date from an officer of
SNFL stating that the conditions specified in this Section 4.1
have been fully satisfied or waived by Lender;
(iii) such
other documents relating to the Transactions contemplated by
this Agreement as Lender or its special counsel may reasonably
request.
4.2
Proceeding
. All proceedings taken or required to be taken in
connection with the transactions contemplated hereby to be
consummated at or prior to the Closing and all documents
incident thereto will be satisfactory in form and substance to
Lender and its special counsel and to Purchasers and their
special counsel.
4.3
Waiver
. Any condition specified in this Article IV may be
waived by Lender; provided that no such waiver will be
effective against Lender unless it is set forth in a writing
executed by Lender.
ARTICLE V – REPRESENTATIONS AND WARRANTIES
SFNL
represents and warrants to Lender that:
5.1
Organization
. Each of SFNL and its Subsidiaries is a
corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation or organization. Each of SFNL and its
Subsidiaries (a) is qualified or licensed in all jurisdictions
where such qualification or license is required to own and
operate its properties and conduct its business in the manner
and at the places presently conducted; (b) holds all
franchises, grants, licenses, certificates, permits, consents
and orders, all of which are valid and in full force and
effect, from all applicable United States and foreign
regulatory authorities necessary to own and operate its
properties and to conduct its business in the manner and at
the places presently conducted; and (c) has full power and
authority (corporate and other) to own, lease and operate its
respective properties and assets and to carry on its business
as presently conducted and as proposed to be conducted, except
where the failure to be so qualified or licensed or to hold
such franchises, grants, licenses, certificates, permits,
consents and orders or to have such power and authority would
not, when taken together with all other such failures,
reasonably be expected to have a Material Adverse Effect with
respect to SFNL. Schedule 5.0 sets forth the
name and jurisdiction of incorporation or organization of each
subsidiary of SFNL. Except as noted in Schedule 5.0
SFNL does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business
association or entity.
5.2
Capital
Structure .
(a) As
of the Effective Date, the authorized capital stock of SFNL
consists of 100,000,000 shares of Common Stock and -0- shares
of preferred stock. As of the Effective Date, (i)
41,175,247 shares of Common Stock were issued and outstanding,
(ii) 58,824,753 shares of Common Stock were held in the
treasury of SFNL, (iii) -0- shares of Common Stock were
reserved for issuance under outstanding SFNL Stock Options,
including stock appreciation rights, performance units and
stock units, and (iv) no shares of preferred stock were issued
or outstanding. All the outstanding shares of
SFNL’s capital stock are duly authorized, validly
issued, fully paid and non-assessable. There are no
bonds, debentures, notes or other indebtedness having voting
rights (or convertible or exchangeable into securities having
such rights) (“SFNL Voting Debt”) of SFNL or any
of its Subsidiaries issued and outstanding. The shares of
Common Stock issuable upon conversion of the Notes have been
reserved for issuance and, when issued upon conversion of the
Notes in accordance with the terms thereof, will be duly
authorized, validly issued and fully paid and non assessable
and not subject to preemptive rights. Except as set
forth above, as described in SFNL SEC Documents and for the
transactions contemplated by this Agreement, (x) there are no
shares of capital stock of SFNL authorized, issued or
outstanding and (y) there are no existing (A) options,
warrants, calls, preemptive rights, subscriptions or other
rights, convertible or exchangeable securities, agreements,
arrangements or commitments of any character, relating to the
issued or unissued capital stock of SFNL or any of its
Subsidiaries, obligating SFNL or any of its Subsidiaries to
issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or SFNL Voting
Debt
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